morgan stanley fifth annual china industrials … stanley fifth annual china industrials summit 1...

Morgan Stanley Fifth Annual China Industrials Summit

1

China Industrials Summit

Hai ZhuExecutive Vice President, China President

18 June, 2014

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

Reference 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 the 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

2

Confidential Property of Schneider Electric

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.

We are global specialist in energy management and efficiency technologies

33

and efficiency technologies

Balanced geographies – FY 2013 revenue1

Schneider Electric: the global specialist in energy management and efficiency technologies

25%North America

28%Western Europe

€25 billionrevenueFY 2013 revenue1

4 – 5%of sales devoted to R&D

4


Diversified end markets – FY 2013 revenue1

Utilities &Infrastructure

Industrial and Machines

Data Centers& Networks

Non-residential and Residential Buildings

27% 25% 14% 34%

20%Rest of World

27%Asia Pacific

1: Pro forma basis including LTM Sep 2013 revenue from Invensys2: As of February 2014 (including Invensys)

FY 2013 revenue

160,000+people2 in 100+ countries

to R&D

43%of revenue in new economiesFY 2013 revenue1

Integrating power with automation to support our customers’ need for efficiency

Software and connectivity

The integration of power and automation is enabling improved reliability, reduced losses, and optimized efficiency.

I manage

IT2

5


Power 1 Automation

1: Supported by low-voltage, medium-voltage, and critical-power technologies2: Information technology (IT) and operational technology (OT)

I control

I operate

IT2

OT2

Convergence

Key technology Low Voltage & Building Automation

Medium VoltageGrid Automation

Discrete & Process Automation

Critical Power & Cooling

Worldwide leadership in four sizeable and integrated businesses

Buildings & Partner Infrastructure Industry IT

6


FY 2013 revenue1 €10.2 billion (40%) €5.7 billion (22%) €6.0 billion (24%) €3.4 billion (14%)

Worldwide position

#1 #1 #2 (Discrete)#4 (Process) #1

Worldwide competitors

ABB EatonLegrandSiemens

ABBSiemens

ABBEmersonRockwellSiemens

EatonEmerson

1: Pro forma basis including LTM Sep 2013 revenue from Invensys

Maximizing growth with two strong and complementary business models

€25 billion1

40%2

ProductScale and

pricing power

SolutionLow capital

intensity and service

7


€8.8billion

2003 2013

pricing power

A decade of solid growth> Segment leadership> Differentiated software> Comprehensive service

Solution

Products

1: Pro forma basis including LTM Sep 2013 revenue from Invensys 2: Schneider Electric solution revenue only, pending Invensys solution split

intensity and service opportunity

Leverage our fundamentals.

Further enhance our expertise.

> Recognized brand> Full global coverage> Worldwide partner network

Nor

th A

mer

ica

33,700 Employees3

38 Factories

A balanced global footprint in 100+ countries

Wes

tern

Eur

ope

47,600 Employees3

92 Factories

Asi

a P

acifi

c

47,500 Employees36.4

4.1

7.1

2003 2013

8


1: Published figures in billion € restated to reflect country-market view; 2: Billion € pro forma basis including LTM Sep 2013 revenue for Invensys3: Including Invensys, excluding Delixi and Fuji

Nor

th A

mer

ica

Wes

tern

Eur

ope

Res

t of W

orld

34,100 Employees3

53 Factories

Asi

a P

acifi

c

47,500 Employees3

69 Factories2.3

2003 2013

1.2

5

2003 2013

1.2

6.8

2003 201320031

20132

Continually investing in innovation

Product innovation

774 764 818

9791058

1,1454 – 5%of sales devoted to R&D

> More connectivity> Mid-market offers> Energy efficiency

9


Solution innovation

2008 2009 2010 2011 2012 2013

R&D spend growth

> Embedding interoperability> Leveraging connectivity and software

to build our service offer> Developing our platform strategy > Instituting operational intelligence

A history of successfully growing our business in China

1010


A strong commitment to growing our business in new economies

€1.7 billion

€5.5

Our goal is to leverage opportunities by:> Expanding our geographical coverage in

these markets, increasing our presence in new cities

> Further penetrating these markets using local R&D and mid-market offerings

2013 Revenue breakdown in new economies 1

€10.9 billion

11


Latin America

Middle East/Africa

Eastern Europe

Asia

€1.6 billion

€2.1 billion

€5.5 billion

1:Pro-forma basis including LTM Sept 2013 revenue for Invensys

billionrevenue 20131

€2.2 billionrevenue 2003

We have a long history in China and continue to invest

ExplorationGrowth(Global for China)

1991-2000

Development(China for China)

2001-2010

A solidified global role(China for Global)

2011-> Contribute to China's

energy efficiency

12


Exploration1979-1990 1991-2000

> HV technology transfer to Ping Ding Shan

> Tianjin Merlin GerinCo.,Ltd.

> Schneider Electric Co., Ltd.

> First wave of large-scale investments

> Establish R&D centre> Massive technology

transfer

energy efficiency> Engineering innovation> Pilot new products and

solutions> Provide global talents

Today we have a nationwide presence

Tianjin

Beijing

Urumqi

> 2013 sales: more than €3 billion

> 28,000 employees

> 1 headquarter in Beijing

53 regional offices

> 2 customer care centres

> 700+ distributors

13


Shanghai

GuangzhouShenzhen

Chengdu Wuhan

Xi’an

Suzhou

Head office

Regional office Production facility

R&D centre

Distribution centreCustomer care centre

> 300 cities in which we have a presence

> 30 production facilities

> 8 distribution centres

> 3 R&D centres with

1,000+ R&D engineers

> 1 online Energy University

> 1,000+ local suppliers

Adapting our business strategy in China during its economic transformation

1414


China is undergoing a major transformation

48% 47% 46% 45%43% 42%

50% 51% 51% 53%55% 56%

48% 48% 48%

48% 49% 49%

Consumption as GDP

Investment as GDP

Rebalancing GDP mix Urbanization & infrastructure Industry upgrades

74+88%

2010

83+66%

Number of cities (>1.5M people)

2025 138

2005

Domestic consumption

15


43% 42%

10 11 12 13 14 15 16 20 22

Investment as GDP

CAPEX ► CAPEX+OPEX and towards balanced regional development

Property investment to peak, new opportunities in infrastructure

Domestic consumption-led / low energy intensity industries to outperform

48.7%

47.5%

51.3% 52.5%

45.9% 45.6%

54.1% 54.4%

2011 2013 2017 2022

West/Central as GDP

East as GDP

Source: Development Research Center of the State Council, The World Bank, IDC, McKinsey & Company

+88%

Length of Expressways (1,000 km)

2020 139

175+37%

Number of Airport

2020 240

2010

510,530+60%

Number of DCs

2020 814,766

2010

High value-add manufacture

Eco-Friendly Infrastructure

IT and Service

Government agenda creates new opportunities and potential challenges

Eco-challenges Wealth distribution & Social welfare

603 987

1,455

3,250

5,209 Energy consumption (mil ton coal)

% of GDP12

10

8

6

4

PensionsHealthEducation

National agenda

Deregulation: i.e. Distributed Generation (DG)

40%

Social safety net investment

NDRC issued new policy encouraging Distributed Generation (“DG”) in July 20131) Exempt DG business from the government

approval2) Clarify the rule of “self-usage first, spare powe r

to grid”

16

Confidential Property of Schneider ElectricSource: Development Research Center of the State Council, The World Bank

Aggressive energy efficiency ambition to meet increasing energy consumption pressure

Healthcare / education as key government investment priorities, meanwhile middle class expanding

603

1980 1990 2000 2010 2020

4

2

0203020202010

3.02.4

2.0 1.8 1.7

China CO 2 emission targets(kg per 2000 US$ GDP)

2015 202020102005

-17% -8%-21%

2020

-16%

(Conservative) (Aggressive)

Government is poised for major deregulation and “go-overseas”

2001 20092005

Budgeted external assistance

Eximbankcommercial loans

China’s external aids fuel “ship-out” businessHousehold income distribution

to grid”3) Require grid companies to cooperate to

purchase DG power

Continuing to adapt our way of doing business in China during this transformation

Our unique value proposition

Coverage Agility

17


Collaboration Branding

Aligning with the 'Go West' policy to tap new opportunities

Schneider Electric strategies:

> More than double city coverage

> Further improve supply chain footprint for productivity

18


Hong Kong

> Optimize shared services resources

> Enhance talents (sales, R&D, engineering, business leaders)

East

West

Embracing e -commerce to expand our online footprint

Flagship stores at both third party market places and e-tailers

11.11 Online FestivalE-commerce DNA: End to end

19


> TMALL.com

> Amazon.cn> JD.com> Suning.com

> 51buy.com> No 1 store

> Dedicated offers

> Full web promotion> Online operation> Supply chain

> 123 million advertising exposures

> More than 8,000 online queries per day

> Sales growth on the day: +1,019%

Leverage mobile capabilities, realize online-to-offline sales

Capturing growth opportunity from medium -range offers by excelling in China for China R&D

China for China R&D resources

> Strong investment in local R&D resources and competency

> Well defined go-to-market strategy by business in addition to R&D resources

20


2009 2013

+100%

Local R&D headcounts China for China by business pla ns

Buildings & Partner

Industry

Infrastructure

ITB

China for China roadmap R&D resources

Why we need local partners:> Market access> Cost competitiveness> Technology

Leveraging local alliances helps to fill gaps and explore new operation models

Offer

> No.1 local brand in MV drive

> Strong R&D capability > Leading company

in ATS market

21


Major alliances/acquisitions and their key capabili tiesGo to market

in ATS market> New offer (ATS)

and GTM team> Largest vacuum

circuit breaker plant in the group

> No. 2 local brand in LV market

> Whole capability to run at low-end

> No. 1 local brand in lighting

> Lighting retail channel

Conclusion

Schneider Electric China is

> A “Chinese” company with superior agility and wide geography coverage

> ONE company to maximize Schneider business opportunities

22


> ONE company to maximize Schneider business opportunities

> A company has strong expertise in local partnership with solid track record

Make the most of your energy SM

23©2014 Schneider Electric. All Rights Reserved.All trademarks are owned by Schneider Electric Industries SAS or its affiliated companies or their respective owners.

Make the most of your energy

morgan stanley fifth annual china industrials … stanley fifth annual china industrials summit 1...

Documents