Siemens to build focused energy powerhouse and further boost performance

• Creation of new major player on the energy market with business volume of €30 billion and over 80,000 employees through spinoff of Gas and Power and transfer of Siemens’ SGRE stake
• Spinoff to give shareholders direct participation in success and enable rapid implementation
• Future industrial core: Digital Industries and Smart Infrastructure
• Ambitious medium-term goals refined and long-term aspiration outlined
• Savings of €2.2 billion by 2023 through structural efficiency gains planned
• Growth in future-oriented fields to generate net increase of over 10,000 jobs despite efficiency measures

Siemens intends to meet its medium-term growth and profit targets by clearly focusing its portfolio on dynamic growth markets and efficiency gains. To this end, the Supervisory Board of Siemens AG today unanimously approved the next steps in the company’s Vision 2020+ strategy concept, including the spinoff of Siemens’ Gas and Power (GP).

The Supervisory Board unanimously supports the realignment measures. "It’s the right thing to do; it’s necessary and courageous to trigger the planned changes when the company is doing well. The Supervisory Board supports the Managing Board in the further implementation of the Vision 2020+ strategy concept under Joe Kaeser’s leadership" said Jim Hagemann Snabe, Chairman of the Supervisory Board of Siemens AG.

The employee representatives on the Supervisory Board also approve the plan for GP and support the Vision 2020+ growth strategy. However, they also note that the Managing Board has a special responsibility for the treatment of the employees who are impacted by the structural change. Birgit Steinborn, the Chairwoman of the Central Works Council of Siemens AG, explained: "The employee representatives agree to the plan for GP and support management’s growth strategy. We’re now facing a fundamental transformation of the company. If the Managing Board is serious about the growth concept, we expect employee expertise to be retained at the company and developed or expanded with respect to digitalization. These objectives can be accomplished through reskilling measures and preferential consideration when people are hired for the new positions that have been announced. The agreed-upon Fund for the Future offers good opportunities for doing this. In addition, we assume that the Region Germany will also benefit from the Managing Board’s investments and growth programs. We reject unimaginative job-cutting programs"

The Digital Industries (DI) and Smart Infrastructure (SI) Operating Companies will comprise Siemens’ future industrial core. This core will be supplemented by company-wide technology and service units and the company’s strategic majority stake in Siemens Healthineers. Siemens Mobility is also to be further strengthened as a growth business.

Siemens’ Gas and Power to be separately managed

Siemens’ Gas and Power (GP) – comprising the company’s oil and gas, conventional power generation, power transmission and related services businesses – is to be given complete independence and entrepreneurial freedom through a carveout and a subsequent public listing (spinoff). In addition, Siemens AG plans to contribute its majority stake in the market-leading renewable energies company SGRE – currently 59 percent – to GP. Plans call for the stock exchange listing to take place by September 2020. Siemens will also give up its majority stake in GP. However, it will remain a strong anchor shareholder in the new company, with a stake that is to be initially somewhat less than 50 percent and, for the foreseeable future, above the level of a blocking minority holding. Siemens will continue to support the new company, for example, through the professional services of Siemens’ Financial Services, the strong sales network of the Siemens Regions and the licensing of the powerful Siemens brand. A decision regarding the spinoff and subsequent public listing is to be made at an extraordinary shareholders’ meeting, probably in June 2020. Siemens will then deconsolidate both the new GP and SGRE.

Significant growth and efficiency gains planned

In addition to strengthening its portfolio structures, Siemens will significantly improve its cost effectiveness across all areas of the company. The goal is to strengthen competitiveness and productivity and thus increase both the annual revenue growth rate and the profit margin of the company’s Industrial Business by two percentage points over the medium term. Basic earnings per share are to grow faster than revenue over the medium term. Over the long term, the profit margin of the industrial core business (adjusted EBITA margin) is to reach 14 to 18 percent. 

Smart Infrastructure has a clear plan to boost growth. First, SI intends to strengthen its product business, particularly in Asia. Second, its attractive service business is to be expanded. Third, SI intends to intensify its activities in future-oriented fields such as electric mobility infrastructure, distributed energy systems, smart buildings and energy storage – also by leveraging the increased use of digitalization solutions. These steps are expected to generate annual revenue growth of four to five percent across SI’s entire portfolio. As a result, SI wants to hire up to 6,000 new employees by 2023 – above all, in services, research and development, and sales. "Overall, with accelerated growth and a leaner setup, we intend to raise our profit margin to between 13 and 15 percent by 2023" explained SI CEO Cedrik Neike.

Digital Industries intends to strengthen its businesses in industrial digitalization and further expand its market leadership. The goal is to grow 25 percent faster than the market. As a result, up to 12,000 new employees are to be hired worldwide, primarily in production, research and development, and sales. Profitability will be optimized, for example, through the integration of two former Divisions, the improvement of internal processes in areas such as logistics, simplified controlling and the increased use of the company’s own industrial software portfolio. These measures will also have a structural impact on jobs since different qualifications will be required in some cases. Up to 4,900 jobs worldwide will be affected by the measures. DI’s management expects to incur restructuring charges of €300 million by 2023. All in all, DI expects additional growth to generate about 7,000 jobs by 2023.

As previously announced, key parts of Siemens’ Corporate Units and administration have been decentralized. The remaining Corporate Functions are also to become significantly leaner. Concentration on the key tasks of the company’s Corporate management means that about 2,500 of the total of around 12,500 jobs at these Corporate Functions will be cut by 2023. This reduction is expected to result in restructuring charges of €400 million.

The newly planned efficiency improvements will cut costs by a total of some €2.2 billion by 2023. This figure includes the €500 million targeted by the GP cost reduction program that was announced in September 2018. All measures worldwide are to be implemented in as socially responsible a manner as possible – in Germany, this is to be done in accordance with the framework agreement (Radolfzell II) signed by Siemens, its Central Works Council and the IG Metall trade union – and through the company’s performance of its social responsibilities. Siemens expects planned growth to create some 20,500 new jobs by 2023. Taking into account the roughly 10,400 efficiency-related workforce adjustments, there will, accordingly, be a net increase of some 10,000 jobs worldwide within the same time period. Therefore, the growth-oriented Vision 2020+ strategy concept will also be reflected in workforce development.
 

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Siemens AG (Berlin and Munich) is a global technology powerhouse that has stood for engineering excellence, innovation, quality, reliability and internationality for more than 170 years. The company is active around the globe, focusing on the areas of power generation and distribution, intelligent infrastructure for buildings and distributed energy systems, and automation and digitalization in the process and manufacturing industries. Through the separately managed company Siemens Mobility, a leading supplier of smart mobility solutions for rail and road transport, Siemens is shaping the world market for passenger and freight services. Due to its majority stakes in the publicly listed companies Siemens Healthineers AG and Siemens Gamesa Renewable Energy, Siemens is also a world-leading supplier of medical technology and digital healthcare services as well as environmentally friendly solutions for onshore and offshore wind power generation. In fiscal 2018, which ended on September 30, 2018, Siemens generated revenue of €83.0 billion and net income of €6.1 billion. At the end of September 2018, the company had around 379,000 employees worldwide. Further information is available on the Internet at www.siemens.com.

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