JP Morgan European Capital Goods CEO Conference
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European Capital Goods CEO Conference
Emmanuel BabeauDeputy CEO in charge of Finance & Legal Affairs
June 2014
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
Reference 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 the 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
2Schneider Electric - Investor Relations – JPM Conference– 12 June 2014
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.
A company with strong foundations, an integrated portfolio and a global footprint
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integrated portfolio and a global footprint
Balanced geographies – FY 2013 revenue1
Schneider Electric: the global specialist in energy management and efficiency technologies
€25 billionrevenueFY 2013 revenue1
4-5%of sales devoted to R&D
25%North America
28%Western Europe
4Schneider Electric - Investor Relations – JPM Conference– 12 June 2014
FY 2013 revenue
160,000+people2 in 100+ countries
to R&D
43%of revenue in new economiesFY 2013 revenue1
Diversified end markets – FY 2013 revenue1
Utilities &Infrastructure
Industrial and Machines
Data Centers& Networks
Non-residential and Residential Buildings
27% 25% 14% 34%
20%Rest of World
27%Asia Pacific
1:Pro-forma basis including LTM Sep 2013 revenue from Invensys2:As of February 2014 (including Invensys)
Key technology Low Voltage & Building Automation
Medium VoltageGrid Automation
Discrete & Process Automation
Critical Power & Cooling
Worldwide leadership in four sizable and integrated businesses
Buildings & Partner
Infrastructure Industry IT
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FY 2013 revenue1 €10.2 billion (40%) €5.7 billion (22%) €6.0 billion (24%) €3.4 billion (14%)
Worldwide position
#1 #1 #2 (Discrete)#4 (Process) #1
Worldwide competitors
ABB Eaton
LegrandSiemens
ABBSiemens
ABBEmersonRockwellSiemens
EatonEmerson
1:Pro-forma basis including LTM Sep 2013 revenue from Invensys
We integrate power with automation to support our customers’ need for efficiency
Software and connectivity
The integration of power and automation is enabling improved reliability, reduced losses, and optimized efficiency
I manage
IT2
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Power 1 Automation
1:Supported by low voltage, medium voltage, and critical power technologies2: Information technology (IT) and operational technology (OT)
I control
I operate
IT2
OT2
Convergence
Nor
th A
mer
ica
33,700 Employees3
38 Factories
A balanced global footprint in 100+ countries
Wes
tern
Eur
ope
47,600 Employees3
92 Factories
Asi
a P
acifi
c
47,500 Employees36,4
4,1
7,1
2003 2013
7Schneider Electric - Investor Relations – JPM Conference– 12 June 2014
1:Published figures in billion € restated to reflect country-market view; 2:Billion € pro-forma basis including LTM Sep 2013 revenue for Invensys3:Including Invensys, excluding Delixi and Fuji
Nor
th A
mer
ica
Wes
tern
Eur
ope
Res
t of W
orld
34,100 Employees3
53 Factories
Asi
a P
acifi
c
47,500 Employees3
69 Factories2,3
2003 2013
1,2
5
2003 2013
1,2
6,8
2003 201320031
20132
A technology company with a long -term commitment to innovation
Product innovation
774 764 818
9791058
1,1454-5%of sales devoted to R&D
> More connectivity> Mid-market offers> Energy efficiency
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Solution innovation
764
2008 2009 2010 2011 2012 2013
R&D spend growth
> Embedding interoperability> Leveraging connectivity and software
to build our service offer> Developing our platform strategy > Instituting operational intelligence
Our near-term priority is capturing growth and improving returns
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and improving returns
We focus on stepping up solution execution capabilities…
Comprehensive approach on selected segments
Differentiated software
> Water & Wastewater
> Telemetry Solutions & Intelligent Water Network Management
Comprehensive services
12,000
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> Water & Wastewater
> Utility> Healthcare> Oil & Gas
> Food & Beverage > Cloud and Telecom> Mining, Minerals, and Metals> OEM (machine builders)
Water Network Management > StruxureWare for Building Operations
> Data Center Infrastructure Management (DCIM) software
12,000Service delivery professionals
250Service centers
15Service bureaus
… while continuing to improve efficiency in key areas…
Supply chain Support functions> Customer satisfaction
> Supplier network rationalization> Inventory efficiency> Rebalance footprint
> Mutualization and globalization of back office
> Simplified infrastructure
> Non-production purchases> Commercial efficiency> Cross-selling
R&D> Prioritize programs
> Build common technology platforms
> Standardize process and tools> Specialize R&D tasks by
leveraging global R&D footprint
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23
24
25
26
27
Support function costs to revenue ratio
> Optimize resource allocation
> Reduce time to market> Rationalize R&D footprint
Inventory to revenue ratio201320122011
-1.5%
2013
358
2012
289
2011
376
Industrial productivity(million euros)
Solid process
Integration typology aligned with strategic intent
Integration focus
> Invensys integration is on track to deliver expected synergies
… and driving value creation on acquisitions through integration
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Clear guidelines on integration tasks and accountability
Regular performance tracking
Dedicated integration teams
expected synergies
> We continue to drive synergies from past acquisitions
Priority is to improve shareholder returns
Balance sheet Share count
> Maintain a solid balance sheet and
Dividend M&A
> Neutralization of dilution from employee
> Attractive and sustainable dividend
> Small acquisitions on an opportunistic basis
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balance sheet and keep a strong credit rating, with a long term target of A-
dilution from employee incentive plan through share buy-back
sustainable dividend policy with 50% targeted payout ratio
an opportunistic basis
Growth profile Efficiency
Targets for improvement:
> ROCE back to pre-Invensys level in one to two years
Focusing on growth and returns to target significan t improvement of ROCE in the next two to three years
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Growth and returns
Acquisition integration Capital allocation
level in one to two years
> 1.5 to 2pts improvement in two to three years
Invensys integration is on track to deliver expected synergy
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expected synergy
Acquisition of Invensys completes our portfolio with added value in automation and software
Buildings 1
Automation SoftwarePower
End-markets
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Utilities and Infrastructure
Industrial and MachinesDiscrete Industries
Process Industries
Data Centers and Networks
1:Including residential and non-residential buildingsInvensys presenceStrong Invensys presence
Double-digit growth
9%
~flat
Invensys achieved strong performance 1 in fiscal year 2013-2014...
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Order intake 2
1: Excluding Appliance division, 2: Constant exchange rate 3: Operating Profit Before Interests and Taxes before exceptional items
Revenues 2 OPBIT2,3
FY 2012/2013 FY 2013/2014 FY 2012/2013 FY 2013/2014 FY 2012/2013 FY 2013/2014
> Strong order growth in software (double-digit) and industrial automation (high single-digit) > Order growth in all regions driven by Asia-Pacific and North America> Profitability improved, OPBIT up double-digit despite flat revenues
… and proved its strong market access and superior software capabilities
34%
12%
> Strong presence in electro-intensive segments
> Project delivery capability across wide end markets
> Diversified industry footprint
> Mitigates industry-specific risks and business cycles
6%
12%
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34%
13%
10%
7%
24% Oil & Gas
Energy
Chemicals
Water/Waste Water
General industries
Others
Industry automation revenueFiscal year 2013- 2014
40%
28%
8%
7%General industries
Oil & Gas
Discrete manufacturing
Food & Beverage
Chemicals
Others
Software revenueFiscal year 2013- 2014
Key integration figures:
> 90%+ synergy is in execution
> 120+ welcome events
Implementation plan to be finalized in next three months
<10%1
Expected 2014 cost synergy
Cost synergy implementation stage
Integration is well on track to deliver 2014 cost synergy…
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> 300+ customers informed and visited
> One CRM kicked off
> 90%+ key talents retained
Implementation plan finalized, execution in progress
>90%1
Total 100%
1: As of end March 2014
… with most synergies coming from low risk and straightforward implementation initiatives
Organization optimization Real estate rationalizationPurchasing excellence
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> De-layering organization> Optimize span of control> Better workforce planning
> 17 major collocations between two companies
> Sites involved across all the regions
> Globalize non-production and electronic purchase
> Convert third party purchase to intra-group
<5%~20%>75%
Percentage of total expected 2014 cost synergy (As of end March 2014)
Solid Q1 2014 performance and Full Year 2014 objectives confirmed
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2014 objectives confirmed
Western Europe 1,672 -2%
Asia-Pacific 1,512 +6%
Q1 2014 revenues of €5.7 billion, up 7.7%, (2.5 % organically), driven by early cycle businesses
Buildings & Partner 2,422 +5.8%
Industry 1,444 +6.0%
Organic growth by business
Organic growth by geographyQ1 2014
revenues(million €)
Organic growth
Q1 2014revenues(million €)
Organic growth
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Asia-Pacific 1,512 +6%
North America 1,428 +2%
Rest of World 1,059 +8%
Group 5,671 +2.5%
Industry 1,444 +6.0%
Infrastructure 1,089 -3.7%
IT 716 -3.4%
Group 5,671 +2.5%
> Continuous improvement of early cycle businesses
> Although still declining, Western Europe improved sequentially in Q1
> Strong service growth across all businesses, up 14% organically
Q1 performance is in line with expectations. As anticipated, Q2 will be impacted by high comparison basis and slightly negative working day effect of ~0.6pt, while growth is expected to accelerate in H2. Therefore the Group confirms its 2014 objectives:
> Low single-digit organic growth in revenue
2014 objectives confirmed
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> Low single-digit organic growth in revenue
> 0.4 pt to 0.8 pt improvement of the adjusted EBITA margin vs. the 2013 pro-forma1 level excluding the currency impact. The negative currency impact is currently estimated at ~0.4 pt, with most of the impact concentrated in H1.
1: The 2013 pro-forma adjusted EBITA margin including the last 12 months of Invensys (without Appliance) to September 2013 and the full consolidation of Electroshield – TM Samara is ~14.0%.
Help people make the most of their energy
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Help people make the most of their energy