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JP Morgan Pan-European Capital Goods ConferenceJune 2012
Jean-Pascal TricoirePresident & CEO
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.
Disclaimer
Schneider Electric 3- Investor Relations – JP Morgan Conference – June 2012
Schneider Electric at a glance
€bn of sales in 2011
% of sales in new economies
NorthAmerica
23% AsiaPacific
27%Rest of World18%
WesternEurope
32%
28 300
44 200
42 600
22 000
A global company – 2011 sales splitnumber of employees end of 2011
employees in 100+ countries
of sales dedicated to R&D
Diversified end markets – 2011 sales split
Residential 9%
Utilities & Infrastructure 24%
Industries & Machine 22%
Data centers 16%
Non-residential building 29%
Schneider Electric 4- Investor Relations – JP Morgan Conference – June 2012
We deployed our long-term strategy consistently in the past decade
Build 2 complementary business models
Build 2 complementary business models
Leverage the world’s new energy challengesLeverage the world’s
new energy challenges
Leverage opportunity arising from geographical shift
Leverage opportunity arising from geographical shift
> Energy Management> Energy Management
> Product leadership> Solutions excellence> Product leadership> Solutions excellence
> Develop new economies
> Develop new economies
Invest in profitable growth while driving efficiency
Invest in profitable growth while driving efficiency
> Customer focused > Simplification> Customer focused > Simplification
Schneider Electric 5- Investor Relations – JP Morgan Conference – June 2012
…and balanced our geographical and end-market footprint
A balanced global presence
Serving 5 diversified end-markets
0%
20%
40%
60%
80%
100%
Rest of WorldAsia PacificNorth AmericaWestern Europe
2000 2011
32%
23%
27%
18%
2000 2011
0%
20%
40%
60%
80%
100%
Data CentresUtilities & InfrastructureIndustrial & MachinesResidentialNon-residential Buildings
29%
9%
22%
16%
44%
8%
34%
14%
46%
35%
9%10%
24%
2011 end market data include acquisitions on a full-year basis
Sales €9.7bn Sales €22.4bn Sales €9.7bn Sales €22.4bnSales €22.4bn
A strong footprintin new economies
0%
20%
40%
60%
80%
100%
New Economies
Mature
2000 2011
39%~20%
Sales €9.7bn Sales €22.4bnSales €22.4bn
Schneider Electric 6- Investor Relations – JP Morgan Conference – June 2012
We have a growth model that is flexible and resilient in profit and cash generation
FlexibleFlexible 70%COGS variable
Low capital intensityLow capital intensity ~3%capex to sales
Multiple channels to market
Multiple channels to market
46%of COGS in
new economiesCost competitiveCost competitive
~50%through
distribution
+ installers+ contractors+ direct sales
Pricing powerPricing powerOffset all
raw materialinflation
since 2005
Market structure Cost structure
Schneider Electric 7- Investor Relations – JP Morgan Conference – June 2012
Robust financial performance despite historical economic downturn
Sales(in €bn)
Adjusted EBITA1
(in €bn)
Free cash flow(in €bn)
Net income(in €bn)
1 see appendix for definition2 conversion = free cash flow / net income
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
0.3
0.8
1.71.8
10-yr CAGR +16%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
10-yr CAGR +8.6%~50% was organic
9.110.3
18.3
22.4
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1.01.3
2.93.2
10-yr CAGR +11.2%Margin up 3 pts to 14.4%
€0.8bn p.a. on avg.
€1.3bn p.a. on avg.
€1.7bn p.a. on avg.
10-yr cash conversion² 105%‘One’ conversion² of 106%
new 2004 new² One
Schneider Electric 8- Investor Relations – JP Morgan Conference – June 2012
Sustainable development is part of our DNA
BoP: Base of the Pyramid (least favoured socio-economic group)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2009 2010 2011
‘One’ barometer
3.0
6.0
7.6
9.4Exceeded our target of 8.0
ProfitSelected indicators
● BoP access to energy(# households)
● Global Compact(% of purchase)
Planet
30% 50%0 1.3m
Global 100 26th “Most Sustainable Corporation” in the World (2012)
Global 100 26th “Most Sustainable Corporation” in the World (2012)
Zayed Future Energy Prize (ZFEP 2012)
Jan 09 2011
Selected indicators
● Reduction of our CO2equivalent emissions
● Green Premium products(% of sales)
160kT
0% 64%
0
PeopleSelected indicators
● Employee recommendation score (vs. start of period)
● BoP young people trained to energy management
+32
0 12k
-Top 52 in Carbon Disclosure Leadership Index
Top 29 in Carbon Performance Leadership Index
Gigaton award for leadership in energy efficiency and development of the smart grid
Awards and rankings
our company program2012-2014
Schneider Electric 10- Investor Relations – JP Morgan Conference – June 2012
Customers
for Efficiency
People
Everywhere
Our new program Connects all to the potential of One
Bring furtherMake stronger
One Organization
One Team
Solution
One EfficientEnterprise
Our Way
Partner
Mature Economies
New Economies
Schneider Electric 11- Investor Relations – JP Morgan Conference – June 2012
Partner Excellence
Solution Excellence
Tailored Supply Chain
Grow in new economies
Grow in mature countries
Engaging leaders Industrial productivity
SFC savings
Planet & Society barometer
Connect to Customers Connect Everywhere
Connect to People Connect for Efficiency
Growth Margins/cash Long-term view
Engaged individuals
Engaging workplace
Schneider Electric 12- Investor Relations – JP Morgan Conference – June 2012
Set the course for solution excellence
AdjustedEBITA
(before corporate cost)
Sales
8,372
Products
Solutions9%margin
* Operational Assets = Property, Plant and Equipment + Inventories + Trade receivables – Trade payables
Solutions in 2011(€m and % of sales)
2011 Operational Assets Efficiency(Operational Assets* / Sales, internal estimates)
30% more
efficient
More improvement expected
Solution ROA to reach the same level as Product ROA
Lower EBITA margin partly offset by a better operational assets efficiency
Services to outgrow rest of group by 5 points
At least 2 points improvement of the adjusted EBITA margin by 2014+At least 20% improvement of the operational assets efficiency through mix and WCR optimization
Schneider Electric 13- Investor Relations – JP Morgan Conference – June 2012
Raise supply chain efficiency further
Purchasing
Sustained productivity savings
2012-2014 cumulative targetGross industrial productivity savings of €0.9bn-1.1bn
Reduce inventory to sales ratio by ~ 2 points
Footprint optimization
Transportation rationalization2006-08 2009-11
One2012-14target
€0.9bn€1.0bn €1.1bn
Absorption of fixed costs
Rebalancing
Lean manufacturing
PurchasingSupply chain flow re-design
€0.9bn
Schneider Electric 14- Investor Relations – JP Morgan Conference – June 2012
24.7%26.4%
24.1%23.2%
At least -1 point* by 2014
Drive savings from scale and invest for tomorrow’s growth
Savings
● Rationalize non-production purchases
● Simplify our presence in key geographies
● Review global functions set-up for increased efficiency
● Deliver synergies from recent acquisitions
● R&D to sales to move towards 5%
● Commercial investment for Partner Excellence, accelerated investments in Service engineers, geographical expansion in new economies
20112008
Achieve significant operational leverage
Support function costs net of investment (in €m and % of sales) Investment
2009 2010
2014 target (vs 2011)Support function costs to sales ratio reduced by at least 1 point* – net of investments
*(excl. scope & currency impact)
Our long-term targets
Schneider Electric 16- Investor Relations – JP Morgan Conference – June 2012
Drive profitability along with capital efficiency
Growth and Cost efficiency
Better Capital Employed mix with
solutions
Short term dilution on Capital Employed
Tailored supply chain
Synergies
External growth
Across the cycle ROCE target
11% - 15%
& beyond
Across the cycle organic growth drivers
Solutions(incl. services)
New economies
Products and Partners
Smart Grid & new markets
World GDP + 3 pointsReference is world real GDP growth at market FX
Across the cycleadjusted EBITA
13% - 17%
Target margin range across a business cycle
Cash focus: target a conversion of 100%of our net income in free cash flow
ROCE drivers
(2011: 12.9%)
(2011: 14.4%)
2011 highlights and 2012 outlook
Schneider Electric 18- Investor Relations – JP Morgan Conference – June 2012
2011: Good results in a difficult environment
Growth
Adj. EBITA
Cash
• 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
• Free cash flow of €1.5bn
Net income • Net income up 6% at €1.8bn• Earnings per share of €3.39
Political instability in North Africa
European debt crisis
Globally fragile macro-economic
context
Supply shortage following the natural
disaster in Japan
Strong raw material inflation
Schneider Electric 19- Investor Relations – JP Morgan Conference – June 2012
Balance sheet remains solid, cash generation is not cyclical
NB: Adjusted EBITDA of €3,852m in 2011 (€3,603m in 2010)
20112010
0.8x
1.4x
Net debt / Adj. EBITDA Cash generation past 10 years - in € bn
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Cash flow from operations
Change in WCRCapital expenditures
+2.58
-0.33
-0.75
Schneider Electric 20- Investor Relations – JP Morgan Conference – June 2012
Brazil
China
India
Russia1
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
€bnin annual sales
• Energy Efficiency Solutions• Smart Grid and infrastructure• Services
InfrastructureMedium Voltage & Grid Automation
Industry boosted its solutions capability
#
• Boost growth and shareholder returns
• Target quick EPS accretion
• ROCE above WACC beyond year 3
• Maintain a solid credit rating
Maintain strict M&A discipline
Increase in size vs 2009 (measured by sales)
1 Excluding Electroshield Samara consolidated under the equity method
Schneider Electric 21- Investor Relations – JP Morgan Conference – June 2012
Market Position
Offering
End Markets
2009 Reinforcedcapabilities 2011
We built a global leader in efficient infrastructures through strategic acquisitions
Size €2.3bn sales €5.3bn* sales
Distribution assets
#3 worldwidein medium voltage
Secondary medium voltage
Buildings Industries
+ Primary & secondary MV+ Substation automation+ Real-time management of
extended networks
#1 worldwideIn medium voltage &
grid automation
BuildingsUtilities IndustriesOil & Gas
Energy business renamed “Infrastructure” following the integration of Telvent
* On proforma basis including Telvent on a 12-month basis
Schneider Electric 22- Investor Relations – JP Morgan Conference – June 2012
Continued solid sales growth in Q1: +9.4% driven by acquisitions
Sales organic growth by business
Sales organic growthby region
Q1 2012
5 411
397836
1 0771 0872 014
-6.8%Industry
+0.4%Group
-0.9%+6.5%
+2.4%+1.7%
Buildings
Infrastructure
IT
Power
Q1 2012
+8%1 163North America-2%1 235Asia Pacific
5 411
838
1 708
+0.4%
+5%
-5%
Rest of World
Group
Western Europe
In m€ In m€
Organic growth slightly up with strong contrast by business and region
Schneider Electric 23- Investor Relations – JP Morgan Conference – June 2012
2012 outlook
We believe that the uncertainty surrounding the global economy continues to limit visibility
We believe that the uncertainty surrounding the global economy continues to limit visibility
In this context and assuming no major change in economic conditions, we continue to expect:
● flat to slightly positive organic sales growth
● an adjusted EBITA margin between 14% and 15%
In this context and assuming no major change in economic conditions, we continue to expect:
● flat to slightly positive organic sales growth
● an adjusted EBITA margin between 14% and 15%
Appendices
Schneider Electric 25- Investor Relations – JP Morgan Conference – June 2012
● EBITA: EBIT before amortization and impairment of purchase accounting intangibles and impairment of goodwill
● Adjusted EBITA: EBITA before restructuring and other operating income and expenses
● Adjusted EBITDA: Adjusted EBITA before depreciation and amortization
● Cash conversion: Free cash flow / net income
● Free cash flow: Operating cash flow – change in working capital – net capital expenditures
● ROCE: After-tax adjusted EBITA / Average Capital Employed
● Capital Shareholders equity + Net financial debt + adjustment Employed: for associates and financial assets (at historical value)
Definitions
Help people make the most of their energy
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