Full year 2014 Results. February 19, 2015

Transcription

1 Full year 2014 Results February 19,

2 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 description of these factors and uncertainties, please refer to the section Risk Factors in our Annual Registration Document (which is available on Schneider Electric undertakes no obligation to publicly update or revise any of these forward-looking statements. This presentation includes information pertaining to our markets and our competitive positions therein. Such information is based on market data and our actual revenues in those markets for the relevant periods. We obtained this market information from various third party sources (industry publications, surveys and forecasts) and our own internal estimates. We have not independently verified these third party sources and cannot guarantee their accuracy or completeness and our internal surveys and estimates have not been verified by independent experts or other independent sources. 2

3 4 19 Strategy and business update Finance presentation 30 Connect Update 32 Full year 2015 Targets 34 Appendices 3

4 Strategy and business update 4

5 Solid execution delivered full year targets Invensys integration well on track Strong H2 performance lifted full year revenues growth Early cycle businesses together with IT drove growth, Infrastructure improved Improvement in mature countries balance new economies. Services kept their pace +6.6% in 2014, +1.4% organically, +3.2% excl. Infrastructure Gross margin up, adj EBITA margin improved at constant FX 1 Continued strong industrial productivity Positive net price (price less raw materials impact) Gross margin +20 bps, +60 bps excl. FX. Adj. EBITA margin 13.9%, +40 bps 1 excl. FX Net income growth despite unfavorable FX Solid free cash flow Net income +3%, c.+11% at constant FX 2 Free cash flow of 1.7bn Invensys integration well on track Organic growth in revenues, strong margin expansion and cash generation Highly EPS 3 accretive to the Group Revenues +2% org, adj. EBITA margin +5.5 pts Double Digit EPS accretion to the Group 1 Comparing to Group proforma 2013 of 13.9%, see page 23 2 Excluding post-tax FX impact on adjusted EBITA and FX gains and losses in financials 3 Based on reported EPS 5

6 Strong H2 performance drove full year revenues up 1.4% organically, 3.2% excluding Infrastructure Group organic growth, % Full year 2014 organic growth, % Focus on growth initiatives and project execution in a turbulent market Group +1.4% org % organic growth excluding Infrastructure Q Q Q Q Buildings & Partner Industry IT Infrastructure 6

7 Buildings & Partner kept its growth pace in H2 Organic growth, % Buildings and Partner Buildings & Partner H2 performance: Dynamic construction and data center markets in the US Slowdown in China while Australia and India improved Western Europe stabilized Rest of the World grew with mixed trends H H Smart connected panelboard Medium range Miniature Circuit Breaker for new economies 7

8 Industry continued to grow in H2 though at a slightly lower pace, due to high comparison base Industry 5.1 Organic growth, % Industry H2 performance: Solid OEM demand in US Soft China market offset by growth in Japan and Australia Sustained export-oriented OEMs demand in Western Europe 3.5 H H M580: World s first epac 1 with built-in ethernet Machine Solution Next Controller Generation 1 PAC: Programmable Automation Controller 8

9 Solid execution in H2 lifted up full year IT growth IT Organic growth, % 3.9 IT H2 performance: Good growth in the US driven by both products and solutions Continued active IT market in Western Europe Active IT investments in Australia and South East Asia -2.0 H H Power Bank for portable reliability Prefabricated data center for quick deployment 9

10 Infrastructure showed signs of improvement towards the end of the year Infrastructure Organic growth, % 0.3 Infrastructure H2 performance: Utility market remains weak in Western Europe Active datacenter and services in the US Growth in Australia and India thanks to project execution Mixed trends in Rest of the World Q Q Q Q Premset medium voltage switchgear modular and compact E-house modular power substation Integrated solution with complete Group offers 10

11 Mature countries accelerated their growth in H2, balancing the lower growth from new economies Mature countries organic growth, % New Economies organic growth, % Mid single digit growth in the US Improvement in Western Europe 3 3 Slow down in China 2-1 H H H H

12 Services continued to be the growth engine thanks to focused investments 2014 investments Continued efforts to improve installed base tracking 2014 organic growth, % 8.0 Recruitment of around 500 field service experts Launch of an Enterprise IoT platform (Schneider Electric Cloud), a key enabler of digital services 0.7 Rest of Group Services Field service Software as a service > Modernization & energy monitoring system for 5-building campus in South Africa > Uptime improvement & up to 30% energy savings > Weather intelligence for NSTAR, a U.S. electricity and natural gas utility > Enabling better anticipation of potential outages & faster power restoration 12

13 Invensys strategic fit confirmed and integration well on track STRATEGIC FIT INTEGRATION HIGHLIGHT Reinforce industrial automation capabilities Boost Group s positions in key electro-intensive segments Strengthen software for customer operational efficiency Invensys fully integrated in the Industry business Value proposition updated for targeted segments to include Invensys offers Invensys software embedded in the Group s offer (StruxureWare suites & digital service platform) 13

14 The Group is well positioned to generate revenue synergies with Invensys Opportunity examples > Design, start-up & commissioning of Jamnagar Refinery in India for Reliance, a former Invensys customer > Complete solution for large ammonia compressor machine for a German OEM Schneider Electric Invensys Schneider Electric Invensys LV/MV power Foxboro DCS Variable speed drives Eliwell controller UPS security system Triconex safety system Contactors HMI HMI > Renovation of one of the top 10 wastewater treatment plant in the world > Construction of a coal-to-liquids plant for one of China s top 100 coal enterprise, with 5.4m tons annual output Schneider Electric Invensys Schneider Electric Invensys LV/MV power Variable speed drives Foxboro EVO MV power Foxboro DCS SIS 14

15 New products and software launches positioned the Group for future growth Enhanced products thanks to software & connectivity M580 Smart Panel > World s first epac 1 with built-in ethernet > Enabling remote real-time monitoring of industrial installations & increased efficiency of maintenance teams > Low voltage electrical distribution panel > Cloud connectivity enabling remote monitoring and control of the meters and breakers built into the panel Software for targeted segments is a success 2014 Highlights > Recognized highest ranking DCIM solution in Gartner Magic Quadrant (Oct 2014) > Successful implementation in the largest critical care complex in Scotland (Brookfield Multiplex Europe) FlexPod > Micro data center for office buildings > Quick installation & self-configuration thanks to smart sensors connected to the SE Cloud platform > Deployed at Iron Ore Company of Canada (Rio Tinto), producing 22 million tons of iron ore concentrate per year 1 PAC: Programmable Automation Controller 15

16 We continued to improve our supply chain efficiency Industrial Productivity ( bn) Inventory to Revenues Ratio 1 (%) 1bn Accumulated Since ~2 pts Excluding Invensys 16

17 At the end of Connect, our Planet & Society barometer reached 9.52/10 10 Performance of our Planet & Society 8 barometer /10 8 Q target Actual Target 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q A performing Planet & Society barometer With a final score of 9.52/10, the Planet & Society barometer has exceeded by far its 3-year target of 8/10, for the period Among the 14 indicators of the Planet & Society barometer, 10 indicators have reached 10/10 and 3 other have reached 8/10. See detailed results page 38 17

18 Our performance and commitment have been recognized Indicators and objectives 2014 Q Q Highlights of the year Planet Selected indicators 10% CO2 savings on transportation 15.4% 16% Industry Leader of the Dow Jones Sustainability World & Europe for the second year 10% energy consumption savings Profit Selected indicators 90% of our recommended suppliers embrace ISO guidelines 300 sites recognized Cool sites People Selected indicators 30% reduction in the Medical Incident Rate (MIR) 63% result in our Employee Engagement Index 12.8% 13% 42.9% 63% % 61% 61% 61% Member of The A list CDP Climate Performance and Disclosure indices 99/100 in disclosure and A in performance Top 10 - Global 100 most sustainable corporations in the world for the second year (Jan 2015) Ethisphere World's most ethical companies for the fourth year Top 10 - Newsweek Green Ranking and 2 nd industrial company 18

19 Finance presentation 19

20 2014 revenues up 1.4% with all regions excluding Western Europe showing growth Analysis of change in Group revenues (in m) Organic +1.4% Scope +7.6% Fx -2.4% 24, % 23,392 Western Europe -2% Asia-Pacific +3% North America +2% Rest of World +3% 2013 restated figures were restated for Delixi full consolidation, CST reclassification in discontinued operations and other minor changes 20

21 Gross margin improved on positive net price and strong productivity Analysis of change of gross margin (%) Industrial productivity is the key gross margin improvement driver bps Net price contributed 0.2pt Negative mix driven by the strong growth of mid-market offers, negative geographical mix notably due to decline in Western Europe and impact of solutions growth in H Restated 1 Volume Net Price Productivity Mix Inflation Scope Currency 2014 & Others Invensys contributed positively to Group gross margin, offsetting the negative FX impact figures were restated for Delixi full consolidation, CST reclassification in discontinued operations and other minor changes 21

22 Adjusted EBITA grew high single digit at constant FX despite SFC investments In m 2013 Restated Change Organic change Change at constant FX Gross Profit 8,763 9, % +1.7% +10% Support function costs (5,407) (5,944) +9.9% +2.4% Adjusted EBITA 3,356 3, % +0.6% +8% figures were restated for Delixi full consolidation, CST reclassification in discontinued operations and other minor changes 22

23 40 bps Adjusted EBITA margin improvement at constant FX and current scope Analysis of change of adjusted EBITA (%) reported CST & Delixi impact 2013 restated Invensys impact 2013 Proforma 1 Margin improvement at constant FX FX The Proforma includes the calendarized 2013 results of Invensys, the restatement due to the reclassification of CST in discontinued operations, the full consolidation of Delixi (previously consolidated proportionally at 50%) and some additional scope adjustment 23

24 Margin in Industry up excluding Invensys while Infrastructure impacted by low volume and mix 2014 Revenue by business Adjusted EBITA margin (%) by business Infrastructure 21% IT 14% 24,939m 43% Buildings & Partner Buildings & 18.6 Partner Industry pt, down mainly due to negative FX. Slight impact from unfavorable mix due to mid-market offers and investments in new initiatives +0.7 pt, excluding Invensys, driven by positive pricing and operational leverage 22% Industry Infrastructure pt, decreased due to low volume and negative mix 1 Before corporate costs of 557m in 2014 ( 526m in 2013) IT pt, resilient 24

25 Net income is up c. 11% at constant FX and 6% adjusted for Invensys acquisition & integration costs In m 2013 Restated 2014 y-o-y Change Adjusted EBITA 3,356 3,463 +3% Other income and expenses 71 (106) Restructuring (173) (202) EBITA 3,254 3,155-3% Change at constant FX Mainly due to Invensys integration costs Amortization & impairment of purchase accounting intangibles (215) (259) Net financial expense (484) (467) Income tax (651) (551) Discontinued operations Equity investments Minority interests (97) (120) Net income (group share) 1,888 1,941 +3% c.+11% Post-tax Invensys acquisition & integration costs adjustment Net income before Invensys acquisition & integration costs 1,898 2,003 +6% Decreased cost of debt despite increase in gross debt Effective tax rate 22.7%, benefiting from Invensys Includes mainly the gain on disposal of CST and Invensys Appliance 1 costs related to the one-off acquisition and integration costs from Invensys. Calculated post-tax using each year ETR 25

26 Free Cash Flow generation at 1.7bn, cash conversion remains high at 96% 2 Analysis of debt change in m 2013 Restated 2014 Net debt at opening (4,398) (3,326) Operating cash flow 2,628 2,640 Capital expenditure net (706) (829) Change in trade working capital 278 (162) Change in non-trade working capital (40) 55 Free cash flow 2,160 1,704 Free cash flow excluding Invensys integration costs 2,160 1,774 Dividends (1,056) (1,205) Acquisitions net 1 (233) (1,743) Capital increase & Share buybacks 235 (134) Effect of exchange rates and others (34) (318) (Increase) / Decrease in net debt 1,072 (1,696) Net debt at December 31st (3,326) (5,022) 1 Includes cash flow from effect of discontinued operations sold in see page 28 Stable excluding US office investments in 2014 and oneoff building disposal gain in 2013 Working capital: the good performance in inventory was offset by the decrease of account payables on high comparison base in 2013 FX-impact increased net debt by 199m 26

27 Invensys performed strongly in 2014 and contributed double-digit accretion to Group EPS in 2014 Order intake ( m) Invensys performance ,742 c. flat org. Solid revenue growth in systems and software; and regionally in 2014 Revenues ( m) 1,683 excl. unusual large orders North America and Asia Pacific Adjusted EBITA margin up 5.5pts to 14.8% in 2014, driven by gross margin improvement and cost synergies, despite SFC investments Strong free cash-flow generation of c. 140m Adjusted EBITA ( m) ,701 1, % org. +5.5pts 1 Based on reported Earnings per Share 2 Including savings from Patriot plan announced by Invensys in 2013 Targets achieved in 2014, confirming next 2 years targets Double digit EPS 1 accretion in 2014 c. 75m cost savings achieved by the end of m total cost savings 2 confirmed, targeting c.75% by end of 2015 and 100% by end of m tax synergies confirmed, of which more than 300m realized by 2016, contributing to 3 to 4 pts reduction in effective tax-rate from 2014 to 2016 Confirming integration costs of 150m by the end of 2015, out of which 81m were incurred in

28 Solid cash conversion and improvement in ROCE despite negative FX impact Cash conversion (Free Cash Flow / Net income) ROCE (in %) Invensys contributed double-digit ROCE thanks to strong margin improvement and tax-benefit 12.1% 10.9% 11.7% 11.0% ROCE improved 80bps adjusted for FX and by 10bps compared to the 2013 proforma Based on the adjusted net income of 1,996m (before impairment of goodwill) 2 Based on net income excluding discontinued operations proforma

29 Proposed dividend up 3% at 1.92, reflecting growth and strong contribution of Invensys Dividend history Dividend Yield (%) 1 DPS ( ) % Based on share price as of date of dividend payment, or Feb.16 for 2014 dividend 2 Subject to shareholder approval on April 21,

30 30

31 We achieved most of our Connect targets by the end of 2014 Program target End of 2014 achievement Service growth rate +5 pts p.a. vs rest of Group Outgrew rest of group by average 7 points (on organic basis) Solutions Adj. EBITA +2 pts vs pt vs 2011 COGS Productivity 1bn to 1.1bn 1bn of cumulated productivity Support function costs Inventory efficiency Continued focus on optimizing R&D, maximizing commercial and back office efficiency ~2 pts reduction 1 vs 2011 Savings from optimizing R&D, maximizing commercial and back office efficiency partially fund investments ~2 points reduction of inventory to revenues ratio 1 Excluding Invensys 31

32 Full year 2015 Targets 32

33 2015 targets The Group expects North America to continue to grow, while Western Europe could show signs of stabilization. New economies will show a mixed picture: India should accelerate while Russia will face a difficult environment. China is expected to have a soft start of the year and should gradually improve during the year. Invensys is expected to continue to contribute to the Group performance. Group performance in Q1 will be impacted by a high base of comparison notably in China and for Invensys which may result in like-for-like decline in revenues in the quarter. In this context, the Group targets for 2015: > Low single-digit organic growth in revenues > Adjusted EBITA margin at % assuming no negative FX impact on margin > An expected significantly positive FX impact, estimated based on current rates at c. 1.5bn on revenues with no material impact on the adjusted EBITA margin 33

34 Appendices 34

35 Definitions EBITA: Adjusted EBITA: EBITDA: Adjusted EBITDA: Cash conversion: Free cash flow: ROCE: EBIT before amortization and impairment of purchase accounting intangibles and impairment of goodwill EBITA before restructuring and other operating income and expenses EBIT before depreciation, amortization, provisions and before share-based compensation cost Adjusted EBITA before depreciation, amortization, provisions and before share-based compensation cost Free cash flow / Net income (Group share) Operating cash flow less change in working capital less net capital expenditures Return On Capital Employed 35

36 Adjusted EBITA grew mainly thanks to volume, positive net pricing, productivity and scope Analysis of change of adjusted EBITA (in m) -67 3, ,463 Negative mix driven by the strong growth of midmarket offers, negative geographical mix notably due to decline in Western Europe and impact of solutions growth in H2 Net price positive Continued investment in services, R&D, and geographic coverage FX negatively impacted adj. EBITA margin by 40bps 2013 restated Volume Mix Net Price 1 Productivity 2 Production, Labor & Other costs 1 Net Price includes Price -45 and Raw material Of which Purchasing: 239, Lean Manufacturing: 63, Rebalancing: 30, Fixed manufacturing costs: 24 SFC Other Net acquisition impact Currency effects

37 ROCE After-tax adjusted EBITA / Average Capital Employed ROCE calculation P&L items Reported Reported EBITA (1) 3,309 3,155 Restructuring costs (2) Other operating income & expenses (3) = Adjusted EBITA (4) = (1)-(2)-(3) 3,412 3,463 x Effective tax rate of the perio (5) 25.0% 22.7% = After-tax Adjusted EBITA (A) = (4) x (1-(5)) 2,559 2, Balance sheet items Reported reported Avg of 4 quarters Avg of 4 quarters Shareholders' equity 17,363 20,151 (B) 16,963 19,070 Net financial debt 3,331 5,022 (C) 4,532 5,847 Adjustment for Associates and Financial assets (at historical value) (D) Electroshield Samara (before 100% consolidation) Sunten Electric Equipment (40% stake) Fuji Electric FA Components & Systems (36.8% stake) NVC Lighting (9.2% stake) CST Holding Other non-current financial investments = Capital Employed 20,368 24,573 (E) = (B)+(C)+(D) 21,088 24,441 = ROCE (A) / (E) 12.1% 11.0% 37

38 The Planet & Society barometer Our detailed sustainability scorecard The Planet & Society Barometer (objectives for 2014) Start 01/2012 Results Q Results Q Target 12/2014 Overall score (out of 10) /10 Planet Carbon Products & Solutions Energy 10% CO 2 savings on transportation 75% of our product revenue achieved with Green Premium 10% energy consumption savings - 63% % 73.2% 12.8% 16% 79% 13% 10% 75% 10% Profit Green growth 7 pts growth revenue with EcoXperts above Group growth revenue pts pts 7 pts Profit Access to Energy Suppliers Governance Best practices 1 million households at the Base of the Pyramid have access to energy 90% of our recommended suppliers embrace ISO guidelines 3 major ethical stock market indices choose Schneider Electric 300 sites recognized Cool sites ,018, % ,095,806 63% ,000,000 90% People Safety Engagement Diversity Training Access to energy Communities 30% reduction in the Medical Incident Rate (MIR) 63% result in our Employee Engagement Index 1 30% women in the talent pool (~ 2,500 people) 1 day of training for each employee every year 30,000 people at the BoP trained in energy management 300 missions achieved with the Schneider Electric Teachers NGO % % 61% 28% 63% 50, % 61% 28% 79% 60, % 63% 30% 100% 30, The arrow shows if the indicator has risen, stayed the same or fallen compared to the previous quarter. The colour shows if the indicator is above or below the objective of 8/10. 1: New objective set in January

39 Q4 revenues details 39

40 Organic growth for all businesses in Q4 Analysis of change in Group revenues ( m) Organic +2.5% Scope +7.7% Fx +2.3% 6, % 6,181 Buildings & Partner +2.7% Industry +1.8% Infrastructure +0.3% IT +6.5% Q Q

41 Buildings & Partner grew driven by US while China slowed down Analysis of change in Q4 Revenues ( m) 2,647 Organic +2.7% Scope +3.0% Fx +3.5% 2, % North America achieved good growth, benefiting from dynamic construction and data center market in the US and some recovery in Mexico. Western Europe was slightly up, driven by focused execution in France and Germany. Asia-Pacific was flat with mixed trends. China was down reflecting continued weakness in construction market, while Australia and India grew. Rest of the World was solid, driven by Africa, Middle East and Russia. 41% of Q4 revenues Q Q

42 Industry grew thanks to good performance in OEMs and services Analysis of change in Q4 Revenues ( m) 973 Organic +1.8% Scope +46.6% 21% of Q4 revenues Fx +2.3% 1, % Industry grew at a slower pace compared to previous quarter, due to the slowdown in China and high base of comparison. Rest of Asia-Pacific was up, driven by South-East Asia, Australia and Japan. Western Europe was slightly down due to weak French market, while demand from export-oriented OEMs continued to be active in Germany, Spain and Italy. North America experienced lower growth compared to last quarter. While U.S. OEM market remained robust, investment in unconventional oil & gas slowed down in the region. Rest of the World was strong, benefiting from OEM demand and project execution. Services were strong across the board. Q Q

43 Infrastructure was flat as utility market in Western Europe stabilized but remained weak Analysis of change in Q4 Revenues ( m) 1,684 Organic +0.3% Scope -2.3% Fx -0.6% 1, % Performance was mainly penalized by continued weak utility market in Western Europe. Asia-Pacific was flat as slowdown in China and South-East Asia was offset by growth in India. North America performed well driven by growth in the US in data centers and services. Rest of the World was flat as growth in Russia and Middle East was dragged down by decline in South America. Services continued to perform strongly in the quarter. 24% of Q4 revenues Q Q

44 IT performed well driven by demand in mature markets Analysis of change in Q4 Revenues ( m) 877 Organic +6.5% Scope -2.2% Fx +5.0% % North America performed well thanks to good growth in products business and mid-sized datacenters investments. Large and extra-large data centers market remained active, benefiting IT and other businesses. Western Europe posted good growth, driven by continued IT investments in datacenter systems and service. Asia-Pacific was down as China faced a high base of comparison. Rest of World was up driven by growth in the Middle East. Services continued to grow well in the quarter. 14% of Q4 revenues Q Q

45 Q4 revenues by geography Analysis of change in Group revenues ( m) Organic +2.5% Scope +7.7% Fx +2.3% 6, % Q4 revenues 6,181 Western Europe -1% Asia-Pacific -1% North America +8% Rest of World +5% Western 26% Europe Asia Pacific 28% North America Rest of the World 26% 20% Q Q

46 Contacts & agenda Anthony Song Head of Investor Relations Tel: Alexis Denaud Senior Investor Relations Manager Tel: Apr 21, 2015 Q Revenues and Annual General Meeting Conference call and Meeting 46

47 Help people make the most of their energy 47