Schneider Electric Se · EURONEXT:SU
Schneider Electric — FY2016 Earnings Presentation
47 slides from Schneider Electric's earnings presentation, Feb 16, 2017
Slide 1: Full Year 2016 Results
Full Year 2016 Results February 16, 2017
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 Full year 2016 performance highlights 22 Full year 2016 finance presentation 30 Full year 2017 targets 32 Appendices Schneider Electric – Investor Relations Page 3
Slide 4: Full year 2016 performance highlights
Full year 2016 performance highlights Schneider Electric – Investor Relations Page 4
Slide 5: Solid execution of Schneider is On: strong improvement in Adjusted EBITA margin
Solid execution of Schneider is On: Strong improvement in Adjusted EBITA margin, all time high Free Cash Flow and Net Income up +24% • We successfully delivered on our roadmap in 2016 • Adj. EBITA c.+90 bps before FX, exceeding initial target and top-end of revised target • All time high FCF of €2.2
Slide 6: Schneider Electric 2016 highlights
Schneider Electric 2016 highlights Balanced geographies – FY 2016 revenues 28% 27% Western €24.7 billion 5% FY 2016 revenues of FY revenues North Europe devoted to R&D America 27% 18% Asia- Rest of the World Pacific 41% 44% of FY revenues in of FY revenues as new economies Solutions Four integrated
Slide 7: This quarter, our Planet & Society barometer reaches 8.48/10
This quarter, our Planet & Society barometer reaches 8.48/10 In 2016, Schneider Electric was awarded by: Indicators & objectives 2017 - selection Q4 2016 Q3 2016 Fortune Magazine: #24 / 50 Companies that are changing the world DJSI Industry Leader ● 10% energy savings for the 4th consecutive year 7.
Slide 8: Focus on strategic priorities yielded strong results in 2016
Focus on strategic priorities yielded strong results in 2016; Well positioned for further organic sales growth and margin improvement SCHNEIDER IS ON INITIATIVES PROGRESS UPDATE IN 2016 • Growth in Products, Software • c.+1% organic growth ex-systems1 & transformers DO MORE & Services • Services up
Slide 9: All financial targets achieved in 2016
All financial targets achieved in 2016 FINANCIAL OBJECTIVES 2016 RESULTS About flat organic growth ex-impact of •Slightly positive organic growth excl. selectivity1 selectivity in 2016 Expand Adj. EBITA margin +60bps to • Adj. EBITA margin of 14.1%, up c.+90bps before FX +90bps before FX (initial ta
Slide 10: Slightly positive underlying organic growth in 2016
Slightly positive underlying1 organic growth in 2016 with c.+1.6% underlying2 growth in Q4 FY 2016 ORGANIC GROWTH, % ORGANIC GROWTH, % Group: -0.9% org, Slightly positive underlying1 ~+1.6 Excl. selectivity ~+0.9 0.3 ~0.3 -0.1 -0.8 ~-0.5 -1.2 -3.4 -1.7 -1.7 H1 2016 H2 2016 Q4 2016 Building Industry
Slide 11: Our strategic priorities achieved good results in a mixed market
Our strategic priorities achieved good results in a mixed market MORE PRODUCTS MORE SERVICES BETTER SYSTEMS THROUGH PARTNERS & SOFTWARE Grow specialized business Services Growth across all the businesses OEM Solution Low-single digit organic growth in products sold Datacenters 5.0 Revenues throug
Slide 12: Building delivers growth and a c.+1.5pt organic margin improvement
Building delivers growth and a c.+1.5pt organic margin improvement Performance highlights €10.7bn • 2 largest countries (U.S., China) both delivered growth, 43% of Group 2016 revenues Western Europe about flat Low Voltage & Building Automation • New economies grew with India and CIS up strongly, Mid
Slide 13: IT grew in large markets but suffered from weakness in EMEA
IT grew in large markets but suffered from weakness in EMEA. Margin decreased but remains resilient at high level Performance highlights €3.6bn • 2 largest markets (U.S. and India) grew 15% of Group 2016 revenues • Weakness in Western Europe, Middle-East & Africa Critical Power, Cooling & Services •
Slide 14: Infrastructure improves margin by c.+1.3pt organic
Infrastructure improves margin by c.+1.3pt organic in difficult markets €4.9bn Performance highlights • Margin improved c.+1.3pt organic thanks to higher system 20% of Group 2016 revenues margin and strong cost control but was below 2016 target Medium voltage & grid automation of 10% due to strong n
Slide 15: Industry delivers a resilient performance in a mixed environment
Industry delivers a resilient performance in a mixed environment, with positive momentum in Q4 €5.5bn Performance highlights FY org. growth impacted by weak O&G, China and U.S. 22% of Group 2016 revenues Growth in Western Europe and New economies ex-China Positive performance in Q4 with improv
Slide 16: Good progress in improving project management and margin
Good progress in improving project management and margin GROUP: ACTIONS LAUNCHED GROUP ACHIEVEMENTS IN 2016 INCREASE SELECTIVITY • Deeper screening of projects through experienced Hit rate improved significantly solution committees and tighter processes and hurdles (>10pts) • Focus on repetitive seg
Slide 17: We continue to simplify our operations for greater efficiency
We continue to simplify our operations for greater efficiency TOTAL SAVINGS (€bn) KEY ACTIONS IN 2016 Industrial productivity (c. €380m) 1.7-1.8 • Ranked #18 Top Global Supply Chain • Purchasing efficiency 1.3 0.7-0.8 • Quality value engineering • Transport: improved container loading factor 0.5 SFC
Slide 18: EcoStruxure Platform
Deployment of EcoStruxure.io EcoStruxure Platform Building Data Center Industry Grid Apps, Analytics & Services Cloud and/or On Cybersecurity End to End Premise Edge Control Connected Products BUILDING POWER DATA CENTER MACHINE PLANT GRID Schneider Electric – Investor Relations Page 18
Slide 19: Numerous key launches in 2016 supporting EcoStruxure deployment
Numerous key launches in 2016 supporting EcoStruxure deployment Buildings Industrial & machines Utilities & infrastructure Data Centers & Networks Building Industry Grid Data Center Apps & Analytics, Asset Performance Services Smart Building Service Plans Wonderware Online, StruxureOn™ Management as
Slide 20: Continued focus on home and small buildings
… with continued focus on home and small buildings Wiser Air Solution Resi 9 Bond distribution board switch range • Complete home energy management solution • Transforms homes into • Designed to be stylish, vibrant, stylish living spaces practical and set the mark in terms of functionality and modul
Slide 21: Investing in Digital Customer Experience and impactful launches
Investing in Digital Customer Experience and impactful launches Refreshed Web Experience Globally Impactful Launches • ~70 Million Visitors annually • Launched with 25 “hero” offers • Leader in Analysts Quadrants for Software, Grid, BMS, Datacenter Mobility for Customer Analytics for Intelligence En
Slide 22: Full year 2016 finance presentation
Full year 2016 finance presentation Confidential Property of Schneider Electric | Page 22
Slide 23: Slightly positive underlying organic growth; scope and FX drive revenue decline
Slightly positive underlying organic growth. Scope and FX main driver for revenue decline ANALYSIS OF CHANGE IN GROUP REVENUES (in €m) Group: -0.9% org, Mainly Delixi slightly positive underlying growth1 deconsolidation, Juno Western Europe & Telvent transport. 26,640 +0% disposals Asia-Pacific Nort
Slide 24: Strong gross margin improvement
Strong productivity, net price and improving mix trend drove a strong gross margin improvement GROSS MARGIN: ANALYSIS OF CHANGE (%) 1.5 -0.2 -0.4 0.1 38.0 0.5 -0.5 37.0 0.0 • Improving trends vs. 2015 thanks to • Price positive outside China. In China, selectivity initiatives Divestments & Delixi R&
Slide 25: Adj. EBITA margin improves c.+90 bps before FX
Adj. EBITA margin improves c.+90 bps before FX, +70 bps organic thanks to strong gross margin improvement In €m FY 2015 FY 2016 Organic change • Gross profit improved organically Revenues 26,640 24,693 through strong productivity & system margin improvement Gross Profit 9,845 9,390 +1% Gross margin
Slide 26: EBIT and Net income increased by +32% and +24%
EBIT and Net income increased by +32% and +24% on reported basis and adjusted EPS1 up c.+2%2 % In €m FY2015 FY2016 change Adjusted EBITA 3,641 3,480 -4% • Restructuring costs expected to be Other income and expenses c. €900m in 2015-2017 to drive (522) (63) efficiency initiatives. Restructuring (318
Slide 27: Record Free cash flow, up +8%
Record Free cash flow, up +8% thanks to improving operating cash flow and good working capital management Analysis of debt change in €m FY2015 FY2016 Net debt at opening Dec 31 (5,022) (4,631) Operating cash flow 2,715 2,942 Capital expenditure – net (787) (764) • Strong control over Change in trade
Slide 28: Strong cash conversion and solid balance sheet
Strong cash conversion and solid balance sheet CASH CONVERSION, % NET DEBT/ ADJ. EBITDA 1132 1183 1.2 1.1 961 109 1.0 2014 2015 2016 2014 2015 2016 1: Based on Net income adjusted for discontinued ops 2: Based on Net income adjusted for business disposals impact and Pelco impairment (see p25) 3: Bas
Slide 29: Proposed dividend of €2.04 per share, increased by +2%
Proposed dividend of €2.04 per share, increased by +2% DIVIDEND HISTORY Dividend Yield (%) 1 2.5 Dividend (€ per share) 5 4 2.0 3 1.5 1.92 2.00 2.04 2 1.87 1.87 1.60 1.70 1.0 1 1.03 0.5 0 2009 2010 2011 2012 2013 2014 2015 20162 1: Based on share price prior to dividend payment, or Feb.15th 2017 for
Slide 30: Full Year 2017 Targets
Full Year 2017 Targets Schneider Electric – Investor Relations Page 30
Slide 31: 2017 Targets
2017 Targets DRAFT In 2017 the Group expects more positive momentum in its major end-markets. In North America, modest growth is anticipated with improvement in industrial activity and continued growth in residential markets. Western Europe is expected to grow moderately, benefiting from an environm
Slide 32: Appendixes
Appendixes Schneider Electric – Investor Relations Page 32
Slide 33: 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 compens
Slide 34: Sustainability key messages 2016 and trends 2017
Sustainability key messages 2016 and trends 2017 2016 key messages: • The Planet & Society barometer reaches 8.48/10, outpacing year-end target 2016 (7.5/10). • More than 20 million people benefited from our Access to Energy offers. Launch of Homaya, a solar home system for off-grid households: comp
Slide 35: The Planet & Society barometer 2015-2017
The Planet & Society barometer 2015-2017 - Results as of Q4 2016 Start Results Results Target Planet & Society barometer 01/2015 Q3 2016 Q4 2016 12/2017 Our megatrends 2015-2020 and our targets 2015-2017 Overall score (out of 10) 3.00 7.65 8.48 8/10 10% energy savings - 5.9% 7.1% 10% 10% CO2 savings
Slide 36: Adj. EBITA up +4% organic thanks to positive net price and strong productivity
Adj. EBITA up +4% organic thanks to positive net price and strong productivity Analysis of change of adjusted EBITA (in €m) -107 28 -82 377 -117 3,641 -113 -199 3,480 -50 102 FY 2015 Volume Mix Net price1 Productivity COGS SFC Other Net Currency FY 2016 (Inflation acquisition effects & R&D) impact 1
Slide 37: ROCE calculation
ROCE calculation ROCE calculation 2016 P&L items Reported EBITA (1) 3,104 Restructuring costs (2) -313 Other operating income & expenses (3) -63 = Adjusted EBITA (4) = (1)-(2)-(3) 3,480 x Effective tax rate of the period1 (5) 23.8% = After-tax Adjusted EBITA (A) = (4) x (1-(5)) 2,650 2015 2016 2016
Slide 38: Adjusted net income calculation
Adjusted net income calculation In €m FY2015 FY2016 Net income (group share) 1,407 1,750 Invensys integration cost post-tax1 57 Impact of business disposals (in OOIE, share of profit 226 10 on associates & discontinued ops) Impairment on Pelco net of tax 180 Restructuring charges post-tax1 249 238 T
Slide 39: Q4 Performance
Q4 Performance Schneider Electric – Investor Relations Page 39
Slide 40: Q4 revenues underlying organic growth up c.+1.6%
Q4 revenues underlying organic growth up c.+1.6% with Industry turning positive in Q4 Analysis of change in Group revenues (€m) Organic Growth: -1.7% c.+1.6% underlying growth1 Industry 7,198 +1.4% IT +0.3% Building 6,783 Infrastructure -1.2% -5.8% -6.7% Scope Fx -3.1% -1.0% Q4 2015 Q4 2016 1: Estim
Slide 41: Building grew in Asia-Pacific but declined in North America and Rest of the World
Building grew in Asia-Pacific but declined in North America and Rest of the World Analysis of change in Q4 Revenues (€m) North America declined, as the U.S. suffered from lower project activity in commercial & industrial buildings mainly due to selectivity and a high base of comparison in solar ma
Slide 42: Industry turned positive in Q4 thanks to OEM and improvement in China
Industry turned positive in Q4 thanks to OEM and improvement in China Analysis of change in Q4 Revenues (€m) Globally, the Group benefited from its focus on OEM in a favorable market. Process automation declined organically, though showing early signs of improvement in order intake. Scope China
Slide 43: Infrastructure slightly up before project selectivity impact
Infrastructure was slightly up before the impact of the project selectivity which accelerated as expected in Q4 Analysis of change in Q4 Revenues (€m) Negative impact from selectivity initiatives accelerated to ~- €100m in Q4, in line with expectations. ~flat organic North America was down due t
Slide 44: IT grew slightly in Q4, thanks to North America and Asia Pacific
IT grew slightly in Q4, thanks to North America and Asia Pacific Analysis of change in Q4 Revenues (€m) North America was up led by the U.S. with strong growth in IT channel sales, continued success in services initiatives and project execution in data Fx 992 centers. Mexico declined. +0.6% +0.9%
Slide 45: Asia-Pacific grew slightly with China & India
Asia-Pacific grew slightly with China & India while rest of regions declined Analysis of change in Group revenues (€m) Organic: -1.7 % Asia- Q4 revenues Pacific 7,198 Western 0% 27% Europe Western Europe North Rest of Asia 6,783 27% -1% America World Pacific -4% -2% -5.8% Scope North -3.1% Fx Americ
Slide 46: Contacts & agenda
Contacts & agenda 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 Apr 20, 2017 Q1 2017 Revenues Conference call Apr 25, 2017 Annual General M
Slide 47: Life Is On | Schneider Electric
Lifels On | Schneider f Electric