Schneider Electric Se · EURONEXT:SU
Schneider Electric — H1 2016 Earnings Presentation
42 slides from Schneider Electric's earnings presentation, Jul 28, 2016
Slide 1: First Half 2016 Results
First Half 2016 Results July 28, 2016
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 H1 2016 performance highlights 20 H1 2016 finance presentation 26 Full year 2016 targets 28 Appendices Schneider Electric – Investor Relations Page 3
Slide 4: H1 2016 performance highlights
H1 2016 performance highlights Confidential Schneider Electric – Investor Property of Schneider Relations Electric | Page 4
Slide 5: Schneider Electric H1 2016 highlights
Schneider Electric H1 2016 highlights Balanced geographies – H1 2016 revenues €11.8 billion c.5% 28% 28% Western H1 2016 revenues of H1 revenues North Europe devoted to R&D America 27% 40% 43% 17% Asia- Rest of Pacific of H1 revenues in of H1 revenues as the World new economies Solutions Diversified
Slide 6: Strong operational performance in H1 in challenging markets
Strong operational performance in H1 in challenging markets, thanks to the solid execution of “Schneider is On” SCHNEIDER IS ON INITIATIVES PROGRESS UPDATE IN H1 2016 DO MORE > Growth in Products & Services > +0.3% organic growth in Products > +7% organic growth in Services > Better project and equi
Slide 7: All financial metrics are up in H1 2016
All financial metrics are up in H1 2016 FINANCIAL OBJECTIVES H1 2016 RESULTS > Expand Adj. EBITA margin > Adj. EBITA margin up +80 bps, up ~+160 bps before FX > Adj. EBITA up +12% organically > Net profit at €809m, up +13% > c.100% FCF conversion of Net income > Last Twelve Months cash conversion of
Slide 8: Growth in Products & Services and decline in Systems mainly due to selectivity
Growth in Products & Services and decline in Systems mainly due to selectivity H1 2016 organic growth, % H1 2016 organic growth, % Group: ~ flat org. c. +1% excl. project Service up c.7% with selectivity1 growth in all businesses 1.3 Up without project 1.3 selectivity 0.4 -0.2 -0.7 -1.4 -1.3 -1.9 -3
Slide 9: Western Europe and U.S. grew, China improving and New Economies slightly up
Western Europe and U.S. grew, China improving and New Economies outside China were slightly up Western Europe organic growth, % North America organic growth, % New Economies organic growth, % With U.S. up in a New economies mixed environment 2 New economies outside China 1 1 1 1 -1 -1 -1 China down
Slide 10: ~€300m cost reduction in H1, as we execute simplification
~€300m cost reduction in H1, as we execute simplification Industrial productivity (€m) Support function cost (€m) ~120 €m Gross SFC savings 3,151 171 2,958 151 2015 H1 2016 H1 2015 H1 2016 H1 Key initiatives Key initiatives > Sales, Inventory & Operations Planning maturity > Simplify our business or
Slide 11: Strong improvement of our Systems business in a tough environment
Strong improvement of our Systems business in a tough environment Environment Initiatives Results > Increase selectivity during Headwinds from O&G tendering phase Hit rate improved significantly > Reinforce governance and risk Weak industrial markets assessment Systems gross margin improved by about
Slide 12: Launch of EcoStruxure.io
Launch of EcoStruxure.io REDEFINED... EcoStruxure.io Homes Buildings Datacenters Industries Grid End to End Cybersecurity Cloud and/or On Premise Apps, Analytics & Services Edge Control Connected Products Schneider Electric – Investor Relations Page 12
Slide 13: Numerous key products, control platforms & software in H1
Numerous key products, control platforms & software in H1…. Buildings Industrial & machines Utilities & Infrastructure Data Centers & Networks Smart Building Service Vijeo Cyber security services StruxureOn™ Apps & Plans include predictive Design’Air for electrical grid connects maintenance mobile a
Slide 14: …with specific focus on home and small buildings
…with specific focus on home and small buildings Wiser Air solution Resi 9 distribution board Bond switch range • Complete home energy management • Transforms homes into vibrant, • Designed to be stylish, practical and solution with state-of-the-art technology stylish living spaces set the mark in t
Slide 15: Buildings & Partner strengthening its global leadership
Buildings & Partner strengthening its global leadership, with revenues and margin up €5.2bn Execution priorities 44% of Group H1 2016 revenues Maximize all businesses through partners Low voltage & Building Automation Continue to drive Wiring devices / Final distribution in all regions Launch
Slide 16: IT margin up c.10bps before FX confirming its leadership
IT margin up c.10bps before FX confirming its leadership €1.7bn Execution priorities Launch new offers and expand channels 14% of Group H1 2016 revenues Integrate Group portfolio into complete offers for targeted Critical Power, Cooling & Services datacenter segments Leverage new cloud-based s
Slide 17: Infrastructure repositioning with margin up +70bps
Infrastructure repositioning with margin up +70bps, up c. +2pts before FX €2.3bn Execution priorities Grow Services and Products 19% of Group H1 2016 revenues Increasing selectivity and better execution of Systems Medium voltage & grid automation (Projects and Equipments) Further cost cutting
Slide 18: Industry solid with moderate decline in revenues while margin up
Industry solid with moderate decline in revenues while margin up despite headwinds from O&G and China €2.7bn Execution priorities Grow business through partners and integrators 23% of Group H1 2016 revenues Continue to develop OEM solutions Grow Software in key segments Balance end markets e
Slide 19: Planet & Society barometer reaches 6.97/10
This quarter, our Planet & Society barometer reaches 6.97/10 Selected Indicators & Objectives Q1 2016 Q2 2016 On first half 2016, Schneider Electric was awarded: Planet 10th in Newsweek Green Ranking ● 10% energy savings Schneider Electric’s rise to the 10th place is an 4.5% 5.6% acknowledgment of o
Slide 20: H1 2016 finance presentation
H1 2016 finance presentation Confidential Schneider Electric – Investor Property of Schneider Relations Electric | Page 20
Slide 21: Revenues in H1 are about stable organically
Revenues in H1 are about stable organically Analysis of change in Group revenues (in €m) Western Europe North America Asia Pacific Rest of World +1% -2% Scope 12,848 +2% -2% -4.1% Fx Group: ~flat % org -3.6% 11,846 -7.8% Mainly deconsolidation Mainly from New of Delixi and sale of economies & Juno l
Slide 22: Strong productivity and net pricing drive gross margin improvement
Strong productivity and net pricing drive a solid gross margin improvement Gross margin: analysis of change (%) 1.4 -0.1 -0.3 -0.7 0.1 38.2 0.8 • Significant sequential improvement in mix impact 37.0 0.0 compared to H2 2015 • Price stability. Positive outside China • Raw material tailwind of c. €100
Slide 23: Adj. EBITA margin up 80bps, and ~160bps before FX
Adj. EBITA margin up 80bps, and ~160bps before FX. Gross margin and SFC improved organically In €m H1 2015 H1 2016 Reported Organic Change Change Revenues 12,848 11,846 -7.8% -0.1% • 1pt leverage as SFC1 declined organically -1%, Gross Profit 4,752 4,528 -4.7% +3.1% thanks to continued focus on simp
Slide 24: Both EBIT and Net income are up double-digits in H1
Both EBIT and Net income are up double-digits in H1 In €m H1 2015 H1 2016 y-o-y Change Adjusted EBITA 1,601 1,570 -2% Other income and expenses (75) (8) Restructuring costs expected to be c. €300m for FY Restructuring (158) (132) Significant decrease mainly due to Amortization of purchase accounting
Slide 25: Free cash flow more than doubled
Free cash flow more than doubled Analysis of debt change in €m H1 2015 H1 2016 Net debt at opening Dec 31 (5,022) (4,631) Operating cash flow 1,134 1,306 Better control of receivables and Capital expenditure – net (382) (402) Inventory Change in trade working capital (283) (251) management Change in
Slide 26: Full Year 2016 Targets
Full Year 2016 Targets Confidential Schneider Electric – Investor Property of Schneider Relations Electric | Page 26
Slide 27: 2016 Targets
2016 Targets In the first half, the Group delivered solid organic growth around Products & Services and a strong improvement in adjusted EBITA margin in a challenging environment. While headwinds from O&G and weakness in resource based markets remained, growth continued in the U.S. construction mark
Slide 28: Appendixes
Appendixes Confidential Schneider Electric – Investor Property of Schneider Relations Electric | Page 28
Slide 29: 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 30: The Planet & Society barometer
The Planet & Society barometer Our 2015-2017 detailed sustainability scorecard, as of Q2 2016 Planet & Society barometer Start Results Results Target (objectives for 2017) 01/2015 Q1 2016 Q2 2016 12/2017 Overall score (out of10) 3.00 6.70 6.97 8/10 10% energy savings - 4.5% 5.6% 10% 10% CO2 savings
Slide 31: Adj. EBITA up +12% organically, helped by net price and productivity
Adj. EBITA up +12% organically, helped by net price and productivity Analysis of change of adjusted EBITA (in €m) -37 31 -55 171 -143 1,601 99 -54 1,570 -28 -15 H1 2015 Volume Mix Net price1 Productivity Production, SFC Net Currency Others H1 2016 Labor cost acquisition effects 1: Of which RMI of c.
Slide 32: Q1 2016 restated for Delixi
Q1 2016 restated for Delixi €m Q1 2015 Q1 2016 Organic Scope FX Reported Buildings & Partner 2,701 2,481 +1.8% -7.5% -2.4% -8.1% Industry 1,371 1,301 -2.6% -0.4% -2.4% -5.4% Infrastructure 1,149 1,083 -0.1% -2.3% -3.0% -5.4% IT 775 774 +0.7% 0% -0.8% -0.1% Group 5,996 5,639 +0.3% -3.9% -2.4% -6.0% €
Slide 33: Delixi financial performance in 2015 and impact on Group performance
Delixi financial performance in 2015 and impact on Group performance in H1 DELIXI IMPACT ON GROUP PERFORMANCE IN H1 2016 Delixi financial information 2015 > A negative scope impact of c. -2.6% on Revenues Revenues (€m) 650 > Close to zero impact on adjusted EBITA margin Adjusted EBITA (€m) 63 > No i
Slide 34: Q2 Performance
Q2 Performance Confidential Schneider Electric – Investor Property of Schneider Relations Electric | Page 34
Slide 35: Q2 revenues were slightly down organically
Q2 revenues were slightly down organically with Buildings & Partners posting solid growth Analysis of change in Group revenues (€m) Buildings & Partner Industry Infrastructure IT Scope 6,852 +0.9% -1.2% -2.3% -0.9% -4.3% Fx Organic: -0.5% -4.6% 6,207 -9.4% Q2 2015 Q2 2016 Schneider Electric – Invest
Slide 36: Buildings & Partner grew across all regions
Buildings & Partner grew across all regions Analysis of change in Q2 Revenues (€m) North America was up driven by successful new offer launches in a favorable construction market in the U.S. and continued growth in Mexico. Organic Scope +0.9% -7.9% In Western Europe, Germany and Spain were up th
Slide 37: Industry declined but on a lower pace than Q1
Industry declined but on a lower pace than Q1 thanks to growth in Western Europe and Rest of the World Analysis of change in Q2 Revenues (€m) The U.S. was down as it continued to be impacted by low O&G investment and a strong dollar, while the Organic priority remains enhancing cross-selling by Sc
Slide 38: Infrastructure was about flat excluding project selectivity impact
Infrastructure was about flat excluding project selectivity impact Analysis of change in Q2 Revenues (€m) The project selectivity impact, estimated to be around -€25m in Q2. This impact is expected to increase in H2. Organic North America was up thanks to project execution Scope 1,367 -2.3% Fx i
Slide 39: IT declined slightly but observed growth in North America and Asia Pacific
IT declined slightly but observed growth in North America and Asia Pacific Analysis of change in Q2 Revenues (€m) Organic The U.S. was slightly up driven by reinvigorated Scope Fx channels and strong services growth. 960 -0.9% +0.0% -3.4% Western Europe declined slightly as the growth from 919 s
Slide 40: In Q2, Western Europe continued to grow, while Rest of World turned negative
In Q2, Western Europe continued to grow, while Rest of World turn into negative Analysis of change in Group revenues (€m) Western Asia- North Rest of Europe Pacific America World Scope Q2 revenues 6,852 +3% -2% 0% -4% -4.3% Western Fx 28% Europe -4.6% 6,207 Asia -9.4% 27% Pacific Organic: -0.5% Nort
Slide 41: 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 Oct 27, 2016 Q3 2016 Revenues Meeting Oct 27, 2016 Investor Day Meeting Sch
Slide 42: Life Is On | Schneider Electric
Lifels On | Schneider f Electric