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Siemens Predicts Big Revenue from Green Products by Mark Halper • Sign up to receive ME Daily News Alerts • POSTED on Tuesday, June 24, 2008 3:54:47 PM |
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LONDON — In an effort to show that “green” can also mean business, German industrial giant Siemens staked out a goal to generate €25 billion in revenue by 2011 by selling products and services from what CEO Peter Loscher called its “environmental portfolio.”
He warned, however, against the effect that the slowing economy will have on Siemens’ business in general in the near term.
Speaking to a gathering of international journalists at the Siemens Media Summit here, Loscher said that Siemens last year generated about €17 billion, or roughly a quarter of its revenue, from selling environmentally conscious products. He’s targeting 10% annual growth for that metric. “We’re significantly outpacing our competitors in this area,” Loscher claimed. “In 2011, we intend to generate some €25 billion with eco-friendly products and solutions.”
The company’s environmental portfolio crosses Siemens’ industry, energy, and healthcare sectors and includes any product that reduces greenhouse gas emissions or helps combat water and air pollution. Those products will cut CO2 emissions by about 275 million tons by 2011, equal to the current CO2 emissions of six major cities, including London, New York, and Tokyo, Siemens claimed in a projection audited by PricewaterhouseCoopers and based on criteria developed by the Greenhouse Gas Protocol Initiative of the World Business Council for Sustainable Development and World Resource Institutes.
About half of the revenue will come from the company’s industry sector, which makes products as diverse as light bulbs, industrial automation equipment, PLM software, trains, and building technology. Industry Sector CEO Heinrich Hiesinger said in an interview that the sale of variable speed drives alone could make a significant contribution to energy savings, as manufacturers run motors only when and at the capacities they need. He cited many other energy-saving products, such as intelligent, IT-based brake systems that Siemens builds into trains. Hiesinger also envisions selling energy management systems that not only help manufacturers cut energy consumption, but also facilitate the sale of excess energy to power grids.
Even with the enthusiasm for environmental sales, CEO Loscher cautioned that the sluggish state of the global economy would curb growth. ”Overall it will be a more difficult environment going into 2009,” Loscher said. Still, he predicted that Siemens would grow at double the rate of GDP growth, and noted that because of the overall global slowdown, “incremental growth opportunities in emerging markets will be very important.”
Hiesinger said that the need for manufacturers to improve productivity during this financial crunch will continue to boost Siemens’ industry sector. When Siemens reported second-quarter results in late April, businesses such as automation and drives showed much healthier profits than other Siemens business units.
In London today, Hiesinger predicted that the overall market for industrial products will grow to €480 billion by 2010, from €420 billion last year, as manufacturers continue to seek productivity improvements and figure out ways to combat high energy prices. In gauging the sector’s prospects, he forecast 20% growth in drive sales to the wind power industry and 8% growth in PLM software through 2010. Major manufacturers, including VW and Audi, will start to implement PLM in their collaborative design programs over the next year, Hiesinger said.
Siemens is scheduled to report third-quarter results at the end of July, when it will for the first time break out sales and earnings according to the simplified business structure that Loscher implemented after he took charge a year ago in the midst of Siemens’ corruption scandal. Siemens is under investigation in several countries, including Germany and the United States, for allegedly bribing foreign officials to win contracts. Loscher said he could not comment on investigations, but that the company is providing quarterly updates. Despite ongoing probes, “The organization is in good morale,” Loscher said.
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