Siemens increases profits in all Sectors in third quarter

Siemens substantially improved operations in the third quarter of fiscal 2008. Siemens'three Sectors delivered €2.084 billion in Total Sectors profit, up 33% from €1.571 billion in the third quarter a year earlier. Furthermore, Siemens achieved robust growth as orders rose 21%, from €19.494 billion to €23.677 billion, and revenue increased 10%, from €17.517 billion to €19.182 billion. On an organic basis, excluding the net effect of portfolio transactions and currency translation, orders climbed 26% year-over-year, and revenue rose 13%. Siemens has confirmed its outlook for fiscal 2008 and gave an outlook for fiscal 2009.

"We shifted Siemens into a higher gear in the third quarter, reaching important milestones on our reorganization path," said Peter Löscher, President and CEO of Siemens AG. "We are becoming faster, more efficient and more focused as a company, with the timely entrepreneurial approach that is required to stay on this course," commented Löscher. "Regarding fiscal 2008, we affirm our full-year outlook. While we expect a less favorable macroeconomic situation in fiscal 2009, we still plan to grow at twice the rate of global GDP. We are also committed to achieving a combined Sector operating result of €8 billion to €8.5 billion for the year. Our new management incentive system should play an important role in our progress ahead, along with worldwide employee participation in Siemens' success through equity ownership," he added.

Robust growth and strong book-to-bill

Order growth was well-balanced, with double-digit expansion in all Sectors. Revenue growth included double-digit increases in Energy and Healthcare and 8% growth in Siemens's largest Sector, Industry. The book-to-bill ratio for the quarter was 1.23, driven by exceptionally large orders in Industry and Energy. The region comprising Europe, the Commonwealth of Independent States(CIS) and Africa contributed, in part due to these large orders, 40% order growth and 12% revenue growth in the third quarter. In the Americas, orders and revenue rose 10% and 5%, respectively, despite strong negative currency translation effects. The region consisting of Asia, Australia and the Middle East saw 9% revenue growth, including double-digit increases in China and India.

Third-quarter orders were nearly the same year-over-year, despite a higher level of large orders in the prior-year period.

Higher profit margin drives increase in Total Sectors profit

Income from continuing operations was €1.475 billion in the third quarter, well above €608 million a year earlier. Basic EPS on a continuing basis climbed to €1.61 from €0.64 in the prior-year period.
The main factor in these increases was the growth in Total Sectors profit year-over-year.

Within Industry, the leading profit performers were the two Divisions created out of the former A&D Group: Industry Automation and Drive Technologies. Sector profit also included a gain of €113 million on the sale of the wireless modules business in the Industry Automation Division. Profit growth within Energy featured strong contributions from the two new Divisions created out of the former PTD Group: Power Transmission and Power Distribution. Siemens' Healthcare Sector contributed 6% profit growth and sustained its profitability despite challenging market conditions.

New compensation system for managers and profit sharing for all employees

When presenting the figures, Löscher also discussed the further development of the company's compensation system for management. About two-thirds of the variable income of managers is determined by the fulfillment of financial targets. The remaining third of the variable income is linked to personal performance and compliance-related criteria.

In addition, Siemens plans to introduce a profit sharing program for all employees worldwide as part of a new stock program. "The decisive point with all measures is the idea thinking in the long term. Our company must achieve sustainable profitable growth. You have to think over the longer term, and not from quarter to quarter," said Löscher. Siemens wants to make it mandatory for the top 500 managers to hold 50 to 300 percent of their annual base salary in the form of Siemens shares. Senior management worldwide - that is, the top 5,000 managers - will continue to be remunerated with the stock awards, as prescribed by the long-term incentive program. In addition to that, Siemens wants to give employees a special incentive to invest in Siemens stock. For each three Siemens shares held three consecutive years, they will get one Siemens share for free.

Note: Today beginning at 09:00 a.m. CEST, the telephone conference at which CEO Peter Löscher and CFO Joe Kaeser discuss the quarterly figures will be broadcast live on the Internet at www.siemens.com/conferencecall. The accompanying slide presentation can also be viewed here, and a recording of the conference will subsequently be made available as well. Starting at 11:00 CEST, Peter Löscher and Joe Kaeser will hold a telephone conference in English for analysts and investors, which can be followed live at www.siemens.com/analystcall.