Schneider Electric at a glance February 2015 1
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 www.schneider-electric.com). 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
A company with strong foundations, an integrated portfolio and a global footprint 3
We are the global specialist in energy management and automation 25 billion FY 2014 revenues ~5% of revenues devoted to R&D 43% of revenues in Solutions ~170,000 people in 100+ countries DIVERSIFIED END MARKETS FY 2014 revenues 1 BALANCED GEOGRAPHIES FY 2014 revenues Non-residential & Residential Buildings 33% Data Centers & Networks 14% Industrial & Machines Utilities & Infrastructure 27% 26% 25% North America 28% Western Europe 1 Estimated at the end of 2014 44% of revenues in new economies 19% Rest of World 28% Asia Pacific 4
With four globally leading and focused businesses BUILDINGS & PARTNER INFRASTRUCTURE INDUSTRY IT KEY TECHNOLOGY Low Voltage & Building Automation KEY TECHNOLOGY Medium Voltage Grid Automation KEY TECHNOLOGY Discrete & Process Automation KEY TECHNOLOGY Critical Power & Cooling FY 2014 REVENUES FY 2014 REVENUES FY 2014 REVENUES FY 2014 REVENUES 10.8 billion (43%) 5.3 billion (21%) 5.6 billion (22%) 3.4 billion (14%) WORLDWIDE POSITION #1 GLOBAL COMPETITORS ABB, Eaton, Legrand, Siemens WORLDWIDE POSITION #1 GLOBAL COMPETITORS ABB, Siemens WORLDWIDE POSITION #2 (Discrete) #4 (Process) GLOBAL COMPETITORS ABB, Emerson, Rockwell, Siemens WORLDWIDE POSITION #1 GLOBAL COMPETITORS Eaton, Emerson 5
We have built two strong and complementary business models Product Scale = Cost + Differentiation + Strong partners network A strong and balanced partner model Solutions Strong segments expertise + Solid execution capabilities A strong solutions offer > Balanced distribution channels > Global distribution network > Strong brand > Differentiation through innovation and system design > Segment expertise > Growing share of services > Org. Growth 7pts higher than rest of Group in past 3 years > Differentiated software 6
Our portfolio integrates power and automation to deliver complete solutions END MARKETS 1 Buildings 2 (33% of group revenues) Industrial and Machines (Discrete and Process) (27% of group revenues) Utilities and Infrastructure (26% of group revenues) Data Centers and Networks (14% of group revenues) POWER (Low and Medium Voltage, Secure power) AUTOMATION SOFTWARE 3 (Enabling integration) 1 Estimated based on 2014 revenues 2 Including residential and non-residential buildings 3 Including standalone software ~65% of Group revenues ~35% of Group revenues 7
Our commercial setup is integrated to supply more to each customer in each country Buildings & Partner Infrastructure Industry IT Low Voltage & Building Automation Medium Voltage & Grid Automation Discrete & Process Automation Critical Power & Cooling Structured commercial setup in each country to drive cross selling and maximize coverage Deliver value to the customer Non-residential & Residential Utilities & Infrastructure Industrial & Machines Data Centers & Networks 8
We are a technology company with a long-term commitment to innovation A TECHNOLOGY COMPANY R&D INVESTMENT AN ECOSYSTEM FOR OPEN INNOVATION > c. 11,000 R&D engineers, c. 10,000 application and software engineers > 20,000 patents active or in application worldwide, >500 filed in 2014 > ~5% of sales devoted to R&D 1,119 1,212 Partnering with 50+ best-in-class public and private organisations > With recognized innovations 1,058 Leading global 979 projects for Intelligent buildings, renewables, 774 764 818 Recognized highest ranking DCIM solution in Gartner Boosting Magic Quadrant Standardisation (Oct 2014) Zigbee, IEC, NEMA Homes, Minalogic, Smart Electricity Machine Solution Next Controller Generation M580: World s first epac with built-in ethernet 2008 2009 2010 2011 2012 2013 2014 Funding start-ups Aster Capital fund Demand response, software breakthrough 9
Sustainable development is an integrated part of our strategy CLIMATE CIRCULAR ECONOMY CLIMATE + POVERTY (Sustainability offers) ETHICS HEALTH & EQUITY POVERTY > Schneider Electric energy efficiency > Transportation CO 2 efficiency > Towards zero waste to landfill > New projects designed with Schneider ecodesign Way TM > Revenues with Green Premium TM eco-labeled products > CO 2 transparency for customers > CO 2 avoidance through maintenance, retrofit, end-of-life services > Access to energy program turnover > Suppliers embracing ISO 26000 guidelines > Ethics & responsibility assessments > Medical incident rate > One day training for every employee every year > Employee Engagement Index > Schneider Electric gender pay equity plan > Underprivileged people trained in energy management > Volunteering missions within Schneider Electric Teachers NGO A MEASURED COMMITTMENT Planet & Society Barometer 2015-2017 1 targets: > Achieve a score of 8/10 at the end of 2017 > Through 16 quarterly-reported indicators > Starting from 3/10 in January 2015 1 See appendix for details 10
A significant transformation over the past 10 years 11
Profitable growth remained at the heart of our transformation REVENUES (Billion ) ADJUSTED EBITA (Billion ) FREE CASH FLOW (Average, Billion ) RETURN OF ASSETS 1 (%) CAGR +9% CAGR +10% 2.0 +9pt 36 24.9 3.5 10.3 1.3 0.8 x2+ 27 2004 2014 2004 2014 2002-2004 2012-2014 2004 2012-2014 Benefit from balanced geography & complementary business model Resilient adj. EBITA margin from 13% 16% Predictable cash generation: over 100% cash conversion from Net income in past 10 years Continuing to improve asset efficiency 1 Calculated on operational assets = property, plant, and equipment + inventories+ trade receivables trade payables. 12
and generated attractive shareholder returns ATTRACTIVE RETURNS TO SHAREHOLDERS (Total shareholder return, %, starting on 16/02/2010, ending 11/02/2015) 140 120 100 80 60 40 20 Schneider Electric Eurostoxx Industrials CAC40 +60% +120% +90% > Focus on profitable growth > Attractive and sustainable dividend policy with 50% targeted payout ratio 0 Jan-10-20 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 13
Our supply chain was a key competitive advantage to drive profitability and customer satisfaction INCREASING INDUSTRIAL PRODUCTIVITY FURTHER REBALANCED INDUSTRIAL COSTS IMPROVED INVENTORY EFFICIENCY INCREASED CUSTOMER SATISFACTION 340 15 ~2pts +13pt 320 300 54% 47% 13 280 260 46% 53% 240 New2 05-08 One 09-11 Connect 12-14 2011 2014 1 2011 2014 2 2011 2014 Average productivity per year (EURm) Mature markets Inventory to Sales ratio (%) Net satisfaction score on delivery New economies 1 2014 estimated 2 Excluding Invensys 14
Targets for long-term profitable growth 15
We target 3 to 6% organic growth across the economic cycle LONG-TERM DRIVERS OF OUR BUSINESS SOME SHORT-TERM UNCERTAINTIES MATURE MARKETS NEW ECONOMIES > Oil & Gas Capex investments > Renovation > Digitization > Efficiency > Urbanization > Industrialization > Digitization + > Currency volatility > Geopolitical uncertainties We target 3% to 6% organic growth across the cycle > More Energy Management > More Digitization > More Automation 16
We confirm our 13-17% long-term adjusted EBITA range and target a margin improvement over the next 3 years GROWTH PROFILE AND EFFICENT BUSINESS MODEL WITH LEVERS ON MARGIN WE REITERATE OUR TARGETED 13-17% ADJUSTED EBITA RANGE THROUGH THE ECONOMIC CYCLE POSITIVE IMPACT NEGATIVE IMPACT 15,4% GROSS MARGIN Organic growth Positive Net pricing 1 Productivity Negative Mix 13,0% 14,3% 14,7% 14,5% 13,9% SFC SFC savings Inflation 2009 2010 2011 2012 2013 2014 Reinvestment 1 Net price: Price less raw materials 17
Industrial productivity and cash efficiency are a key focus Sales Inventory & Operations Planning maturity + Enhance Purchasing + Transportation and Network optimization + Footprint rebalancing > c. 1bn productivity targeted in 2015-2017 > Further increase cash efficiency + Quality Value Engineering 18
We target 400m-500m support function cost savings from simplification initiatives by 2017 before reinvestments 400-500m SAVINGS 1 THROUGH SIMPLIFICATION AND EFFICENCY > Optimize R&D efficiency & solution execution > Mutualize back-office functions > Simplify our management set-up. > Increase focus and prioritization > Increase sales force efficiency c. 200m SAVINGS REINVESTED ON CORE GROWTH INITIATIVES > Services and software > Segment expertise > Expand coverage in key geographies > Brand Development > Digitization 1 Before inflation and reinvestment WE TARGET A REDUCTION IN SFC/REVENUES RATIO DURING THE COMPANY PROGRAM 26.4 2005 New 2 25.6% 25.8 2006 25.4 24.7 26.4 One 24.6% 24.1 23.3 23.1 Connect 23.3% 23.3 23.5 2007 2008 2009 2010 2011 2012 2013 2014 SFC to Revenue ratio (%) Restructuring costs of c. 700m-900m for 2015-2017 Restructuring costs for Connect (2012-2014) amounted to c. 550m 2 SFC excluding Invensys for Connect 2 19
Continued focus on delivering attractive shareholder return 20
We will continue to optimize our portfolio and consider the disposal of non-core/ non-strategic businesses WE HAVE OPTIMIZED OUR PORTFOLIO IN 2014 WITH THE DIVESTMENTS OF NON-CORE BUSINESSES > We will continue to review the portfolio and contemplate potential disposal of non-core / nonstrategic businesses APPLIANCE BUSINESS c. 900m cash generated through disposals > The disposal of potential non-core/ non-strategic assets might generate a capital loss or asset impairment of up to several hundred millions Euros > Potential capital losses or asset impairments if any would be adjusted in the dividend calculation 21
We reaffirm our long-term capital structure target of A- with flexibility to move to BBB+ on a temporary basis 2 000 1 500 OBJECTIVE TO INCREASE THE DEBT MATURITY > Current bonds duration stands at c. 4 years 1 000 500 0 2015 2016 2017 2018 2019 >2019 12 10 8 6 4 2 0 TAKING ADVANTAGE OF LOW COST OF FINANCING > Attractive financing market conditions Yield to maturity (in %) Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 Jun 10 Oct 10 Feb 11 Jun 11 Oct 11 Feb 12 Jun 12 Oct 12 Feb 13 Jun 13 Oct 13 Feb 14 Jun 14 Oct 14 Feb 15 Bonds (EURm) by maturity (Dec-2014) Bonds benchmarks iboxx.eur.corporates.a.7-10 years iboxx.eur.corporates.bbb.7-10 years We take opportunity of historical low financing conditions to increase debt maturity and lower average cost of debt 22
Confirming c.100% FCF conversion target 1, FCF to be used in dividend, share buybacks and value-creating bolt-on M&A STRONG FCF CONVERSION + FLEXIBILITY TO BENEFIT FROM LOW COST OF FINANCING > Progressive dividend > 1.0-1.5bn share buyback in next 2 years 2 > Bolt-on M&A in our core businesses with strong EPS accretion and return on investment 1 Net income conversion in FCF across the cycle target 2 Including share buyback for neutralization of employees share plans 23
We target strong EPS growth in the next company program ORGANIC GROWTH AND EFFICIENCY INITIATIVES EBITA growth + SHARE BUYBACKS ( 1.0 to 1.5bn in next 2 years) Reduce share count + STRONG EPS GROWTH ACCRETIVE BOLT-ONS Strong EPS accretion 24
We set a progressive dividend 3,5 70 > Dividend payout targeted at c.50%, based on the Net income excluding one-offs such as capital gains or losses and, or asset impairments > Progressive dividend policy with no year-on-year decline 3,0 2,5 2,0 1,5 1,0 1,03 1,60 1,70 1,87 1,87 1,92 1 60 50 40 30 20 0,5 10 0,0 09 10 11 12 13 14 0 1 Dividend proposed and to be approved in Annual General meeting on Apr 21,2015 Dividend per share ( ) left-axis Payout (% Basic EPS) right-axis 25
We confirm our goal of improving ROCE but move targets by one year due to FX impact in 2014 KEY DRIVERS FOR ROCE IMPROVEMENT WE FOCUS ON ROCE IMPROVEMENT 10.9% 11.7% Adjusted for FX c.12% 12.9% 15.0% Organic growth 11.0% 12.4% 11.0% Efficiency 2013 proforma 2014 2015/2016 Target 2016/2017 target Mediumterm range Capital optimization > We aim to come back to ROCE pre-invensys level (c. 12%) by 2015/2016 > 1.5-2pt 1 improvement in ROCE by 2016/2017 > Medium-term target range confirmed 1 From 2013 proforma level of 10.9% 26
Help people make the most of their energy SM 2014 Schneider Electric. All Rights Reserved. All trademarks are owned by Schneider Electric Industries SAS or its affiliated companies or their respective owners. 27
Appendix 28
Our Planet & Society barometer 2015-2017 10% energy savings 10% CO 2 savings from transportation Towards zero waste to landfill for 100 industrial sites 100% of new projects with Schneider ecodesign Way TM Target 12/2017 8/10 10% 10% 100 100% 80% of product revenue with Green Premium TM eco-label 100% of new large projects with CO2 impact quantification for customers 120,000 tons of CO 2 avoided through maintenance, retrofit and end-of-life services x5 turnover of Access to Energy program to promote development for underprivileged people 100% of recommended suppliers embrace ISO 26000 guidelines All our entities pass our internal Ethics & Responsibility assessment 80% 100% 120,000 x5 100% 100% 30% reduction in the Medical Incident Rate (MIR) One day training for every employee every year 64% scored in our Employee Engagement Index 85% of employees work in countries with Schneider gender pay equity plan 150,000 underprivileged people trained in energy management 1,300 missions within Schneider Electric Teachers NGO 30% 85% 64% 85% 150,000 1,300 29