Schneider Electric Se · EURONEXT:SU
Schneider Electric — H1 2020 Earnings Presentation
54 slides from Schneider Electric's earnings presentation, Jul 29, 2020
Slide 1: Consistent strategy & resilient business model to navigate ongoing crisis
Consistent strategy & resilient business model to navigate ongoing crisis Well positioned and focused to grow in a post-COVID-19 world
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
04 H1 2020 Business Highlights 27 H1 2020 Financial Performance Highlights 42 Expected market trends & Targets 47 Q&A 48 Appendix Investor Relations - Schneider Electric Page 3
Slide 4: H1 2020 Business Highlights
H1 2020 Business Highlights Jean-Pascal Tricoire, Chairman & CEO Investor Relations - Schneider Electric Page 4
Slide 5: COVID-19: a catalyst for digital adoption
COVID-19: a catalyst for Digital adoption for more sustainability, efficiency & NOW resilience 2 Transitions Energy Transition Industry 4.0 Energy Industrial Management Automation 2 synergetic businesses Strengthened Value SUSTAINABILITY + EFFICIENCY + RESILIENCE Digital Solutions Unique business mo
Slide 6: H1 2020 Financial Highlights
H1 2020 Financial Highlights Delivering resilient financial performance through the crisis Revenues Adj. EBITA margin €11.6 billion 13.6% Down -10% org. in H1 Down -130bps org. in H1 Adjusted Net Income Free Cash Flow Net Debt €1.0 billion ~ €1 billion €4.8 billion Benefitting from disciplined After
Slide 7: H1 2020: Both businesses impacted due to COVID-19 crisis
H1 2020: Both businesses impacted due to COVID-19 crisis Energy Management Industrial Automation Energy efficiency Process efficiency 17.1% € 8.8 bn € 2.8 bn 15.2% c.-80bps Org. adj. EBITA margin -11% H1 org. sales -9% H1 org. sales c.-200bps Org. adj. EBITA margin growth growth Investor Relations -
Slide 8: Our key attributes in navigating this unprecedented crisis
H1 2020: Our key attributes in navigating this unprecedented crisis Consistent Strategy Empowered & very Local & Trained Organization Consistency • Sustainability, Efficiency and Resilience, • Empowered and integrated country enabled by Digital organizations for quick decision making • Locally Integ
Slide 9: Key customer successes in recent months
Key customer successes in recent months Smart Grid Industrial Digital Transformation Greenfield Process Automation Country-wide Smart Grid An Open standard based IOT Data Greenfield development to ensure efficient, reliable collection and structuration and library for including EcoStruxure™ & safe e
Slide 10: Enabling value for customers through enhanced digitization
Enabling value for customers through enhanced digitization Digital and service business World leading product business for increased efficiency across lifecycle also going digital Software + Digital • Enabling our world leading partner network in digital transformation services c. 7% • Step change i
Slide 11: Software & Services offers: more resilient than rest of Group
Software & Services offers: more resilient than rest of Group Software & Services c.17% of H1 2020 Customer stickiness revenues Recurring revenues -1% Org. growth Resilience vs Group’s Margin Catalyst for growth in Increased customer performance Accretive controls & connected intimacy Products Inves
Slide 12: Our supply chain set-up responded to the crisis
Our supply chain set-up responded to the crisis… GSC organization set-up 's Supply • Regionally organized - Globally managed Chain Rankings (2015–2020) • Balanced footprint & COGS inline with sales profile • Current GSC model relevant post-crisis 2015 2016 2017 2018 2019 2020 • Supply chain digitiza
Slide 13: … though we continue to face some challenges
… though we continue to face some challenges Supply issues due to contagion and Increased costs lockdown effect from specific factories North America • Mitigation of challenges/disruptions • Impacting residential end-market in North America • Increased freight costs (using air shipments to reduce •
Slide 14: Employees stepped up efforts to support COVID-19 relief
Our employees have come together and stepped up efforts to support COVID-19 relief Respond April to July Tomorrow Rising Fund by First needs of low-income people +60 +65 +800k Countries Projects Beneficiaries July to September Recovery Education system to prepare the future 5 Initiatives identified
Slide 15: Our distinctive DNA is externally recognized in 2020
Our distinctive DNA is externally recognized in 2020 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 Inve
Slide 16: We accelerate our sustainability trajectory
We accelerate our sustainability trajectory Schneider Sustainability Impact: 7.7/10 in H1 Indicators & objectives 2020 - selection H1 2020 Q1 2020 selects Schneider Electric as preferred partner for its CO2 Neutral objective CLIMATE 120 million metric tons CO₂ saved on our customers’ end thanks to o
Slide 17: We are back to business “as unusual”
We are back to business “as unusual” … 1 2 3 4 5 Health Business Cash & Ready for Communities Continuity Costs Rebound Shifted from “crisis management” . 1 2 3 4 5 Safe New Ways Business Structural Trust & De-escalation of Working Growth Efficiencies Resilience To “Fully back in business” mode Inves
Slide 18: Success factors for companies in a post-COVID-19 world
Success factors for companies in a post-COVID-19 world Sustainability Resilience Remote Efficiency everything Cost reduction through 4X integration Digitization + Electrification Predictive maintenance Automated Operations 1. Energy and Process Efficiency Carbon & resource Savings Cyber security ser
Slide 19: Zoom on resilience
Zoom on resilience GRID POWER BUILDING IT PROCESS ANALYTICS & SOFTWARE CYBERSECURITY MicroGrid Power Asset Unified IT AVEVA Machine AVEVA Unified SERVICES Advisor Advisor Advisor Operations Center Advisor Predictive Analytics Advisor Supply Chain AUTOMATION EcoStruxure EcoStruxure EcoStruxure EcoStr
Slide 20: Complete end-to-end solutions across the life cycle
Schneider is well positioned to offer complete end-to-end solutions across the life cycle for Industry & Buildings Design Build Operate & Maintain Design Alliances Construction Digital Services (Advisors) software Power HVAC Asset Sustainability Power Design Edge Control Connected Products Investor
Slide 21: 5D BIM
Cloud based End-to-End Capital Expenditure Platform 4th D Time Project Cost 5D = Integrated 3D model + project cost (4D) + schedule (5D) BIM for cost, time, budget and business partner management Infrastructure Power Industry 5th D Cost Schedule 3D Modeling Integrated Investor Relations - Schneider
Slide 22: New launch in H1: End-To-End Solution for Data Centers
New launch in H1: End-To-End Solution for Data Centers Unified Operations Center EcoStruxure solutions for Data Center Cockpit and Global Monitoring for Efficiency Predictive Diagnostics Operations Optimization Energy Optimization 10-15% 20-25% 5-10% +100 Savings Annually Savings Annually Savings An
Slide 23: Digitization & Sustainability high on customer and stimulus agendas
Digitization & Sustainability high on our customer’s agenda and government stimulus packages… All government initiatives would have Green and digital MV technology a link with sustainability SF6-Free : SM AirSeT switchgear USD USD World First: Switchgear powered by air & digital ~ 10 ~ 14% ~4 Trilli
Slide 24: Sustainability as a business driver for Schneider Electric
Sustainability as a business driver for Schneider Electric LOS ANGELES COUNTY SANITATION DISTRICTS Design & Build all efficiency improvements for Ultra-low carbon footprint Data Center Digitization with EcoStruxure solutions ~110M plant optimization metric tons CO₂ Modernization to replace obsolete
Slide 25: Our end-markets are well oriented in a post COVID-19 world
Our end-markets are well oriented in a post COVID-19 world Key drivers for end-market growth Smart buildings Software Building c. 35% Sustainability Full lifecycle efficiency Edge computing Data Center 5G IIOT Tech wars c. 15% Emerging markets Government stimulus Infrastructure Modernization 5G c. 2
Slide 26: All Customers have a digital, sustainability and resilience agenda
All Customers have a digital, sustainability and now resilience agenda Cost Sustainability, Efficiency Capacity & Efficiency & Resiliency boosters & Resilience Oil & Gas Software Healthcare Retail Digital Services Data Center Hotels EcoStruxure Food & Beverage MMM Cybersecurity Lifescience CIB Susta
Slide 27: H1 2020 Financial Performance Highlights
H1 2020 Financial Performance Highlights Hilary Maxson, CFO Investor Relations - Schneider Electric Page 27
Slide 28: Revenue down -10.5% organic in H1 2020, across all regions
Revenue down -10.5% organic in H1 2020, across all regions Analysis of Change in Group Revenues (in €m) Weakening of several new economies’ currencies 13,202 -10.6% against Euro partly offset -11.7% by strengthening of USD -10.1% -8.5% -1.7% -0.1% 11,575 Mainly comprises the Group -10.5% org. in H1
Slide 29: Differing Q2 performance across regions
Differing Q2 performance across regions linked to contagion levels & specific lockdown % Q2 20 Org. growth Group Sales NORTH AMERICA WESTERN EUROPE 28% -20% 25% -18% United States Canada Mexico France Germany United Kingdom Spain Italy Nordics REST OF WORLD ASIA PACIFIC 14% -15% 33% -5% China India
Slide 30: Energy Management H1 performance highlights
Energy Management H1 performance highlights €8.8bn • Residential & small building demand relatively stronger especially towards end of H1 76% of Group H1 2020 revenues • CIB remained impacted through H1 • Resilience in hospitals & healthcare 10,072 • Strong demand in Data centers through crisis • Di
Slide 31: Industrial Automation H1 performance highlights
Industrial Automation H1 performance highlights €2.8bn 24% of Group H1 2020 revenues • H1 impacted by economic cycle coupled with the impact of COVID-19 3,130 • Continued delivery on critical infrastructure through crisis • Resilience through offerings in Software & services 2,820 • Critical segment
Slide 32: Focus on Q2 - Energy Management down -15% organic
Focus on Q2 - Energy Management down -15% organic Q2 Org. growth N. America W. Europe Split of Q2 2020 revenue by geography: 24% 31% 31% 14% Rest of the World Asia Pac. North America -20% Western Europe -17% • Residential well oriented, impacted by short-term • Germany resilient helped by project ex
Slide 33: Focus on Q2 – Industrial Automation down -10% organic
Focus on Q2 – Industrial Automation down -10% organic Q2 Org. growth N. America W. Europe Split of Q2 2020 revenue by geography: 27% 19% 39% 15% Rest of the World Asia Pac. • North America -21% Western Europe -21% • Weakness in Process & Hybrid markets due to oil price, • Germany down, but more resi
Slide 34: H1 2020 revenues by categorization
H1 2020 revenues by categorization Group -10.5% Organic growth Products Systems Software & services -11% -15% -1% Organic growth Organic growth Organic growth Investor Relations - Schneider Electric Page 34
Slide 35: Gross Margin +20 bps organic in H1
Gross Margin +20 bps organic in H1 GROSS MARGIN: ANALYSIS OF CHANGE (%) +0.2 -0.2 +0.3 -0.1 -0.3 +0.6 39.9 39.4 • Positive Mix due to the balance of growth by geography along with the • Pricing on Products +37m€. relative growth rate of Positive pricing actions Products vs Systems • Raw material tai
Slide 36: Adj. EBITA: -18% organic growth, -130 bps organic margin decline
Adj. EBITA: -18% organic growth, -130 bps organic margin decline In €m H1 2019 H1 2020 Reported Organic change change Revenues 13,202 11,575 -12.3% -10.5% Gross Profit 5,202 4,621 -11.2% -10.1% Gross margin • Overall SFC to Sales ratio rose from 24.6% to 26.3%, 39.4% 39.9% +50bps +20bps (%) deterior
Slide 37: Delivering efficiency to meet short term challenges
Delivering efficiency to meet short term challenges and positioning for the new reality SFC Cost Savings in H1 • Deferral of salary increase • Digitizing planned physical • Cancellation of employee Marketing events Tactical savings share ownership plan for 2020 • Travel freeze c. €200 million • Hiri
Slide 38: Adj. Net Income of €1bn
Adj. Net Income of €1bn In €m H1 2019 H1 2020 % change Mainly M&A / integration costs. 2019 included loss on Adjusted EBITA 1,960 1,576 -20% disposal of Pelco Other income and expenses (346) (69) Restructuring (101) (221) Amortization & depr. of purchase Increased restructuring costs related to Grou
Slide 39: Free cash flow at €1 billion in H1
Free cash flow at €1 billion in H1 Analysis of debt change in €m H1 2019 H1 2020 Net debt at opening Dec 31 (5,136) (3,792) Operating cash flow 1,791 1,459 Capital expenditure – net (380) (339) Operating Cash Flow net of capex 1,411 1,120 Positive cash evolution on receivables & payables, offset by
Slide 40: Our capital allocation priorities remain unchanged
Our capital allocation priorities remain unchanged M&A in the core Disposal of non-core activities • No significant disposals in H1 2020 Deal closed 10 July 2020 enhancing Schneider Electric’s capabilities in building lifecycle digitization • Committed to €1.5bn - €2bn disposal plan Closing of acqui
Slide 41: Strong liquidity position
Strong liquidity position €6.3 bn c. €10 bn c. €8 bn Dec 31,2019 June 30, 2020 July 20, 2020 Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents + + + Available credit lines Available credit lines Available credit lines + + 3 successful Bonds 3 successful Bonds + + Divide
Slide 42: Expected market trends & Targets
Expected market trends & Targets Jean-Pascal Tricoire, Chairman & CEO Investor Relations - Schneider Electric Page 42
Slide 43: H2 2020 Expected market trends
H2 2020 Expected market trends The Group recognizes the ongoing uncertainty and challenges relating to the continuing global health and economic crisis. It is hard to predict whether there might be another significant lockdown in major economies following a second wave of contagion. On the assumptio
Slide 44: 2020 Targets
2020 Targets Following the resilient H1 and acknowledging the uncertain macro-economic trends, the Group re-establishes targets for FY 2020 as it deploys its strategic priorities in key markets to drive towards its medium-term ambition. In the current context, the Group notes the inherent uncertaint
Slide 45: Across cycle & Medium-term ambition reiterated
Across cycle & Medium-term ambition reiterated • Organic revenue growth of between +3% to +6%, on average across cycle • Achieve higher margins with a first step of moving adjusted EBITA margin to around 17%* by 2022 • Free cashflow to be around €3 billion, on average across cycle (*) at 2019 consta
Slide 46: Q&A
Q&A Investor Relations - Schneider Electric Page 46
Slide 47: Investor Relations ready to engage
Investor Relations ready to engage Proposing quarterly interaction with investors showcasing specific businesses, geographies or functions 29 July H1 Results 10 September Vertical Research Conference 11 September Morgan Stanley Industrial CEOs unplugged 24 September Bernstein 17th Annual Strategic D
Slide 48: Appendix
Appendix Investor Relations - Schneider Electric Page 48
Slide 49: 2020 additional notes
2020 additional notes • Foreign Exchange impact: Based on current rates, the FX impact on FY 2020 revenues is estimated to be between -€500 million to -€600 million. The FX impact at current rates on adjusted EBITA margin could be between -30bps to -40bps • Scope: Around -€300 million on 2020 revenu
Slide 50: Schneider Sustainability Impact 2018 – 2020, Results as of H1 2020
Schneider Sustainability Impact 2018 – 2020, Results as of H1 2020 Beginning Results Target 01/2018 H1 2020 End 2020 Our megatrends and SDGs Our 21 goals 2018-2020 Overall score out of 10 3 7.71 9 CLIMATE 1. Renewable electricity -- 65% ↑ 80% 2. CO2 efficiency in transportation -- 3.2% ↓ 10% 3. Mill
Slide 51: H1 Adj. EBITA -18% org.
H1 Adj. EBITA -18% org. Analysis of Change of Adjusted EBITA (in €m) 1,960 -551 151 -29 -75 29 -27 1,576 81 37 • Positive Mix due to the • The reduction in support function cost • Pricing on Products +37m€. balance of growth by was supported by savings of Positive pricing actions geography along wit
Slide 52: Adjusted Net income calculation
Adjusted Net income calculation In €m H1 2019 H1 2020 Adjusted EBITA 1,960 1,576 Amortization of purchase accounting intangibles (88) (86) Financial Costs (140) (172) Income tax with impact from adjusted items (386) (317) Discontinued ops 4 - Equity investment & Minority Interests (10) (6) Adjusted
Slide 53: Investor Relations contacts
Investor Relations contacts Amit Bhalla – Head of Investor Relations, amit.bhalla@se.com Graham Phillips – Investor Relations Director, graham.phillips@se.com Alban de Beaulaincourt – Investor Relations Director, alban.de-beaulaincourt@se.com Investor Relations - Schneider Electric Page 53
Slide 54: Life Is On | Schneider
Lifels On | Schneider GeElectric