Half-Year 2004 Earnings

Transcription

1 Half-Year 2004 Earnings July 29, 2004 Building a New Electric World

2 We are a world leader in Power & Control Electrical Distribution Supplying electricity reliably and in complete safety 70% of sales - No.1 worldwide Automation & Control Controlling, monitoring and protecting machines and equipment 30% of sales - No. 2 worldwide Low Voltage No.1 worldwide Industrial Control No.1 worldwide Ultra Terminal No.2 Medium Voltage No.2 PLCs No.3 Breakdown of estimated 2004 core business sales 2

3 Our solutions, products and services serve the needs of 4 markets Optimizing safety, comfort, productivity, availability, operating costs and communication Residential Single and multi-family dwellings Industry Food & Beverage, Automotive, Pharmaceuticals, Electronics, etc. 11% of sales 41% of sales Buildings Offices, Retail outlets, Factories, Hotels, Hospitals, etc. 31% of sales 17% of sales Energy & Infrastructure Water treatment, Telecommunications, Data centers, Airports, Tunnels, etc. 3

4 Our comprehensive, differentiated lineup offers a solution to every customer need Low Voltage Medium Voltage Secured Power Ultra Terminal Industrial Control PLCs Building Automation Services 4

5 We have developed forefront positions in the global marketplace 10 billion in sales 83,000 employees worldwide North America HQ: Chicago 21% of sales 16,500 employees International HQ: Barcelona 6% of sales 5,000 employees Europe HQ: Paris 48% of sales 42,500 employees Asia-Pacific HQ: Hong Kong 16% of sales 14,000 employees Growth platforms Building Automation (TAC), Secured Power (MGE UPS) 9% of sales 5,000 employees Breakdown of estimated 2004 sales and number of employees 5

6 Our strengths are unique in the industry A world leader in Power & Control A premium portfolio of products and brands & high investment in Research and Development A business model based on flexibility and the ability to form partnerships A balanced worldwide presence and forefront positions in emerging markets Skilled and committed teams & young management Strong operating performance and very solid financials Schneider Electric is fully leveraging the worldwide economic recovery and the high potential of its accessible markets 6

7 Highlights Review of Operations First-Half 2004 Financial Results Strategy and Outlook

8 First-half 2004 highlights Record growth in sales: +18% Sharp rebound in North America and Western Europe +5% supported by our growth plans Remarkable performance in emerging countries +21% Strong organic growth +9% Significant contribution from acquisitions ( 556 million) TAC - Building Automation MGE UPS Systems - Secured Power Clipsal - Ultra Terminal, Asia-Pacific Growth in half-year 2004 sales: +18% 8

9 First-half 2004 highlights High-quality acquisitions in high-potential businesses... Targeted segments Companies acquired Growth Human-Machine Interface Building automation & security Ultra Terminal Secured power Sensors for repetitive machines Digital Electronics TAC Andover Controls Clipsal MGE UPS Systems Kavlico +22% +10% +8% +5% +7% +14% Andover Controls and Kavlico acquired in first-half 2004 First-half 2004 organic growth in orders 9

10 First-half 2004 highlights enabling us to enlarge our accessible markets 120 Accessible markets ( bn) Automation specialties Ultra Terminal Asia-Pacific Building Automation & Security Secured power (UPS) 0 Dec June 2004 We have enlarged our accessible markets by 50% thanks to our acquisitions 10

11 First-half 2004 highlights Strong growth in operating income: +30% Record sales growth +18% Sustained improvement in gross margin In line with our NEW2004 target Driven by our productivity plans Still limited impact of higher raw materials prices Less unfavorable but still significant currency effects (-0.6 pts) Clear improvement in operating margin +1.1 pt Growth in half-year 2004 operating income: +30% 11

12 First-half 2004 highlights An excellent first-half H 2004 YOY m % of sales Change Sales 4, % Operating income % +30% Net income before % +23% goodwill amortization Operating cash flow % +19% At constant exchange rates, first-half 2004 operating margin would have reached 12.1% 12

13 Highlights Review of Operations First-Half 2004 Financial Results Strategy and Outlook

14 Strong growth in earnings thanks to our Growth & Efficiency plans Focus on organic growth Ability to seize market opportunities Mobilization on targeted businesses Ultra Terminal, Automation, Services High R&D investment Assertive expansion in new growth platforms driven by highquality acquisitions Systematic deployment of productivity plans As part of our NEW2004 program 14

15 A winning focus on organic growth 18% 13% (Quarterly sales change compared to the same quarter last year) Current Organic +14% +21% +10% 8% +6% +7% 3% +0.3% +0.3% +5% -2% -7% -12% -7% -9% -7% -7% -2% -8% -3% -9% -1% -8% -7% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q % 15

16 Sustained sales growth in all our operating divisions 1H 2004 % Change ( m) Organic Current Europe 2, % +4.3% North America 1, % -3.7% Asia-Pacific % +37.7% Rest of the world % +19.7% Growth Platforms 418 n/a n/a Total 4, % +17.7% 16

17 An ability to seize market growth opportunities Recovery of our markets in North America and Western Europe Growth potential in emerging countries Need for environmental and energy management Customer needs linked to their globalization and their outsourcing Growth plans targeted by market segments and distribution channels Sustained expansion and forefront positions Dedicated energy efficiency and water treatment solutions Added-value services: diagnosis, maintenance, performance of installations 17

18 Our dedicated growth plans in North America Organic sales growth - North America 8% 5% 8% -5% -5% -1% Powerpact H MCCB Q Q2 Q3 Q4 Q Q2 Motorpact MV Motor controller Major Metro Initiative Deploy in largest metropolitan areas dedicated sales resources & customer support for offices, schools, infrastructures (water, metro) Small Project Express Program Gain market share in small electrical & control projects with local stock, quick quotations & expert advice Critical Power Competence Center - data centers & targeted OEMs Meet growing needs with dedicated teams and systems based on our PowerLogic & Transparent Ready offers 18

19 Our dedicated growth plans in Western Europe Organic sales growth - Europe 1% 4% 7% -3% -1% -3% Q Q2 Q3 Q4 Q Industry development plan Numerous launches of innovative products Development of applications centers dedicated to OEMs: elevators, hoisting, packaging, refuse handling Residential growth plan Launch of dedicated ranges in Ultra Terminal Success of growth initiatives with orders up +10% Q2 Launch of our dedicated Ultra Terminal, Building Security, VDI solutions Prisma + Merlin Gerin switchboard AVT31 VVD 19

20 Remarkable growth in all emerging countries led by forefront positions Eastern Europe +24% Japan/Korea +22% Greater China +32% South America +21% Africa/Middle East +19% India +40% Other Asia/Pacific +10% % of total sales Production units Employees 27% 75 21,900 20% 59 15, % +46% First-half 2004 organic growth in sales 20

21 Sustainable development: we are part of the solution We help to significantly reduce our customers energy consumption Savings Remote energy monitoring: to control electrical installations -10% Variable speed drives: to monitor high-energy use applications -30% The Aleo (Air Liquide Energy Optimization) program: reduce compressor motor power consumption by adjusting operation to compressed air flows Transparent Ready: to optimize Buildings energy management -20% Public lighting management -40% Merlin Gerin s innovative Lubio solution adapts light intensity to local conditions and needs We have dedicated solutions for water treatment 21

22 Our power management solutions A fast-growing worldwide market Energy costs are a major expense in running a business Power system uptime is becoming more critical for companies Schneider Electric PowerLogic systems are the global leader in power management & control solutions Innovative, web-enabled systems and services to give insight into all facility Proven return on investment with savings through reduced utility costs and optimized equipment utilization Reference: Mercedes-Benz USA uses PowerLogic systems Have the necessary information to diagnose power problems and increase production time Selected Schneider Electric offering for its superior ability to perform power quality and disturbance monitoring functions PowerLogic : control the cost, quality and reliability of our electric power 22

23 Our dedicated solutions for water treatment A high growth worldwide in the coming years All countries have to improve water management Increasing environmental care leads to stronger regulations As a preferred supplier to the world leaders, Schneider Electric offers guaranteed water quality and uninterrupted supply Close relationships are established with world leaders Veolia and Suez, our key strategic accounts We propose systems to monitor electricity consumption & services to optimize Reference: Kranji Newater in Singapore Provides high purity water to Singapore inhabitants and industries from effluent water (reverse osmosis technology) Selected Schneider Electric for its wide offering ensuring electricity availability together with the control of pumps and processes 23

24 Mobilization on targeted businesses: Ultra Terminal We are leveraging the offering of our Clipsal and Lexel acquisitions To offer our customers a complete set of products To grow geographically and penetrate new countries We are leveraging Clipsal and Lexel distribution channels to push the rest of our offering We are reaching a +14% growth in wiring devices and home control orders We are increasing our positions in Residential, a more local, less cyclical market 24

25 Mobilization on targeted businesses: Services A strong development in services: 7% of business today, with orders growing +12% Our two strengths: our wide installed base & our legitimacy with customers A dual track strategy Leverage installed base support services Through our electrical maintenance & contract for two plants in Mexico, General Motors benefits from cost savings, reduced scrap and improved process Expand energy and industrial performance services Through our solution based on the Ordinal MES software and the Telemecanique Unity platform, cattle food maker Unicopa increases productivity, improves and secures production processes, while complying with traceability regulations 25

26 Mobilization on targeted businesses: Automation Focus our development in PLCs Target selected segments with an applications-driven offering Invest in programming environment: Unity platform launch Accelerate growth in small and distributed PLCs (Low End Control) while embedding more automation in distributed products Differentiate in Human Machine Interface, drives, sensors, motor starters Leverage technological competitiveness in Japan and developing supervisory software solutions MES solutions: first customers with Ordinal software Digital solutions for automation and production engineering: partnership with Dassault System in Dextus Simply Smart 26

27 More than 5% of sales invested in Research and Development Leverage on strong R&D centers close to very demanding markets: Japan, China, United States, France Nordic USA France Germany Japan Mexico India China Leverage the potential of emerging and competitive countries Grow our R&D centers in Bangalore (India), Shanghai (China) and Monterrey (Mexico) Leverage technological know-how in Japan Consolidate our French power protection and control R&D sites in a single and worldwide center based in Grenoble 27

28 Systematic deployment of our productivity plans as part of NEW2004 Purchasing Target of 5% productivity gain met in first-half 2004 Setting up of international sourcing teams in Shanghai, Bangalore and Eastern Europe Lean Manufacturing Deployment in 108 plants at the end of June 2004 Direct labor cost average savings in line with our targets Globalizing and outsourcing of IT Outsourcing plan in Europe and installation of shared management applications worldwide Partner selected, contract signing scheduled for year-end Optimizing support functions Overhead reduction plans underway in France: full impact of savings excepted in 2005 Launch of a plan to adjust headcount in corporate functions, R&D and marketing: reduction in staff to be effective in

29 Extensive deployment of Six Sigma program Number of Black Belt & Green Belt trained or in training 1200 BB GB Objectif BB Objectif GB 844 GB BB 0 Jan-02 Jun-02 Jan-03 Jun-03 Jan-04 Jun-04 29