Full Year Results 2017: Strong operational performance ... · Full Year Results 2017: Strong...

Confidential Property of Schneider Electric

Full Year Results 2017: Strong operational performance yields record EPS

February 15, 2018

Confidential Property of Schneider Electric |

Disclaimer

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. For a detailed description of these factors and uncertainties, please

refer to the section “Risk Factors” in our Annual Registration Document (which is available on www.schneider-

electric.com). Schneider Electric undertakes no obligation to publicly update or revise any of these forward-looking

statements.

This presentation includes information pertaining to our markets and our competitive positions therein. Such

information is based on market data and our actual revenues in those markets for the relevant periods. We obtained

this market information from various third party sources (industry publications, surveys and forecasts) and our own

internal estimates. We have not independently verified these third party sources and cannot guarantee their

accuracy or completeness and our internal surveys and estimates have not been verified by independent experts or

other independent sources.


FY 2017 Strategy Highlights

Full Year 2018 Targets

Appendix

FY 2017 Finance Presentation

4

24

36

39

XX


Strong Results in 2017 with All-time High Adj. EBITA, Net Income and Free Cash-Flow

• Q4 organic growth accelerating to

+4.6% with Energy Management

and Industrial Automation up

+4.3% and +5.6% respectively

• FY Group organic growth +3.2%

• FY org. growth in Low Voltage,

Secure Power and Industrial

Automation accelerated to +4.5%,

well above initial target of +1% to

+3%

Strong Revenues Growth

• FY adj. EBITA organic growth: +9%

• FY adj. EBITA margin: 14.8%, up

+90bps org.

• Continued expansion of Adj. EBITA

margin over past 10 quarters

Sustained Profit momentum

• All time-high Net Income: €2.15bn,

up +23%

• All time-high EPS of 3.85€ / share

• Record Free Cash Flow at €2.25bn

Free Cash Flow conversion: 105%

• Disciplined capital allocation:

ROCE up +1.3pt at 12%

• Dividend proposed: €2.20, up +8%

Record Earnings & Strong Cash

2016

13.7

14.814.1

2015

+1.1pt, c.+1.6pt org.

2017


Good progress in strategic priorities

Drive organic growth through more products and innovation

Push organic growth

on differentiated

business models

Improve margin

• Products revenues up +4.3%

org., accelerating in H2 at

+4.9%

• Final Distribution and Wiring

Devices activities: solid mid

single digit growth in 2017

(4+ years of consecutive

growth)

• Industrial Automation

products up high single

digit over 2017

Strong organic growth 100+ product launches in 2017 Recognition in innovation

SM6 ConnectedCompact NSXm

Masterpact MTZ Galaxy VX



Drive organic growth on differentiated business models

• Industrial software sales about flat impacted by O&G,

with Q4 revenues slightly up

• Acquisition of IGE+XAO to strengthen position in

electrical CAD for Energy Management

• Transaction with AVEVA awaiting completion, providing

unique software portfolio across asset lifecycle for

continuous & hybrid processes

• CFIUS approval obtained

• Closing expected by March 1st

• CEO on board 19 February

More Software

• High single-digit growth in FY orders

• +6% organic growth in Q4 revenues

• Services supported by Digitization

• Digitization of delivery for best-in-class

customer satisfaction leveraging IT tools

• Connecting critical customer infrastructure to

EcoStruxure Advisor (apps) for increased asset

performance

More Services



Cross selling accelerating

Steam Engineering

Customer

Germany

Water and waste

management facilities

Brazil

Global leader in

logistics

USA

MV Secure PowerLV Industrial Automation

Telco’s Data Center

China

Powering and Controlling

pumping system with industrial

automation and LV equipment

A complete panel with all

components and complete

wiring and application software

Distribution hubs with conveyor

sortation system having 5ms

Application Response time

Complete solution of MV

switchgear, power system and

relay protection



Digital Journey progressing

Connectivity Experience Scale Ecosystem

• 1.6 million of Assets

under Management,

+25% YoY

• New web experience, with

traffic up +15% YoY

• New Digital Catalog roll

out with traffic up +70%

• 650,000+ channel

partners on our digital

portal

• Brand new EcoStruxure

Cloud Platform scaling

up: ~2,500 events per

second

• 20,000+ System

Integrators and

Developers working with

us

• X2 in connected

customers vs end of 2016


Baosteel: The world's leading

modern steel joint venture

• Up to 30% improvement on

productivity

• Cost savings of over 20

personnel

Future-ready hospital in USA

• Projected CAPEX Savings

up to 5%

• Flexible and upgradable

through next 15-20 years

• Improved patient experience

Integrated Data Center in China

• 60% reduction in maintenance

breakdown

• Automated operation for

quantifiable efficiency gains

• Migrating to Integrated,

Intelligent & Digital experience

Proven value for customers:

EcoStruxure wins in Q4 – some examples

City of Milford: Weather-proof

Microgrid

• 50% greater energy

efficiency for electricity &

heat generation

• 15 – 30% reduction in energy

spending


Proven value for customers: EcoStruxure in international retail chain Auchan

Maximize energy performance to reach COP21 commitments

Challenges Full EcoStruxure solution deployed Significant results

• Roll out in 10 out of 12 countries

• -20% targeted energy savings in 4 years

• Tens of m€ of annual energy bill

reduction achieved at the end of 2017

• Tailored Energy Procurement process

• Worldwide supervision through

Resource Advisor

• Tailored performance contracting model

• Remote monitoring and optimization services

• Adherence to COP21

commitments and protect

environment

• Manage costs and protect

margin

• Deploy at scale (3,000+ retail

sites potentially involved)

“Schneider Electric has a deep

business knowledge… a real value

add partnership based on a client

centric approach”

Sustainability is a growth pillar for Schneider

Electric.

Our sustainability strategy is integrated in the

Group strategy to meet the energy challenge.

Schneider Electric’s project for society is to act

to keep global warming below the 2°C limit

and to reduce the energy gap, with ethics and

responsibility.

Schneider Electric listed as 5th global

company with the most SRI funds in

its capital (365 funds)

(Ipreo report SRI Leaders Index Fall 2017)



Our Planet & Society barometer reaches 9.58/10 on Q4

Our vision for increased

long-term performance

● 100% of new large customer projects with CO2 impact

quantification

● All our entities pass our internal Ethics & Responsibility

assessment98.4%

100%

● 10% CO2 savings from transportation

● 100% of products in R&D designed with Schneider

ecoDesign WayTM

10.3%

100%

● 64% scored in our Employee Engagement Index

● 85% of employees work in countries with Schneider gender

pay equity plan

65%

89%

Q4 2017Indicators & objectives 2017 - selection



Our new 2018-2020 Planet & Society barometer drives further performance

Circular Economy

75% of sales under our new Green Premium

program

190 sites labeled towards zero waste to landfill

100% cardboard / pallets from recycled or certified

sources

100,000 metric tons of primary resource

consumption avoided through Ecofit, recycling,

and take-back programs

Climate

80% renewable electricity

10% CO2 efficiency in transportation

100 million metric tons customers CO₂ avoided

through our offers

25% increase in turnover for our Energy &

Sustainability Services

Development

x4 turnover of our Access to Energy program

350,000 underprivileged people trained in energy management

12,000 volunteering days thanks to our VolunteerIn global platform

Ethics

5 pts /100 increase in avg. ISO26000 assessment for strategic suppliers

300 suppliers received on-site Human Rights & Environment assessment

100% of sales, procurement, & finance employees trained on anti-corruption

Health and Equity

70% score in Employee Engagement Index

1 medical incident per million hours worked

90% of employees have access to well-being at work program

100% of employees in countries w/ fully deployed Family Leave policy

100% of workers received 12h learning in year (30% digital)

90% of white collars have an individual development plan

95% of employees in countries w/ commitment/process for gender pay equity


Recognition and Continuous Commitment in multiple areas

Sustainability

Human Resources

2017 Gartner Supply Chain:

Europe Top 15

2017 Gartner Supply Chain

Top 25

Supply Chain



Driving continuous efficiency

• c.€1.9bn of gross costs savings in 3 years with c.€650m

achieved in 2017

• Cumulative savings since 2015:

• Tailored Supply Chain program delivered

• Customer Satisfaction in top quartile of industrial companies

• Network modelling and lead-time reduction

• End to end digitization powered by EcoStruxure

• Ambitious supplier concentration program

Productivity targets overachieved

•MV Adj. EBITA margin reached 10% in FY17

(up c.260bps organic since 2015)

•Selectivity1 ending in 2017. Q4 Org. growth was +2.2%

(c.+5% ex-selectivity)

• Implementation of specialized organization (“Power

System”) focused on greater agility, autonomy & focus

•FY18 Adj. EBITA margin for MV division targeted to

improve organically by +1pt to 1.5pts

Medium Voltage Rebound on track

1.3

0.7

0.8

2016

1.0

0.8

2017

1.9

1.2

0.5

0.4

2015

0.30.7

Target

1.8

Gross SFC savings

Industrial prod. 2014

8.6

20172016

9.79.1

2015

10.0

Factory visit in Wuhan (China) on March 26 1: MV Sales impacted by c. €195m of selectivity in 2017 and c.€40m in Q4 17

Reinforcing our core

Disposal of non-core assets

Schneider Electric – Investor Relations

We continue to optimize our portfolio

We continue to optimize our portfolio and focus on shareholder returns

…and generate attractive returns for our shareholders

Dividend up +8% in 2017

+

Share buyback of c.€1bn until mid-2019 launched

+

c.75% of FCF returned to shareholders over past 3 years


Business Performance Highlights


We are leading the digital transformation of Energy Management and Industrial Automation

Energy Management

c.+4% FY17 organic

excl. selectivity and with Delixi

Industrial Automation

+6% FY organic

With an Integrated and Digitized portfolio to

step up efficiency for our customers


Energy Management

Complete end-to-end offering addressing customer needs across segments

Delivering higher reliability and efficiency

combining Medium & Low Voltage, Secure Power

powered by EcoStruxure

… driving strong cross-sell in segments

Building

on Floor Space

in Data Center

Healthcare

Hotel

Data Center

F&B

MMM

O&G

WWW

Utilities

c.90% of MV packaged with LV outside of utilities

in Electrical Room

• IT racks, IT pods

• UPS

• Access floor

• PDU’s, rack PDUs

• CRAC and Air Containment

• Panels, Breakers

• Environmental and power

sensors

• Physical security

• UPS

• Switchboards & Switchgear

(MV, LV)

• Busway

• Power Meters and Sensors

• Breakers

• Transformers

• Automatic Transfer Switch

• Building Mgt system

• HVAC & Light controls

• Sensors

• Wiring devices

MV Secure PowerLV


Key macro drivers for Energy Management

North

America

Western

Europe

Asia-

Pacific

Resi. & Non-resi. Buildings Industry & Infrastructure UtilitiesData Center & Networks

• Continued capital

investment in Data center

& Edge computing

• Microgrids activity

ramping up

• Improving demand on CIB1

• Good demand in

residential markets

• Favorable Industry &

Infrastructure demand

• Good demand in

residential markets

• More focus on efficiency &

sustainability in CIB

• Growth in Data center

investment and in edge

computing

• Strong OEM demand

• Good trends in hybrid

industries

• Utilities challenged by

decentralized grid

creating opportunities in

digital

• Residential & CIB

markets up

• Increasing focus on

Energy Efficiency

• Data center investments

• Growth in Home Secure

Power in New eco.

End Market

1. Commercial & Industrial Buildings

• Investments in

Transportation

• End-users need for greater

efficiency

• Utilities investments

continued in the region

Rest of

the World

• Utilities investments

lower in the Middle-East

• Microgrids activity

ramping up

• Residential & CIB markets

grew

• Some improvement in

Mining demand

• O&G remains on low levels

• Data center investments

in the region

En

erg

y M

an

age

me

nt

~+2% excl.

selectivity1


Energy Management showed strong performance in 2017

FY2017 ORGANIC GROWTH, %

Energy Management: +3.4% org., ex-selectivity1

FY2017 Adj. EBITA, %

4,4

-2,2

2,1Secure

Power

Low

Voltage

Medium

Voltage

En

erg

y M

an

age

me

nt

9.7

20.6

16.8

16.6

10.0

Medium

Voltage2

Low

Voltage

Secure

Power

20.2

FY16 FY17

Energy Management: 17.3%, +40bps, +100bps org.

~+130 bps

~+flat

Strong recovery

in H2

~+80 bps

FY organic

improvement

1. Revenues in Medium Voltage impacted by c. €195m of selectivity in 2017

2. FY17 Scope Impact -50bps (mainly DTN)

~+5.3% with

Delixi

Energy Management – Performance Highlights

Low Voltage

• All 4 regions grew. Strongest growth in North America, China and Rest of the World

• Final Distribution & Wiring Devices continued strong +6% org. growth, in line with past trends

• Good growth in Commercial and Industrial buildings (incl. Data centers)

• EcoStruxure Power / Building connected points growing double-digit

Medium Voltage

• Power System2 margin improving strongly, driving business margin improvement

• Services revenues were stable but orders up mid single-digit

• More EcoStruxure – ADMS ranked Leader in 2017 Gartner Magic Quadrant;

Secure Power

• Strong growth in New Economies, up +7%

• Distributed IT up low single digit / Good performance in non-IT end-markets

• Group sales in Datacenter up mid single-digit with: Secure Power sales up low single-digit,

MV/LV sales up double-digit

• Services up mid single-digit

€18.9bn76% of Group 2017 revenues

Energy Management

Energy Management

Execution priorities

• Maximize Group’s growth through every

channel

• Continue to deliver margin improvement

• Accelerate sales through partners

• Grow EcoStruxure: New connected offers,

Analytics & Digital Services

Organic

growth

+3.41%Adj. EBITA

margin

17.3%/ +0.4pt

Performance in 2017

1: excluding selectivity of c. €195m in 2017

2. activity focused on projects & equipment primarily for utilities and electro-intensive end-users


Industrial Automation – Growth at the Core

Application knowledge for

greater conversion of machines

EcoStruxure Machine is growing 4x

faster than the market*

We lead at the Edge w/ EcoStruxure

Plant & differentiated software

Synergies w/ Energy Management

driving customer value in Industry

& Infrastructure end-markets

F&B

MMM

O&G

WWW

Utilities

Energy ManagementIndustrial Automation

Power & Automation awards

won based on refinery domain

expertise in automation

The customer

• The largest silicone materials production

facilities in the world

The solution

• EcoStruxure Plant deployed, incl.

Foxboro DCS and modernization services

• Deployment of renewed Edge Control

portfolio

The results

• Reduced project risk and cost due to

preservation of infrastructure

• Executed jobs 50% faster than expected

• Reduced CAPEX by 50%

• Added 2 extra days of production, leading

to a faster time to profit

Conversion of machines from

packaging to hoisting to HVAC

Selected segments

2006 2008 2010 2012 2014 2016 2018

200 k

0 k

800 k

1.000 k

1.200 k

600 k

400 k

(*) Machine CAGR = 4.1% (source IHS)

machines >1.000.000


Industrial Automation - Strong performance growing top line and margin with +90bps organic

improvement on Adj. EBITA margin

Organic growth

+5.9%Adj. EBITA margin

17.6%/ +0.9pt

Performance in 2017

€5.8bn24% of Group 2017 revenues

Industrial Automation

#2 worldwide

Performance highlights

• Growth across all 4 regions

• Strong Products (Contactors, HMI, Drives and Signaling) performance driven by

channel initiatives

• EcoStruxure Machine growing double-digit

• End-user automation boosted by Industry 4.0

• Process Automation revenues up low single-digit

• Software revenues about stable org. and grew in H2

• Adj. EBITA margin +90bps organic with improved volume and productivity

Execution priorities

• Grow business through distributors & partners

• Continue roll-out of EcoStruxure Plant & EcoStruxure Machine

• Drive growth through industrial software platform

#4worldwidediscrete automation process


FY2017 finance presentation

ANALYSIS OF CHANGE IN GROUP REVENUES (in €m)

Based on current rates, the FX impact on FY 2018 revenues is estimated to be between -€1.0bn to -€1.1bn. The FX impact at current rates on

adjusted EBITA margin is expected to be around -20bps

12,570

-1.2%

North America

+3%

H2 2016

restated

H2 2017

12,717

Western Europe

+3%

Asia-Pacific

+6%

Fx

-4.6%

Rest of World

+3%

Scope

-0.3%

Group Q417: +4.6% org

Group H217: +3.7% org

Group FY17: +3.2% org

Mainly DTN sale, consolidation

of Asco for 2 months

Mainly due to the USD, CNY

and some new economies’

currencies decline vs. EUR


Revenues accelerating to +4.6% in Q4, leading to +3.7% organic in H2 17, with growth across regions

En

erg

y M

ana

ge

me

nt

Indu

str

ial

Au

to.


Strong performance in H2 with all businesses accelerating organic growth and improving Adj.

EBITA margin organically

H2 ORGANIC GROWTH, % Group: acceleration to +4.6% on Q4

with all businesses growing

H2 Adj. EBITA, %

1. Selectivity estimated at c.€40m on Q4 and c.€95m on H2;

2. Restated from Solar deconsolidation

En

erg

y M

ana

ge

me

nt

Indu

str

ial

Au

to.

Secure

Power

17.5

Low

Voltage

17.8

Medium

Voltage

Industrial

Automation

20.0

20.5

12.2

11.5

18.6

18.4

Group: +40bps

+100bps org.

-0,7

Low

Voltage

2.2

Medium

Voltage

Secure

Power

Industrial

Automation

5.4

5.6

4.9

2.2

4.0

6.2

Q4 17 H2 17 H2 17H2 16 rest.H2 organic

improvement

MV Excl. selectivity

Q4: ~+5.3%

H2: ~+3.3%~+140 bps

~+100 bps

~+120 bps

~+100 bps

GROSS MARGIN: ANALYSIS OF CHANGE (%)

1,8

Mix H2 2017

38.1

FXR&D & Prod.

Labor infl.

ProductivityNet price11VolumeH2 2016

restated

0.0

-0.6

-0.1-0.4

-0.2

-0.5

38.1

Scope &

Others


Gross Margin up +50bps organically on H2

• H2 Raw Material Impact on products more than

covered outside China. In China, volume growth,

strong productivity and cost efficiency enabled good

evolution of the margin, despite price investments,.

• Raw material impact in H2: -€116m. RMI expected

around -€200m in 2018 at current prices

• Pricing actions will continue in order to compensate

for raw material inflation in 2018

• R&D increase

impacted c. -0.2pt

• Scope impact of c. -0.3pt

mainly linked to DTN

deconsolidation

1. Price less raw material impact


Strong H2 performance with +11% organic growth in Adj. EBITA, leading to Adj. EBITA of

€3.7bn and FY +90 bps organic improvement, exceeding the high end of revised guidance

In €m H2 2017Organic change

2016restated

2017Reportedchange

Organic change

Revenues 12,570 +3.7% 24,459 24,743 +1.2% +3.2%

Gross Profit 4,783 +5.1% 9,358 9,498 +1.5% +4.2%

Gross margin

(%)38.1% +50 bps 38.3% 38.4% +10bps +40bps

SFC1 (2,850) +1.3% (5,860) (5,847) -0.2% +1.3%

SFC1 ratio (% Revenues) 22.7% +60 bps 24.0% 23.6% +40bps +40bps

Adjusted EBITA 1,933 +11.2% 3,498 3,651 +4.4% +9.2%

Margin % 15.4% +100 bps 14.3% 14.8% +50 bps +90 bps

1: Support function cost

SFC to Revenues improves by 40bps

due to disciplined SFC management

involving simplification and selected

reinvestments

Gross profit improved organically

through improved volumes and

strong productivity, and with

improving net pricing in H2

Above objective of 4 to 7% organic

growth


We delivered the highest industrial productivity in past 7 years and continued our disciplined

SFC management

Key Actions Over 2017

Industrial productivity (c. €430m)

• Ranked #17 Top Global Supply Chain by Gartner

• Purchasing & lean manufacturing results boosted by

volume

• Reached €1.2bn over 3 years

SFC Savings (c.€220m Gross savings)

• Cumulative savings: c. €760m over 3 years

• Finance/ Marketing simplification

• Real Estate cost reduction

• Optimization levers on operations per region

Reinvestments (>€100m)

• Digital customer experience

• Digital and mobile tools

• Services & marketing capabilities

• Platform for EcoStruxure development

SFC to Sales ratio (%)

Industrial productivity (€m)

20172016

380

430

20172016

24.0

23.6

-40bp

Target to sustain good

level of industrial

productivity in 2018

Continue to invest in

core priorities – Digital,

Services and Marketing

Targeting an organic

improvement in SFC to

Sales ratio


Accelerating profit growth: EBIT grew by +8% and Net income up +23%, thanks to improved

financial costs and lower tax rate

In €m 2016 restated 2017 % change

Adjusted EBITA 3,498 3,651 +4%

Other income and expenses (63) (15)

Restructuring (309) (286)

Amortization & depr. of purchase accounting intangibles (151) (140)

EBIT 2,975 3,210 +8%

Financial costs (462) (367)

Income tax (719) (600)

Discontinued operations (17) (94)

Equity investment & Minorities (27) 1

Net income (Group share) 1,750 2,150 +23%

Adjusted Net income1 2,134 2,378 +11%

Adjusted Earning per share1 3.80 4.26 +12%

Concluding the 3 year adjustment of our structure and

costs. Restructuring costs expected to be €150m to

€200m going forward to generate industrial productivity

Including €53m lower Finance costs. Avg. cost of debt

improved due to new issuance at favorable rates

Increase mainly due to asset depreciation in Solar activity

Includes Group share of Delixi Net income for €39m, up

c.€14m.

1: Adjusted net income and EPS calculation in appendix

2017 ETR 21.1%, Normative Tax rate of 21.5% with higher

tax synergies from Invensys & favorable profit mix.

ETR expected at 22-24% in 2018 & medium-term.


Strong Free Cash Flow generation at €2.25bn

Analysis of debt change in €m 2016

restated2017

Net debt at opening Dec 31 (4,631) (4,824)

Operating cash flow 2,956 3,020

Capital expenditure – net (741) (688)

Change in trade working capital 55 (126)

Change in non-trade working capital (54) 47

Free cash flow 2,216 2,253

Dividends (1,227) (1,197)

Acquisitions – net 47 (557)

Net capital increase (689) (10)

FX & other (540) 39

(Increase) / Decrease in net debt (193) 528

Net debt Dec 31 (4,824) (4,296)

Mainly Asco acquisition and Luminous

minority interest acquisition, balanced by

DTN disposal

Working capital growth driven by inventory

and receivables, a result of topline

expansion


1051182

2015 2017

100 long-term objective

2016

1131

1,01,1

2015 2016 2017

<1.0

CASH CONVERSION, % NET DEBT/ ADJ. EBITDA

1: Based on Net income adjusted for business disposals impact and Pelco impairment

2: Based on Net income adjusted for non-cash c.€120m income tax increase due to deferred tax assets adjustment

Strong cash conversion and solid balance sheet

IMPROVING CAPITAL

EFFICIENCY

ROCE IMPROVEDHIGH LEVEL OF RETURN ON

OPERATIONAL ASSETS

Operational Assets / Revenues (%)1

1. Operational assets: Tangible assets + Net working capital (Inventories + Accounts receivables less payables)

2. Adjusted EBITA / Operational assets (year-average)

3. Pro forma including Invensys

40

37

20172014

Return on Operation Assets (Post-tax) 2

2014 2017

31

2810.7

20162013 pro-

forma3

2017

15

1111.0

12.0Target range

Strong improvement of ROCE thanks to higher margin, capital efficiency and lower taxes

Disposal of non-core activities

APPLIANCE

TRANSPORTATION

~€2.2Bn generated through disposals

of non-core activities since 2014


DTN

Reinforcing our coreFocusing on integration

c.€130m cost synergies

achieved by 2016

c. €400m revenue synergies

generated in 2017 (1 year

early)

Tax synergies increase by

€100m to c. €600m

2017 main disposals

2014-2016 main disposals

M&A on the core, adding value


Proposed dividend: €2.20 per share, up +8%

2013

1.87 1.92

2014

2.042.00

2015 20171

2.20

2012 2016

1.87

2011

1.70

2010

1.60

2009

1.03

Dividend (€ per share)

1: Subject to shareholder approval in AGM

Progressive dividend policy

Full Year 2018 Targets


2018 Targets

In a positive environment, the Group targets to deliver strong organic growth of Adjusted EBITA in

2018, around the high-end of the +4% to +7% bracket earlier communicated as the average

yearly objective for 2017-2019.

To deliver this strong performance the Group will balance both levers of organic top line growth and

Adj. EBITA margin expansion. Therefore, for 2018, the Group will target:

• An organic top line growth between +3% to +5%; and

• An organic Adj. EBITA margin expansion towards the upper end of the +20bps to +50bps range

targeted as yearly average improvement for 2017-2019.

Further notes on 2018 in the next page


2018 additional notes

• Exchange rates impact: Based on current rates, the FX impact on FY 2018 revenues is estimated to be between -

€1.0bn to -€1.1bn. The FX impact at current rates on adjusted EBITA margin is expected to be around -20bps

• Scope: Based on FY17 financials for acquisitions, scope impact is currently estimated around +€200 million in

revenues and expected to be about neutral at the level of the Group Adj. EBITA margin. This does not include

AVEVA which would be fully consolidated in the financial statements at completion. For FY2017 (March year-end),

AVEVA revenues and operating profit amounted to £216m and £55m respectively.

• Tax rate: Thanks to the positive evolution of the corporate income tax rates in several countries where the Group

operates, the ETR is expected to be in a 22-24% range in 2018 and in the medium term.

• Restructuring: Restructuring costs are expected in the foreseeable future to be back to a normative recurring

amount of €150m to €200m corresponding in majority to the costs required to generate the manufacturing

productivity and to continue to drive simplification.

• Working days: The Group expects a negative working day impact of c. -1.5pts in Q1 2018 that will reverse during

the balance of the year.

Appendix


Definitions

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

EBITDA EBIT before depreciation, amortization, provisions and before share-based compensation cost

Adjusted EBITDA Adjusted EBITA before depreciation, provisions and before share-based compensation cost

Cash Conversion Free cash flow / Net income (Group share)

Free Cash Flow Operating cash flow less change in working capital less net capital expenditures

ROCE Return On Capital Employed

The arrow shows if the indicator has risen, stayed the same or fallen compared to the previous quarter. The colour shows if the indicator is above or below the objective of 9/10.

10% energy savings

10% CO2 savings from transportation

Towards zero waste to landfill for 100 industrial sites

100% of products in R&D designed with Schneider ecoDesign WayTM

30% reduction in the Medical Incident Rate (MIR)

One day training for every employee every year

64% scored in our Employee Engagement Index

85% of employees work in countries with Schneider gender pay equity plan

150,000 underprivileged people trained in energy management

1,300 missions within Schneider Electric Teachers NGO

75% of product revenue with Green PremiumTM eco-label

100% of new large customer projects with CO2 impact quantification

120,000 tons of CO2 avoided through maintenance, retrofit and end-of-life services

x5 turnover of Access to Energy program to promote development

100% of our recommended suppliers embrace ISO 26000 guidelines

All our entities pass our internal Ethics & Responsibility assessment

-

-

34

-

10%

10%

100

100%

60.5%

-

-

-

48%

-

75%

100%

120,000

x5

100%

100%

30%

85%

64%

85%

150,000

1,300

-

79%

61%

-

73,339

460

9.2%

11.6%

116

100%

75.9%

16%

148,415

x2.09

84.6%

88.7%

37%

85%

64%

75%

143,756

1,289

10.3%

10.3%

130

100%

80.1%

100%

168,400

x2.21

87.9%

98.4%

38%

92%

65%

89%

148,145

1,347

Planet & Society barometer

Overall score (out of 10)

Start

01/2015

3.00

Target

12/2017

9/10

Results

Q4 2017

9.58

Results

Q3 2017

9.01Our megatrends 2015-2020 and our targets 2015-2017

The Planet & Society barometer 2015-2017 - Results as of Q4 2017


FY Adj. EBITA up +9% organic thanks to strong productivity and volume

Analysis of change of adjusted EBITA (in €m)

430

233-119

ScopeNet price1

3,498

Volume

-97

FY 2016

restated

-124-30

Other

-77

COGS

(Inflation

& R&D)

3,651-51

-12

FXProductivityMix FY 2017SFC



H2 Adj. EBITA up +11% organic

Analysis of change of adjusted EBITA (in €m)

224

139

OtherCOGS

(Inflation

& R&D)

SFC

-35

-143

-53

ScopeProductivityNet price1

-30

-44 1,933

Mix

-3

Volume FX H2 2017

1,911

H2 2016

restated

-33


In €mFY2016restated

FY2017

Net income (group share) 1,750 2,150

Impact of business disposals (in OOIE, share of profit

on associates & discontinued ops)27 (7)

Integration costs post-tax1 - 23

Restructuring charges post-tax1 238 224

Tax rate: deferred tax net assets depreciation2 119 (12)

Adjusted Net income 2,134 2,378

Adjusted EPS (€) 3.80 4.26


Adjusted net income calculation

1. Calculated post-tax at the year effective tax rate (ETR)

2. see Press release from 9 January 2017 for 2016 amount

ROCE calculation

2017

P&L items Reported

EBITA (1) 3,350

Restructuring costs (2) -286

Other operating income & expenses (3) -15

= Adjusted EBITA (4) = (1)-(2)-(3) 3,651

x Effective tax rate of the period1 (5) 21.5%

= After-tax Adjusted EBITA (A) = (4) x (1-(5)) 2,865

2016 2017 2017

Balance sheet items Adjusted reported Avg of 4

quarters

Shareholders' equity 20,653 19,941 (B) 19,994

Net financial debt2 4,824 4,295 (C) 4,598

Adjustment for Associates and Financial assets (fair value) -762 -709 (D) -733- Sunten Electric Equipment (25% stake) 52 48 50

- Fuji Electric FA Components & Systems (36.8% stake) 115 116 116

- NVC Lighting (8.9% stake) 35 23 29

- Delixi (50% stake) 279 278 279

- CST Holding (30% stake) 77 35 56

- Other non-current financial investments 204 209 203

= Capital Employed 24,715 23,527 (E) = (B)+(C)+(D) 23,859

= ROCE² (A) / (E) 12.0%

1. Effective tax rate before exceptional items

2. Average Net debt adjusted from the carrying value of ASCO for 1 month as acquisition consolidated for 2 months

ROCE Calculation


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showcasing specific businesses, geographies

or functions

http://www.schneider-electric.com/finance

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[email protected]

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