Schneider Electric Sa

Welcome to Schneider Electric's 2024 full year results with Olivier Blum, Chief Executive Officer, Hilary Maxson, Chief Financial Officer, and Amit Bala, Head of Investor Relations. Thank you for standing by. At this time, participants are in a listen-only mode until the dedicated question and answer session of today's conference. At any time, you may press star, then the number one on your phone to pull for a question. If you need to withdraw your question, press star and two. I would like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now hand you over to Amit Balla.

Good morning, everyone. Very happy that you could be with us today, and thank you for your interest in Schneider Electric. I'm joined with Olivier and Hilary, our CEO and CFO. We will have the business highlights section followed by the financial highlights, and we'll keep time for Q&A. So I obviously want to remind everybody about the disclaimer, as always, on our slides, and immediately hand it over to Olivier.

Thank you very much, Amit. Good morning to all of you. It's great to be with you today to share our 24 results. Of course, very honored myself after a couple of months as a new CEO of the company to report first of all that Schneider Electric has been named the most sustainable company in the world by corporate knights. early 2025, and this is a second time in the past five years. So, as you know, we always claim that we want to be an impact company, but being an impact company for us starts to be a company that performs. And it's very important for us that we keep that in mind. If you want to impact, the right to impact should be coming from the your performance and we are very happy today to report that we have seen an accelerated growth execution of our growth in q4 and as you can see a 12.5 percent growth in q4 itself which has been supported of course by energy management that continue to be the driving force from a growth standpoint but also as you can see on on that slide after several quarters of negative growth in distribution for the first time we see a return to growth, which is quite encouraging for 2025. Moving on to 2024 as a full year, we deliver the record level of sales at 38 billion plus and 8.4% growth organically, which is slightly above Argonauts, which I remind you was 6% to 8%. And what is really interesting is one is to see the acceleration of growth both for energy management and industrial automation from H1 to H2. But also just to remind everyone that when you look at the past years, it's not only 2024. 2024 follows a couple of years of really sustained growth for Schneider Electric, which demonstrates the solidity of our strategy, but also the way we execute the strategy collectively. All of that translates in a high level of profitability, where we have increased by 14%, here again slightly above our guidance, with an adjusted EBITDA of 7 billion for the year 2024. And here again, when you look at the evolution of our profitability in terms of EBITDA, but also adjusted net income, you see that it's not only the year 2024, but it comes after a couple of years of great performance. It translates in an increase of our dividend again. And here I'm particularly proud to say that this is the 15 years in a row that we are progressing progressive dividend and with an 11% increase for the year 2024 only. looking forward you've seen this slide in our capital market day end of 2023 you've seen for those of you who just are in the investor event it's always important to remind you what we see for the coming cycle so we continue to stick to what we say which is a favorable market addressable market in all our market for schneider electric in total 6% to 7% is the growth that we see, no change for the coming years. And of course, with different dynamics, all of them being positive, but in particular, from the left to the right, starting by data center, that continues to be a very, very good opportunity for Schneider Electric. And that represents 24% of our end orders in 2024 from an end market exposure standpoint. But I want to remind everyone that the strategy of Schneider Electric in the past, and still today and for the future, will be to continue to have a very balanced exposure in terms of end markets while we love to capture as much as we can the opportunity in data center for us it's very important that we continue to deliver a solid and strong performance in buildings industry and infrastructure which are also offer which are also offering from an electrification and digitalization standpoint a lot of opportunities for schneider electric so At the end of the day, we confirm really this 7% to 10% growth across the cycle. We'll come back a little bit later on our guidance 2025, but no change and very encouraging for the future. Looking at data center in particular, because we have always a lot of question, since 2017, more or less, we've seen an acceleration. And for us, which was very, very important, when we look at the different driver, which were internet and things, the action of cloud computing, and so on and so forth. Definitely with AI and large language model, we've seen in the past two years an acceleration of the market. And I'm sure there will be some of you asking this question on DeepSeq. But DeepSeq for us is just the illustration that the consumption of AI is just increasing. And that translate for us in our end market in really double digit growth for the future. And it's very, very encouraging for Schneider Electric considering that we have a unique positioning because we are one of these few companies in the world that can go from the low voltage to the medium voltage to the digital building technology and also, of course, UPS. So that gives us a unique positioning in the market. As you know, we are a global company. We continue to reinforce our go-to market, our access to the large customer. We continue to invest organically in R&D and our technology. But also, as we announced last year, when there are good opportunities, we love to capture them. And we decided last year to go with the acquisition of All the conditions presented, by the way, have been met. So we will get back to you very shortly in the coming weeks to announce the closure of Motiver. So all end-in-end, it confirmed a very strong positioning of China Electric, a very strong end-market dynamic in data center, and definitely an opportunity for us to continue to differentiate in that segment. Now, I'd like to take you through on how we want really to execute that strategy. What are really the key markers of Schneider Electric? Probably a lot of things that you know already, but I think it's always good to remind it because we are convinced that we are pursuing a very differentiated strategy that benefits to all our stakeholder, and of course, in particular, our shareholder. So, starting from the technology, let's never forget that we are a tech company. Our job at the end of the day is to innovate and to develop the best technology. that will help our customer to benefit from electrification and digitalization. And that's why we have decided to launch EcoStruxure a couple of years ago, which help us to build a complete stack of solution from our customer, from product, which is where you access to your customer, where you connect with your customer, where you can go either at the edge level or at the cloud level, and which give you a unique opportunity to develop solution for your customer, again, across the entire lifecycle from the design, build, and operate. And we do that, as you know, in different segments, such as building data center, industry, and infrastructure. So I know it's something we've shared with you for many years. It was really a big transformation at the beginning for Schneider Electric. And I'm glad to report that we are really benefiting from that transformation of our portfolio, that we keep on pushing to the next level. making sure that most of the new product that we deliver or equipment are connectable. We connect them, again, either at the edge or at the Cloud level, and all of that supported by a very strong focus on our services strategy, not only in field services, but also in digital services, where we do believe we can extract more value, from our customer translated in more recurring revenues, but also it creates a lot of stickiness with our customer and much stronger loyalty with Schneider Electric. On top of that, we continue to develop our agnostic software play with Aveva Group, where we have created, as you know, the Connect platform that comes on everything we do with EcoStruxure, combining energy management and use automation, and offering our customer to go to the next level when it comes to software agnostic, in particular, in the industrial world. So this transformation is not new. It's something that have been in the making in the past year, but we are really now in the middle of that opportunity, and we see really a strong demand on the customer side. So we will continue to accelerate the transformation of EcoStruxure. We will also continue to accelerate the transformation of our software portfolio. And I'm glad to report that for the year 2024, our AVEVA group has grown its annual recurring revenue IRR by 15%, which is extremely good and in line with our plan. And we continue to be in the middle of that subscription transition, which will end probably in a year or two. Last but not the least, I want to remind you that we continue also to develop advisory services activity. It's not a big part of our revenues, but it helps us to have a very different access at CXO level with large enterprise everywhere in the world. We've done that historically with sustainability, but we have developed capabilities in process electrification, you know how much it is important in the industrial sector to help our customer to go through the electrification of their process, and also helping them in their industrial and digital transformation. Here, this is really an agnostic part of our portfolio where we are providing advisory services. It's a business by itself, but it create of course a huge opportunity to engage at the second level when they want to execute their roadmap. So all of that translate for us in a very strong ambition to continue to move our digital flywheel to the next level. That's something we've presented to you. Our objective at the end of the day is to make sure that 60 to 65% of our group revenue by 2027, which will come from that flywheel, again, from the connectable product to the edge, to the cloud, including our services portfolio, again, is giving a lot of opportunity of growth, and in particular, in recurring revenues for Schneider Electric that we love to have in our performance. So when you look at this huge investment that we are in technology, every year it translates in a lot of new products, which are very important for us in all our end segments. We continue to put A lot of investment in R&D translate every year, in a lot of innovation in different segments that you can see in the screen. Just to take the example of Airset, which has been a massive transformation of our medium voltage portfolio. Simplification, decarbonize, more value to our customer. Just to take one example on that screen. We continue to be extremely focused on our customer, on how we can differentiate our customer, how we can improve their satisfaction. We've presented to you multiple times our unique model, what we call the multiple approach, where we develop products in all our regions with our R&D center. We have a very, very strong focus also on local and regional supply chain for resilience purpose, with a very strong connection with our commercial team, which gives us a very strong access to our partner, to end-user, and which give us opportunity also to leverage and have a strong pricing power. As we said, we continue to move towards an objective at the end of the day, which is to make sure that 90 percent of what we sell in the region is sourced and manufactured locally. We have tested that in particular during the COVID time and we do believe that's a unique capability that we have. which help us to grow faster, but that creates also a lot of resilience in difficult times. And maybe just to mention in particular the situation of North America, where we have already 83% of what we sell in North America, which is manufactured in the region. So we'll continue definitely to develop this multi-up approach in the next cycle, which I believe is the best answer to a world which is very, very volatile, with a lot of geopolitics. So that's the best answer that we have on our side. We continue to make responsible investment. If you remember, we announced that we will invest 2 billion of incremental capacity in the next cycle. It's super important. It has translated already in 2024 in new capacity. especially in North America, but not only, as you can see on this screen. As we said, we are in a favorable growth cycle, 7% to 10%. It's super important for us that we make the most of this opportunity, and we continue to invest in our capacity. So at the end of the day, what I want also to mention, all those capacity we are building, for instance, for data center in low voltage and medium voltage are also capacity that we are using for the other segment of Schneider Electric, which give us quite a lot of agility whenever the market turn in one direction or the other. And at the end of the day, we'll continue to have a very specific focus on US, India, and Middle East and Africa, which are definitely markets where we have observed already higher growth than the rest of the world. And we continue to believe it will be the same in the next two years. So just a couple of examples. I'm not going to go through all of them. But always our obsession at Schneider Electric is to develop technology that will create difference for our customer. And of course, what we have developed, which is unique at Schneider Electric, is a complete portfolio of solutions. I said it, from product to automation, services, software, but also in different categories, in energy management, low voltage, medium voltage, BMS, UPS, in industrial automation with Aveva software. and when we are able to combine those solutions together we deliver different values for our customer in the different end market as you can see on that slide and it can be about energy saving it can be about how you make your factory more efficient so that creates a huge differentiation at the end of the day for the customer and maybe just to pick up one that i like to pick personally which is the example of capgemini capgemini worldwide Like any company, they are looking at their evolution of their CO2 emission, but more important, they are looking at energy consumption. And then turn to India, where they have more than 70% of their energy consumption in the world. And they turn to us, Schneider Electric, 12 months ago and say, hey, what can we do to achieve our objective? And by bringing together all the infrastructure stack from product system, but also services contract, Together with our software portfolio and working hand-in-hand with Capgemini, we deliver a unique value proposition for the customer that helps them to save energy across all their campuses in India. So very strong focus on customer, making sure we translate innovation into differentiation for our customer, making sure we build capacity for our customer, and we continue to have a unique positioning in the market. I like, as usual, of course, to report on sustainability, which is really the third key pillar of our differentiation. As I said in my introduction, being an impact company, as you probably know we are by the way in 25 in the last year of the previous cycle of the previous strategy but it's great to report that we have exceeded our objective for 2024 itself on multiple aspects of the rssi our schneider sustainability impact barometer and just to pick up the first one very pleased to report that since the beginning of that commitment We've generated close to 700 million tons of CO2 saved and avoided, which demonstrates that the portfolio of Schneider Electric has a direct impact on energy consumption for our customers. And again, good recognition from the outside world, Ecovadi, CDP, and many others. So we continue to have a very, very strong focus. We've been recognized externally. I've mentioned corporate nights at the beginning. I've mentioned Time Magazine. For me, this is just the illustration that Schneider Electric continue to be recognized for all its commitment on the different aspect of what we are doing as an impact company. Delivering short-term results is super important for us, and at the same time making sure we find a way to impact positively our ecosystem. I'd like to report in particular the recognition we got from the World Economic Forum for Lighthouse Factory, which is for me a good illustration on how our technology can benefit. We are implementing ourselves most technology in Schneider Electric, I can tell you as the CEO of the company, I'm asking my team to deliver strong productivity every year, my supply chain in particular, and it's important for me that they can benefit, we can test, we can experiment all our technology, and it has been a great recognition by the World Economic Forum this year again in Davos. Moving to the last pillar of our differentiation, which is very, very, very important, which is the people one. At the end of the day, we differentiate thanks to unique leadership in our company, starting by the executive committee. I just want to mention on that, but you know it already, that Frederic Godmel has taken over for me in charge of energy management. huge expansion in the company, which will ensure a very strong continuity and acceleration of our strategy. But also important to mention, and I was talking earlier on the multi-up strategy of Schneider Electric, with this unique operating model and our colleagues being located in different part of the world, different nationality, a very strong knowledge of what is happening in the different part of the world, very strong focus on generosity. I think we are benefiting really from a unique experience in this management team, which give me the confidence that we can continue to accelerate the execution of our strategy in future, but we can continue, of course, to keep on reinventing ourselves to stay very, very, very competitive. This strong focus on people is also translated in everything we do for employees everywhere in the world. We want really to continue to give access to training to our employees. We want to make sure that they continue to upskill their capability especially in everything which is related to digital. You can also see that we continue to have a very strong engagement from our employees and close to 90 percent of them participating every year to this survey and giving us a lot of insight on how we can continue to improve as a company. Last but not least, but something we are extremely proud, 61% of our employees worldwide have participated to our shareholding plan in 47 countries. So it's great to report that our employees are actually in the top five, the number five in terms of shareholding of Schneider Electric. So to conclude, we continue to be focused on our mission. Our mission is to be the trusted partner in sustainability and efficiency. What does it mean? With the need for more integration and digitalization, we do believe that we have a unique portfolio, unique position by end market, very balanced revenue across different geography, which give us the confidence that we can continue to drive strong results and consistent value for all our shareholder. I'm going to stop here for the recap of 24 and the recap on our strategy and then over to you, Hilary, to give us more detail on our 2024 financial performance.