Schneider Electric Se · EURONEXT:SU
Schneider Electric — FY2017 Earnings Presentation
48 slides from Schneider Electric's earnings presentation, Feb 15, 2018
Slide 1: Full Year Results 2017: Strong operational performance yields record EPS
Full Year Results 2017: Strong operational performance yields record EPS February 15, 2018 Confidential Property of Schneider Electric
Slide 2: Disclaimer
Disclaimer All forward-looking statements are Schneider Electric management’s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For a detailed des
Slide 3: Agenda
4 FY 2017 Strategy Highlights 24 FY 2017 Finance Presentation 36 Full Year 2018 Targets 39 Appendix XX Confidential Property of Schneider Electric | Page 3
Slide 4: Strong Results in 2017 with All-time High Adj. EBITA, Net Income and Free Cash-Flow
Strong Results in 2017 with All-time High Adj. EBITA, Net Income and Free Cash-Flow Strong Revenues Growth Sustained Profit momentum Record Earnings & Strong Cash • Q4 organic growth accelerating to • FY adj. EBITA organic growth: +9% • All time-high Net Income: €2.15bn, +4.6% with Energy Management
Slide 5: Good progress in strategic priorities: more products and innovation
Good progress in strategic priorities Drive organic growth through more products and innovation Strong organicPush growth organic growth 100+ product launches in 2017 Recognition in innovation on differentiated business models • Products revenues up +4.3% org., accelerating in H2 at +4.9% Masterpact
Slide 6: Good progress in strategic priorities: software and services
Good progress in strategic priorities Drive organic growth on differentiated business models More Software More Services • Industrial software sales about flat impacted by O&G, • High single-digit growth in FY orders with Q4 revenues slightly up • +6% organic growth in Q4 revenues • Acquisition of I
Slide 7: Cross selling accelerating
Good progress in strategic priorities Cross selling accelerating Steam Engineering Water and waste Global leader in Telco’s Data Center Customer management facilities logistics China Germany Brazil USA A complete panel with all Powering and Controlling Distribution hubs with conveyor Complete soluti
Slide 8: Digital Journey progressing
Good progress in strategic priorities Digital Journey progressing Connectivity Experience Scale Ecosystem • 1.6 million of Assets • New web experience, with • Brand new EcoStruxure • 20,000+ System under Management, traffic up +15% YoY Cloud Platform scaling Integrators and +25% YoY up: ~2,500 event
Slide 9: EcoStruxure wins in Q4 – some examples
Proven value for customers: EcoStruxure wins in Q4 – some examples Future-ready hospital in USA Integrated Data Center in China Baosteel: The world's leading City of Milford: Weather-proof • Projected CAPEX Savings • 60% reduction in maintenance modern steel joint venture Microgrid up to 5% breakdow
Slide 10: EcoStruxure in international retail chain Auchan
Proven value for customers: EcoStruxure in international retail chain Auchan Maximize energy performance to reach COP21 commitments Challenges Full EcoStruxure solution deployed Significant results • Adherence to COP21 • Tailored performance contracting model • Roll out in 10 out of 12 countries com
Slide 11: Our Planet & Society barometer reaches 9.58/10 on Q4
Good progress in strategic priorities Our Planet & Society barometer reaches 9.58/10 on Q4 Our vision for increased Indicators & objectives 2017 Q4 2017 long-term performance - selection Sustainability is a growth pillar for Schneider ● 10% CO2 savings from transportation 10.3% Electric. ● 100% of p
Slide 12: Our new 2018-2020 Planet & Society barometer
Good progress in strategic priorities Our new 2018-2020 Planet & Society barometer drives further performance Climate Health and Equity 80% renewable electricity 70% score in Employee Engagement Index 10% CO2 efficiency in transportation 1 medical incident per million hours worked 100 million metric
Slide 13: Recognition and Continuous Commitment in multiple areas
Recognition and Continuous Commitment in multiple areas Sustainability Human Resources Supply Chain 2017 Gartner Supply Chain 2017 Gartner Supply Chain: Top 25 Europe Top 15 Confidential Property of Schneider Electric | Page 13
Slide 14: Driving continuous efficiency
Good progress in strategic priorities Driving continuous efficiency Productivity targets overachieved Medium Voltage Rebound on track • c.€1.9bn of gross costs savings in 3 years with c.€650m • MV Adj. EBITA margin reached 10% in FY17 achieved in 2017 (up c.260bps organic since 2015) • Cumulative sa
Slide 15: We continue to optimize our portfolio and focus on shareholder returns
We continue to optimize our portfolio and focus on shareholder returns We continue to optimize our portfolio …and generate attractive returns for our shareholders Reinforcing our core Dividend up +8% in 2017 + Share buyback of c.€1bn until mid-2019 launched + Disposal of non-core assets c.75% of FCF
Slide 16: Business Performance Highlights
Business Performance Highlights Confidential Property of Schneider Electric | Page 16
Slide 17: Leading the digital transformation of Energy Management and Industrial Automation
We are leading the digital transformation of Energy Management and Industrial Automation Energy Management Industrial Automation c.+4% +6% FY17 organic FY organic excl. selectivity and with Delixi With an Integrated and Digitized portfolio to step up efficiency for our customers Confidential Propert
Slide 18: Energy Management: complete end-to-end offering across segments
Energy Management Complete end-to-end offering addressing customer needs across segments Delivering higher reliability and efficiency … driving strong cross-sell in segments combining Medium & Low Voltage, Secure Power c.90% of MV packaged with LV outside of utilities powered by EcoStruxure MV LV Se
Slide 19: Key macro drivers for Energy Management
Key macro drivers for Energy Management End Market Resi. & Non-resi. Buildings Industry & Infrastructure Data Center & Networks Utilities North • Improving demand on CIB1 • Favorable Industry & • Continued capital • Microgrids activity America • Good demand in Infrastructure demand investment in Dat
Slide 20: Energy Management showed strong performance in 2017
Energy Management showed strong performance in 2017 FY2017 ORGANIC GROWTH, % FY2017 Adj. EBITA, % Energy Management: +3.4% org., ex-selectivity1 Energy Management: 17.3%, +40bps, +100bps org. FY organic improvement Low ~+5.3% with Low 20.2 4,4 Delixi ~+80 bps Voltage Voltage Energy Management Energy
Slide 21: Energy Management – Performance Highlights
Energy Management – Performance Highlights Medium Voltage • Power System2 margin improving strongly, driving business margin improvement €18.9bn • Services revenues were stable but orders up mid single-digit 76% of Group 2017 revenues • More EcoStruxure – ADMS ranked Leader in 2017 Gartner Magic Qua
Slide 22: Industrial Automation – Growth at the Core
Industrial Automation – Growth at the Core Application knowledge for We lead at the Edge w/ EcoStruxure Synergies w/ Energy Management greater conversion of machines Plant & differentiated software driving customer value in Industry & Infrastructure end-markets EcoStruxure Machine is growing 4x The
Slide 23: Industrial Automation - Strong performance growing top line and margin
Industrial Automation - Strong performance growing top line and margin with +90bps organic improvement on Adj. EBITA margin €5.8bn Performance highlights • Growth across all 4 regions 24% of Group 2017 revenues • Strong Products (Contactors, HMI, Drives and Signaling) performance driven by channel i
Slide 24: FY2017 finance presentation
FY2017 finance presentation Schneider Electric – Investor Relations Page 24
Slide 25: Analysis of change in group revenues
Revenues accelerating to +4.6% in Q4, leading to +3.7% organic in H2 17, with growth across regions ANALYSIS OF CHANGE IN GROUP REVENUES (in €m) Rest of World North America +3% Asia-Pacific +3% Scope +6% Western Europe -0.3% +3% 12,717 Mainly DTN sale, consolidation of Asco for 2 months 12,570 -1.2%
Slide 26: Strong performance in H2 with all businesses accelerating
Strong performance in H2 with all businesses accelerating organic growth and improving Adj. EBITA margin organically H2 ORGANIC GROWTH, % H2 Adj. EBITA, % Group: acceleration to +4.6% on Q4 Group: +40bps with all businesses growing +100bps org. H2 organic Q4 17 H2 17 H2 16 rest. H2 17 improvement Lo
Slide 27: Gross Margin up +50bps organically on H2
Gross Margin up +50bps organically on H2 GROSS MARGIN: ANALYSIS OF CHANGE (%) 1,8 -0.1 38.1 0.0 -0.4 38.1 -0.2 -0.5 -0.6 • R&D increase • Scope impact of c. -0.3pt impacted c. -0.2pt mainly linked to DTN • H2 Raw Material Impact on products more than deconsolidation covered outside China. In China,
Slide 28: Strong H2 performance with +11% organic growth in Adj. EBITA
Strong H2 performance with +11% organic growth in Adj. EBITA, leading to Adj. EBITA of €3.7bn and FY +90 bps organic improvement, exceeding the high end of revised guidance In €m H2 2017 Organic 2016 2017 Reported Organic change restated change change Revenues 12,570 +3.7% 24,459 24,743 +1.2% +3.2%
Slide 29: Industrial productivity and SFC savings
We delivered the highest industrial productivity in past 7 years and continued our disciplined SFC management Key Actions Over 2017 Industrial productivity (€m) Industrial productivity (c. €430m) 430 • Ranked #17 Top Global Supply Chain by Gartner 380 Target to sustain good • Purchasing & lean manuf
Slide 30: Accelerating profit growth: EBIT +8% and Net income +23%
Accelerating profit growth: EBIT grew by +8% and Net income up +23%, thanks to improved financial costs and lower tax rate In €m 2016 restated 2017 % change Adjusted EBITA 3,498 3,651 +4% Other income and expenses (63) (15) Concluding the 3 year adjustment of our structure and costs. Restructuring c
Slide 31: Strong Free Cash Flow generation at €2.25bn
Strong Free Cash Flow generation at €2.25bn Analysis of debt change in €m 2016 2017 restated Net debt at opening Dec 31 (4,631) (4,824) Operating cash flow 2,956 3,020 Capital expenditure – net (741) (688) Change in trade working capital Working capital growth driven by inventory 55 (126) and receiv
Slide 32: Strong cash conversion and solid balance sheet
Strong cash conversion and solid balance sheet CASH CONVERSION, % NET DEBT/ ADJ. EBITDA 1131 1182 1,1 105 1,0 <1.0 100 long-term objective 2015 2016 2017 2015 2016 2017 1: Based on Net income adjusted for business disposals impact and Pelco impairment 2: Based on Net income adjusted for non-cash c.€
Slide 33: Strong improvement of ROCE
Strong improvement of ROCE thanks to higher margin, capital efficiency and lower taxes IMPROVING CAPITAL HIGH LEVEL OF RETURN ON ROCE IMPROVED EFFICIENCY OPERATIONAL ASSETS 15 31 40 Target range 12.0 11.0 10.7 28 37 11 2014 2017 2014 2017 2013 pro- 2016 2017 forma3 Operational Assets / Revenues (%)1
Slide 34: M&A on the core, adding value
M&A on the core, adding value Focusing on integration Reinforcing our core Disposal of non-core activities c.€130m cost synergies 2017 main disposals DTN achieved by 2016 APPLIANCE c. €400m revenue synergies generated in 2017 (1 year early) TRANSPORTATION Tax synergies increase by 2014-2016 main dis
Slide 35: Proposed dividend: €2.20 per share, up +8%
Proposed dividend: €2.20 per share, up +8% Progressive dividend policy 2.20 2.00 2.04 1.87 1.87 1.92 1.60 1.70 1.03 2009 2010 2011 2012 2013 2014 2015 2016 20171 Dividend (€ per share) 1: Subject to shareholder approval in AGM Schneider Electric – Investor Relations Page 35
Slide 36: Full Year 2018 Targets
Full Year 2018 Targets
Slide 37: 2018 Targets
2018 Targets In a positive environment, the Group targets to deliver strong organic growth of Adjusted EBITA in 2018, around the high-end of the +4% to +7% bracket earlier communicated as the average yearly objective for 2017-2019. To deliver this strong performance the Group will balance both lever
Slide 38: 2018 additional notes
2018 additional notes • Exchange rates impact: Based on current rates, the FX impact on FY 2018 revenues is estimated to be between - €1.0bn to -€1.1bn. The FX impact at current rates on adjusted EBITA margin is expected to be around -20bps • Scope: Based on FY17 financials for acquisitions, scope i
Slide 39: Appendix
Appendix ectric
Slide 40: Definitions
Definitions EBITA EBIT before amortization and impairment of purchase accounting intangibles and impairment of goodwill Adjusted EBITA EBITA before restructuring and other operating income and expenses EBITDA EBIT before depreciation, amortization, provisions and before share-based compensation cost
Slide 41: The Planet & Society barometer 2015-2017 - Results as of Q4 2017
The Planet & Society barometer 2015-2017 - Results as of Q4 2017 Start Results Results Target Planet & Society barometer 01/2015 Q3 2017 Q4 2017 12/2017 Our megatrends 2015-2020 and our targets 2015-2017 Overall score (out of 10) 3.00 9.01 9.58 9/10 10% energy savings - 9.2% 10.3% 10% 10% CO2 saving
Slide 42: FY Adj. EBITA up +9% organic thanks to strong productivity and volume
FY Adj. EBITA up +9% organic thanks to strong productivity and volume Analysis of change of adjusted EBITA (in €m) -97 -77 430 -51 -30 -12 -124 3,651 -119 3,498 233 FY 2016 Volume Mix Net price1 Productivity COGS SFC Other Scope FX FY 2017 restated (Inflation & R&D) Confidential Property of Schneide
Slide 43: H2 Adj. EBITA up +11% organic
H2 Adj. EBITA up +11% organic Analysis of change of adjusted EBITA (in €m) -53 -35 224 -33 -30 -3 139 -143 1,911 -44 1,933 H2 2016 Volume Mix Net price1 Productivity COGS SFC Other Scope FX H2 2017 restated (Inflation & R&D) Confidential Property of Schneider Electric | Page 43 1. Price less raw mat
Slide 44: Adjusted net income calculation
Adjusted net income calculation In €m FY2016 FY2017 restated Net income (group share) 1,750 2,150 Impact of business disposals (in OOIE, share of profit 27 (7) on associates & discontinued ops) Integration costs post-tax1 - 23 Restructuring charges post-tax1 238 224 Tax rate: deferred tax net assets
Slide 45: ROCE Calculation
ROCE Calculation ROCE calculation 2017 P&L items Reported EBITA (1) 3,350 Restructuring costs (2) -286 Other operating income & expenses (3) -15 = Adjusted EBITA (4) = (1)-(2)-(3) 3,651 x Effective tax rate of the period1 (5) 21.5% = After-tax Adjusted EBITA (A) = (4) x (1-(5)) 2,865 2016 2017 2017
Slide 46: Investor Relations ready to engage
Investor Relations ready to engage Upcoming events: Conferences Schneider Electric events Proposing quarterly interaction with investors showcasing specific businesses, geographies or functions 08 March Industrials day (IR), Paris, Morgan Stanley 26 March Smart Supply Chain site visit in Wuhan (
Slide 47: Contact
Contact Amit Bhalla– Head of Investor Relations Tel: +44-20-7592-8216 amit.bhalla@schneider-electric.com Alexis Denaud – Senior Investor Relations Manager Tel: +33-1-41-29-51-24 alexis.denaud@schneider-electric.com Confidential Property of Schneider Electric | Page 47
Slide 48: Life Is On | Schneider Electric
Lifels On | Schneider f Electric