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
~5%
43%
~170,000
FY 2014 revenues
of revenues devoted
to R&D
of revenues
in Solutions
people in 100+
countries
DIVERSIFIED END MARKETS – FY 2014 revenues1
Non-residential &
Data Centers
Residential Buildings & Networks
33%
14%
Industrial
& Machines
27%
BALANCED GEOGRAPHIES – FY 2014 revenues
Utilities &
Infrastructure
28%
25%
26%
North America
44%
of revenues in
new economies
1 Estimated at the end of 2014
Schneider Electric at a glance – February 2015
Western Europe
19%
28%
Asia Pacific
Rest of World
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
WORLDWIDE POSITION
#1
WORLDWIDE POSITION
#2 (Discrete)
#4 (Process)
GLOBAL COMPETITORS
ABB, Emerson,
Rockwell, Siemens
WORLDWIDE POSITION
#1
GLOBAL COMPETITORS
ABB, Eaton,
Legrand, Siemens
GLOBAL COMPETITORS
ABB, Siemens
GLOBAL COMPETITORS
Eaton, Emerson
5
Schneider Electric at a glance – February 2015
We have built two strong and complementary business models
Product
Solutions
Scale = Cost
+
Differentiation
+
Strong partners
network
Strong segments
expertise
+
Solid execution
capabilities
A strong and balanced
partner model
A strong solutions offer
>
Balanced distribution channels
>
Segment expertise
>
Global distribution network
>
Growing share of services
>
Strong brand
>
Differentiation through innovation
and system design
>
>
Org. Growth 7pts higher than
rest of Group in past 3 years
Differentiated software
6
Schneider Electric at a glance – February 2015
Our portfolio integrates power and automation to deliver
complete solutions
POWER
END MARKETS1
(Low and Medium Voltage, Secure power)
SOFTWARE3
AUTOMATION
(Enabling integration)
Buildings2
(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)
1 Estimated based on 2014 revenues
2 Including residential and non-residential buildings
3 Including standalone software
Schneider Electric at a glance – February 2015
~65%
~35%
of Group revenues
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
Schneider Electric at a glance – February 2015
We are a technology company with a long-term
commitment to innovation
A TECHNOLOGY COMPANY
R&D INVESTMENT
> c. 11,000 R&D engineers, c. 10,000
> ~5% of sales devoted to R&D
AN ECOSYSTEM FOR OPEN INNOVATION
with 50+
best-in-class public and
private organisations
Partnering
application and software engineers
> 20,000 patents active or in application
1,212
worldwide, >500 filed in 2014
1,119
1,058
> With recognized innovations
Leading global
projects for Intelligent
979
buildings, renewables,
774
764
818
Recognized highest
ranking DCIM
solution in Gartner
Magic Quadrant
(Oct 2014)
Boosting
Standardisation
Zigbee, IEC, NEMA
Machine Solution – Next Controller
Generation
M580: World’s first ePAC with
built-in ethernet
Homes,
Minalogic,
Smart
Electricity
Funding start-ups
Aster Capital fund
2008
2009
2010
2011
2012
2013
2014
Demand
response,
software
breakthrough
9
Schneider Electric at a glance – February 2015
Sustainable development is an integrated part of our strategy
CLIMATE
> Schneider Electric energy efficiency
> Transportation CO2 efficiency
CIRCULAR ECONOMY
> Towards zero waste to landfill
> New projects designed with Schneider ecoDesign WayTM
CLIMATE + POVERTY
(Sustainability offers)
>
>
>
>
Revenues with Green PremiumTM eco-labeled products
CO2 transparency for customers
CO2 avoidance through maintenance, retrofit, end-of-life services
Access to energy program turnover
ETHICS
> Suppliers embracing ISO 26000 guidelines
> Ethics & responsibility assessments
HEALTH & EQUITY
>
>
>
>
POVERTY
> Underprivileged people trained in energy management
> Volunteering missions within Schneider Electric Teachers NGO
1 See appendix for details
Schneider Electric at a glance – February 2015
Medical incident rate
One day training for every employee every year
Employee Engagement Index
Schneider Electric gender pay equity plan
A MEASURED COMMITTMENT
Planet & Society Barometer
2015-20171 targets:
> Achieve a score of 8/10 at the end of 2017
> Through 16 quarterly-reported indicators
> Starting from 3/10 in January 2015
10
A significant transformation over the past 10 years
11
Profitable growth remained at the heart of our transformation
REVENUES
ADJUSTED EBITA
FREE CASH FLOW
RETURN OF ASSETS1
(Billion € )
(Billion € )
(Average, Billion € )
(%)
+9pt
CAGR +9%
CAGR +10%
24.9
2.0
3.5
36
27
x2+
10.3
2004
0.8
1.3
2014
Benefit from balanced
geography & complementary
business model
2004
2014
Resilient adj. EBITA
margin from 13% –16%
2002-2004
2012-2014
Predictable cash generation:
over 100% cash conversion from
Net income in past 10 years
2004
2012-2014
Continuing to improve
asset efficiency
1 Calculated on operational assets = property, plant, and equipment + inventories+ trade receivables – trade payables.
12
Schneider Electric at a glance – February 2015
…and generated attractive shareholder returns
ATTRACTIVE RETURNS TO SHAREHOLDERS
(Total shareholder return, %, starting on 16/02/2010, ending 11/02/2015)
140
120
Schneider Electric
+120%
> Focus on profitable growth
100
Eurostoxx Industrials
80
60
CAC40
+60%
+90%
> Attractive and sustainable
dividend policy with 50%
targeted payout ratio
40
20
0
Jan-10
-20
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
13
Schneider Electric at a glance – February 2015
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
~2pts
340
+13pt
15
13
320
300
54%
47%
46%
53%
2011
2014
280
260
240
New2
’05-’08
One
’09-’11
Connect
’12-’14
Average productivity per year (EURm)
Mature markets
1
2011
20142
Inventory to Sales ratio (%)
2011
2014
Net satisfaction score on delivery
New economies
1 2014 estimated
2 Excluding Invensys
Schneider Electric at a glance – February 2015
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
MATURE
MARKETS
NEW
ECONOMIES
> Renovation
> Digitization
> Efficiency
> Urbanization
> Industrialization
> Digitization
SOME SHORT-TERM
UNCERTAINTIES
> Oil & Gas Capex investments
+
> Currency volatility
> Geopolitical uncertainties
We target
3% to 6% organic
growth across the cycle
> More Energy Management
> More Digitization
> More Automation
16
Schneider Electric at a glance – February 2015
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
POSITIVE IMPACT
WE REITERATE OUR TARGETED 13-17% ADJUSTED
EBITA RANGE THROUGH THE ECONOMIC CYCLE
NEGATIVE IMPACT
SFC
GROSS MARGIN
15,4%
Organic growth
14,7%
Negative Mix
Positive
Net pricing1
14,3%
14,5%
13,9%
13,0%
Productivity
SFC savings
Inflation
2009
2010
2011
2012
2013
2014
Reinvestment
1 Net price: Price less raw materials
17
Schneider Electric at a glance – February 2015
Industrial productivity and cash efficiency are a key focus
Sales Inventory & Operations
Planning maturity
+
+
Enhance Purchasing
Transportation and Network
optimization
+
+
> c. €1bn productivity targeted in
2015-2017
> Further increase cash efficiency
Footprint rebalancing
Quality Value Engineering
18
Schneider Electric at a glance – February 2015
We target €400m-500m support function cost savings from
simplification initiatives by 2017 before reinvestments
€400-500m SAVINGS1 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
WE TARGET A REDUCTION IN SFC/REVENUES
RATIO DURING THE COMPANY PROGRAM
New 2
25.6%
26.4
26.4
25.8
One
24.6%
25.4
Connect
23.3%
24.7
24.1
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
Schneider Electric at a glance – February 2015
2
23.3 23.1 23.3 23.5
2005
2006
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
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
> The disposal of potential non-core/ non-strategic
assets might generate a capital loss or asset
impairment of up to several hundred millions Euros
APPLIANCE BUSINESS
> Potential capital losses or asset impairments if any
would be adjusted in the dividend calculation
c. €900m cash
generated through disposals
21
Schneider Electric at a glance – February 2015
We reaffirm our long-term capital structure target of A- with
flexibility to move to BBB+ on a temporary basis
TAKING ADVANTAGE OF
LOW COST OF FINANCING
> Attractive financing market conditions
OBJECTIVE TO INCREASE
THE DEBT MATURITY
> Current bonds duration stands at c. 4 years
Yield to maturity
(in %)
12
2 000
10
1 500
8
6
1 000
4
2
500
0
2015
2016
2017
2018
Bonds (EURm) by maturity (Dec-2014)
2019
>2019
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
0
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
Schneider Electric at a glance – February 2015
Confirming c.100% FCF conversion target1, 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 years2
> 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
Schneider Electric at a glance – February 2015
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
Schneider Electric at a glance – February 2015
We set a progressive dividend
> Dividend payout targeted at c.50%, based on the
Net income excluding one-offs such as capital
gains or losses and, or asset impairments
3,5
70
3,0
60
2,5
50
2,0
1,60
> Progressive dividend policy with no year-on-year
decline
1,70
1,87
1,87
1,921
1,5
1,0
40
30
1,03
20
0,5
10
0,0
0
09
1 Dividend proposed and to be approved in Annual General meeting on Apr 21,2015
10
11
12
13
14
Dividend per share (€) left-axis
Payout (% Basic EPS) right-axis
25
Schneider Electric at a glance – February 2015
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
15.0%
c.12%
12.9%
Organic growth
11.0%
12.4%
11.0%
Efficiency
2013
proforma
Capital
optimization
2014
2015/2016 2016/2017 MediumTarget
target
term range
> We aim to come back to ROCE pre-Invensys level
(c. 12%) by 2015/2016
> 1.5-2pt1 improvement in ROCE by 2016/2017
> Medium-term target range confirmed
1 From 2013 proforma level of 10.9%
26
Schneider Electric at a glance – February 2015
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
Target
12/2017
8/10
10% energy savings
10%
10% CO2 savings from transportation
10%
Towards zero waste to landfill for 100 industrial sites
100
100% of new projects with Schneider ecoDesign WayTM
80% of product revenue with Green PremiumTM eco-label
100% of new large projects with CO2 impact quantification for customers
120,000 tons of CO2 avoided through maintenance, retrofit and end-of-life services
x5 turnover of Access to Energy program to promote development for underprivileged people
100%
80%
100%
120,000
x5
100% of recommended suppliers embrace ISO 26000 guidelines
100%
All our entities pass our internal Ethics & Responsibility assessment
100%
30% reduction in the Medical Incident Rate (MIR)
30%
One day training for every employee every year
85%
64% scored in our Employee Engagement Index
64%
85% of employees work in countries with Schneider gender pay equity plan
85%
150,000 underprivileged people trained in energy management
1,300 missions within Schneider Electric Teachers NGO
150,000
1,300
29