Siemens : H1 FY21 Half-year financial report

Half-year Financial Report

FIRST HALF OF FISCAL 2021

Table of contents

3 A	Interim Group Management Report

3 A.1 Results of operations

1. A.2 Net assets and financial position
2. A.3 Outlook

1. A.4 Risks and opportunities
2. B Half-year Consolidated Financial Statements

7 B.1 Consolidated Statements of Income

1. B.2 Consolidated Statements of Comprehensive Income
2. B.3 Consolidated Statements of Financial Position
3. B.4 Consolidated Statements of Cash Flows

1. B.5 Consolidated Statements of Changes in Equity
2. B.6 Notes to Half-year Consolidated Financial Statements

16 C	Additional information

16 C.1 Responsibility statement

1. C.2 Review report
2. C.3 Notes and forward-looking statements

Introduction

Siemens AG's Half-year Financial Report complies with the applicable legal requirements of the German Securities Trading Act (Wertpapierhandelsgesetz - WpHG) and comprises condensed Half-year Consolidated Financial Statements, an Interim Group Management Report and a Responsibility statement in accordance with section 115 WpHG.

The Half-year Consolidated Financial Statements are in accordance with IFRS applicable to interim financial reporting as issued by the IASB and as adopted by the EU.

This Half-year Financial Report should be read in conjunction with our Annual Report for fiscal 2020, which includes a detailed analysis of our operations and activities as well as explanations of financial measures used.

A. Interim Group Management Report

In the first half of fiscal 2021, Siemens sold 100% of its shares in Flender GmbH including Siemens' Wind Energy Generation business (Flender). The results of Flender are reported within discontinued operations. Prior-period amounts are presented on a comparable basis. For more detailed information, please refer to Note 2 in B.6 Notes to Half-year Consolidated Financial Statements.

A.1 Results of operations

• Continuing complex macroeconomic environment influenced by the coronavirus pandemic (COVID-19)
• Pent-updemand and growth opportunities varied by business and geographic region

A.1.1 Orders and revenue by regions

Location of customer				Orders				Revenue
	First half		% Change	First half		% Change
(in millions of €)	FY 2021	FY 2020	Actual	Comp.	FY 2021	FY 2020	Actual	Comp.
Europe, C.I.S., Africa, Middle East	16,908	14,443	17%	17%	14,553	13,675	6%	7%
therein: Germany	6,193	4,965	25%	21%	5,157	4,643	11%	8%
Americas	7,319	7,948	(8)%	2%	7,275	7,637	(5)%	5%
therein: U.S.	6,046	6,518	(7)%	2%	6,035	6,371	(5)%	4%
Asia, Australia	7,593	6,634	14%	18%	6,907	6,148	12%	15%
therein: China	4,274	3,453	24%	26%	3,827	2,962	29%	31%
Siemens (continuing operations)	31,819	29,024	10%	13%	28,736	27,459	5%	8%
therein: emerging markets	8,921	7,738	15%	22%	8,173	7,473	9%	16%

Orders

• On a worldwide basis, order intake up clearly year-over-year on increases in all four industrial businesses, led by substantial growth in Mobility, due primarily to a higher volume from large orders, and by a significant increase in Siemens Healthineers
• Substantial negative currency translation effects took five percentage points from order growth year-over-year, while portfolio transactions added one percentage point
• Strong book-to-bill ratio of 1.11; order backlog at €72 billion, up from €69 billion as of September 30, 2020
• Europe, C.I.S. Africa, Middle East: Order intake up in all four industrial businesses, led by sharp growth in Siemens Healthineers and a significant increase in Mobility which recorded a sharply higher volume from large orders year-over-year; order growth was even stronger in Germany, which largely followed the pattern for the region
• Americas: Decline both in the region and in the U.S. on a nominal basis due to substantial negative currency translation effects; on a comparable basis, excluding currency translation and portfolio effects, order growth in Mobility and Smart Infrastructure more than offset declines in Siemens Healthineers and Digital Industries
• Asia, Australia: Growth in all four industrial businesses, led by Digital Industries and Siemens Healthineers; order growth was even stronger in China where all four industrial businesses recorded double-digit growth

Revenue

• On a worldwide basis, revenue up in all four industrial businesses, led by clear growth in Siemens Healthineers and Digital Industries
• Substantial negative currency translation effects took five percentage points from revenue growth year-over-year, while portfolio transactions added one percentage point
• Europe, C.I.S. Africa, Middle East: Revenue grew across all four industrial businesses, led by a substantial increase in Siemens Healthineers; even stronger growth in Germany included a sharp revenue increase in Siemens Healthineers
• Americas: As with orders, revenue decreased on a nominal basis due to substantial negative currency translation effects; on a comparable basis, double-digit increases in Mobility and Digital Industries; revenue development in the U.S. largely followed the pattern for the region
• Asia, Australia: Significant growth in the region, led by a strong performance of Digital Industries in China; double-digit increases in Siemens Healthineers and Smart Infrastructure

3

A.1.2 Income

					Profit			Profit margin
				(IB, POC: Adj. EBITA; SFS: EBT)	(Adj. EBITA margin; SFS: ROE)
		First half			First half
(in millions of €, earnings per share in €)		FY 2021		FY 2020	% Change	FY 2021		FY 2020
Digital Industries		1,659		1,126	47%	21.3%		15.1%
Smart Infrastructure		781		466	68%	11.1%		6.6%
Mobility		427		428	0%	9.6%		9.6%
Siemens Healthineers		1,349		1,104	22%	17.2%		15.2%
Industrial Businesses (IB)		4,216		3,124	35%	15.5%		11.9%
Siemens Financial Services (SFS)		272		305	(11)%	17.0%		20.2%
Portfolio Companies (POC)		(71)		(54)	(33)%	(5.2)%		(3.2)%
Reconciliation to Consolidated Financial Statements		(469)		(632)	26%
Income from continuing operations before income taxes		3,948		2,744	44%
Income tax expenses		(957)		(564)	(70)%
Income from continuing operations		2,991		2,179	37%
Income (loss) from discontinued operations, net of income taxes		897		(394)	n/a
Net income		3,888		1,786	118%
Basic earnings per share		4.55		2.13	113%
ROCE		17.1%		6.4%

Industrial Businesses

• Digital Industries: Adjusted EBITA higher in all businesses, with the strongest increases in the electronic design automation (EDA) software and short-cycle businesses; key factors included higher revenue, expense reductions due to COVID-19 restrictions, such as lower travel and marketing expenses, cost savings from prior cost structure improvements, and substantially lower severance charges year-over-year
• Smart Infrastructure: Adjusted EBITA and profitability rose in all businesses, due largely to sharply lower severance charges, higher capacity utilization, cost savings resulting from prior execution of the competitiveness program, and expense reductions related to COVID-19 restrictions
• Mobility: Adjusted EBITA and profitability on the strong prior-year level despite ongoing impacts due to COVID-19-related measures to safeguard employee health in manufacturing facilities
• Siemens Healthineers: Margin expansion and increase in Adjusted EBITA in the diagnostics business mainly driven by high demand for rapid coronavirus antigen tests; continuing strong performance of the imaging business
• Severance charges for Industrial Businesses were €166 million (H1 FY 2020: €330 million)

Income from continuing operations before income taxes

• SFS: Results in the equity business came in below the level of H1 FY 2020 in part due to sales of investments in previous periods; strong earnings contribution from the debt business driven by sharply lower expenses for credit risk provisions compared to H1 FY 2020, when results were significantly influenced by the initial worldwide spread of COVID-19
• Portfolio Companies: Adjusted EBITA included sharply higher severance charges related to cost structure improvements mainly at Large Drives Applications, which more than offset a decreased burden recorded for equity investments
• Reconciliation to Financial Statements in both periods included gains in connection with the transfer of assets to Siemens Pension- Trust e.V., totaling €0.4 billion in H1 FY 2021, compared to €0.2 billion in the same period a year earlier
• Severance charges for continuing operations were €267 million (H1 FY 2020: €378 million)

Income from continuing operations

• Tax rate of 24.2% benefited from largely tax-free gains resulting from the transfers of assets to Siemens Pension-Trust e.V. mentioned above

Income (loss) from discontinued operations, net of income taxes

• Discontinued operations turned positive due primarily to a pre-tax gain of €0.9 billion from the sale of Flender; in the prior-year period, loss in Siemens' former energy business

Net income, Basic earnings per share, ROCE

• Basic earnings per share more than doubled year-over-year due to sharply higher income attributable to shareholders of Siemens AG
• ROCE higher and within the target range on a combination of sharply higher net income and a substantial decrease in average capital employed following the spin-off of Siemens Energy AG; increase benefited from the above-mentioned gain from the sale of Flender

4

A.2 Net assets and financial position

Asset and capital structure

	Mar 31,	Sep 30,
(in millions of €)	2021	2020	% Change
Current assets	63,793	52,968	20%
therein: Cash and cash
equivalents	23,639	14,041	68%
Non-current assets	67,865	70,928	(4)%
therein: Other financial assets	20,175	22,771	(11)%
Total assets	131,658	123,897	6%
Debt	52,098	44,567	17%
Provisions for pensions and similar
obligations	3,288	6,360	(48)%
Other liabilities	31,676	33,147	(4)%
Equity	44,595	39,823	12%
Total liabilities and equity	131,658	123,897	6%

Cash flows

			First half FY 2021
	Continuing		Discontinued		Continuing
	operations		operations		and
					discontinued
(in millions of €)					operations
Cash flows from:
Operating activities	2,924		(19)		2,905
Investing activities	(899)		1,522		623
therein: Additions to
intangible assets and
property, plant and
equipment	(692)		(26)		(719)
Free cash flow	2,232		(45)		2,187
Financing activities	5,954		−		5,955

• Three of our four industrial businesses posted cash inflows from operating activities within continuing operations, with the strongest conversion of Adjusted EBITA into cash by Siemens Healthineers; Mobility reported an aggregate cash outflow driven by a build-up of operating net working capital; this was also the largest factor for overall cash outflows from the change in net working capital, which totaled €0.9 billion
• Cash inflows from investing activities from discontinued operations were driven by the sale of Flender, which resulted in cash inflows (net of cash disposed) of €1.6 billion in the current period, with €0.2 billion in proceeds to follow mainly at the beginning of the second half of fiscal 2021; for information on the derecognition of assets and liabilities relating to the sale please refer to Note 2 in B.6 Notes to Half-year Consolidated Financial Statements
• The decrease of other financial assets was due mainly to the repayment and reclassification of loans receivable to other current financial assets, and to extraordinary fundings to Siemens Pension-Trust e.V. in Germany. The latter was also the main factor for the decrease of provisions for pensions and similar obligations, together with a positive return on plan assets; weighted-average discount rate as of March 31, 2021: 1.2% (September 30, 2020: 1.1%); for further information please refer to Note 6 in B.6 Notes to Half-year Consolidated Financial Statements
• Debt increased primarily from the issuance of bonds and new bank loans. This increase was partly offset by repayment of debt including a reduction of commercial paper. Further cash inflows from financing activities related to Siemens Healthineers AG's issuance of 53 million new shares. This issuance resulted also in a corresponding increase of equity. For further information please refer to Notes 2 and 3 in B.6 Notes to Half-year Consolidated Financial Statements
• At the beginning of the second half of fiscal 2021, Siemens paid the purchase price of €13.9 billion for Varian Medical Systems, Inc., U.S. in cash; for further information on this acquisition please refer to Note 2 in B.6 Notes to Half-year Consolidated Financial Statements

5