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Peter LöscherThank you very much, Mariel, good afternoon also from my side to the second quarter analyst conference. It appears that we are last on a busy day or you had a very exciting Champions League game and everybody is so exhausted. Let me summarize the key takeaways. In a nutshell the performance in the second quarter was mixed, with a positive developments particularly regarding revenue growth, but also some disappointments in order intake and transmission we have been putting a lot of emphasis to work on the transmission topics, and I will give you more background in a minute including the implications for the full year guidance. The macroeconomic environment remains volatile, but the expected softening of growth rates has only materialized in selective regions like China, all parts of Europe while the U.S. and Germany have held up well. For Siemens this resulted in a very robust development of our short-cycle businesses, in Industry where we saw particularly strength in the U.S. business. We may see a slight shift of regional growth dynamics during the second half of 2012. But global GDP growth is still expected to be on a moderated level of around 2.8% for the full year. Overall, our order intake decreased significantly by 16%, mainly due to a much lower number of large orders in energy and transportation and logistics. Due to this fact, our book-to-bill decreased to 0.93 to 0.93, but we see this only as a temporary development. Our backlog remains at a very healthy level of around €100 billion, we accelerated revenue growth to 7% across all the sectors, driven by continued backlog conversion in energy and above average growth in emerging markets of 10%. Profitability was substantially prudent by further charges mainly for the German offshore grid connections in power transmission.
As indicated, the fundamental restructuring of investment weighted on our equity investments results. This led to a significant decrease of profit from total sectors by 48%. Major part of the difference was also the Areva disposal gain of more than €1.5 billion in the second quarter of last year.Together with the additional NSN effect is led to a 67% decline in income from continuing operations, we saw some moderate improvement over the last year in our free cash flow, but net working capital stayed on a high level of during Q2, and Joe will discus this topic in more detail. From a strategic perspective, we continued our selective approach to do bolt-on acquisitions. For example we strengthened our portfolio in industrial software through the acquisition of RuggedCom, specialized Canadian company providing communication solutions for harsh environments such as in electric utility, substations, oil refineries and rail applications. In oil and gas, we complemented our subsea power grid offering by taking over the connectors and measurement division of Expro Holdings. For records, here you just see as an overview of the key figures of the second quarter, which you have already received this morning. The regional perspective for orders and sales in the second quarter provides a mix picture. The base business in industry and healthcare showed solid growth rates, but we lack large orders particularly in energy, and also in the rail business. For example the decline in orders and revenue in China can be explained by missing business for rail equipment in China due to delays in investment decisions. In energy, the comparables were particularly tough in Germany where we won three major orders for offshore win parts a year ago. But also in emerging markets like the Middle East where we booked a major combined cycle power plant order in Saudi Arabia in Q2 of last year. The U.S. showed strength both in orders and revenue in a better than anticipated economic environment.
Our sales growth was very broad based with particular strength in emerging markets such as in India with remarkable 48% growth or Brazil achieving 18% increase. For the second quarter, this resulted in a further shift of our revenue distribution towards emerging markets with a share of 32%, up 1 percentage point over the second quarter of fiscal 2011.What were the key developments in each of the sectors? First sector, energy. As already mentioned, orders in energy went down substantially by 36% due to a broad based decline of large projects in all divisions. The energy market remains highly competitive but our sales funnel for the coming quarters looks promising, and we expect a book-to-bill ratio about one for the full-year. Intentionally, we were more selective on orders and walked away from low margin businesses. The sector’s backlog was at the healthy €56 billion at the end of the quarter. A major highlight in Q2 was the order for the 834 megawatt combined cycle power plant in Ansan in South Korea, where we will deliver among other equipments to world leading H class turbines to Bosco. Second quarter revenue rose by 10% on the conversion from energy, strong order backlog with substantial growth in Asia, Australia and a sharp increase of 42% in the renewal business. I want to point out that besides the challenges in transmission, the Sector Energy delivered a very solid quarter regarding profit, and once again proved that our position as the only integrated and energy companies fully intact. Fossil delivered 17.5% profit margin, and continued its excellent project execution in the solution business, also achieved the strong earnings contribution from the service business. We were very pleased to see renewable energy rebounding from the weak Q1 and also taking our profitability sharply to 8.2%, which was basically volume and top line driven.
Our clear number one position in offshore wind gives us a competitive advantage since we achieved a healthy revenue mix of around one-third of offshore and two-thirds on onshore businesses in the first half of fiscal 2012. We are working hard to maintain the lead offshore wind and stay competitive in onshore to be successful and expected difficult market conditions ahead. Besides ongoing pricing pressure and expected industry consolidation, this is mainly caused by the uncertainty over the extension of the U.S. tax benefit scheme beyond 2012. Power transmission reported a significant loss of €169 million in the second quarter major factors were additional charges of €278 million we had to take mostly related to the grid connections to offshore wind farm projects in Germany.Read the rest of this transcript for free on seekingalpha.com