Adj. EBITA reached €1.6bn, up 6.4%, Adj.
EBITA margin flat excl. Invensys in a challenging
environment
2015 targets: Around flat organic growth in
revenues and a significant growth in adj. EBITA at current FX
rates, with a stable to moderate decline in adj. EBITA margin vs.
2014
Regulatory News:
Schneider Electric (Paris:SU) announced today
its second quarter revenues and first half results for the period
ending June 30, 2015.
Key figures (€ million) 2014 HY 2015
HY Change
Revenues 11,700
12,848 +9.8% Organic growth (%)
-0.9% Organic growth (%) w/o Invensys
0% SFC ratio (% of revenues)
25.2% 24.5% -70 bps
Adjusted EBITA 1,504 1,601 +6.4% %
of revenues 12.9 % 12.5%
- 40 bps
Net Income (Group share) 821 719
-12%
Adjusted Net Income1.
879 912 +4%
Jean-Pascal Tricoire, Chairman and CEO, commented: "In the first
half we focus on deploying our strategy with ‘Schneider is On’ in
an environment where headwinds from O&G and China are higher
than expected. These headwinds, along with a high base of
comparison for Invensys, particularly impact our Industry business,
which drags down the Group performance. However we see solid growth
in the U.S. construction market, improvements in Western Europe,
good progress in adapting costs and in achieving Invensys
synergies.
In the second half our focus will be on driving the recovery of
our Industry business, executing growth initiatives, delivering
cost efficiency, and improving project margin. We expect continued
growth in the U.S. construction market, sustained improvement in
Western Europe, persistent weakness in China and in O&G related
investments. Therefore, we target around flat organic growth in
revenues, and a significant growth in adjusted EBITA at current FX
rates, with a stable to moderate decline in adjusted EBITA margin
versus 2014.
As announced, we are working on a combination of a selected part
of our industrial software assets with AVEVA to create a global
leader in industrial software, and accelerate our development in
this field.
I. SECOND QUARTER REVENUES WERE UP 0.1% ORGANICALLY
2015 Q2 revenues were €6,852 million, up +0.1%
organically and +11.7% on a reported basis.
Organic growth by business
€ million HY 2015 Q2 2015
Revenues
Organic
growth
Organic growth
(ex. Invensys)
Revenues
Organic
growth
Buildings & Partner 5,763 +0.4% +0.4%
3,062 +0.5% Industry 2,834 -5.3%
-2.4% 1,463 -4.2% Infrastructure 2,516
+0.7% +0.7% 1,367 +1.2% IT 1,735
+0.5% +0.5% 960 +4.8%
Group
12,848 -0.9% 0%
6,852 +0.1%
Buildings & Partner (45% of Q2 revenues) grew
+0.5% organically. North America was up driven by continued
growth in construction markets in the U.S. and Mexico. Western
Europe grew thanks to good execution in France, and improvement in
Spain and Italy. Asia-Pacific was down. China declined as expected,
reflecting continued weakness in the construction market, while
Australia and India grew. Rest of the World performed well, driven
by infrastructure investment in the Middle East.
Industry (21% of Q2 revenues) was down -4.2%
year-on-year, temporarily impacted by the Invensys integration.
Western Europe was flat as growth in Italy and Spain, driven by OEM
exports, was offset by a soft market in Germany and France. North
America was down due to lower industrial investments related to the
decline in oil prices and strong U.S. dollar. Asia Pacific
declined, penalized by the slowdown in China while Japan performed
well. Rest of the world was slightly up.
Infrastructure (20% of Q2 revenues) was up +1.2%
in the second quarter. Western Europe grew from a low base thanks
to improvement in Spain, Italy and the U.K. North America was up
driven by project execution in Canada, while the U.S. was penalized
by lower investment in Oil & Gas and delays in data center
investments. Asia Pacific was down due to weakness in China and a
high base of comparison in Australia while East Asia posted growth.
Rest of the World was slightly up as infrastructure investments in
the Middle East more than offset the decline in Russia. Services
remained a growth engine, up double-digit.
IT (14% of Q2 revenues), was up +4.8% organically
in the second quarter. India posted strong growth after a one-off
impact in Q1. The U.S. grew driven by channel initiatives and
project execution in a slow market. IT investment in Western Europe
remained positive. Rest of the world performed well as continued
weakness in Russia was more than offset by growth in the
Middle-East and Africa.
In the second quarter, Solutions business was up +1%
organically while services2 were up +7% organically in
Q2.Solutions represented 41% of 2015 Q2 revenues.
Organic growth by geography
€ million HY 2015 Q2 2015
Revenues
Organic
growth
Organic growth
(ex. Invensys)
Revenues
Organic
growth
Western Europe 3,378 +1% +2% 1,719
+2% Asia-Pacific 3,678 -5% -4%
2,013 -5% North America 3,491 -1% 0%
1,871 0% Rest of the World 2,301 +2%
+3% 1,249 +6%
Group
12,848
-0.9%3
0% 6,852 +0.1%
Western Europe (25% of Q2 revenues), was up +2%
organically. Spain and Italy grew, driven by exports and
progressive recovery in domestic markets. In a challenging market,
France was up due to good execution. The U.K. grew while Germany
experienced mixed trends.
Asia-Pacific (29% of Q2 revenues), was down -5%,
with contrasting trends. China declined across businesses due to
weak construction and industrial markets. India was up as the
country’s economy accelerated. Australia was flat as the
improvement in residential construction and growth in IT was offset
by weakness in natural resource investments and a high base of
comparison.
North America (27% of Q2 revenues), was flat for
Q2. The U.S. was about flat as growth from construction market was
offset by lower industrial investment and data center investment
delays. Mexico was up driven by the recovery of the construction
market.
Rest of the World (19% of Q2 revenues), was up +6%
organically in the second quarter. Growth in the Middle East,
thanks to infrastructure investments, more than offset continued
weakness in Russia. Africa grew and South America was up with
contrasting trends.
Revenues in new economies were down -1% organically and
represented 44% of total second quarter 2015 revenues.
Consolidation and foreign exchange impacts
Net acquisitions contributed €8 million or +0.1%
of growth compared to Q2 2014, mainly reflecting the acquisition of
Günsan Elektrik.
The impact of currency fluctuations was positive at
€6984 million or +11.5%, as the positive
effect of the stronger US dollar and Chinese Yuan compared to the
Euro, more than offset the negative impact due to depreciation of
the Russian Ruble. Based on current rates, the positive FX impact
on 2015 revenues is estimated to be c. €2bn. In this volatile FX
environment, the Group continues to expect a limited impact on the
2015 adjusted EBITA margin.
II. FIRST HALF 2015 KEY RESULTS
€ million 2014 HY 2015 HY
Change Gross Profit 4,457
4,752 +7% Support Function Costs
(2,953) (3,151) +7% Adjusted
EBITA 1,504 1,601 +6%
Restructuring costs (71) (158)
Other operating income
& expenses
(57) (75)
EBITA 1,376 1,368
-1%
Amortization & impairment of purchase accounting intangibles
(127) (138)
Net income (Group share)
821 719 -12%
Adjusted Net Income5
879 912 +4%
Free cash flow
179 216 +21%
- ADJUSTED EBITA MARGIN AT 12.5%, DOWN
-0.4 POINT VERSUS 2014, FLAT EXCLUDING INVENSYS6
Gross profit was up +6.6%.
Gross margin declined -1.1pt. H1 2015 positive net pricing7 and
productivity partially offset negative mix and increased R&D
costs:
- Net price contributed +0.4pt and
productivity contributed +1.2pt.
- Negative mix of -1.6pt comprised -1pt
due to pricing of large projects (impacted by competitive pressure
and investment for future service business) and a few project
one-offs, and -0.6pt due to geography, business, and
product/solution mix.
- New product launches drove up R&D
depreciation, impacting margin by -0.4pt. COGS inflation &
others had a negative impact of -0.5pt. Currency and scope had a
negative impact of -0.2pt.
Support function costs declined -2.1% organically,
and grew +6.7% on a reported basis, 3pts less than revenue
growth.
2015 Adjusted EBITA reached €1,601 million, up
6.4%.
The key drivers contributing to the earnings change were the
following:
- Volume impact was negative €45
million in the first half.
- Consistent execution of tailored supply
chain initiatives contributed €151 million in the first
half. Good contribution from supplier negotiation and industrial
footprint optimization was partially offset by lower fixed cost
absorption due to negative volume.
- The net price impact was positive at
€44 million, as the favorable raw materials environment with
a tailwind of €77 million compensated for the negative
pricing of €33 million, mainly due to China. Full year
positive raw material impact is expected to be around €100
million.
- Production, labor & other costs
increased by €86 million, of which production labor
inflation was €38 million and R&D increase in COGS was
€48 million.
- Support function costs had a positive
impact of €67 million in the first half, reflecting the
Group’s good progress of simplification initiatives.
- Currency had a €200 million
positive impact on the adjusted EBITA, mainly driven by the
depreciation of the euro against the U.S. dollar and Chinese
Yuan.
- Mix was negative at €219
million.
- Acquisitions, net of divestments, were
minimal at €5 million for the first half.
By business, adjusted EBITA of Buildings &
Partner 2015 amounted to €1,031 million, or 17.9% of
revenues, slightly up +0.3 point year-on-year thanks to better
support function cost control. Industry generated an
adjusted EBITA of €440 million, or 15.5% of revenues, down
-2.7 points, penalized by volume decline, especially in Invensys,
negative FX transaction impact, mix and higher R&D investment.
Infrastructure adjusted EBITA was €156 million, or
6.2% of revenues, up +0.6 point benefiting from good control
of SFC. IT business reported an adjusted EBITA of €279
million, 16.1% of revenues, down -0.8 point compared to
2014, penalized by FX transaction impact.
Corporate costs in 2015 amounted to €305 million or 2.4%
of revenues, at the same level as in the previous year.
Reported EBITA was €1,368 million, after accounting for
€158 million of restructuring costs. For the full
year the restructuring costs are expected to be €300-€350 million,
higher than previous years, attributed to SFC improvement
initiatives. Other operating income and expenses were €75
million of which losses on business disposals amounted to €55
million, mainly related to the disposal of Telvent Global
Services.
- ADJUSTED NET INCOME8 UP
+4%
The amortization and depreciation of intangibles was €138
million, compared to €127 million last year, up slightly.
Net financial expenses were €226 million, with a stable
cost of debt.
Income tax amounted to €231 million corresponding
to an effective tax rate of 23.0%, stable vs. previous H1,
benefiting from Invensys.
The Adjusted Net Income was €912 million in H1 2015, up
+4%. The Adjusted Net Income will be one of the key elements for
dividend consideration.
- FREE CASH FLOW OF €216 million, up
21% from H1 2014
Free cash flow was reported at €216 million. It included
net capital expenditure of €382 million, representing 3.0%
of revenues. The trade working capital increased by €283 million
compared to €385 million in H1 2014 thanks to better control on
account receivables and payables.
- BALANCE SHEET REMAINS SOLID
Schneider Electric’s net debt at June 30, 2015 amounted to
€6,468 million, an increase since the beginning of the year,
mainly due to dividend payment and FX.
III. INVENSYS UPDATE
Invensys synergy execution is on track in the first half.
Over 50% of the planned 2015 cost synergies were realized
thanks to well structured initiatives. Revenue synergies are
progressing well, with c. 50% of targeted 2015 orders
booked, and opportunities coming from diversified end-markets. 2015
H1 integration costs amounted to €21 million.
Performance in the first half was penalized by Oil & Gas and
one-offs. Revenues were impacted by the ramping down of the China
Nuclear project as well as the change in fiscal year closing in Q1.
Underlying performance was slightly down as field devices declined
~20% due to Oil & Gas headwinds while the project business was
flat to slightly down in H1, but improved in Q2. Software orders
were up in Q2. Margin was penalized by the one-off impact, decline
in volume, negative mix and continued R&D investment for future
growth. However, margin is expected to improve in H2.
IV. CREATING A LEADING INDUSTRIAL SOFTWARE BUSINESS
WITH AVEVA9
Schneider Electric announced a non-binding agreement for the
combination of selected software assets with AVEVA Group to create
a global leader in industrial software with a unique portfolio from
design & build to operations. The proposed transaction9 aims to
realize the full value of contributed industrial software assets
and unlock additional value through the potential for material cost
synergies as well as revenue synergies for the enlarged AVEVA and
Schneider Electric. It would also create a platform for potential
industrial software consolidation.
The enlarged AVEVA would have a balanced geographical and
end-market exposure and would generate combined revenues and
Adjusted EBITA of c. £534 million and c. £130
million, respectively. Schneider Electric would have a majority
stake of 53.5% in the enlarged AVEVA Group and would fully
consolidate the business in its Group financials.
V. SHARE BUY BACK
In line with the plan to buy back between €1 billion and €1.5
billion worth of shares by 2016, the Group has repurchased
1,364,929 shares for a total amount of c. €90 million
in the first half of 2015. The Group intends to accelerate the
share buy-back in the second half. As of 30th June 2015, the total
number of shares outstanding was 585,159,105.
VI. 2015 TARGETS
In the first half, the Group saw stabilization of the
Infrastructure business, improvement in Western Europe, and good
progress in adapting costs and in achieving Invensys synergies.
However the Group’s performance was impacted by stronger than
expected headwinds from O&G and China, and one–offs in
Invensys
In the second half the Group expects continued growth in the
U.S. construction market, sustained improvement in Western Europe,
persistent weakness in China and in O&G related
investments.
Therefore the Group now targets for 2015:
- Around flat organic growth in
revenues.
- A significant growth in adjusted EBITA
at current FX rates, and a stable to moderate decline in adjusted
EBITA margin versus 2014.
*******************
The financial statements of the period ending June 30, 2015
were established by Board of directors on July 28, 2015 and
certified by the Group auditors on July 28, 2015.
The half year 2015 consolidated financial statements and the
interim result presentation are available at
www.schneider-electric.com
Third quarter 2015 revenues will be released on October 29,
2015.
About Schneider Electric
As a global specialist in energy management with operations in
more than 100 countries, Schneider Electric offers integrated
solutions across multiple market segments, including leadership
positions in Utilities & Infrastructure, Industries &
Machines Manufacturers, Non-residential Building, Data Centers
& Networks and in Residential. Focused on making energy safe,
reliable, efficient, productive and green, the Group's 170,000
employees achieved revenues of 25 billion euros in 2014, through an
active commitment to help individuals and organizations make the
most of their energy.
www.schneider-electric.com
Appendix – Revenues breakdown by
business
Second quarter 2015 revenues by business were as follows:
€ million Q2 2015 Revenues
Organic
growth
Changes in
scope of
consolidation
Currency
effect
Reported
growth
Buildings & Partner 3,062 +0.5% +0.6%
+13.2% +14.3% Industry 1,463 -4.2%
-0.1% +11.2% +6.9% Infrastructure 1,367
+1.2% -0.7% +6.7% +7.2% IT 960
+4.8% 0% +13.1% +17.9%
Group
6,852 +0.1% +0.1%
+11.5% +11.7%
Half year 2015 revenues by business were as follows:
€ million HY 2015 Revenues
Organic
growth
Organic
growth (ex.
Invensys)
Changes in
scope of
consolidation
Currency
effect
Reported
growth
Buildings & Partner 5,763 +0.4% +0.4%
+0.6% +12.0% +13.0% Industry 2,834
-5.3% -2.4% -0.1% +10.2% +4.8%
Infrastructure 2,516 +0.7% +0.7% -0.1%
+5.8% +6.4% IT 1,735 +0.5% +0.5%
-0.1% +13.0% +13.4%
Group
12,848 -0.9% 0%
+0.2% +10.5% +9.8%
Appendix – Breakdown by
geography
Second quarter 2015 revenues by geographical region were as
follows:
€ million Q2 2015 Revenues
Organic
growth
Reported
growth
Western Europe 1,719 +2% +4% Asia-Pacific
2,013 -5% +13% North America 1,871
0% +22% Rest of the World 1,249 +6%
+6%
Group 6,852 +0.1%
+11.7%
Half year 2015 revenues by geographical region were as
follows:
€ million HY 2015 Revenues
Organic
growth
Organic
growth (ex.
Invensys)
Reported
growth
Western Europe 3,378 +1% +2% +3%
Asia-Pacific 3,678 -5% -4% +12% North
America 3,491 -1% 0% +20% Rest of the
World 2,301 +2% +3% +3%
Group
12,848 -0.9% 0%
+9.8%
Appendix – Consolidation impact on
revenues and EBITA
In number of months
2014
Q1
Q2
Q3
Q4
2015
Q1
Q2
Q3
Q4
Electroshield-TM Samara
Infrastructure business
Average annual revenue of more than RUB 20
billion since acquisition of 50% stake in 2010
3m
Invensys
Industry business (+ partly Buildings
& Partner business)FY 30/9/13 revenue £1,450 million excluding
Appliance
3m 3m 3m 3m
Gunsan Elektrik
Buildings & Partner businessTRY 100
million revenue in 2013
3m
3m 3m 3m
Appendix - Results breakdown by
division
€ million 2014 HY 2015 HY
Revenues 11,700 12,848 Buildings
& Partner 5,102 5,763 Industry 2,704
2,834 Infrastructure 2,364 2,516 IT
1,530 1,735
Adjusted EBITA 1,504
1,601 Buildings & Partner 898 1,031
Industry 493 440 Infrastructure 132 156
IT 258 279 Corporate (277) (305)
-
Other operating income and expenses (57)
(75) Buildings & Partner (1) (12) Industry
(37) (3) Infrastructure (9) (51) IT
(5) (1) Corporate (5) (8)
-
Restructuring (71) (158) Buildings
& Partner (31) (70) Industry (10)
(27) Infrastructure (28) (46) IT (1)
(6) Corporate (1) (9)
EBITA
1,376 1,368 Buildings & Partner 866
949 Industry 446 410 Infrastructure 95
59 IT 252 272 Corporate (283)
(322)
Appendix – Adjusted Net Income
Key figures (€ million) 2014 HY 2015
HY Change
EBIT 1,249 1,230
-2% Net financial expense (201) (226)
Income tax (241) (231)
Discontinued operations 70 0 - of which
gains from business disposals 25 0
Equity investments 6 (1) Minority
interests (62) (53)
Net income
(Group share) 821 719
-12% Invensys integration cost post-tax (calculated at Group
effective tax rate) 28 16 Gain/losses
on business disposals(from OOIE & discontinued operations)
(25) 55 Restructuring charges
post-tax(calculated at Group effective tax rate) 55
122
Adjusted Net income 879
912 +4%
Appendix – Free Cash Flow
Analysis of debt change in €m H1 2014
H1 2015 Net debt at opening (Dec. 31st)
(3,326) (5,022) Operating cash flow
1,083 1,134 Capital expenditure – net (386)
(382) Change in trade working capital (385) (283)
Change in non-trade working capital (133) (253)
Free cash flow 179 216 Dividends
(1,095) (1,109) Acquisitions – net (2,257)
(77) Net capital increase 64 (72) FX &
other (112) (404)
(Increase) / Decrease in net
debt (3,221) (1,446) Net debt at
June 30 (6,547) (6,468)
1 See appendix p.13
2 Within H1, services out-grew the rest of the group by 6pts
3 Excluding China, Group organic growth is +1.1%
4 Excludes the positive impact of €15 million related to the
price increase adjusting for the depreciation of the Rouble against
the U.S. Dollar for IT business in Russia.
5 See appendix p.13
6 12.6% H1 2015 vs. 12.7% H1 2014
7 Price less raw material impact
8 See appendix p.13
9 The transaction remains subject to, amongst other things, the
completion of mutual due diligence to the satisfaction of both
parties, agreement on the terms of definitive legal documentation,
the approval of the respective Boards of Schneider Electric and
AVEVA, AVEVA shareholder approval and relevant anti-trust and
regulatory approvals (if required).
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150728006857/en/
Investor Relations :Schneider ElectricAnthony
SongTél. : +33 (0) 1 41 29 83 29Fax : +33 (0) 1 41 29 71
42www.schneider-electric.comISIN : FR0000121972orPress Contact
:Schneider ElectricVéronique Roquet-MontégonPhone
: +33 (0)1 41 29 70 76Fax : +33 (0)1 41 29 88 14orPress Contact
:DGMMichel CalzaroniOlivier LabessePhone :
+33 (0)1 40 70 11 89Fax : +33 (0)1 40 70 90 46
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