- Revenues: Stable organic growth in
H1, with focus on growth in Products and Services, while being
selective in Systems
- W. Europe & U.S. up, China
improving, rest of New Economies up
- Good progress in streamlining &
cost reduction
- Adj. EBITA +12% organically, margin
up +0.8pt, up +1.6pts before FX
- Net Profit of €809m, +13%
- Strong cash generation, Free Cash
Flow (FCF) more than doubled
- Full Year Adj. EBITA Margin target
upgraded
Regulatory News:
Schneider Electric (Paris:SU) announced today its second quarter
revenues and first half results for the period ending June 30,
2016.
Key figures (€ million) 2015 HY 2016
HY Reported Change Organic Change
Revenues 12,848 11,846
-7.8% -0.1% Gross Margin (% of
revenues) 37.0% 38.2%
+120bps SFC ratio (% of revenues)
24.5% 25.0% +50 bps
Adjusted EBITA 1,601
1,570 -1.9% +12% % of
revenues 12.5% 13.3% +80
bps Net Income (Group share)
719 809 +13%
Free Cash Flow 216 446
+106%
Jean-Pascal Tricoire, Chairman and CEO, commented: “We deliver
strong performance in the first half in a challenging environment.
Our margin is up by +1.6pts before FX, and Free Cash Flow more than
doubles. Adjusted EBITA and Net Profit both grow double digits.
This strong performance is driven by our continued focus on
executing the simple strategy laid out in Schneider is On, with
good progress of cost and simplification initiatives. In an
environment impacted by O&G headwinds and weakness in resource
based markets, we see continued growth in Western Europe and the
U.S. construction market, improvement in China’s construction
market and slight growth in the rest of New Economies despite
difficulties in Brazil and the Middle East.
Looking forward, our priorities remain to accelerate growth in
Products, Software and Services, better select and execute systems,
and continue focusing on our cost and cash efficiency in a mixed
environment. We should also face a high base of comparison in
margin, an accelerated negative impact on revenues from project
selectivity, less favorable raw material tailwinds and a slowdown
in the U.K. Taking into account these elements, and our strong
performance in H1, we update our 2016 objectives and target about
flat underlying organic growth in revenues before the impact of
selectivity, and adjusted EBITA margin to improve +60bps to +90bps
before FX”
I. SECOND QUARTER REVENUES WERE DOWN -0.5%
ORGANICALLY
2016 Q2 revenues were €6,207 million, down -0.5%
organically and down -9.4% on a reported basis.
Organic growth by business
€ million HY 2016 Q2 2016
Revenues Organic growth Revenues
Organic growth Buildings & Partner 5,186
+1.3% 2,705 +0.9% Industry 2,667
-1.9% 1,366 -1.2% Infrastructure 2,300
-1.3% 1,217 -2.3% IT 1,693 -0.2%
919 -0.9%
Group 11,846
-0.1% 6,207 -0.5%
Buildings & Partner (44% of Q2 revenues) grew
+0.9% organically in the second quarter, growing in all
regions except Rest of the World. Wiring Devices & Final
Distribution was up mid-single digit. The execution priorities
remained focusing on maximizing all businesses through its network
of partners, launching new connected offers for “Power distribution
redefined” and driving Wiring devices / Final distribution growth
in all regions. North America was up driven by successful new offer
launches in a favorable construction market in the U.S. and
continued growth in Mexico. In Western Europe, Germany and Spain
were up thanks to commercial initiatives. The Nordics grew in a
mixed environment while France performed well in the residential
construction market. Asia-Pacific was up. China stabilized thanks
to construction markets in tier 1 and tier 2 cities and growth
initiatives in targeted segments. India was up strongly in a
favorable market. Rest of the World was slightly down as the growth
in CIS couldn’t offset the declines in the Middle East and South
America.
Industry (22% of Q2 revenues) declined -1.2%
organically, at a slower pace than Q1 thanks to the focus on
accelerating business through partners and integrators, developing
OEM solutions, growing software in key segments, balancing end-user
exposure and growing strategic accounts. The U.S. was down as it
continued to be impacted by low O&G investment and a strong
dollar, while the priority remains enhancing cross-selling by
leveraging channels and new offer launches. Western Europe was up,
driven by growth initiatives and project execution while the OEM
market remained positive. France and Germany performed well thanks
to channel initiatives in a tepid market. Italy was up benefitting
from sustained demand from export oriented OEMs while the U.K. was
down. China declined at a slower pace than in Q1 as the OEM market
showed early signs of improvement. The Rest of the World grew.
Services were up strongly in the quarter.
Infrastructure (20% of Q2 revenues) was down -2.3%
organically in the quarter, about flat without the project
selectivity impact, estimated to be around -€25m in Q2. This impact
is expected to increase in H2. The business continued to focus on
growing Services and Products while increasing selectivity and
better executing systems (projects and equipment). North America
was up thanks to project execution in difficult markets in the U.S.
while Canada was penalized by a high base of comparison. In Western
Europe, France, Germany & the U.K. were up due to solid project
execution while Spain and Italy declined mainly impacted by project
selectivity. In Asia-Pacific, China declined as the growth from
emerging segments could not offset weakness from traditional
segments. Australia was down while South East Asia grew. Rest of
the World was dragged down by weakness in the Middle East, Russia
and Brazil.
IT (14% of Q2 revenues) was down -0.9%
organically. Launching new offers and expanding channels,
integrating the total Group portfolio for targeted datacenter
segments, leveraging new cloud-based software and driving services
growth were the priorities for the business in a mixed environment.
The U.S. was slightly up driven by reinvigorated channels and
strong services growth. Western Europe declined slightly as the
growth from service was offset by weak IT channel sales.
Asia-Pacific was up thanks to strong growth in India and South East
Asia. The Rest of World declined as growth in CIS was offset by
declines in Middle East and Africa. Services continued to grow
strongly.
Organically, systems & equipment were down -3% while
products & services were up +1% in the quarter.
Organic growth by geography
€ million HY 2016 Q2 2016
Revenues
Organic growth
Revenues
Organic growth
Western Europe 3,369 +2% 1,726 +3%
Asia-Pacific 3,141 -2% 1,698 -2% North
America 3,328 +1% 1,731 0% Rest of the
World 2,008 -2% 1,052 -4%
Group
11,846 -0.1% 6,207
-0.5%
Western Europe (28% of Q2 revenues) was up +3%
organically in the second quarter. Germany and France were up
thanks to growth initiatives in the construction and industry
markets and the execution of infrastructure projects. The Nordics
grew strongly driven by good market momentum in some countries and
project execution. Italy and the U.K. grew while Spain was impacted
by a high base of comparison.
Asia-Pacific (27% of Q2 revenues), was down –2%
organically. China continued to post a slower paced decline thanks
to stabilization in tier 1 and tier 2 city construction markets.
New Economies outside China were up, driven by India and South East
Asia. Australia was penalized by the phasing down of some projects
and continued weakness in commodity-related segments while the
residential construction markets continued to grow.
North America (28% of Q2 revenues) was about flat
organically in Q2. The U.S. was up thanks to growth in the
construction market and infrastructure project execution, while
industry markets remained weak. Additionally, there were signs of
improvement in some data center segments. Canada was down while
Mexico continued to grow in a favorable market.
Rest of the World (17% of Q2 revenues) was down
-4% organically. Middle East turned negative as a result of
weak investment caused by a low oil price and lack of financing.
South America was dragged down by weakness in Brazil, while the
rest of region grew. CIS was up thanks to growth in medium range
offer and project execution.
Revenues in new economies were down around -2% and represented
41% of total second quarter 2016 revenues. Revenues in the
new economies outside China were up 1%, while China was down low
single digit in the first half 2016.
The Working Day impact in H1 was estimated at +0.9pt,
which is expected to be -0.9pt in H2.
Consolidation1 and foreign exchange
impacts
Net acquisitions had an impact of -€292 million or
-4.3%. This includes mainly the deconsolidation of Delixi2
(consolidated under Buildings & Partner business), the disposal
of Juno Lighting (consolidated under Buildings & Partner
business), Telvent Global Services and Transportation (consolidated
under Infrastructure business), and some minor acquisitions and
disposals in other businesses. Delixi remains a 50/50 joint venture
and the deconsolidation had almost no impact on the Group’s
adjusted EBITA margin evolution in H1, and no impact on net profit
at the Group level (see table in appendix).
The impact of foreign exchange fluctuations was negative at
-€322 million or -4.6%, primarily due to the
weakening of the U.S. dollar, Chinese yuan, British Pound and
several new economies’ currencies against the euro.
Based on current rates, the negative FX impact on FY 2016
revenues is estimated to be ~€1bn. The negative FX impact on
adjusted EBITA margin for FY 2016 is now estimated to be
-50bps to -60bps due to increased currency volatility
since April.
II. HALF YEAR 2016 KEY RESULTS
€ million 2015 HY 2016 HY
Reported Change Organic Change Gross
Profit 4,752 4,528
-5% +3% Support Function Costs
(3,151) (2,958) -6%
-1% Adjusted EBITA 1,601
1,570 -2% +12% Other operating
income & expenses (75) (8)
Restructuring costs (158) (132)
Amortization of PPA intangibles (138)
(83)
EBIT 1,230
1,347 +10% Net income
(Group share) 719 809
+13% Free Cash Flow 216
446 +106%
- ADJUSTED EBITA MARGIN AT 13.3%, UP
+0.8 POINT VERSUS HY 2015, UP c. +1.6 POINTS BEFORE NEGATIVE FX
IMPACT
Gross profit was down -4.7%, up 3.1% organically, and systems
gross margin improved by ~+1pt
Gross margin increased +1.2pts to 38.2% in HY 2016
as positive net pricing3 and productivity offset negative FX and
production labor inflation:
- Net price contributed +0.8pt and
productivity contributed +1.4pts
- Negative mix of -0.1pt showing
significant sequential improvement compared to H2 2015
- Production Labor inflation had a
negative impact of -0.3pt
- Currency had a negative impact of
-0.7pt mainly due to the depreciation of the U.S. dollar,
Chinese yuan, and several new economies’ currencies against
Euro
- Scope and Others had a positive
+0.1pt impact, mainly due to the deconsolidation of Delixi,
the disposal of Telvent Transportation and some negative one-off
adjustments
Support function costs decreased -1.0%
organically, a 1pt greater decrease than organic growth and
decreased -6.1% on a reported basis.
HY 2016 Adjusted EBITA reached €1,570
million, down -1.9%, up 12% organically
The key drivers contributing to the earnings change were the
following:
- Volume impact was negative -€28
million
- Solid execution of tailored supply
chain initiatives contributed €171 million, higher than H1
2015
- The net price impact was positive at
€99 million, comprised of a favorable raw materials tailwind
of ~€100 million and price stability at Group level
(positive outside China). The raw material tailwind is expected to
be close to zero in the second half of the year
- Production Labor inflation was
-€37 million
- Support function costs reduced by
€31 million in H1. Total gross SFC reduction in H1 2016 is
c.€120m thanks to solid execution of the Group’s
simplification program
- Currency fluctuation decreased the
adjusted EBITA by -€143 million, mainly due to the
depreciation of the U.S. dollar, Chinese yuan, and several new
economies’ currencies against the euro
- Mix was negative at -€15
million
- Acquisitions, net of divestments, were
a negative -€55 million for H1 mainly driven by the
deconsolidation of Delixi and the disposal of Telvent
Transportation and Juno Lighting. The impact on adjusted EBITA
margin was positive at c. +0.1pt, mainly due to the disposal of
Telvent Transportation
By business, adjusted EBITA of Buildings &
Partner for HY 2016 amounted to €1,025 million, or
19.8% of revenues, up +1.9 points year-on-year thanks to
strong gross margin improvement. Industry generated an
adjusted EBITA of €424 million, or 15.9% of revenues up +0.4
point, up c. +1.2pts before FX thanks to strong cost control.
Infrastructure adjusted EBITA was €158 million, or
6.9% of revenues. The underlying trend was positive at +0.7
point year-on-year, driven by system gross margin improvement and
stringent cost control. The adjusted EBITA margin was up c. +2pts
before FX. IT business reported an adjusted EBITA of €266
million, 15.7% of revenues, down -0.4 point, up c. +0.1pt
before FX. Gross margin was up, while adjusted EBITA margin was
impacted by FX.
Corporate costs in H1 2016 amounted to €303 million,
about the same level as in the previous year.
The restructuring charges were €132 million in HY
2016. Restructuring Costs are expected to be c. €300
million in FY 2016 to drive efficiency and simplification
initiatives
Other operating income and expenses had a negative impact of
-€8 million, vs. -€75 million in HY 2015
The amortization and depreciation of intangibles linked to
acquisitions was €83 million compared to €138 million last
year, a significant decrease mainly due to the end of the
depreciation of several previously acquired brands
Net financial expenses were €246 million, compared to
€226 million in HY 2015 as the cost of net debt decreased by €18
million, but was offset by a loss on exchange
Income tax amounted to €275 million reflecting a
tax rate of 25%, an increase from last year mainly due to
the ramp down of Invensys tax synergies, in line with the 2016
expected tax rate of 24% to 26%
Share of profit on associates amounted to €13 million
including the effect of the change in consolidation of Delixi.
The Net Income was €809 million in HY 2016, up +13% from
HY 2015
- FREE CASH FLOW OF €446 million, more
than double HY 2015
Free cash flow was reported at €446 million for the first
half, more than double the cash flow from HY 2015 thanks to strong
growth of operational cash flow. This figure included net capital
expenditure of €402 million. The trade working capital
increased by €251 million, a lower increase than in HY 2015
thanks to better control over receivables and inventory
management.
- BALANCE SHEET REMAINS SOLID
Schneider Electric’s net debt at June 30, 2016 amounted to
€5,723 million, an increase of €1,092 million compared to
the beginning of the year, mainly due to dividend payments and
share buybacks.
III. SHARE BUY BACK
Since the beginning of the year, the Group has repurchased
6,192,623 shares for a total amount of c. €320
million with an average price of €52. The share buyback was
accelerated after Brexit. The Group has repurchased
16.8m shares, investing ~€0.9bn cumulatively on share
buybacks since 2015 against the Group’s target of
~€1.5bn.
IV. 2016 TARGETS
In the first half, the Group delivered solid organic growth
around Products & Services and a strong improvement in adjusted
EBITA margin in a challenging environment. While headwinds from
O&G and weakness in resource based markets remained, growth
continued in the U.S. construction market and in Western Europe,
China’s construction market showed improvement and New Economies
outside China were slightly up. Additionally, the Group's organic
growth was negatively impacted by project selectivity. The impact
of this selectivity is estimated at -€70 to -€80m in H1, and is
expected to accelerate in H2.
In the second half the priority remains to accelerate growth in
Products, Software and Services, better select and execute Systems,
and continue to focus on cost and cash efficiency. The Group should
also face a high base of comparison in margin, an accelerated
negative impact from project selectivity, less favorable raw
material tailwinds and a slowdown in the U.K. due to Brexit.
Based on this, and given the strong performance in H1, the Group
now targets for full year 2016:
- Revenues: About flat underlying organic
growth before project selectivity impact (currently estimated to be
c. -2% in H2).
- +60bps to +90bps improvement on
adjusted EBITA margin before FX. The negative FX impact on margin
is estimated at -50bps to -60bps at current rates.
************
The financial statements of the period ending June 30, 2016
were established by the Board of
Directors on July 27, 2016 and certified by the Group
auditors on July 27, 2016
The Q2 2015 & HY 2016 Results presentation is available
at www.schneider-electric.com
Q3 2016 Revenues will be presented on October 27,
2016
2016 Investor Day will be held in London, U.K. on October 27,
2016
About Schneider Electric: Schneider Electric is the
global specialist in energy management and automation. With
revenues of €27 billion in FY2015, our 160,000 employees serve
customers in over 100 countries, helping them to manage their
energy and process in ways that are safe, reliable, efficient and
sustainable. From the simplest of switches to complex operational
systems, our technology, software and services improve the way our
customers manage and automate their operations. Our connected
technologies will reshape industries, transform cities and enrich
lives. At Schneider Electric, we call this Life Is On.
Appendix – Revenues breakdown by
business
Second quarter 2016 revenues by business were as follows:
€ million Q2 2016 Revenues
Organic growth Changes in scope of
consolidation Currency effect Reported
growth Buildings & Partner 2,705 +0.9%
-7.9% -4.7% -11.7% Industry 1,366 -1.2%
-0.3% -4.9% -6.4% Infrastructure 1,217
-2.3% -3.3% -5.6% -11.2% IT 919
-0.9% 0.0% -3.4% -4.3%
Group
6,207 -0.5% -4.3%
-4.6% -9.4%
H 1 2016 revenues by business were as follows:
€ million HY 2016 Revenues
Organic growth Reported Growth
Buildings & Partner 5,186 +1.3% -10.0%
Industry 2,667 -1.9% -5.9% Infrastructure
2,300 -1.3% -8.6% IT 1,693 -0.2%
-2.4%
Group 11,846 -0.1%
-7.8%
Appendix – Revenues breakdown by
geography
Second quarter 2016 revenues by geographical region were as
follows:
€ million Q2 2016 Revenues
Organic growth Reported growth Western
Europe 1,726 +3% 0% Asia-Pacific 1,698
-2% -16% North America 1,731 0%
-8% Rest of the World 1,052 -4% -16%
Group 6,207 -0.5%
-9.4%
H1 2016 revenues by geographical region were as follows:
€ million HY 2016 Revenues
Organic growth Reported growth Western
Europe 3,369 +2% 0% Asia-Pacific 3,141
-2% -15% North America 3,328 +1%
-5% Rest of the World 2,008 -2% -13%
Group 11,846 -0.1%
-7.8%
Appendix – Q1 2016 restated for
Delixi
First quarter restated revenues by business were as follows:
€ million Q1 2015 Q1 2016
Organic growth Changes in scope of
consolidation Currency effect Reported
growth Buildings & Partner 2,701 2,481
+1.8% -7.5% -2.4% -8.1% Industry 1,371
1,301 -2.6% -0.4% -2.4% -5.4%
Infrastructure 1,149 1,083 -0.1% -2.3%
-3.0% -5.4% IT 775 774 +0.7%
0% -0.8% -0.1%
Group
5,996 5,639 +0.3%
-3.9% -2.4% -6.0%
First quarter restated revenues by geographical region were as
follows:
€ million Q1 2015 Q1 2016
Organic growth Reported growth Western Europe
1,659 1,643 +1% -1% Asia-Pacific
1,665 1,443 -2% -13% North America
1,620 1,597 +1% -1% Rest of the World
1,052 956 +1% -9%
Group
5,996 5,639 +0.3%
-6.0%
Appendix – Consolidation impact on
revenues and EBITA
In number of months
2015
Q1
Q2
Q3
Q4
2016
Q1
Q2
Q3
Q4
Günsan
Elektrik
Buildings & Partner BusinessTRY100
million revenues in 2013
3m 3m 3m 3m
Juno Lighting
Buildings & Partner Business
$230 million revenues in 2014
1m 3m
3m 3m 2m
Telvent Transportation
Infrastructure Business
€125 million revenues in 2015
3m 3m 3m
Delixi
Buildings & Partner Business
€650 million revenues in 2015
€63 million adjusted EBITA in 2015
3m
3m 3m 3m
Appendix - Results breakdown by
division
€ million 2015 HY 2016 HY
Revenues 12,848 11,846 Buildings
& Partner 5,763 5,186 Industry 2,834
2,667 Infrastructure 2,516 2,300 IT
1,735 1,693
Adjusted EBITA 1,601
1,570 Buildings & Partner 1,031 1,025
Industry 440 424 Infrastructure 156 158
IT 279 266 Corporate (305) (303)
Appendix – Free Cash Flow
Analysis of debt change in €m HY 2015
HY 2016 Net debt at opening at Dec. 31
(5,022) (4,631) Operating cash flow
1,134 1,306 Capital expenditure – net (382)
(402) Change in trade working capital (283) (251)
Change in non-trade working capital (253) (207)
Free cash flow 216 446 Dividends
(1,109) (1,127) Acquisitions – net (69)
(11) Net capital increase (72) (273) FX & other
(412) (127)
(Increase) / Decrease in net debt
(1,446) (1,092) Net debt at Jun.
30 (6,468) (5,723)
1 . Changes in scope of consolidation also include some minor
reclassifications of offers among different businesses.
2 . Delixi remains a 50/50 JV but from 2016 is consolidated
through the equity method (previously fully consolidated) in
application of IFRS10
3 . Price plus raw material impact
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160727006717/en/
Investor RelationsSchneider ElectricAmit BhallaTel: +44 20 7592
8216www.schneider-electric.comISIN : FR0000121972orPress Contact
:Schneider ElectricVéronique Roquet-MontégonTel : +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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