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Schneider Electric — H1 2014 Earnings Presentation
45 slides from Schneider Electric's earnings presentation, Jul 30, 2014
Slide 1: Half-year 2014 Results
Half-year 2014 Results July 30, 2014 1
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 Overview 6 Strategy and business update 20 Finance presentation 29 Full year 2014 Targets 31 Appendices Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 3
Slide 4: Overview
Overview Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 4
Slide 5: Schneider Electric first half 2014 highlights
Schneider Electric first half 2014 highlights Balanced geographies – H1 2014 revenues 1 €11.7 billion c. 5% 28% 25% Western Europe H1 revenues1 of H1 revenues1 North America devoted to R&D 28% 43% 41% 19% Asia-Pacific Rest of of H1 revenues1 in of H1 revenues1 as the World new economies Solutions Fo
Slide 6: Strategy and business update
Strategy and business update Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 6
Slide 7: Good H1 performance with margin expansion, strong contribution from Invensys
Good H1 performance with margin expansion, strong contribution from Invensys Revenue1 growth in H1 2014 led by early cycle +3.2% reported, +8.6% before FX impact • Buildings & Partner and Industry continue to lead the growth • New economies and services remain solid +0.6% organically, +2.7% excl. In
Slide 8: Revenues up 2.7% organically in H1 excluding Infrastructure, driven by early cycle businesses
Revenues up 2.7% organically in H1 excluding Infrastructure, driven by early cycle businesses H1 organic growth Early cycle business organic growth Group +0.6% org. Buildings & Partner +2.7% organic growth excluding Infrastructure Industry +5.1% 5.1% +3.5% 3.5% 2.6% 1.5% -2.0% 0% -6.7% -1.4% Buildin
Slide 9: New economies and Services remain growth engines
New economies and Services remain growth engines H1 organic growth H1 organic growth 9% 3.2% +5 pts 1% -1.3% Group Services Mature New economies New Economies: good performance in China, Services continued growth in Middle East and South America • Growth in all businesses while weakness in Russia •
Slide 10: Buildings & Partner business continued to grow, driven by China and the U.S.
Buildings & Partner business continued to grow, driven by China and the U.S. Analysis Of Change of H1 Revenues (€m) High single-digit organic growth in China, driven by successful mid-market offers and commercial Scope Fx initiatives +2.2% -5.4% Organic +3.5% Low single-digit growth in the U.S. bene
Slide 11: Industry business posted the strongest growth, supported by all regions
Industry business posted the strongest growth, supported by all regions Analysis Of Change of H1 Revenues (€m) Strong growth in products Benefited from broad based OEM demand Scope Fx +40.1% -5.6% 2,704 +39.6% Strong service growth, up double-digit Mixed trends in end-user segments Organic +5.1% 1,9
Slide 12: Infrastructure business was mainly impacted by very weak utility markets in Western Europe
Infrastructure business was mainly impacted by very weak utility markets in Western Europe Analysis Of Change of H1 Revenues (€m) Very weak utility markets in Western Europe High base of comparison penalized North America, but benefited from oil & gas, data center and utility Organic 2,627 -6.7% Sco
Slide 13: IT business showed signs of improvement despite continued destocking in Russia
IT business showed signs of improvement despite continued destocking in Russia Analysis Of Change of H1 Revenues (€m) Russian distributors continued to destock, yet at a lower pace in Q2 Organic In the US, H1 revenues declined, but orders grew 1,686 -2.0% Scope -2.2% Fx -5.1% Projects in telecom, ba
Slide 14: Consistent delivery of high industrial productivity
Consistent delivery of high industrial productivity Industrial Productivity (€m) On track to deliver Connect productivity target €1-1.1Bn €824 m Accumulated Since 2012 Key productivity drivers: 1771 168 Strong material productivity led by purchasing negotiations and continued supplier rationalizatio
Slide 15: Invensys: strong strategic fit and well structured integration set clear path for value creation
Invensys: strong strategic fit and well structured integration set clear path for value creation Strategic fit Integration highlights Reinforce industrial Initiatives driving 90% of 2014 automation capabilities target cost savings are completed Boost our positions in key electro-intensive segments +
Slide 16: Early signs of success: revenue synergies
Early signs of success: revenue synergies Schneider Electric Customer profile Invensys offer offer • Leading O&G player • DCS for all phases of a • Add on low and • Existing Invensys client refinery project medium voltage equipment • Major F&B company • Wonderware software • Operational in Australia
Slide 17: Continued investment for long term growth was funded by SFC savings
Continued investment for long term growth was funded by SFC savings R&D Geographies Services > Common technology platforms > Coverage in new economies: > Field service engineers > Comprehensive software for x3 in China since 2009 > Cloud-based service offers targeted segments > Funding growth initia
Slide 18: This quarter, our Planet & Society Barometer reaches 8.85/10
This quarter, our Planet & Society Barometer reaches 8.85/10 8.85/10 10 Performance of our Planet & Society 8.04 8 Q4 2014 Barometer 7.51 8 target 6.42 6.25 6.38 6.09 6 4.94 3.87 3.94 5.50 4 3.85 2 0 Actual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Target 2012 2013 2014 A performing Planet & Society Barom
Slide 19: Our performance and commitment are recognized
Our performance and commitment are recognized Indicators and objectives 2014 Q1 2014 Q2 2014 This quarter, Schneider Electric was rewarded by: Planet Selected indicators 2014 Newsweek Green Ranking Schneider Electric within the ● 75% of our product revenue achieved with 70.8% 70.9% “Top 10 Green com
Slide 20: Finance presentation
Finance presentation Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 20
Slide 21: H1 2014 revenues up 3.2% despite significant negative FX impact
H1 2014 revenues up 3.2% despite significant negative FX impact Analysis of change in Group revenues (in €m) Scope Fx +8.0% -5.4% Organic +0.6% 11,700 +3.2% Asia-Pacific North America Rest of World Western Europe 11,335 +4% -1 % +2% -3% H1 2013 H1 2014 restated1 Based on current exchange rates, we s
Slide 22: Strong gross margin improvement on organic and reported basis
Strong gross margin improvement on organic and reported basis Analysis of change of gross margin (%) Organic +1.5 -0.8 +90 bps Industrial productivity is the key +0.4 -0.6 gross margin improvement driver 38.1 +70 bps Raw material tailwind supported gross margin improvement +0.2 37.4 0.0 Invensys con
Slide 23: Despite investment in SFC, Adjusted EBITA margin up +30 bps organically
Despite investment in SFC, Adjusted EBITA margin up +30 bps organically In €m H1 2013 H1 2014 Reported Organic restated1 Change change Gross Profit 4,237 4,457 +5.2% +2.6% Support function cost (2,734) (2,953) +8.0% +2.5% Adjusted EBITA 1,503 1,504 0.1% +2.8% Margin % 13.3% 12.9% -40 bps +30 bps 1:
Slide 24: 80 bps margin improvement before FX at current scope
80 bps margin improvement before FX at current scope Analysis of change of adjusted EBITA (%) +0.8 -0.8 13.4 -0.1 13.3 -0.4 12.9 12.9 H1 2013 Mainly CST & H1 2013 Invensys impact H1 2013 Margin FX H1 2014 reported Delixi impact restated Proforma1 improvement before FX 1: See appendix p.34 Schneider
Slide 25: Margin in Industry is up excluding Invensys, stable in IT and down in Infrastructure
Margin in Industry is up excluding Invensys, stable in IT and down in Infrastructure H1 Revenue by business Adjusted EBITA margin (%) by business1 H1 2014 H1 2013 IT -0.6 pt, slightly down due to Buildings & 18.2 13% FX impact Partner 17.6 Infra- Buildings & -1.2 pt, mainly due to 19.4 44% Partner I
Slide 26: Underlying net income up 4%, up 20% at constant FX
Underlying net income up 4%, up 20% at constant FX In €m H1 2013 H1 2014 y-o-y Change at restated Change constant FX Adjusted EBITA 1,503 1,504 0.1% +10.8% Other income and expenses 12 (57) Circa €200m Restructuring (60) (71) expected for the full Amortization & impairment of year purchase accountin
Slide 27: Free Cash flow is impacted by investment phasing and Invensys integration costs
Free Cash flow is impacted by investment phasing and Invensys integration costs Analysis of debt change in €m H1 2013 restated H1 2014 Net debt at opening (4,398) (3,326) Operating cash flow 1,045 1,083 Capital expenditure – net (283) (386) Higher Capex due to expected investment Change in trade wor
Slide 28: Invensys contributed strongly to the Group's performance: circa 15% EPS accretion in H1
Invensys contributed strongly to the Group’s performance: circa 15% EPS1 accretion in H1 Order intake (€m) Invensys H1 performance H1 2013 843 c.+3% org Solid software revenue growth. System order grew high single digit while nuclear order declined due to project phasing H1 2014 829 Strong growth of
Slide 29: Full year 2014 Targets
Full year 2014 Targets Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 29
Slide 30: 2014 targets confirmed
2014 targets confirmed Our performance in H1 shows continuous improvement of our early cycle businesses, a high level of industrial productivity and a strong contribution from Invensys driving margin expansion before FX. With the stabilization of Western Europe outside utility markets, improvements
Slide 31: Appendices
Appendices Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 31
Slide 32: 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 compensa
Slide 33: Restated Q1 2014 revenues
Restated Q1 2014 revenues €m Q1 20131 Q1 20142 Organic Scope FX Reported Buildings & Partner 2,355 2,422 +5.3% +2.7% -5.1% +2.9% Industry 901 1,337 +6.9% +47.1% -5.6% +48.4% Infrastructure 1,109 1,089 -3.7% +6.8% -4.9 % -1.8% IT 793 716 -2.1% -2.3% -5.3% -9.7% Group 5,158 5,564 +2.6% +10.6% -5.3% +7
Slide 34: H1 2013 Proforma and FY 2013 Proforma
H1 2013 Proforma and FY 2013 Proforma Sales EBITA Adj. EBITA Adj. Revenues EBITA Adj. EBITA Adj. €m H1 13 H1 13 Margin H1 13 2013 2013 Margin 2013 Reported 11,430 1,532 13.4% 23,551 3,412 14.5% Invensys (ex-Appliance) 874 95 1,701 159 Other scope effects 22 (35) (43) (62) Proforma1 12,326 1,592 12.9
Slide 35: Adj. EBITA is stable despite severe currency headwinds
Adj. EBITA is stable despite severe currency headwinds Analysis of change of adjusted EBITA (in €m) 19 -66 126 -162 -28 1,503 20 177 1,504 • Expect raw -60 material price to -25 increase in H2 • Additional 20-40m • Positive for Brazil, expected in H2 based • Less negative vs. H1 Russia, Indonesia, 2
Slide 36: The Planet & Society Barometer
The Planet & Society Barometer Our 2012-2014 detailed sustainability scorecard, as of Q2 2014 The Planet & Society Barometer Start Results Results Target (objectives for 2014) 01/2012 Q1 2014 Q2 2014 12/2014 Overall score (out of 10) 3.00 8.04 8.85 8/10 Planet Carbon 10% CO2 savings on transportatio
Slide 37: Q2 revenues details
Q2 revenues details Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 37
Slide 38: Q2 revenues of €6.1bn
Q2 revenues of €6.1bn Analysis of change in Group revenues (€m) Scope Fx Organic +5.9% -5.5% -1.1% Buildings & Industry Infrastructure Partner +3.5% -8.9% +2.0% 6,136 6,178 IT -1.9% -0.7% Q2 2013 Q2 2014 Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 38
Slide 39: Buildings & Partner was up, driven by the U.S. and China
Buildings & Partner was up, driven by the U.S. and China Analysis of change in Q2 Revenues (€m) North America continued to grow with mixed trends. The US benefited from datacenter investments and improvements in the residential market. Mexico weighed down the performance as Scope Fx limited governme
Slide 40: Industry was driven by good performance in OEMs and services, while end-users saw mixed trends
Industry was driven by good performance in OEMs and services, while end-users saw mixed trends Analysis of change in Q2 Revenues (€m) Western Europe was positive, due to export-oriented OEMs in Italy, Germany and Spain. Scope Fx North America continued to grow benefiting from investments in +34.0% -
Slide 41: Infrastructure was impacted by very weak utility markets in Europe and a high comparison basis
Infrastructure was impacted by very weak utility markets in Europe and a high comparison basis Analysis of change in Q2 Revenues (€m) Western Europe accounted for most of the decline as utility markets remained weak, especially in Germany, France and Spain. Organic North America performed well in bo
Slide 42: IT was impacted by distributor destocking in Russia, but grew in China and Western Europe
IT was impacted by distributor destocking in Russia, but grew in China and Western Europe Analysis of change in Q2 Revenues (€m) Western Europe grew thanks to project execution in datacenters and growth in services. Organic Performance in the United States was still impacted by 893 -1.9% Scope conti
Slide 43: Q2 revenues by geography
Q2 revenues by geography Analysis of change in Group revenues (€m) Scope Fx Organic +5.9% -5.5% -1.1% Q2 revenues Western 27% Western Europe Asia-Pacific North America 6,136 Europe 6,178 -4% +3% -3 % Rest of World -1% -0.7% Asia 29% Pacific North 25% America Rest of 19% the World Q2 2013 Q2 2014 Sch
Slide 44: Contacts & agenda
Contacts & agenda Anthony Song – Head of Investor Relations Tel: +33-1-41-29-83-29 anthony.song@schneider-electric.com Alexis Denaud – Senior Investor Relations Manager Tel: +33-1-41-29-51-24 alexis.denaud@schneider-electric.com Oct 29, 2014 Q3 2014 Revenues Conference call Schneider Electric – Inve
Slide 45: Help people make the most of their energy
Help people make the most of their energy Schneider Electric – Investor Relations – Half year 2014 results – 30 July 2014 45