JP Morgan Pan-European Capital Goods · PDF fileSchneider Electric - Investor Relations – JP Morgan Conference – June 2012 3 Schneider Electric at a glance €bn of sales in 2011

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%


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


…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


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


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.



10-yr cash conversion² 105%‘One’ conversion² of 106%

new 2004 new² One


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


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


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


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


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


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


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


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


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


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


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


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


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


● 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

Documents

JP Morgan Pan-European Capital Goods · PDF fileSchneider Electric - Investor Relations – JP Morgan Conference – June 2012 3 Schneider Electric at a glance €bn of sales in 2011