This morning, ladies gentlemen. Welcome to the Siemens 2018 4th Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the Safe Harbor statement on page 2 of the Siemens presentation. This conference call may include forward looking statements.
These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would now like to turn the conference over to your host today, Ms. Sabine Vidal, Head of Investor Relations. Please go ahead, madam.
Good morning, ladies and gentlemen, and welcome to our OQ4 Conference Call. The Q4 earnings release, presentation and press release regarding our new share buyback program were published at 7 am this morning. You can find everything on our Investor Relations website. Siemens' President and CEO, Joe Cazer, as well as Siemens' CFO, Ryst Tomas are here this morning to review the Q4 results and give the outlook for fiscal 2019. After the presentation, we will have time for further Q And A.
With that, I would like to hand over to Joe.
Good morning, everyone, and thank you for joining us for our fourth quarter conference call. Obviously, we do have a lot to cover let's have a look at the agenda for today. Again, as we executed, on what the parameters and fully reached our guidance for fiscal 2018, which, as you know, we raised during midyear. This shows strength of our global team achieving excellent operational performance. We delivered these results in an economic period sound global environment, with dynamic industrial demand, but obviously also continued structural challenges in the power generation market including what I would sort of call a geopolitical uncertainty.
Tivens is growing and in many of our businesses, they are stronger than ever. Taking further market share, in highly competitive markets such as industrial, digitalization, automation, Billing Technologies are 1st and foremost also in the mobility sector. And we are rigorously addressing these challenges. In those areas, where the markets are structural declining or shifting the center of gravity, for example, from fossil to renewable energy generation. Out of this position of strength, we believe now is exactly the right time.
To raise the bar with our Vision 2020 plus. And, before Ralph goes into the 4th quarter results, maybe highlight a few recent things in that respect. If you look at 2018, targets. We said we would actually have organic revenue grew modestly by 2%. And in fact, that's exactly what we achieved on a book to bill, which was at a strong 1.10.
We saw a strong operational performance. The most divisions within our reef and above the target margin ranges and has led to an inductance margin, excluding severance, of 11.3%, which obviously has also been within our guidance range for fiscal 2018. EPS earnings per share, excluding severance, were 2% to compared to fiscal 2017. And again, also here, we had it actually also committed it to be. We made excellent progress on our strategic priorities.
You can think about the completion of the Egypt Mega project which happened in record time of less than 2.5 years after financial costs. Each of the 34,800 kilowatt power plants has become the largest gas fired combined cycle power plant ever built in one piece. And operated in the world. In total, we added about 10.4 gigawatts capacity to the national grid of Egypt, which is obviously enough power to, to serve more than 40,000,000 people to be the backbone, of course, what we believe to lead to economic prosperity. If we really look at it, we not only provide energy and also helping the country to save more than USD 1,000,000,000 on annual fuel costs compared to what they had.
Inserted operating before the mega powertrains attributable. For us, It has not already been challenging to help Egypt's power grid to be improving. This is also a crucial topic for us when it comes to creating jobs and local steels at a sustainable eco NOVIC TRADE 600 Egyptian engineers and technicians to make sure that they can properly not already have maintained the plan. I also want to highlight three examples out of many of our We will drive digital business together with our customers and partner ecosystems. 1st, we will digitalize the entire region of infrastructure into a full digital IP based signaling system.
This landmark order, which is worth more than 1,000,000, is a real long term project, which is scheduled, we completed by 2000 and 34, and we combined in the 35 years of maintenance agreement. 2nd, MindSphere, which is the leading IoT duct based operating system, will run Alibaba trucks at the end of fiscal 2019. This is a really important step in order to offer a comprehensive IoT service solution for our Chinese customers and manufacturing partners to support them in their digital transformation all over the country. 3rd, Our strategic cooperation with Bantou System is really, really bearing fruit. We have several new solutions such as what we call Bensite, It is a digital twin cloud service for more efficient process, plant operations or that increased our 20 nesting program now up to EUR 100,000,000 and we intend to continue that path.
So with that, I'd like to hand it over to Rolf to go through fourth quarter financial performance, give you a guidance for fiscal 2019 before I'm going to close with perspective of where we are at in implementing our vision 2010 scopes. Did that also hand it over to you?
Thank you, with broad based order growth of 5% driven by double digit growth in Mobility, Digital Factory, Power And Gas And Health And Years. Base orders were also up 3% on a nominal basis. Book to bill reached 1.05 while order backlog remained at a record high EUR 132 billion negatively impacted by exchange rate. Revenue growth accelerated to 5.5 percent with growth in all divisions except Power And Gas. Industrial Business Profit margin excluded, excluding severance, reached CHF 11.3, up 100 basis points year over year.
Most divisions increased margins now well in or even above the margin corridor. This excellent performance was held back, however, by structural challenges in power and gas, which weighed on profitability. Our industrial businesses margin was also impacted by 60 basis points of negative currency effects, As expected, net income and earnings per share were also burdened by sharply higher income taxes related to carve out activity that mobility and severance charges mainly at Power And Gas And Process Industries And Drive. Brightbot was free cash flow of 1,000,000,000, up 38% year over year, adding up to 1,000,000,000 for the fiscal 2018 in total. Let me now highlight the performance of our division.
As we have mentioned for quite some time, power and gas continues to operate in a very challenging environment. Global Energy trends towards renewables led to declining markets for new units, in particular for large gas turbine. Demand from oil and gas customers shows some signs of stabilization. We booked orders for 5 large gas turbine 11 large steam turbines and 12 small and medium gas turbines in the quarter. Service business held up again very well and drove order growth for so called flex LTPs has grown now to 1,000,000,000, while power and gas total backlog stands at 1,000,000,000.
A significant order contribution came from the contracts already mentioned by Joe to operate and maintain 3 mega power plants in Egypt. Some weeks ago, we agreed to a reconciliation of interest with the Central Works Council in Germany to implement measures boost competitiveness in power and gas. The goal is to save around 1,000,000 globally. For the quarter, we booked severance trust of 1,000,000. Profit margin of 4.9% excluding severance was somewhat better than expected.
Revenue and price declined again, weighed on profitability, while service made a strong profit contribution again. In addition, we had positive effects from stringent project execution and early closeouts. For fiscal 2019, we reiterate our view of a low to mid single digit margin level, excluding clearance. Energy Management continued its steady improvement path and closed with annual profit exceeding the EUR 1,000,000,000 threshold for the first time. In the quarter, all systems and product businesses recorded healthy order growth with a very strong data center business.
Orders and transmission solutions were clearly below prior year, due to a tough comp. We also saw some push outs into the next year. Our project pipeline looks very healthy for HVDC related Solutions project in fiscal 2019. Profit margin of 9.4 percent moved towards the higher end of the target margin range with distributions from all business Building Technologies achieved its best operational year ever, delivering a record margin of 13.7% in the 4th quarter typically being the strongest quarter of the year. Revenue growth of 5% once again exceeded market growth of around 3%.
Clear evidence of consistent market share gains while increasing profitability. Building Technologies is continuously strengthening its integrated in automation and digitalization for buildings, combined with excellent and customer proximity through its service network. Another highlight is the mobility performance. The team delivered all time high quarterly revenue of most notably in the Rail Infrastructure And Service business. This came with an excellent profit margin of 10.1% We also expect double digit margin level to continue in the quarters to come.
Mobility has built a sustainable execution track record, meanwhile. Margin was at in or above the target margin corridor for 20 consecutive quarters now. We are very pleased with another world class performance of the digital factory team. Strong order growth was driven by PL software business where we recorded several major orders in the semiconductor space by Mentor. We saw excellent revenue growth of 10% fueled by mid teen growth in software and peer growth in the short cycle automation business, both winning market share.
Our short cycle businesses in China was again up by healthy 13% despite tougher comps. From end market perspective, Automotive demand showed slower growth while machine building was favorable. Looking ahead, manufacturing production is expected to continue expansion. However, we see a softer pace in gross momentum across many countries and regions such as in China or Europe. We expect a good start for the short cycle business in the first quarter based on backlog conversion and visibility 3 to 6 months.
Digital factories margin, excluding severance, improved 110 basis points versus strong level of 19.2%. Margin is around 21%, excluding investments to accelerate the adoption of digital offerings such as the MindSphere platform and increasingly also into software as a service. I wanna give you some more color on why the fourth quarter of digital factory slightly lower versus year to date performance. Software margin in the 4th quarter is typically lower reflecting Metro's profit seasonality. Manual 4th quarter is typically the weakest and the first quarter is the strongest.
Furthermore, we recorded a higher revenue share in business in the quarter, which carries a lower margin. And last but not least, digital factory was burdened by around 80 basis points currency headwind. In a nutshell, digital Factory delivered another strong operational performance, building on its unique capabilities combining automation and software. Pros Industries And Drive successfully continued its steady improvement part. Revenue increased broad based with particular strength in China, growing in the mid teens.
Margin, excluding severance, improved 6.7% despite currency headwinds of 70 basis points. Structural improvement and better operational performance make their way to the bottom line. Deverance charges of $85,000,000 reflect the intended major milestone to adjust capacities in Germany. For Health And Years closed in its fiscal year with a very successful IPO and delivering on its financial targets. They released strong 4th quarter financial 3 days ago with an excellent order growth of 13% geographically driven by the United States Operational improvements and productivity gains were more than offset by substantial currency headwinds of 220 basis points.
Siemens Ganeta completed the initial phase of its strategic roadmap and achieved its fiscal 2018 guidance. Sgre made significant progress to improve its competitive positioning by diligent execution of the announced cost out program. Overall, we are very pleased as a majority shareholder with the progress of our strategic company. Fiscal 2018 was a very successful year for Siemens. We achieved our target and all stakeholders will benefit.
Therefore, we decided to raise the dividend for the 5th, 5th year in a row. We proposed a dividend EUR3.80, which is an increase of 3% and equals the payout ratio of 53% well within the target range. The dividend yield of 3.4 percent as of September 30, we offer a very attractive and sustainable return. The second pillar of shareholder return was a successful execution of our 3,000,000,000 share buyback. And I'm sure you will be pleased to hear that we will start a new share buyback program for up to 1,000,000,000 until November 21.
And finally, We foster entrepreneurial thinking amongst our employees. We increased the number of employee shareholders to around 300,000 This is a clear sign of confidence and commitment. Before I come to our assumptions and guidance for fiscal 2019, let me use some data points on how we lift our performance through rigorous execution. Since starting Vision 2020 in fiscal 2014, we have increase the gross margin level to around 30% and we intend to improve further. The continued strive for productivity digitalization of internal processes and the move towards flexible and adaptive teams is bearing fruit.
We achieved another year with total cost productivity gains of around 1,000,000,000. A driver is the accelerated implementation of cross value engineering in the supply chain, strongly supported by our widely applied own PLM software tools. We are also pleased with our consistent tight grip around project execution. Now let me share some assumptions with you, which are relevant for our guidance. We assume no material impact for the businesses from Geopolitical risks and macroeconomic factors.
Top endbottom line Most of our divisions have demonstrated competitive strength and are on a positive trajectory. We continue to expect revenue growth market share gains and margin expansion in most of our businesses. However, the positive momentum will be held back to some extent by declining power generation market as already mentioned. Negative pricing impact is expected to be around 2% to 3% of revenue, which stability in short cycle and ongoing pricing pressure in power generation businesses. Personnel cost inflation is expected to be in the range of 3% to 4%.
And also assume vision 2020 plus related efficiency measures to optimize support functions. We will give you further details at our planned Capital Markets Day. CapEx in the industrial business is expected to go up clearly in fiscal 2019 as we have taken some decisions to expand and optimize footprint in line with market demand. We expect continuing adverse currency effects. It results primarily from translation effects of businesses in emerging markets such as China, India, Turkey, or Argentina.
Just as a reference, we recorded revenue of 1,000,000,000 in emerging market for fiscal 2018, thereof 8,000,000,000 in China. The negative impact from exchange rates on margin is expected to be services will continue to be a reliable profit contributor on fiscal 2018 level. Siemens Real Estate is depending on disposal gains, as in previous years. Centrally managed portfolio activities include at equity investments such as Valleo Siemens or Primetals and further carve out related items. We expect a significant swing in CNPA and overall negative impact in fiscal 2019.
Furthermore, we assume no material gains from divestments. For corporate items and pensions, you can assume a cost run rate of around 1,000,000 per quarter. For PPA, you can assume a similar as in fiscal 2018. The same applies to elimination, corporate treasury and other items. The tax rate is expected to be in the range of 25% to 31%.
Important to consider is the higher level of minorities in fiscal 2019 due to health and ears included for the full fiscal year. Now let me summarize the guidance for fiscal 2019. We expect that continued favorable market environment, particularly for the short cycle businesses with limited risks related to geopolitical uncertainties. For fiscal 2019, we expect moderate growth in revenue, net of currency translation and portfolio effects. We further anticipate that orders will exceed revenue for a book to bill ratio above 1.
We expect the profit margin of 11% to 12% for our industrial business based on our current organizational structure excluding severance charges. Furthermore, we expect basic EPS from net income in the range of EUR 6.30 to EUR 7,000,000, also excluding severance charges. Fiscal 2018 basic EPS from net income of $0.12 benefited from per share in portfolio gains related to our states and ADOS and Ostrand and was burdened by from severance charges resulting in I hand it back to you, Joe.
Thank you, Charles, ladies and gentlemen. Since 2013, we have made major progress and have achieved strong results by executing our vision to Anthony. What's important, necessary to develop in group quality various quality through liability of our complex. And that performance in our view is a very clear evidence that Siemens is stronger than ever. And over the years, we have invested quite some resources into the future of our company.
That I just want to highlight maybe a few areas. 1st of all, innovation has always been the key driver of value creation and profitable growth. And since 2014, We have constantly ramped up R and D resources in both absolute as well as relative terms. Main driver obviously has been the rising share of software and digital and artificial intelligence, certain applications across the business Those are reflected this is also reflected in our resource allocation. Our growth and profitability strongholds such as Digital Factory Or Healthcare are by far the most R And D And Jiff Businesses investing more than half of our R and D spend, which obviously in turns leads to quite rich gross margins in those sectors.
If you look at Digital Factory, for example, It will provide a leading innovation platform by combining the digital enterprise software suite Mendix's local application platform and managed your IoT ecosystem. And that drives quite a massive amount of interest from all our verticals in the market because you obviously see the benefit in combining those elements to help them improve their efficiency. In the market. We do support all those customers, and we support them of all sizes from small, medium enterprises, all the way up to big companies, such, for example, owing more others in that space. In industrial digitalization, We are clearly the number one with our unique combination of automation and software.
With 12% organic growth, In the industrial software business, we outperformed the sector and we expect to continue this path going forward. Our ongoing investments in this field are paying off. They're also very proud, especially about one great team success which has to route to celebrate, and that was actually that we have been able to cut a deal with Boeing obviously, one of our lead customers in that area when we talked about the 2nd century partnership of electrical and electronic designs. With our Boeing together now, we will significantly expand the partnership by going to standardize the enterprise based on our tools and solutions. And that long term agreement on how we see it today offers quite a potential for a triple digit million total contract rally.
And as mentioned, continue to invest in bringing the bits and pieces together for enterprise solutions, which, helped the customers benefit in terms of efficiency savings and expansion. The Mendix acquisition now closed on October 1st, and we are starting to use massively use the low code platforms to speed up our application development, which obviously, again, in turn, provides customer solution which are, make customers willing to pay for the benefits they have. The digital transformation is changing, obviously, and you know that for industries and we are proactively shaping this development in our domains such as Discrete indices, We also see verticalization in electronics in automotive, in semiconductors and the other appliances. As you also see, gradables in the smart infrastructure environment, not just limited to digital Industries. One example, is, a recent order we were able to close in Singapore.
Our venture application center will develop and manage the comprehensive data analytics solution for the mass transit system. So that actually means that full mobility in the City or state of Singapore is going to be integrated into 1 data application center and Oposte can be optimized as we speak. Combined with commercial information, obviously, we'll be able to provide decision support and guarantee optimized availability and efficiency of the rolling stock and the hardware. Saved them 100 of millions of investment into hardware going forward. As you can see, From those examples like Empower Services Building Technologies and are continuously expanding our digital portfolio, and sales competencies, which is an important factor, in an organic way, but also through some smaller bolt on acquisition.
These investments are a sound pace to raise the power of Vision Trinity Plus for higher aspirations, in sharpening our purpose. Our team is more than ever impact oriented. And in this align the cross haul areas, the customer proximity, innovation efficiency and adaptability as one of the prerequisites of a dynamic organization going forward. We work to further development, what we further develop, what we call, ownership culture, to the benefit of clear entrepreneurship, responsibility and accountability as the cornerstones for our Vision 2020 plus management system. And that management system basically is built on 3 key principles: 1st, focus The focus means that we do whatever the independent and different businesses need as their priority They have the entrepreneurial freedom to exactly do what is the best for their respective market and then case of a conflict focused matters over synergies, which typically are pretty overrated anyway.
The companies will have full control in shaping their businesses to achieve superior performance, which will be measured against the best Spokya Respective industries. Cardability, we introduced either own decisions and actions for the individual businesses and is accountable for achieving the different targets. There is obviously no entrepreneurial freedom without a corresponding responsibility that will also hopefully find its way in the long term incentive systems of the new operating companies such Finally, that's very important because that's true for all the functions in the company, the ability, the absolutely critical in 2 days, fast paced, complex and, obviously, uncertain around. And within this transition, 2010 plus, we will shift from a one size fits all approach to a purpose driven and market focused approach. We do what is best for the respective businesses in the company.
So as we stand, in executing on 1st, the organizational changes. We are in the middle of doing that. We are making our way well into what they said they would do. We will be ready with the organizational alignment by March 31. And beginning with the second the third quarter of our fiscal 2019, they're going through explicitly and deeply start the optimization of the businesses.
And after the release of our second quarter fiscal earnings in 2019, we are going to host a Capital Market Day where the CEOs and the management teams of the operating companies will provide details on how they are going to secure the growth targets as well as improve profitability target ranges. As we have outlined then in our August presentation, OFITION 2020 plus Later in the year, we're also going to have an innovation day, which Robert is going to focus on the latest innovation management tools, on Daliputo resources to work on Vietic commonalities are within the company to share with each and any of of the operating companies so that we get the best out of what we do in our organization. With that, I believe the goal is clear We ultimately want to create value for our stakeholders, for our customers, for our shareholders, and lifestyle, not least also for our people even outside the company. With that, Ross and I are happy to take your questions and I return the mic back to
the team.
Thank you, Joe. Thank you, Raj. Operator, we will start now with the Q And A.
You. And we will take our first question. From Ben Oglow, Morgan Stanley.
A couple, if I may, obviously around digital factory. I just want to understand, in terms of the margin effect that we saw in the fourth quarter, how many are kind of reversible and how many are ongoing. So if I look at the If I look at the margins sequentially, quarter on quarter, on an underlying basis, we've stepped down from about 21% to 19%. So that's basically about a 2 percentage point impact. Within that, as you mentioned, we've got FX, we've got solutions, and we've got the mentor effect So how much of this is kind of one off and how much can we expect sort of reverses?
And then obviously, I also noticed from your presentation, that we are stepping up some of the investments in that area as well. So can you just give us a feeling for how to think about the margins as we move into 2019 versus the 20% that we've achieved, in 2018. And then the follow-up, Joe, you've been very sort of candid about this over the years about the drop through rates in factory automation and motion control in particular. If we are thinking and I stress who knows, But if we are thinking about China slowing down, is it natural to expect that those margins in factory automation and motion control would come down as well. Those are my questions.
Thank you, Ben. Ralph speaking, of course, very relevant questions we have been asking ourselves quite in detail before. And let me quickly get you some color on the digital factories margin in the fourth quarter. As we have been guiding you we have been spending about 150 basis points on margin impact for MindSphere. We had another, say, around 50 basis points for Mentor Integration haircuts and like And what you may have not been having on your list is the fact which we indicated that we now start to ramp up software as a service investment, even though that was in the low double digit million area in fiscal 2018, This will increase as we indicated before the mid double digit million in fiscal 2019.
And what we also have been mentioning is the 80 basis points of exchange rate negative impact for the quarter. So if you take all that into consideration plus eliminating the restructuring expenses, you will come to a fairly healthy margin level of clearly about 22% again. The mix being hidden in the fourth quarter and we also discussed it a couple of times depending on whether or not we execute on what digital factory is calling projects means implementation of projects, mainly at large OEM customers with a fairly low margin. Why are we doing that? Because we will tie in their supply base then in the year to come with the Tier 1 and Tier 2 customers of those, OEMs.
We are quite happy with that investment because we definitely will mark share with that and may get sustainable revenues from that on the way forward. The mantra of seasonality, we talk about, I mean, it's hard to tell and quantify what that will mean in detail, in the first quarter to combat after all we saw so far, Mentor really has been very quickly integrated and the sales forces are a fruitfully benefiting from each other, historical and the new joiners from Mentor. So we are quite happy with the quarter even from a even though from a face value, it may have been difficult for you to judge for the way forward in fiscal 2019, I think, we just can repeat and stick to that what we have been guiding you before, just for modeling the MindSphere Impact we continue investing in the area of 1,000,000 per year, what we said, which was also applicable for 2018. We will ramp up software as a service with some mid double digit million amount. So maybe you consider 1,000,000 in your models.
And what we also will see as always when you acquire and integrate a software company Mendix will be in the higher double digit million area. And we intentionally do that as quickly as for a big and fastest possible because the faster we move, the better our opportunities to occupy the space in a very interesting environment where we also have quite plenty of cross selling opportunities in the years to come. And for men's sure there will be a residual amount of integration cost in fiscal 2019, with the associated effects of revenue recognition, as you know, that from the past, so that will also be in the mid to higher double digit million areas. So From that point of view, there's a substantial amount of investment, Eugene, in 2018 actuals, and we will continue being very transparent in what we intend to invest for moving into more and more into software as a service and also building on the success that we had on F already with our MindSphere applications and to build on that. With regard to the drop through rates, of course, we are very, very carefully watching not only FA and motion control, but all the short cycle businesses.
And in particular, China, what we have been seeing in China was quite a strong performance in the 4th quarter as we indicated. And going forward, there will be some moderation on the growth pace, most likely, mainly in automotive. But we also see strong momentum in machine building industries, as I said before. So from that perspective, we feel quite confident for 1st 3 to 6 months of the new fiscal year. And what you also should bear in mind, I had been mentioning that the last quarter and now for the fourth quarter years that for the fourth quarter's end, we even had a higher backlog in the fact the re automation environment, the highest level that I ever experienced and I'm in the business for more than 15 years now, which is encouraging us that we are doing the right thing and at least for the next 3 to 6 months, see a continuing growth momentum, even though moderating in pace.
I hope that has been kind of comprehensively touching on your topics.
Ben, ladies and gentlemen, let me make maybe a general comment about the whole macroeconomic geopolitical and have few methods. I mean, this has been on the agenda for all interviews and all things which we have actually been questioned about and asked about, for the last 3 hours. And we don't see there is a lot of concern about trade war and behavioral aspects of the main players. Questions about have the same eyes in the automotive sectors and the short cycles reached people not, how close we are. I mean, obviously, if you look at really what has happened so far was that consumer presumans continue to buy almost no matter how big the terms are going to be increased upon.
Now to drill these out, whether or not there will be a different tone between the U. S. And the China after the midterm elections, so we'll see. But, but I'm really not that worried about sector too much honesty. I'm almost amazed about the fact that no one has actually looked at what would interest rates to the business, it's developing, raised in a massive way.
Obviously, it's hit by inflation, which could be caused by tariffs and the like if consumers have to pay the bill. So I do see if there is a risk in 2019, I would actually expect the major risk to be coming from a significant interest rate hike, in both in the United States, obviously, killing consumer euphoria, in buying stuff and consuming stuff, which is almost unprecedented in the U. S. If interest rates are being raised in Europe, that will definitely spark another debate on on physical debt and the likes and the more South Dakota, the worst it will get. So that's much more what we are currently looking at.
On how the demand will be affected in some big words on trade, and we have a little actions. So that's that's in our view, the reason why we have actually been flacking that we would not expect major adverse impact from geopolitical aspects. If you look at what do the interest rates and what they could do if they hike very quickly to consumer confidence because that's the end customer in a way. Very early in the value chain with our equipment for machine builders and car makers and top yard protests. So that's what we are currently having to focus and then we'll take it from there.
I don't think it was important that you understand our thinking here. We cannot predict the future, but we obviously can do everything to perform better relative to competition. That's the aspiration that's what you can take us up on in the end.
That's great.
And our next question comes from the line of Andreas Willey, JP Morgan. Please go ahead.
Yes. Good morning, everybody. Thanks for the time. My first question is on power and gas, whether you could maybe provide an date on some of these mega projects that seem to dominate now the opportunities in the market in Iraq, both you and GE have announced some wins, but maybe you could clarify a little bit in terms of what exactly you think will turn into firm orders in the near term? And also you mentioned that you would have signed a SEK 20,000,000,000 contract or a framework agreement in Saudi Arabia.
Had you gone to the summit maybe you could also elaborate a bit on that in terms of timing, what it is and what's happening now? And follow-up on the guidance, and your earlier comments, you seem not that worried about short cycle or the tariff impact how do I reconcile that then with the 630 lower end of the EPS guidance in terms of the kind of the spread of assumptions you make, particularly for digital factory in the upside case and downside case?
Thanks, Andreas. I mean, obviously, we agree with you that the power generation market will be impacted quite a lot by measures of rebuilding, economies which have always been suffering from a lot of external impact. When it comes to Iraq, There's a lot has been written about it in the media. And what we do is we focus on our customers. And focus on who can build the better concept, for what is being needed on the customer side.
And that's all what we do. We presented that concept, it has been listened to an MOU has been signed. We understand, MOU has also been signed And that's as much as we can tell at this time. And if we have an order, we will book it and report on it And other than that, we focus on our customers and the solutions. What we, of course, expect is, they were playing field from any of the constituents, let's say, involved in the matter.
And that's all we ask for. And we have a lot to offer in the United States, almost 60,000 jobs. Which trigger another 150,000 to 200,000 indirect jobs, be paying a lot of taxes still despite the fact that as the tax reform, which I believe, is a good thing if it creates more jobs and increase and increases the substrate associated with that. So we are a global company. We can offer a lot in many countries, and I think that's why I believe also governments are well advised to have a look at that, multilateral and not such have a narrow focus on nationalistic use, although people commit to being nationalistic So that's as much as I can say.
Everything else, people rely on financial ustainability, there are some stability on innovation of executing big projects, which we have quite a nice track record of the niche And that's that we want to speak for us and not some other, let's say, methods which are outside of our On Saudi, yes, it's always been a very long term committed partner and that continues to be the case. We believe Division 2030, which has been outlined by his highness, Mohammed Bin Salman and his team as I wise compelling strategy to develop, a kingdom asset you will. We support that. We have if you look at what's being needed and what's being addressed there, almost recycled description of business, of sealants from generation to natural resources to digitalization, industrial build of, of modern cities and infrastructures over the way to building, virtual twins by software and, of course, health care. So we have to hold spectrum via an actual partner And that's understood and that doesn't change.
Now obviously, I made myself known that there's got to be a few topics, which need to be clarified. I did the extension extensively described by viewers, which I think are much more differentiated than most others have reflected on it. Can read it in the LinkedIn post, and that's such master seats in sales. So we look to the future, we cooperate the group together, but also we believe in only natural that, developed economies have a certain way of dealing with, fatalities, and that's that's also has been set. And other than that, we work it from there.
And also here, like we look at projects and customer benefits. And if there is orders, we book the mental part.
Yes. And with regards to your second question, Andreas, around the guidance and the confidence, I think, was the word that you have been using. I mean, what we said is what we tried to express is at the moment, yes, we have fairly good visibility for the 1st 6 months of the fiscal year in our short cycle business. We don't see We don't have any indicators that clearly would tell us anything else than just assuming that the momentum, yes, is obviously not burdened by all the geopolitical tensions we saw in the past. So why would we have a reason to anticipate that to change if we don't have a trigger?
And as I answered to Ben already, when it comes to the short cycle element of digital factories portfolio, We also have a very tangible and firm backlog in our hands at the moment also on the start into the new fiscal was really quite promising. So in a nutshell, we don't have a negative indicator. So the assumption we set yes? And that's what the guidance is supposed to express is that this is something we expect, yes, to keep on with the momentum that may decrease a little bit compared to the pace of growth we saw in the past. Including China.
With regard to the tariffs, I think Jochen Schmidt has been mentioning the health and health Q and A, that the impact for the Health And Years was something between 1000000 or 1000000 and 1000000. For Siemens in total, it's really hard to tell because you would have to get into each and every single declaration between all those pairs of countries where we are trading between. But if you assumed a high double digit number for that one, that what we would also presume from today's perspective. Of course, not a good thing to have, but also not really material from a from a corporate perspective from a company's perspective in total. And, with regards to the digital factory and the margin conversion in the year to come.
As I indicated before, We will continue to invest in MindSphere as pointed out before. This is going to be 150 to 200 basis points in 2019 again. Equaling around 1,000,000 for modeling that, we will continue and increase our investments in software as a service as indicated before. And if you then add also what I said about the mandates integration and the residual on mentor, you end up with some 300 basis points of upfront investment that will be burdening the margin of fiscal 2019, but it's, I think, one of the best investments we can make those days. I also have been indicating that there will be a basic and regular restructuring of 1000000 to 1000000 on an annual basis as normal course of business, a portion of that will also be in the short cycle business where we continuously driver value chain closer to the growth markets.
And I also talked about the incremental impact of exchange rates. Which will not be material in total, but also will be rather a drag on margins. And also on a nominal basis when it comes to EPS. I mean, that's a different story, obviously.
I mean, you all know, how quickly short cycle can move? Otherwise, would it be short cycle So they also are all aware of the impact of what's revenue growth or contraction has to to the bottom line keeps them to reach, 1st margins, which we have in that business. But I also, however, would like to throw your attention to is that we are, since we are in quite a growth path, we also also own an investment path. So we are planning to incrementally spend money and allocate resources to the business. Good news to that is, should there be any adverse, impacts on top line based on markets or other things We have the freedom to choose and decide whether or not to spend that money, which is a fundamentally different situation, then if you have spent the money already and need to deal with fixed costs, which hardly go away over time, talking about Origin.
So I think if I would probably guess that we are planning to spend a mid three digit million amount of OpEx in 2019, roundabout, then you see that we have a lot of leeway to decide whether or not to stand it, if we believe market condition will unexpectedly change, which is quite an important factor to know. So we have flexibility also in OpEx pending. And we will do that very meaningfully related to what they believe the marketplace will do and develop going forward. Think it's a very important aspect you want to consider.
Yes. Thank you for the clarification. But on Page 19, slide where you talk about the investments in Digital Factory over the next 2 years, does this already include the 10,000 implementation engineers you want to hire over time, for the kind of driving further down the vertical integration to deploy software solutions?
That's a different aspect, Andreas. This is supposed to be in the IoT space. That's this IoT nucleus we have been talking about. So that happens in the corporate development. It's got nothing to do with digital sector at this time.
And up to those 10,000 in total, first of all, that will be all low cost like India, Romania, Egypt, and the likes. Secondly, this is something which we may or may not invest. This is based on the use cases. We provided the customer, the customer framework we work together with. So that would be, if at all, incremental spending, covered in the corporate development in the R And T space.
It's got nothing to do with the short cycle industrial verticals. That's one keep within the digital industries because it's a very specific IoT use case in the digital industrial field and not in infrastructure such as smart cities or, or, mobile infrastructure or charging infrastructure in e mobility. Thank you very much. Sure.
Thank you. We will now take our next question from Peter Reilly from Jefferson. Please go ahead.
Good morning. Thank you for taking my question. Two questions, please. Can you give us some more detail on the Boeing Mensa win. I'm interested to know whether you think you would have won that contract if Menta hadn't been part of Siemens, whether it was an example of revenue synergies.
And more broadly, You talked about winning large projects with OEM customers. Are they still mainly in the automotive space or are you managing to be more successful now in non automated customers in Boeing. Just a very public example of that. And then secondly, I'd like some more color if you couldn't share it on where you you gave me with Building Technologies had a very successful few years now. You're above the margin quarter range.
It's growing nicely, but it's still, I would argue probably smaller than a lot of its peers. So do you see the need or the scope to expand the business more rapidly or aggressively by doing some larger deals? Or are you happy with the organic development?
So thank you, Peter, talking building technologies. I think this is a true success story because now for many, many quarters in a row, they have been continuously improving both their top and bottom line 3, 4 years back. There was still quite a material gap between best in class in terms of profitability and that what we contribute and they have been consistently closing that gap between then and now. They have been very much focusing on growth markets and have been concentrating also the resource allocation into those markets and benefit from that now very much though also in the U. S.
And of course, and therefore, they are very partially adding incremental investments from an M and A perspective as they did with three ones we had been mentioning, I think that makes a whole lot of sense in that field. And what they also have been very much driving in past is that they consistently have been increasing their portion of product business and now also earn a premium on the digitalization efforts of the past. For many years, it was a kind of paradigm that has been said that you only can increase your margin to a certain level if you have at least 2 thirds, if not more of your revenues in product. And now, building technology has been delivering proof point the proof point that they can do that also by occupying the digital space with a higher portion of service activities and upgrades, etcetera. That was quite a healthy development.
And what I like best to be honest about BT is that for many, many years, I'm looking at the cycle They have been converting their profits also into cash, which is encouraging, because, I mean, that also shows that they don't tie tons of money into their asset management. We're working at working net working capital. And so they are quite strong and we will continue on that path.
And absolutely, Absolutely. And you may recall our discussion we had on the 2020 plus operating company structure. Talking about, smart infrastructure. If you really look at it, the nucleus of that smart infrastructure is nothing but building technologies. And we add now the decentralized energy systems, the TES, we add the whole method of, pushing the e mobility infrastructure, which is also sort of a decentralized concept into that.
We also had the industrial communication piece from the digital factory over to the smart infrastructure. So we don't want to overload it. The reason why we did it though is that Building Technologies has been extremely successful in building the go to market channel and to manage local solutions on a smaller scale. Firstly, secondly, one of the major reasons ITT has actually been outperforming even the bigger peers was that they're continuously now have been investing into solutions in combining fragmented islands of services in the building. And if you anticipate that whole matter further, assuming that building technology will benefit like no one else from our cloud based digital platforms and the knowledge of application centers You can actually make a case that all those product related services and buildings, which are completely isolated from each other, taking a ton of money out from the customers, with that razor razor play concept.
This could be quite the focus point on getting that profit will hand it over to the ones who integrate the solutions and hand out of it back to the customers and keep the other part of it. And that's only a natural that's only a matter of times, Lucas will be naturally developed into that, that building operators are that are determining when they need service and not the product. We're installing them when they need to pay another horrendous amount of money for people coming in and do a job which the others could actually determine. We call that demand response integration, which we do already a long time ago in the areas like power generation and associated grid. Things.
That's exactly the focus point. So expect more intelligent smart approach is to profit pools. We believe should actually be ours and the customers secondly, expect that PT will use its, it's a remarkable performance to make this decentralized energy systems and power infrastructure based success. And then they're pretty busy with doing that. So there is no pointing, going after overrated targets, which are up there for quite some time in the voltage and the likes
Next question please.
We will now take our next question from Simon Tundson from Berenberg. Please go ahead. Your line is open.
Everyone. My first question is just on Digital Factory in the U. S. More broadly. China has been strong for Digital Factory for quite some time.
And, and you seem to be gaining share. In the U. S, you struggled for quite a few years, not necessarily to grow, but to gain share against some of the established competitors there. I think you flagged, you've been growing double digit in the U. S.
In the fourth quarter. So looking at some of the peers that have reported, for example, yesterday, it seems that you are gaining share in the U. S. As well in the automation channels. Can you just talk a bit more about competitive dynamics there?
Your distribution set up, obviously, software plays a key element when you flag obviously mentor in the presentation as well. Obviously, some of competitors are waking up a bit more now to the digital angle via partnerships, etcetera, and that they need to offer bundles just would be interested to hear your view as to how you can really continue that market share dynamic in the U. S. Second question, just on the balance sheet. Free cash flow has been again strong.
The even with the buyback in taking into account, your balance receipt is probably still quite ungeared also for fiscal 2019. When I look at the new divisional structure, so obviously, Digital Industries And Smart Infrastructure being kind of the key areas, Where do you see a bigger need in either of the 2 to potentially do a larger deal, I. E, mentor size or even slightly bigger And do you think there is a potential to do a larger deal in the next 12 months here?
Hi, Kevin. Maybe if Ralph goes into the money, the abandoned resources of of cash, which is a good thing to have, I believe. Let me maybe reflect a little bit on the U. S. So we've been we've been booking quite some growth.
And it's true that we have not been really back that grade on winning market share over the years. Now, however, I believe there is an inflection point I would say, in the next 24, 36 months. And if the collection point comes from the fact that people more and more understand how powerful the integration of mechanical and electrical simulation actually is for future application on, on gross market such as autonomous driving cars, and other areas. Boeing, obviously, being in our urban aerospace and automotive traffic innovation in that order. People now all of a sudden understand how powerful that integration as electrical and mechanical simulation.
And as you mentioned, you know, competitors seem to wake up, I would not have minded to keep them keep them there. But from their actions, you see that there's got to be something to eat what we have done use and have been developing. We focus more on our customers because we know what needs to be done not so much on competitors. But, we do believe we have quite a unique window now in the next 2 to 3 years to correct the current, share deals in that economy. Especially with the rise of, e mobility and autonomous cars, also with aerospace, quite a lot, There'll be a lot of companies who have been committing to invest in the United States based on encouragement and economic terms and tax reform and what have you.
And with those huge big companies are investing there. This is a new field on a green field. And green fields, obviously, always, is very courageously getting the latest and the best solution in brownfields. Sometimes it's not that simple. But also I talk to just recently in Shanghai to some body who manages the biggest car company in the United States.
Those are talked about the electrical and mechanical simulation that has that all together with the automation piece, including even the manufactured Fusion System, which is the link to logistics and warehousing you could tell how massive interest for us to have a holdout of one hand out of office reasons. So we believe we have a window. We still need to Oh, that the door opens. We still need to cross that door, and I'm sure that, we have a strong competitors, they can just look and see how we do it. But we feel pretty good about what we have in the offering and how we need to make it work.
We have had a good start in 2018. Needed to continue to explore and exploit those opportunities in items. That's exactly what we are planning to do.
Yes. And taking the part of your question around our balance sheet, are you Of course, like to hear that you appreciate the strong cash flow that we have been able to generate while being on a growth part path and investing also substantially, but also in a very focused way. And the fact that we have an industrial net debt over EBITDA, that is clearly below the threshold that we have been setting ourselves does not implicitly mean that we are in spending mode. I have been answering that question also in the press conference. I mean, we're very we will be very consistently reviewing, of course, opportunities when they arise.
But the fact that we have a strong balance sheet does not necessarily mean that we need to
We will now take our next question from James Moore, Redburn. Please go ahead.
Yes, good morning, everyone. Thanks for taking my questions. I've one on outlook one on charges and gains and one on investment. I was interested in your comment that you're expecting favorable short cycle markets in 19. And I listened to your answers earlier, but I was wondering if you might quantify your first half or your first half visibility says your U.
S. European China short cycle revenue growth will be, around the different regions? Secondly, just on housekeeping, was there a provision release in PG in the fourth quarter? And if so, could you quantify it? Can you put a rough size on any likely Alstom merger or Vision 2020 plus charges?
And just on the PPA guidance, for flat, I would have thought you might have a 200,000,000 dollars, $300,000,000 drop from Mentor, Gemessa, backlog amortization dropping out. And if that's not the case, is there an offset And finally, sorry for all these, on the investment slide where you've raised your guidance to 3.82.20 for the next 2 years, I'm wondering whether that's really going to be the case. And will it drop to nothing in 2021, or will we be here in 12 months where we acknowledge IOT cloud means that these numbers will just keep staying quite high.
So, James, let me start with your first question around the outlook. I mean, what we said is that from today's perspective, And I think that's important. We don't see any tangible indicator that would suggest that the short cycle business is harmed or somewhat materially impacted by geopolitical tensions and alike I also said that we have a very strong backlog in our short cycle business compared to that. What saw in the past. I mean, this is not 1,000,000,000, obviously, like you know that from project business, but, a couple of 100 of 1,000,000, and that is allowing us to have a very good view on the 1st 3 to 6 months of the fiscal year.
It definitely would be too early to quantify by regions and it's also would probably not help you a lot because the dynamics that Joe has been pointing out. They can change fairly quickly and we don't want to speculate. You'll get all the details and the regional split as we do that once we have been completing the quarter, And, as we, you have to be patient with that split, for the first quarter and the second quarter then. But the momentum, and that's what I said a couple of times and the pace of growth, will moderate, but it will not materially impact from today's perspective. The growth trajectory for the digital factory, even though the growth rate is such may not be on exactly the same level but moderated a bit In terms of PG, as I said, we have been successfully reaching a couple of important milestones in particularly around the Egypt projects.
The mechanics of pure see a percentage of completions are known to you. And whenever you reach a milestone and execute flawless, of course, then you will incrementally recognize revenue and also profit accordingly. We will not start to discuss the margins and the POC milestones and the impact on margins on a project by project basis. With regard to PPA, if I got your question properly, I said in the guidance for the next fiscal that you should assume pretty much the same level as for fiscal 2018. And on the one hand side, we now see from our very first acquisitions on industrial software companies like UTS, more than 10 years back now.
The end of the amortization period for some of those assets, at the same time with mandates and also with smaller acquisitions like we had them in building technologies, we add. So the level will be pretty much the same. So for modeling, I think you just straightforward take the figure of fiscal 2018 and you will be safe.
There was one on the Alstom merger and Vision 2020 plus charges, whether you could quantify it and whether the investments will really come down as we go
forward? So what we what we said is that of course, we will keep you posted on the impact of the carve out activities. And the related taxes associated. I think it's fair to say that we have been digesting a big part of that with regards to mobility, but we are not done yet. And It also makes a lot of sense.
I think we discussed it the last time we met already in particular when it comes to taxes, it's not smart to move ahead too fast too early because this is immediately triggering cash out, obviously, when the taxes are supposed to be paid. So some of those carp out steps are intentionally saved for a later point in time, but fully under our control and definitely not keeping us away from moving ahead as fast as we can with regard to the content the moment, but you saw from the high tax rate of the fourth quarter that, obviously, that period of work, we then carve out and try start to organize a group, also tax wise for mobility. We are entering the the last couple of years.
There's still a few people in the line. So maybe we limit to 1 or 2 questions get more people because we have only 15 minutes left.
We will now take our next question from Martin Wilkie from Citi. Please go ahead.
Yes, thank you. Martin from Citi. Just a couple of questions on some of the longer cycle markets. Firstly, in process and drives, order growth slowed. And I know there was a high base of comparison.
But just to check, has there been any sort of change in what customers are doing in those process markets? And secondly, in Power And Gas, if we ignore the large gas business, obviously, there are, the old dresser and business things like that. If you could just let us know where is the book to bill on the non, large gas business, which is presumably a little bit earlier cycle and therefore could give us some indication as to how that business might progress over the course of 2019?
Thank you, Martin. Let me start with the process and drive. I mean, as indicated before, we saw that some of the commodity markets coming back. But it's too early for a euphoria, of course, because many of them are so much making full use of existing capacities, in some areas driven by commodity pricing. There had been incremental investments that we saw.
Probably one of the single biggest changes compared to prior year's quarter is fact that wind has been coming back to a certain extent. However, as you probably also took from the disclosures of Siemens Gamesa, there is quite an intense pricing pressure in that market, in particular, in the onshore piece of it, which then filtering through to the suppliers, of course. So therefore, there's still a high demand for productivity gains. That's why I also have been mentioning that we will continue doing that and we will use our own tools, with the cost value engineering toolbox, of course, on selected customers, there is momentum that we send. And as I said, too early to say, was hit.
I mean, typically, this is not only a long cycle, but also late cycle. So we may expect another 2, 3 quarters, in which that's been late in the cycle. Is stabilizing the top line. That's what I also mentioned in my presentation. And the other part of your question referring to the book to bill outside of large gaps, the book to bill ratio is still below 1.
Okay. Thank you.
Thank you. We'll now take our next question from Marcus Miller from UBS. Please go ahead.
Yes. Hi. Good morning, everyone. Quick question on guidance. Again, at a group level, if I look at your more late cycle businesses, process industries, win mobility, etcetera.
And look at the exit margin this year versus 17 levels and the order intake you've had throughout the year. I'm just a little bit puzzled how, you only can get to sort of a 20 basis points at the midpoint margin improvement guidance for next year. Maybe you can comment to that. I think your top line language from modest to moderate is becoming a bit more positive, your positive on short cycle for the 1st 6 months. So just how we get to an essentially flat to only slightly up margin guidance.
That's question number 1. And number 2, on non PG specifically, in the backlog, if I look at FlexLTP and large gas service, I know that you can't comment on specific projects, but can I assume that the margin profile and margin levels, in that flex LTP and gas service business remain at roughly historic levels? So it has to be no change. And if you allow just on a very brief housekeeping on CMPA, would say this negative swing versus, I think consensus had 100,000,000 positive, for next year.
Thank you, Marcus, for those questions.
Let me start with the quickest one on CMPA. We I don't know how the consensus has been finally shaped obviously, but it was very clear and evident and we have been also very transparent on the extraordinary gains that have we've been benefiting from in fiscal 2018. And with Ostrand and also with Atos. And if you just take those out, you will pretty much conclude that you can expect, under the, in the absence of major divestment gains, as I said, that you can't come to that plus 100 or the consensus has been suggesting. So this is obvious with regards to the flex LTPs, yes, you're right.
We are very carefully watching that. It's a very important indicator for us also. And as I said before, the service business from a top line and also from profitability perspective is standing strong. Probably also driven by the technology that we can provide. We discussed it at several stages that whenever a renewal upcoming, we may or different providers may be in a different position, when it comes to be under pricing pressure as we can provide productivity gains with new technology to our customers We are very happy with the development of Ciflex LTPs and also with the total backlog for PG of 1,000,000,000.
I think it's also good to know that, a bit more than 80% of that service related in which, again, then the FlexLTPs are playing a major role. So service is a very consistent and strong pillar of our business model there. And we do not have any indication that this is going to change throughout the next 1.5 years, as we said before, 4 to 6 quarters is the typical visibility. We have pre notice of renewals coming up. I'm not sure whether I completely got your question around the guidance around late cycle and so on, but what I took from it is the fact that we do have very limited impact on the industrial businesses margin from exchange rates.
Of course, does not implicitly mean there is no impact on EPS. We said that, in particular, due to the fact that we have a growing business in emerging countries as a result of moving to those growth markets. The big parts of our value chain, of course, there is also impact from those from those currencies. And I have been spelling out China, India and also Argentina, obviously. From a nominal perspective on EPS basis that has an impact.
And I also would like to reiterate that we have been guiding you to low to mid single digit margins for power and gas for fiscal 2019.
Yes, maybe. Maybe. So that's been since we have been shifting a bit from the short cycle to the more long cycle environment out side, the famous large turbine generation. I just want to make sure that the records are straight. I mean, you asked about PD, on set the orders are slow.
Well, we do see it. We tend to see that in the commodity related environment such metals, mining, obviously oil and gas, there is some signs of life, particularly, of course, in the LNG environment. If you look at what we believe will happen in 2019 on the on the, on the, let's say, the big metals mining, oil and gas related businesses and the solutions We actually do see clear order growth, coming along with the bigger projects. It's the same, by the way, is new and willing to ask we expect, clearly, about 1,000,000,000. But this is only orders.
So it may take some time till we see it in the P and L. And that's why we'll be out of it. No, Kathleen andbaum, you have done the related methods. But in terms of bookings, in the large solution PD environment related to commodities, as well as oil and gas, we do see fewer orders out.
Yes. Maybe you misunderstood my question. That's exactly my point, if you look at Mobility, when PD, you had significant order growth throughout the year, and you're exit margins are very much higher than sort of where we started the year, right? So I would have expected that that backlog that you've accumulated in those longer execution cycle businesses is significantly higher margin. Than what we would have seen maybe even on the 2017 print.
So hence, my thought whether the 20 basis points at the mid point improvement to guidance on margin is actually a bit conservative?
Look, it is what it is. If we have been able to predict the future, we would have been more precise. You could see that we opened the corridor a little bit to 70 basis points instead of the typical 50 basis points AR, we do see some favorable conditions, in some areas. And there is also a risk and what is to come up with what was what is what would be a balanced way of risks and opportunities to make a meaningful guidance of it. We've been we've been meeting the original guidance, all the increased guidance is now 5 years in a row.
So we there is a track record at Stakey. That's why we hit the guidance as we did it. I think we are pretty see well aligned with the investor community and the sales side. If it comes to top line engagement, the same in book to bill, as well as in industrial merchants. We had a bit of a clash in CMPA.
They're market expected us to produce another one off as an average of the last years. Well, one offs are all one offs because they don't happen every year. And that's why we have been guiding the market now the way we believe is most probable. We feel good in what we said we want to achieve. Don't forget that on top of, Northern Area course of business.
We also do a realignment of our company is stronger in the future. So we needed to wait at the time, and that's exactly how we wanted the guidance to be understood. In a balanced way with some upside, uncertainties coming more from macroeconomics interest or we believe actually interest rate movement 0.6. But that's in essence how we wanted the market to understand we are well underway. We know what we are doing.
We have a lot on our plate. We are strong. We do have good cash flow. We have options which act at any different point in time if you wanted to. And other than that, to serve our customers.
The year being developed. Thank you very much.
We will conclude now. Thank you, Jill. Thank you, Charles. Thank you everyone for your participation today in the call. The team and I will be available for further questions.
And with that, we will conclude now the call. Goodbye.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. Once again, let me repeat the instant replay numbers. Participants in Germany, please call the replay number plus 490692000 1800 access code 1552335 hash. Participants in Europe, please call the replay number +4402076600134.
Access code 155 2335. And participants from the United States, please call the replay number +1719 4570820. Access code 1552335 hash. This replay service will be available until tomorrow night. A recording of the conference will also be available on the Investor Relations section of the Siemens website.
The website address is www.seimens.com/investorrelations.