Schneider Electric. May, Investor Presentation

Transcription

1 Schneider Electric May, 2012 Investor Presentation

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.

3 Schneider Electric at a glance A global company 2011 sales split number of employees end of 2011 bn of sales in 2011 % of sales in new economies North America 23% Rest of World 18% Western Europe 32% Asia Pacific 27% employees in 100+ countries Diversified end markets 2011 sales split Utilities & Infrastructure 24% Industries & Machine 22% Data centers 16% of sales dedicated to R&D Non-residential building 29% Residential 9% 3

4 We deployed our long-term strategy consistently in the past decade Leverage the world s new energy challenges > From Power & Control to Energy Management Build 2 complementary business models > Product leadership > Solution excellence Leverage opportunity arising from geographical shift > Accelerate expansion in new economies Invest in profitable growth while driving efficiency > Customer focused organization > Simplification 4

5 We built a unique and integrated business portfolio Power Infrastructure Industry IT Buildings 2011 sales 8.3bn 4.9bn 4.4bn 3.2bn 1.6bn Key technology Low Voltage & Renewable Medium Voltage & Grid Automation Industrial Automation Critical Power & Cooling Building Automation & Security Schneider Electric worldwide rank #1 #1 #2 #1 #4 Global competitors ABB Siemens Eaton Legrand ABB Siemens Siemens Rockwell Emerson Eaton Siemens JCI Honeywell Adjacent & synergetic businesses 90% of group sales as world #1 or 2 player vs. 50% in

6 and balanced our geographical and endmarket footprint A balanced global presence A strong footprint in new economies Serving 5 diversified end-markets 100% 80% 60% 40% 20% 0% % 27% 23% 32% 100% 80% 60% 40% 20% 0% Sales 9.7bn Sales 22.4bn Sales 9.7bn Sales 22.4bn Sales 9.7bn Sales 22.4bn 10% 9% 35% 46% 100% 80% 60% 40% 20% 0% ~20% 39% 14% 34% 8% 44% 16% 24% 22% 9% 29% Rest of World Asia Pacific North America Western Europe New Economies Mature Data Centres Utilities & Infrastructure Industrial & Machines Residential Non-residential Buildings 2011 end market data include acquisitions on a full-year basis 6

7 We have a growth model that is flexible and resilient in profit and cash generation Market structure Cost structure Multiple channels to market Pricing power ~50% through distribution + installers + contractors + direct sales Offset all raw material inflation since 2005 Flexible Cost competitive Low capital intensity 70% COGS variable 46% of COGS in new economies ~3% capex to sales 7

8 Robust financial performance despite historical economic downturn Sales (in bn) Adjusted EBITA 1 (in bn) yr CAGR +8.6% ~50% was organic 10-yr CAGR +11.2% Margin up 3 pts to 14.4% Free cash flow (in bn) Net income (in bn) 1.3bn p.a. on avg. 1.7bn p.a. on avg bn p.a. on avg yr cash conversion² 105% One conversion² of 106% yr CAGR +16% new 2004 new² One see appendix for definition 2 conversion = free cash flow / net income 8

9 Sustainable development is part of our DNA Planet Selected indicators Reduction of our CO 2 equivalent emissions Green Premium products (% of sales) 0 160kT 0% 64% One barometer Exceeded our target of Profit Selected indicators BoP access to energy (# households) Global Compact (% of purchase) People Selected indicators Employee recommendation score (vs. start of period) BoP young people trained to energy management 0 1.3m 30% 50% k Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global Global Awards and rankings 26th Most Sustainable 26th Most Sustainable Corporation in the World Corporation in the World (2012) (2012) Gigaton award for leadership in energy efficiency and development of the smart grid Zayed Future Energy Prize (ZFEP 2012) Top 52 in Carbon Disclosure Leadership Index Top 29 in Carbon Performance Leadership Index BoP: Base of the Pyramid (least favoured socio-economic group) 9

10 our company program

11 Our new program Connects all to the potential of One Everywhere Make stronger New Economies Bring further Mature Economies Customers Solution Partner People One Team Our Way for Efficiency One Organization One Efficient Enterprise 11

12 Connect to Customers Partner Excellence Solution Excellence Connect Everywhere Grow in new economies Grow in mature countries Tailored Supply Chain Connect to People Engaging leaders Engaged individuals Engaging workplace Connect for Efficiency Industrial productivity SFC savings Planet & Society barometer Growth Margins/cash Long-term view 12

13 Connect * to Customers

14 Connect to Customers Further improve the performance of our business models Be a leader in products and in solutions Today With Undisputable leadership in our product business Strong legitimacy in high value-added solutions to end-users Leading technologies in energy management and automation Global industrial & commercial footprint Partner Excellence Solution Excellence Tailored Supply Chain Build on the close relationship with our channels and develop the next step of our partner model Enhance solution execution and boost services Align supply chain to customer needs, for higher customer satisfaction and more efficient inventory management Growth Margins/cash 14

15 Partner excellence 15

16 Connect to Customers Partner Excellence Continue to grow in products in a win-win relationship with partners Direct partners More opportunities for Distributors & Partners Distribution partners (Contractors, Panel builders, OEMs, System integrators ) End-users Broader products portfolio ( channel cross-selling ) Power Infrastructure Simple and easy-to-install pre-packaged solution kit New online collaborative tools for building new business with partners Industry Win-win logistic efficiency Leverage one Schneider Electric IT Customer care excellence Buildings Raise brand awareness Partners are key to all of our 5 businesses One web Main channel Other key channels Other channels Continue to lead innovation on products Reference is world real GDP growth at market FX Across the cycle target Products organic sales growth rate at GDP +1 to 3 points 16

17 Solution excellence 17

18 Connect to Customers Solution Excellence (1) Further push our unique value proposition EcoStruxure for simplicity Seamless integration of our technologies Unique capabilities Combination of power & process in each endmarket for optimal efficiency Operations StruxureWare: our unified software suite Operations One control cockpit from field level to enterprise management Operations Connectivity Enterprise Integration of our technologies in each market - then managed at Operations & Enterprise levels An enabler of services Integration into the wider ecosystem of the smart grid and smart cities Across the cycle target Solutions organic sales growth rate at GDP + 3 to 5 points Reference is world real GDP growth at market FX 18

19 Connect to Customers Solution Excellence (2) Stringent on costs, selective on execution Cost effectiveness Equipment Simplification of the offering Specialization of the industrial footprint More frequent use of partners for execution Systems Reinforced execution Focus on selected end-markets and countries 6.3bn 2011 sales 28% of group sales 75% of solutions sales Invest in reference designs Scale up solution centers capabilities Be more selective in our project pipeline 2014 target Improve Solutions adjusted EBITA margin by at least 2 points 19

20 Connect to Customers Solution Excellence (3) Boost services Installed Base Services Systematic tracking and offering Maintenance / Retrofit Cross-business tracking of the installed base System sale coupled with service offering Advanced Services Boost energy management services Energy audits 2bn sales 9%* of group sales 25% of solutions sales Energy procurement and reporting services Remote monitoring services Performance contracting * Based on revised service scope Target for Services to outgrow the rest of the Group by more than 5 points (on organic basis) 20

21 Set the course for solution excellence Solutions in 2011 ( m and % of sales) 2011 Operational Assets Efficiency (Operational Assets* / Sales, internal estimates) 8,372 9% margin Solutions Products 30% more efficient Sales Adjusted EBITA (before corporate cost) Lower EBITA margin partly offset by a better operational assets efficiency More improvement expected Services to outgrow rest of group by 5 points At least 2 points improvement of the adjusted EBITA margin by At least 20% improvement of the operational assets efficiency through mix and WCR optimization Solution ROA to reach the same level as Product ROA * Operational Assets = Property, Plant and Equipment + Inventories + Trade receivables Trade payables 21

22 Tailored supply chain 22

23 Connect to Customers Tailored supply chain Customer-centric, higher inventory efficiency Distribution partners Standard products Make to Stock Model 1 Organization along customer needs Differentiated manufacturing and delivery models adapted for each customer segment Direct partners Equipments Systems Make to Order Configure to Order Model 2 Model 3 Better planning process Better align supply chain and front office Better inventory management End-users Services Engineer to Order Model N Eliminate excess stock and improve cash Customer satisfaction Customer segments Supply chain models Delivery model Key satisfaction criteria prioritized 2014 target Improve customer satisfaction, reduce inventory to sales ratio by ~2 points 23

24 Connect * Everywhere

25 Connect Everywhere Identify key investment areas in new economies and create new opportunities in mature countries Be a leader in mature and new economies Today With Leader in mature countries Critical mass in new economies reached (c 9bn of sales, ~40% of Group) Key technologies and customer base to capture new opportunities Grow in New Economies Grow in Mature countries Capture opportunities in fast-growing second-tier cities and further penetrate with mid-market segment offerings Grow activities that develop independently from traditional capex trends: opex-driven opportunities and new businesses Growth 25

26 Grow in new economies 26

27 Connect Everywhere Grow in new economies Extend geographic coverage and Expand mid-market offerings Go-East in Russia Go-West in China Electroshield Samara (50% owned since 2010) Go-North in Brazil Leverage our strengths Size Channels Strong brand Premium market leadership Across the cycle target New economies organic sales growth at world GDP + 6 to 8 points Reference is world real GDP growth at market FX 27

28 Grow in mature countries 28

29 Connect Everywhere Grow in mature countries Grow new businesses and capture opex opportunities Develop services From Capex to Opex economies The Green Push Installed base services Energy management services > Remote energy monitoring > Performance contracting > Software based services Smart Grid / Smart Cities Connected technologies Telvent inside Develop new markets Ageing infrastructure Disciplined investment in a portfolio of start-ups: Electric Vehicle infrastructure Demand / response Carbon management Home automation Solar systems Creating our own growth momentum in mature countries 29

30 Connect * People

31 Connect to People create a culture and an environment for our people s development and performance Today With One company model with One Among most attractive engineering companies to work for: #31 in China, #46 in Russia, #69 in India, #59 in Brazil * Global job opportunities Nationality and gender diversity Engaging Leaders Engaged Individuals Engaging Workplace Train leaders with Schneider Electric University and promote Diversity Develop employee via training, empowerment, cross-business mobility Step-up collaboration & communities, regroup locations, ensure safety at work, develop the Schneider Way * Source: Universum 2011 surveys Long-term view 31

32 Connect * for Efficiency

33 Connect for Efficiency a new chapter in our history of profitable and responsible growth Today With Highly variable COGS structure Gross margin pressure in 2011 linked to raw materials, acquisition dilution, solution mix Support function costs at historical low Deeply involved in sustainable development Productivity Support functions efficiency Sustainability Continue to drive industrial savings from purchasing and manufacturing Use our scale to save on support functions while investing in sales and R&D for new growth Maintain best-in-class standard in environmental sustainability and social responsibility Growth Margins/cash Long-term view 33

34 Raise supply chain efficiency further 0.9bn 1.0bn 1.1bn Purchasing Absorption of fixed costs Rebalancing Lean manufacturing Purchasing 0.9bn Footprint optimization Supply chain flow re-design One target Transportation rationalization Sustained productivity savings cumulative target Gross industrial productivity savings of 0.9bn-1.1bn Reduce inventory to sales ratio by ~ 2 points 34

35 Drive savings from scale and invest for tomorrow s growth Savings Support function costs net of investment (in m and % of sales) Achieve significant operational leverage 24.7% 26.4% 24.1% 23.2% At least -1 point* by 2014 Rationalize non-production purchases Simplify our presence in key geographies Review global functions set-up for increased efficiency Deliver synergies from recent acquisitions Investment R&D to sales to move towards 5% Commercial investment for Partner Excellence, accelerated investments in Service engineers, geographical expansion in new economies 2014 target (vs 2011) Support function costs to sales ratio reduced by at least 1 point* net of investments *(excl. scope & currency impact) 35

36 Financial targets

37 Key financial impacts of by 2014 Service growth rate rate Solutions EBITA EBITA Outgrow the rest of group by more than 5 points (on organic basis) At least 2 points improvement on the adjusted EBITA margin COGS COGS Productivity Support function costs costs 0.9bn to 1.1bn of cumulated gross productivity At least 1 point decrease of SFC/sales ratio* (excl. scope and currency, net of investments) Inventory efficiency Reduce inventory to sales ratio by ~2 points NB: Total restructuring costs over the period estimated at about 500m * Assuming no severe disruption of the global economy 37

38 Drive profitability along with capital efficiency Across the cycle organic growth drivers ROCE drivers Solutions (incl. services) New economies Products and Partners Smart Grid & new markets World GDP + 3 points Reference is world real GDP growth at market FX Across the cycle adjusted EBITA & beyond Growth and Cost efficiency Better Capital Employed mix with solutions Tailored supply chain External growth Synergies Short term dilution on Capital Employed Target margin range across a business cycle 13% - 17% (2011: 14.4%) Cash focus: target a conversion of 100% of our net income in free cash flow Across the cycle ROCE target 11% - 15% (2011: 12.9%) 38

39 2011 highlights

40 2011: Good results in a difficult environment Strong raw material inflation Supply shortage following the natural disaster in Japan Political instability in North Africa European debt crisis Growth Adj. EBITA Net income 8.3% organic growth 14.3% total growth 22.4bn of sales Adj. EBITA up 7%, reaching a record of 3.2bn, 14.4% of sales Net income up 6% at 1.8bn Earnings per share of 3.39 Globally fragile macro-economic context Cash Free cash flow of 1.5bn 40

41 2011 Net income reached 1.8bn, 8% above 2008 level In m Sales 19,580 22, % Adjusted EBITA 3,019 3,232 +7% Margin % 15.4% pts Other operating income and expenses 8 (8) Restructuring charges (96) (145) EBITA % Amortization & impairment of purchase accounting intangibles (228) (226) EBIT 2,703 2,853 +6% Net financial expense (347) (415) Income tax (566) (562) Equity investments 6 28 Minority interests (76) (84) Net income (group share) 1,720 1,820 +6% Earnings per share % 41

42 Balance sheet remains solid, cash generation is not cyclical Net debt / Adj. EBITDA Cash generation past 10 years - in bn Cash flow from operations x 0.8x Change in WCR Capital expenditures NB: Adjusted EBITDA of 3,852m in 2011 ( 3,603m in 2010) 42

43 Proposed dividend of 1.70 euro Earnings per share Dividend per share Payable fully in cash Payout of 50% of net income NB: Per share data are adjusted for the 1-for-2 share split of September

44 We executed our strategic priorities with acquisitions that complement organic growth M&A target areas & transformation accomplished since 2009 Local businesses in new economies Skills and services geared towards energy management Businesses that could reinforce our global leadership Brazil India bn in annual sales # Infrastructure Medium Voltage & Grid Automation China Russia 1 Energy Efficiency Solutions Smart Grid and infrastructure Services Industry boosted its solutions capability Increase in size vs 2009 (measured by sales) Maintain strict M&A discipline Boost growth and shareholder returns Target quick EPS accretion ROCE above WACC beyond year 3 Maintain a solid credit rating 1 Excluding Electroshield Samara consolidated under the equity method 44

45 We built a global leader in efficient infrastructures through strategic acquisitions 2009 Reinforced capabilities 2011 Size 2.3bn sales 5.3bn* sales Market Position Offering #3 worldwide in medium voltage Secondary medium voltage Distribution assets #1 worldwide In medium voltage & grid automation + Primary & secondary MV + Substation automation + Real-time management of extended networks End Markets Buildings Industries Utilities Oil & Gas Buildings Industries Energy business renamed Infrastructure following the integration of Telvent * On proforma basis including Telvent on a 12-month basis 45

46 2012 Outlook

47 Continued solid sales growth in Q1: +9.4% driven by acquisitions Sales organic growth by business Sales organic growth by region In m Q In m Q Power % Western Europe % Infrastructure Industry IT Buildings % -6.8% +6.5% -0.9% Asia Pacific North America Rest of World % +8% +5% Group % Group % Organic growth slightly up with strong contrast by business and region 47

48 2012 outlook We We believe believe that that the the uncertainty uncertainty surrounding surrounding the the global global economy economy continues continues to to limit limit visibility visibility In In this this context context and and assuming assuming no no major major change change in in economic economic conditions, conditions, we we continue continue to to expect: expect: flat flat to to slightly slightly positive positive organic organic sales sales growth growth an an adjusted adjusted EBITA EBITA margin margin between between 14% 14% and and 15% 15% 48

49 Schneider Electric s strengths going into growth levers Footprint diversity Efficiency Leadership position in products Diversified end markets and geographies Flexible cost structure (70% of COGS variable) Solution: another growth engine Global and local footprint Low capital intensity Unique position in energy efficiency and smart grid 5 integrated businesses One Schneider Electric One efficient enterprise

50 Appendices

51 Definitions Adjusted EBITA: EBITA: Cash conversion: Free cash flow: ROCE: EBITA before restructuring and other operating income and expenses See reconciliation to EBITA and information relating to prior periods in the 2011 annual results financial release EBIT before amortization and impairment of purchase accounting intangibles and impairment of goodwill Free cash flow / net income Operating cash flow change in working capital net capital expenditures Return On Capital Employed See definition and calculation on the next page 51

52 ROCE After-tax adjusted EBITA / Average Capital Employed* ROCE calculation P&L items 2011 reported EBITA (1) 3,079 Restructuring costs (2) -145 Other operating income & expenses (3) -8 = Adjusted EBITA (4) = (1)-(2)-(3) 3,232 * Effective tax rate of the year (5) 23.1% = After-tax Adjusted EBITA (A) = (4)*(1-(5)) 2, Balance sheet items reported reported Avg of 4 quarters Shareholders' equity 14,989 16,090 (B) 15,150 Net financial debt 2,736 5,266 (C) 4,689 Adjustment for Associates and Financial assets (at historical value) (D) Electroshield Samara (50% stake) Sunten Electric Equipment (50% stake) Fuji Electric FA Components & Systems (36.8% stake) NVC Lighting (9.2% stake) AXA (0.5% stake) = Capital Employed 17,179 20,695 (E) = (B)+(C)+(D) 19,236 = ROCE (A) / (E) 12.9% 52

53 Contacts & agenda Carina Ho Head of Investor Relations Tel: Grégoire Rougnon Investor Relations Manager Tel: August 1, Half Year Results Meeting and conference call in the morning October 25, 2012 Q Sales Conference call in the morning 53

54 Help people make the most of their energy