Schneider Electric Se · EURONEXT:SU
Schneider Electric — FY2020 Earnings Presentation
70 slides from Schneider Electric's earnings presentation, Feb 11, 2021
Slide 1: A signature year defining the foundation for the future
- A signature year defining the foundation for the future: Acceleration of digital, step change in sustainability, resilient financial performance, transformational acquisitions, embracing new normal
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 FY 2020 Business Highlights 29 FY 2020 Financial Highlights 48 Expected Market Trends & Financial Target 53 Q&A 56 Appendix Investor Relations – Schneider Electric | Page 3
Slide 4: FY 2020 Business Highlights
FY 2020 Business Highlights 2020, a year of intensive execution & accelerated transformation Jean-Pascal Tricoire Chairman & CEO Investor Relations – Schneider Electric | Page 4
Slide 5: Digital solutions for sustainability and efficiency
Digital solutions for sustainability and efficiency Energy Industrial Management Automation Energy Transition Industry 4.0 Electrification Digitization SUSTAINABILITY + EFFICIENCY One Platform Four End-markets Buildings & Data Center c.50% Infrastructure & Industry c.50% One Model Integrated Empower
Slide 6: 2020: a signature year for Schneider Electric
2020: a signature year for Schneider Electric Life Is On High Performance Future-Ready Support mission-critical Strong H2 - quick recovery from crisis Transformational acquisitions applications in a world In Software under stress Full year - profitability up and cash up In India Hospitals Driven by
Slide 7: Life Is On I High Performance I Future-Ready
Life Is On I High Performance I Future-Ready Investor Relations – Schneider Electric | Page 7
Slide 8: Our purpose and mission
Life Is On I High Performance I Future-Ready Our purpose is to empower all to make the most of our energy and resources, bridging progress and sustainability for all. At Schneider, we call this Life Is On. Our mission is to be your digital partner for Sustainability and Efficiency. Investor Relation
Slide 9: Life Is On: Meeting critical needs in a year like no other
Life Is On I High Performance I Future-Ready Life Is On: Meeting critical needs in a year like no other > 90 countries where we were Hospitals Food and Beverage Data Centers recognized as Mission Critical Urgent support through digital and services: Hospitals, Mobile ICUs… Grid for electrical distri
Slide 10: High Performance
Life Is On I High Performance I Future-Ready Investor Relations – Schneider Electric | Page 10
Slide 11: Strong rebound in H2
Life Is On I High Performance I Future-Ready Strong rebound in H2 €14bn Energy Management +1% Industrial Automation Energy efficiency Group H2 2020 revenues, org. growth Process efficiency c. +120bps org. improvement 11bn € € 3bn c. +120bps org. improvement adj. EBITA margin +1.8% -1.6% adj. EBITA m
Slide 12: Accelerated momentum in H2
Life Is On I High Performance I Future-Ready Accelerated momentum in H2 Leveraging: Performance: More • Unrivalled partner network More • Digital services benefitting from Products • Multi-local business model Software & need for remote access • Resilient Supply Chain Services • Software strong in Q
Slide 13: Strong 2020 performance margin up, record free cash flow
Life Is On I High Performance I Future-Ready Strong 2020 performance margin up, record free cash flow €25bn Energy Management -4.7% Industrial Automation Energy efficiency Group FY 2020 revenues, org. growth Process efficiency 18.8% 19bn € €6bn 17.1% adj. EBITA margin -4.5% -5.3% adj. EBITA margin O
Slide 14: Our expanding Software & Services portfolio delivering
Life Is On I High Performance I Future-Ready Our expanding Software & Services portfolio delivering Software & Services Increasing Enabling Customer stickiness Recurring revenues Org. growth Resilience vs Catalyst for growth in Proportion set to Group’s Margin Accretive controls & connected increase
Slide 15: Supply chain delivering in challenging environment
Life Is On I High Performance I Future-Ready Supply chain delivering in challenging environment Schneider’s 5th Lighthouse Digitization of operations Lexington Smart Factory for efficiency, productivity and quality Fourth Industrial Revolution Advanced Lighthouse Designation Greater regionalization
Slide 16: Embracing new ways of working and technology
Life Is On I High Performance I Future-Ready Embracing new ways of working and technology as an accelerator of multi-hub Change Learn & Adapt & Transform Digital remote services E3D Design On-site workers & field service agility WORLDWIDE Digital customer meetings COLLABORATIONS Digital everywhere V
Slide 17: Customer successes driven by EcoStruxure
Life Is On I High Performance I Future-Ready Customer successes driven by EcoStruxure Building Data Center Industry Infrastructure Richland One Hong Kong Willingboro National energy grid South Carolina, U.S. Jockey Club New Jersey, U.S. Egypt Reduce district’s utility consumption by Increase visuali
Slide 18: Future-Ready
Life Is On I High Performance I Future-Ready Investor Relations – Schneider Electric | Page 18
Slide 19: Acquisitions & partnerships to prepare for the future
Life Is On I High Performance I Future-Ready Acquisitions & partnerships to prepare for the future… JAN DEC Structured integration plans underway to drive synergies ACQUISITIONS Electrical & Automation Combine Low Voltage Accelerate industrial Leader of 5D BIM cloud- World-leading industrial & Digit
Slide 20: Strengthening our multi-hub operating model with India as 4th hub
Life Is On I High Performance I Future-Ready Strengthening our Multi-hub operating model with India as 4th hub China Products R&D Supply Chain Europe Products R&D Supply Chain Sales Suppliers Sales Suppliers Supply USA Products R&D India Chain Products R&D Supply Chain Sales Suppliers Sales Supplier
Slide 21: Strengthening Digitization across the lifecycle
Life Is On I High Performance I Future-Ready Strengthening Digitization across the lifecycle Design Build Operate & Maintain Digital Services (Advisors) Power HVAC Asset Sustainability AVEVA AVEVA AVEVA Asset AVEVA Enterprise Asset AVEVA Unified AVEVA System Platform AVEVA Manufacturing AVEVA Simula
Slide 22: Digitization becoming pervasive in our end-markets
Life Is On I High Performance I Future-Ready Digitization becoming pervasive in our end-markets Smart Buildings Data Centers Smart Grid Industry 4.0 Boosted by AI, 5G, IIoT… x6 Buildings account for IP traffic growth ~40% ~30% Renewable Electricity 97% of organizations are of CO2 emissions CAGR from
Slide 23: We are digital partners of our customers
Life Is On I High Performance I Future-Ready We are digital partners of our customers Digital & Services combined for a unique efficiency value proposition down to the shop floor Unique value proposition 4x integrations 76,000+ registered users >450 new digital offerings >500 Service providers liste
Slide 24: More innovation and more products
Life Is On I High Performance I Future-Ready More innovation and more products EcoStruxure™ Automation Expert Stepping up on frictionless digital experience SF6-free Project with E.ON wins enerTIC Award Distribution Contractors OEM customers 100% connected Power PrismaSeT Active Panel System switchb
Slide 25: ESG at the core of our strategy & purpose
Life Is On I High Performance I Future-Ready ESG at the core of our strategy & purpose Focusing on ESG for over 15 years Leading the pack in ESG ratings 2005- 2009- 2012- 2015- 2018- 2008 2011 2014 2017 2020 AAA 13.4 (low risk) A 9.32/10 FY’20 surpassing target of 9/10 BB 67 B* Taking Sustainability
Slide 26: Sustainability as a business - another growth driver
Life Is On I High Performance I Future-Ready Sustainability as a business - another growth driver Novartis first pharmaceutical set to achieve 100% renewable electricity in its European > 130M First-ever sustainability flagship restaurant to meet goals with optimal energy efficiency in Australia ope
Slide 27: Our distinctive DNA is externally recognized
Life Is On I High Performance I Future-Ready Our distinctive DNA is externally recognized the world’s most #1 sustainable company 2021 Investor Relations – Schneider Electric | Page 27
Slide 28: We remain focused on generating shareholder value
Life Is On I High Performance I Future-Ready We remain focused on generating shareholder value Total Shareholder Return * 200 SE #1 in 2020 & over a 3-year period 180 160 €2.60** 140 Dividend per share 120 +2% vs. 2019 100 80 Progressive Dividend** for 11 years 60 40 2018 2019 2020 x2.5 1-YEAR TSR 3
Slide 29: FY 2020 Financial Highlights
FY 2020 Financial Highlights Hilary Maxson CFO Investor Relations – Schneider Electric | Page 29
Slide 30: FY20 Financial highlights - further progress on our journey
FY20 Financial highlights - further progress on our journey Revenues Gross Margin Adj. EBITA Margin €25bn, -4.7% org. +60bps org. +20bps org. Ending the year with consecutive quarters of Demonstrating discipline on pricing, and Cost containment through crisis while still organic growth move towards
Slide 31: Revenue growth rebound up +1.0% organic in H2
Revenue growth rebound up +1.0% organic in H2 Analysis of Change in Group Revenues (in €m) +1.3% -5.0% Mainly due to the +3.4% +0.4% 0.0% strengthening of the 13,956 -0.3% Euro against the USD 13,584 Contributions from L&T E&A, RIB Group +1.0% org. in H2 Software and ProLeiT partially offset by (+0.
Slide 32: Energy Management - H2 performance highlights
Energy Management - H2 performance highlights €11bn Key performance highlights 78% of Group H2 2020 revenues • Strong performance in Residential Scope • Good traction in specialized areas of non-residential, Organic +1.5% +1.8% e.g. healthcare 10,775 10,589 • Sales to Data Center market finished str
Slide 33: Industrial Automation - H2 performance highlights
Industrial Automation - H2 performance highlights €3bn Key performance highlights 22% of Group H2 2020 revenues • Discrete end-markets resilient, with strong growth in Scope China 3,181 +0.6% • Process Automation end-markets remained 2,995 challenged Organic -5.9% -1.6% • Strong finish in Q4 from AV
Slide 34: Focus on Q4 - Energy Management up +1% organic
Focus on Q4 - Energy Management up +1% organic Q4 Org. growth Split of Q4 2020 revenue by geography: 26% 29% 29% 16% N. America W. Europe Asia Pac. Rest of the World North America +3% Western Europe +1% • Good growth in U.S. and sequential improvement on Q3 • Strong growth in Germany, led by Residen
Slide 35: Focus on Q4 - Industrial Automation down -1% organic
Focus on Q4 - Industrial Automation down -1% organic Q4 Org. growth Split of Q4 2020 revenue by geography: 33% 18% 33% 16% N. America W. Europe Asia Pac. Rest of the World North America -12% Western Europe +3% • U.S. OEM demand remained soft overall, but with • Good demand for the Group’s software o
Slide 36: Resilience in execution across strategic pillars
Resilience in execution across strategic pillars More Products More Software & Services Better Systems -4% +1% +10bps FY’20 org. FY’20 org. FY’20 GM expansion growth growth On -9% FY’20 organic growth 59% of Group 17% of Group 24% of Group Investor Relations – Schneider Electric | Page 36
Slide 37: Increased portfolio quality - demonstrated by GM trajectory
Increased portfolio quality - demonstrated by GM trajectory FY’20 Gross margin % FY’20 Gross margin expansion Gross margin expansion Gross margin % 40.4% +60bps +250bps 5 Years Representing a 12-year high Organic improvement Organic improvement in last 5 yrs of continuous improvement Net price1 evol
Slide 38: Continued focus on adj. EBITA margin expansion
Continued focus on adj. EBITA margin expansion FY’20 Adj. EBITA margin % FY’20 Adj. EBITA margin growth 15.6% +20bps On track for adj. EBITA margin Unchanged margin % vs. last year Organic improvement * Adj. EBITA margin expansion Adj. EBITA c. 17% by 2022, which is not the end of the journey +300bp
Slide 39: FY 2020 Adj. EBITA +20 bps org. due to productivity, net price and SFC savings
FY 2020 Adj. EBITA +20 bps org. due to productivity, net price and SFC savings Analysis of Change of Adjusted EBITA (in €m) 171 -191 4,238 -558 51 -87 219 -179 262 3,926 • Favorable mix impact from balance • The reduction in support function cost of growth by geography and the was supported by savin
Slide 40: Adj. EBITA: Margin maintained at 15.6%, growing +20bps org.
Adj. EBITA: Margin maintained at 15.6%, growing +20bps org. Energy Management Industrial Automation In €m 2019 2020 Reported Organic change change Revenues 27,158 25,159 -7.4% -4.7% c.+30bps c.-30bps Gross Profit 10,735 10,156 -5.4% -3.2% Org. Adj. EBITA Org. Adj. EBITA Gross Margin (%) 39.5% 40.4%
Slide 41: Positioning for the new reality: stepping up on structural savings
Positioning for the new reality: stepping up on structural savings SFC Cost Savings in 2020 Tactical / structural FY 2020 Cumulative structural savings 2020-2022 Tactical savings c.€300 c.€1bn H1 H2 million c. €200 million c. €100 million FY’20 c.€650 million Operational efficiency H1 H2 c.€350 mill
Slide 42: Adj. Net Income of €2.6bn
Adj. Net Income of €2.6bn In €m 2019 2020 % change Mainly M&A / integration costs. 2019 included loss on disposal of Pelco Adjusted EBITA 4,238 3,926 -7% Other income and expenses (411) (210) Restructuring (255) (421) Increased restructuring costs due to Group’s ongoing structural savings and cost e
Slide 43: Record Free cash flow at €3.7 billion
Record Free cash flow at €3.7 billion Analysis of debt change in €m 2019 2020 Positive evolution on receivables and payables typical of a lower growth environment, offset by increase in inventory Net debt at opening Dec 31 (5,136) (3,792) in preparation for 2021 Operating cash flow 4,012 3,651 Capit
Slide 44: Capital allocation: priorities unchanged
Capital allocation: priorities unchanged 1 2 Strong Investment Continued focus on Grade Credit Ratings Dividends 3 4 Portfolio optimization Share buyback* Near-term focus: Successful integration of recent Renewed progress Small bolt-ons or partnerships acquisitions and deliver associated + expected
Slide 45: Balance sheet remains strong - Net Debt impacted by timing of OSIsoft completion
Balance sheet remains strong - Net Debt impacted by timing of OSIsoft completion Net Debt / Adj. EBITDA Timing impacts on Dec. 31 balance sheet 0.99x • The Group benefits from holding at Dec. 31, the cash contribution from 3rd parties of the AVEVA rights issue 0.73x 0.75x • As the acquisition of OSI
Slide 46: Continued focus on return on capital
Continued focus on return on capital but impacted by transformational software deals to prepare the future 13% ROCE* Group ROCE*: 12.0% (vs. 12.1% in 2019) 12% Transformational software deals announced in 2020 will be a catalyst for future sales growth 11% Recent transactions could impact ROCE in ne
Slide 47: First ever sustainability-linked convertible bond
First ever sustainability-linked convertible bond €650 million 3 key performance indicators selected in H2 2020 Climate Deliver 800 megatons of saved and avoided CO2 emissions to our customers Increase gender diversity, from hiring to Equal front-line managers and leadership teams (50/40/30) linked
Slide 48: Expected market trends & financial target
Expected market trends & financial target Jean-Pascal Tricoire Chairman & CEO Investor Relations – Schneider Electric | Page 48
Slide 49: Expected market trends in 2021
Expected market trends in 2021 By End-market By Geographic market BUILDINGS NORTH AMERICA WESTERN EUROPE • Strong growth in Residential markets • Strong growth expected for the region, including • Good recovery to continue in the region, led • Good growth in specialized areas of Non- in both Residen
Slide 50: 2021 Target
2021 Target The Group expects positive growth in aggregate in 2021 as it continues to deploy its strategic priorities in key markets. The Group targets 2021 Adjusted EBITA growth between +9% and +15% organic The target would be achieved through a combination of organic revenue growth and margin impr
Slide 51: Across cycle & Medium-term ambition reiterated
Across cycle & Medium-term ambition reiterated • Organic revenue growth of between +3% to +6%, on average across the 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 (excluding IFRS16), on average across t
Slide 52: 2021 and beyond: strategic direction is clear
2021 and beyond: strategic direction is clear More More More More Products Service Software Sustainability Recurring Margin Cashflow Sustainable Growth Revenues Improvement Generation Model Shareholder return Investor Relations – Schneider Electric | Page 52
Slide 53: Q&A
Q&A Investor Relations – Schneider Electric | Page 53
Slide 54: Investor Relations ready to engage
Investor Relations ready to engage Proposing quarterly interaction with investors showcasing specific businesses, geographies or functions 11 February FY Results 17 February Barclays Industrial Select Conference 27 April Q1 2021 Revenues 28 April Shareholders’ Meeting 10 & 11 March UBS Best of Busin
Slide 55: 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 55
Slide 56: Appendix
Appendix Investor Relations – Schneider Electric | Page 56
Slide 57: 2021 additional notes
2021 additional notes • Foreign Exchange impact: Based on current rates, the FX impact on FY 2021 revenues is estimated to be between -€600 million to -€700 million. The FX impact at current rates on adjusted EBITA margin for FY 2021 could be around -10bps • Scope: Around +€600 million on 2021 reven
Slide 58: Consistent strategy delivering on several counts
Consistent strategy delivering on several counts Topline Growth Profile Across cycle target : 3% to 6% org., 2020 impacted by pandemic, 2016-2019 CAGR c. 4.5% org. Continued Pricing Power Net pricing in 2020 € 262 million; € 525 million delivered over a 5-year period Industrial Productivity Strong t
Slide 59: Schneider Sustainability Impact 2018-2020, Results as of Q4 2020
2018-2020 Schneider Sustainability Impact 2018-2020, Results as of Q4 2020 Beginning Results Target 01/2018 Q4 2020 End 2020 Our megatrends & SDGs Our 21 goals 2018-2020 Overall score out of 10 3 9.32 9 CLIMATE 1. Renewable electricity -- 80%↑ 80% 2. CO2 efficiency in transportation -- 8.4% ↑ 10% 3.
Slide 60: New SSI 2021-25: taking sustainability to next level
New SSI 2021-25: taking sustainability to next level 2018-2020 CLIMATE 1. Grow our green revenues to 80% 2. Deliver 800 megatons of saved and avoided CO2 emissions to our customers 3. Reduce CO2 emissions from top 1000 suppliers’ operations by 50% RESOURCES 4. Increase green material content in our
Slide 61: Essentials 2021-2025
2021-2025 ESSENTIALS CLIMATE 1. 150 Zero-CO2 sites 2. 100% substitution with SF6-Free medium voltage technologies 3. 90% of electricity sourced from renewables 4. 15% CO2 efficiency in transportation RESOURCES 5. 15% energy efficiency in our sites 6. 80% of product revenues covered by Green Premium™
Slide 62: Our employees have come together to support COVID-19 relief
Our employees have come together and stepped up efforts to support COVID-19 relief Respond April to December Tomorrow Rising Fund by First needs of low-income people 67 74 1.5m Countries Projects People benefited Resilience Employees contribution as a volunteer 5,000 volunteering days June to Decemb
Slide 63: FY revenue down -4.7% org. having rebounded well in H2
FY revenue down -4.7% org. having rebounded well in H2 Analysis of Change in Group Revenues (in €m) Mainly due to the 27,158 -5.3% strengthening of the -4.1% Euro against the USD -4.9% -4.1% -0.2% -2.5% 25,159 Mainly comprises the disposal of Pelco and Converse Energy Group +1.0% org. in H2 Projects
Slide 64: Organic growth by region Q4 2020: Energy Management +1.2%
Organic growth by region Q4 2020: Energy Management +1.2% % EM revenues Org. growth NORTH AMERICA WESTERN EUROPE 29% +3% 26% +1% United States Canada Mexico France Germany United Kingdom Spain Italy Nordics REST OF WORLD ASIA PACIFIC 16% +1% 29% +0% China India Australia Indonesia Thailand Russia So
Slide 65: Organic growth by region Q4 2020: Industrial Automation -0.8%
Organic growth by region Q4 2020: Industrial Automation -0.8% % IA revenues Org. growth NORTH AMERICA WESTERN EUROPE 18% -12% 33% +3% United States Canada Mexico France Germany United Kingdom Spain Italy Nordics REST OF WORLD ASIA PACIFIC 16% -7% 33% +6% China India Australia S. Korea Japan Russia S
Slide 66: GM - strong contribution from price and productivity
GM - strong contribution from price and productivity Gross Margin Analysis of Change – FY20 0.9pt -0.1pt -0.3pt 0.2pt 40.4% 0.7pt -0.5pt 39.5% FY 2019 Net price1 Productivity FX R&D & Prod. Mix Scope & Others FY 2020 Labor infl. 1. Price on products and raw material impact Investor Relations – Schne
Slide 67: Adjusted Net Income calculation
Adjusted Net Income calculation In €m FY2019 FY2020 Adjusted EBITA 4,238 3,926 Amortization of purchase accounting intangibles (173) (207) Financial Costs (261) (278) Income tax with impact from adjusted items (836) (781) Discontinued ops (3) - Equity investment & Minority Interests (32) (46) Adjust
Slide 68: Record Free cash flow at €3.7 billion
Record Free cash flow at €3.7 billion Free cash-flow evolution (€m) FY20 FCF €3.7bn with strong 3,673 contribution from working capital typical 3,476 of low growth environment €3bn Also benefitted by certain timing impacts 2,206 2,253 €274m €283m specific to COVID-19 situation in the year 2,045 2,10
Slide 69: ROCE calculation
ROCE calculation ROCE Calculation 2020 P&L items Reported EBITA1 (1) 3,246 Restructuring costs (2) -421 Other operating income & expenses (3) -210 = Adjusted EBITA (4) = (1) - (2) - (3) 3,877 x Effective tax rate of the period2 (5) 22.7% = After - tax Adjusted EBITA (A) = (4) x (1-(5)) 2,997 2020 20
Slide 70: Life Is On | Schneider
Lifels On | Schneider GeElectric