Schneider Electric Se · EURONEXT:SU
Schneider Electric — H1 2019 Earnings Presentation
46 slides from Schneider Electric's earnings presentation, 2019
Slide 1: Continued strong performance in H1 2019, FY target upgraded
Continued strong performance in H1 2019, FY target upgraded Revenue growth of +5.4% organic, Adj. EBITA up +11% organic, strong FCF Investor Relations - 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: H1 2019 Business Highlights Business Performance Highlights H1 2019 Finance Presentation
04 H1 2019 Business Highlights 15 Business Performance Highlights 20 H1 2019 Finance Presentation 33 2019 Target Upgraded 37 Appendix Investor Relations - Schneider Electric Page 3
Slide 4: H1 2019 Business Highlights
H1 2019 Business Highlights Strategy continues to deliver strong performance Photos: J.Deloy – SE Design Lab
Slide 5: Our unique positioning: Energy and Automation digital solutions
Our unique positioning: Energy and Automation digital solutions for efficiency and sustainability Energy Energy Industrial Industry Management Automation Transition 4.0 significant customer benefits… Energy efficiency Productivity Reliability and Safety Sustainability Up to Up to Up to Aiming at ~65
Slide 6: Our strategy continues to deliver strong financial performance
Our strategy continues to deliver strong financial performance Energy Management Industrial Automation Energy efficiency €13.2bn, +5.4% Process efficiency Group H1 2019 org. revenues € 10.1 bn c.+80bps Org. adj. EBITA c.+30bps Org. adj. EBITA € 3.1 bn +7% + 1% H1 org. sales H1 org. sales growth grow
Slide 7: H1 2019 Key Results: Unique portfolio delivering strong growth
H1 2019 Key Results: Unique portfolio delivering strong growth Strong revenue growth Sustained profit momentum Strong shareholder focus Revenue More Products More Services + 5% + 4% + 8% Organic growth Organic growth Organic growth More Software More EcoStruxure Better Systems Up double-digit Above
Slide 8: Continued and consistent expansion of Group adj. EBITA margin
H1 2019 Key Results: Continued and consistent expansion of Group adj. EBITA margin Strong revenue growth Sustained profit momentum Strong shareholder focus Adj. EBITA Adj. EBITA margin Adj. Net Income +10.9% +70 bps € 1.3bn, +10% Organic growth Organic improvement Adj. EBITA margin: c.+330 bps organ
Slide 9: Focus on shareholder returns, strong free cash generation
H1 2019 Key Results: Focus on shareholder returns, strong free cash generation and disciplined capital allocation Strong revenue growth Sustained profit momentum Strong shareholder focus Strong H1 FCF Portfolio management • € 837m L&T competition approval 2.0x higher vs. H1’18 • Pelco disposed 2.4x
Slide 10: Consistent execution on our growth strategy pillars
Consistent execution on our growth strategy pillars MORE PRODUCTS MORE SERVICES BETTER SYSTEMS New connected products for greater Clear plan for growth across Systems provides resilience across efficiency across end-markets geographies and businesses economic cycle. Orders growth in mid to late cycl
Slide 11: More Digital
More Digital: Strong progress in digitizing Strong performance through apps, Enriching our offer customer engagement & ecosystem analytics and digital services Multiple launches of new Strong growth of Assets Under Strong growth of SE software portfolio for EcoStruxure Advisor apps Management Data C
Slide 12: Selection of H1 customer successes across markets
Selection of H1 customer successes across markets BUILDINGS DATACENTERS INFRASTRUCTURE INDUSTRY Major medical institution Marina Bay Sands Urban transportation Baowu Steel Middle East Singapore Argentina China Energy Management digital solution EcoStruxure for Data Center to Global management system
Slide 13: Sustainability at the heart of our strategy and business
Sustainability at the heart of our strategy and business Schneider Sustainability Impact: 6.78/10 in Q2 Schneider wins the Philips supplier innovation event Indicators & objectives 2020 - selection Q2 2019 Q1 2019 Royal Philips, Netherlands 120,000 metric tons CO₂ saved on our CLIMATE customers’ end
Slide 14: Our distinctive DNA is externally recognized
Our distinctive DNA is externally recognized Commitment to sustainability: Climate, Ethics, Empowered Diversities; Inclusive Practices; Lean Organization; Multi-Hub Model; Circular economy, Health and Equity, Development Inclusive Behaviors; Advocacy The Schneider Way; #FreeUpYourEnergy Batam Smart
Slide 15: Business performance highlights
Business performance highlights Strong portfolio delivering growth Photos: J.Deloy – SE Design Lab
Slide 16: Energy Management - broadest portfolio in the industry delivers strong performance
Energy Management - broadest portfolio in the industry delivers strong performance €10.1bn H1 2019 - Key performance highlights • Strong growth across portfolio, end-markets and regions; NA +12%, Asia Pac +7% 76% of Group H1 2019 revenues • Data center segment growing strongly in both large and smal
Slide 17: Organic growth by region in H1 2019 – Energy Management
Organic growth by region in H1 2019 – Energy Management % Business Sales Org. growth NORTH AMERICA WESTERN EUROPE 32% +12% 25% +3% United States Canada Mexico France Germany United Kingdom Spain Italy REST OF WORLD ASIA PACIFIC 15% +4% 28% +7% China India Australia Indonesia Singapore Russia South A
Slide 18: Industrial Automation: Complete & resilient industrial automation portfolio
Industrial Automation: Complete & resilient industrial automation portfolio €3.1bn H1 2019 performance highlights • Resilient growth thanks to the balanced portfolio across cycle 24% of Group H1 2019 revenues • Demand in process & hybrid markets (c.50% of IA revenue) continues to be positive, with d
Slide 19: Organic growth by region in H1 2019 – Industrial Automation
Organic growth by region in H1 2019 – Industrial Automation % Business Sales Org. growth NORTH AMERICA WESTERN EUROPE 21% c.-2%* 32% +2% United States Canada Mexico France Germany United Kingdom Spain Italy REST OF WORLD ASIA PACIFIC 15% +3% 32% +1% China India Australia S. Korea Japan Russia South
Slide 20: H1 2019 Finance Presentation
H1 2019 Finance Presentation Delivering consistent and strong financial performance
Slide 21: Analysis of Change in Group Revenues (in €m)
Revenue growth of +5.4% organic in H1 2019, with growth across all regions Analysis of Change in Group Revenues (in €m) FX 13,202 Rest of World Scope +1.9% +7.2% North America +3.6% -0.1% +8.8% Asia-Pacific +5.7% Mainly comprises the Western Europe AVEVA consolidation, the +2.6% disposal of Pelco an
Slide 22: H1 2019 - Energy Management: growing in all regions
H1 2019 - Energy Management: growing in all regions H1 Org. growth N. America W. Europe Split of H1 2019 revenue by geography: 25% 32% 28% 15% Asia Pac. Rest of the World North America +12% Western Europe +3% • U.S. delivering double-digit growth • Growth in offers for Residential markets supported
Slide 23: H1 2019 - Industrial Automation: resilience across regions
H1 2019 - Industrial Automation: resilience across regions from balanced portfolio H1 Org. growth N. America W. Europe Split of H1 2019 revenue by geography: 32% 21% 32% 15% Asia Pac. Rest of the World North America c.-2%* Western Europe +2% • Mexico saw a big decline in Q2 due to trade uncertainty
Slide 24: Organic growth derived from products, systems, services and software
Organic growth derived from products, systems, services and software Organic Growth in H1 • Good growth driven by Buildings end-markets while Discrete industrial markets were down in several geographies. Products 4% • > 50 new offers launched during H1 2019 • Leveraging complete product portfolio ac
Slide 25: Gross Margin up +30bps organic in H1
Gross Margin up +30bps organic in H1 GROSS MARGIN: ANALYSIS OF CHANGE (%) 1.1 -0.6 0.8 -0.5 Reflects geographic 39.4 mix and stronger -0.3 39.1 -0.2 growth in mid/late cycle businesses H1 Productivity • H2’18 pricing action carry- +€144m includes over delivering in H1’19: Reflects technical risks, t
Slide 26: Consistent improvement in Gross Margin
Consistent improvement in Gross Margin Gross Margin improves to 39.4%, up +240bps in 4 years Main drivers 39.4% 39.1% Strategically positioned toward 38.7% high value added 38.2% 37.0% Margin accretive Industrial Productivity H1’15 H1‘16 H1‘17 H1‘18 H1‘19 Portfolio optimization Gross Margin % Invest
Slide 27: Strong performance in adj. EBITA; +11% organic growth
Strong performance in adj. EBITA; +11% organic growth, +70 bps organic margin improvement Energy Management Industrial Automation In €m H1 2018 H1 2019 Reported Organic change change Revenues 12,317 13,202 +7.2% +5.4% c.+80bps c.+30bps Gross Profit 4,818 5,202 +8.0% +6.2% Org. adj. EBITA Org. adj. E
Slide 28: IFRS 16 impact
IFRS 16 In €m H1 2019 H1 2019 Impact (pre-IFRS 16) (IFRS16) Revenues 13,202 13,202 n/a Gross Profit Immaterial impact on P&L in H1 5,202 5,202 n/a Adjusted EBITA 1,950 1,960 +€10m Margin % 14.8% 14.8% n/a Net neutral to cash flow, benefit to FCF, Financial Income/(loss) (120) (140) -€20m additional
Slide 29: Strong underlying profit growth: Adj. Net Income of €1.3bn, up 10%
Strong underlying profit growth: Adj. Net Income of €1.3bn, up 10% In €m H1 2018 H1 2019 % change Including Pelco disposal some asset impairments along Adjusted EBITA 1,769 1,960 +11% with some M&A/integration costs Other income and expenses (64) (346) FY19 expectation unchanged for restructuring to
Slide 30: Strong Free Cash Flow from high operating cash-flow and working capital management
Strong Free Cash Flow from high operating cash-flow and good working capital management Analysis of debt change in €m H1 2018 H1 2019 Net debt at opening Dec 31 (4,296) (5,136) Includes €134m benefit of IFRS 16 Operating cash flow 1,515 1,791 Slight increase in CapEx due in part to capacity Capital
Slide 31: Free cash-flow evolution (€m)
H1 FCF offers strong start for 2019 Free cash-flow evolution (€m) 837 134 Strong FCF for a first half, recovery to a more normative IFRS 16 level following the working capital challenges in H1 2018 703 501 446 FY19 cash expectations unchanged 350 IFRS 16 impact positive for FCF H1’16 H1’17 H1’18 H1’
Slide 32: Good progress on portfolio optimization; consistent capital allocation
Good progress on portfolio optimization; stable and consistent approach to capital allocation M&A in the core Disposal of non-core activities Acquisition of Larsen & Toubro E&A Further progress in Q2 on actions toward the €1.5 billion - division approved by Competition €2.0 billion in revenues ident
Slide 33: Full Year 2019 Target
Full Year 2019 Target Upgraded following strong H1 performance Photos: J.Deloy – SE Design Lab
Slide 34: H2 2019 – Expected market trends
H2 2019 – Expected market trends In its main markets, the Group currently expects the following trends in H2 2019: • In North America, the Group anticipates a continuing favorable environment overall, noting a high H2 base of comparison in Energy Management. In Automation, process remains positively
Slide 35: 2019 Target upgraded
2019 Target upgraded Following the strong H1 and considering developing macro-economic trends, the Group upgrades its 2019 target as it deploys its strategic priorities in key markets and its focus on the c. +200 basis points (at constant FX) margin ambition for 2019-2021. 2019 Target: Adj. EBITA gr
Slide 36: Investor Relations ready to engage
Investor Relations ready to engage Upcoming events: Proposing quarterly interaction with investors showcasing specific businesses, geographies or functions 2- 5 Sep Management roadshow, Europe 5 Sep Morgan Stanley Industrials CEO’s Unplugged Conference, London 18 Sep Management roadshow, Singapore 2
Slide 37: Appendix
Appendix Photos: J.Deloy – SE Design Lab
Slide 38: 2019 additional notes
2019 additional notes • Foreign Exchange impact: Based on current rates, the FX impact on FY 2019 revenues is estimated to be between +€300 million to +€400 million. The FX impact at current rates on adjusted EBITA margin could be between -10bps to -20bps. • Industrial Productivity: While the increa
Slide 39: 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 40: Schneider Sustainability Impact 2018 – 2020, Results as of Q2 2019
Schneider Sustainability Impact 2018 – 2020, Results as of Q2 2019 Objective Beginning Results Results 12/2019 01/2018 Q1 2019 Q2 2019 Our megatrends 2015 – 2020 and targets 2018 – 2020 Overall Score of 10 7/10 3 6.23 6.78 CLIMATE 80% renewable electricity -- 35% 40% 10% CO2 efficiency in transporta
Slide 41: Organic growth across regions in Q2
Organic growth across regions in Q2 % Group Sales Org. growth NORTH AMERICA WESTERN EUROPE 29% +9% 26% +2% United States Canada Mexico France Germany United Kingdom Spain Italy REST OF WORLD ASIA PACIFIC 15% +4% 30% +5% China India Australia S. Korea Japan Russia South America Middle East Africa Inv
Slide 42: Analysis of Change of Adjusted EBITA (in €m)
H1 Adj. EBITA up +11% organic thanks to strong top line performance, productivity and pricing actions Analysis of Change of Adjusted EBITA (in €m) 144 144 142 -78 218 -58 -118 -4 -55 H1 Productivity +€144m includes tariffs impact and • H2’18 pricing action carry- other inflationary over delivering i
Slide 43: Adjusted Net Income calculation
Adjusted Net Income calculation In €m H1 2018 H1 2019 Net Income (group share) 1,020 993 Impact of business disposals and other asset impairments, post tax 24 160 Major acquisition / integration costs net of tax1 7 24 Restructuring charges net of tax1 67 78 Impact from Tax reforms 25 - Adjusted Net
Slide 44: Key management messages…
Key management messages… Group positioning – Digital Solutions for Energy Transition & Industry 4.0 Strategy – More products, More services, More software, Better systems Balanced portfolio – by geography, by end-market, from early to mid-late cycle Organic growth - sustained growth to deliver Energ
Slide 45: Investor Relations contacts
Investor Relations contacts Amit Bhalla – Head of Investor Relations, Tel: +44 207 592 8216, Email: amit.bhalla@se.com Phil Buller – Investor Relations Director, Tel: +44 207 592 8291, Email: phil.buller@se.com Investor Relations - Schneider Electric Page 45
Slide 46: Life Is On | Schneider
Lifels On | Schneider GeElectric