Schneider Electric Sa

Welcome to the Schneider Electric's 2025 half-year results presentation with Olivier Blum, Chief Executive Officer, Hilary Maxson, Chief Financial Officer, and Ahmed 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 poll for a question. To withdraw your question, please 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 Bala.

Well, good morning, everyone, and welcome to our half-year 2025 results presentation and webcast, joined by Olivier and Hilary from Paris. You have already the slides, and we'll go through it, and we'll make sure we have enough time for Q&A. So without further ado, I'll pass it over to Olivier.

Thank you, Amit, and good morning to all of you. Always excited to be with you to share our AFIA results for Schneider Electric. Look, before I start to talk about financial, I'd like to share, and I'm sure you are already aware, that Schneider Electric has been ranked for the second time in a row the most sustainable company in Europe. in 2025 by time. It's a great achievement for us. And beyond for me, you know, those kind of awards that we get from outside, it concerns really the credibility that Schneider Electric has. When we say we want to be a partner to deliver efficiency and sustainability for our customers, I can tell you it's really, really a strong marker of Schneider Electric. Always well-appreciated, recognized by all our partners and our customers everywhere in the world, but also a good and strong recognition for our own employees and a good attractive point when new people want to join Schneider Electric. So, again, very pleased with this recognition. It confirms our commitment and it helps really to enforce the credibility of the mission of Schneider Electric. Now, turning to the most important topic of the day, which are really our financial results, I'm pleased to report a very strong growth revenue in Q2. After 7.4 in Q1, we have delivered 8.3 in organic growth in Q2, which continues to show with the momentum from a growth standpoint and as you can see we continue to deliver a very very strong performance on energy management with double digit 10.5 and of course negative still negative on the industrial automation side but the good news and we said that in our yearly results and it was confirmed at the end of q1 by hillary We continue to see step-by-step improvements in industrial automation, in particular in discrete. And in different parts of the world, we see that it's picking up, and we believe that we will continue to face a good acceleration in the rest of the year. Now, if I turn to the full H1 results, it gives a plus 8%, which is a very good performance from a growth standpoint at 19.3%. We are very, very pleased with this strong growth performance for H1. And with 7% organic growth on adjusted EBITDA. And of course, Hilary will get back more in the details on how all of that moved from the top line to the bottom line. We'll comment in particular. what we see on the gross margin and what we plan to do in H2. And maybe a short comment at this stage on my side regarding the free cash flow. We are still very confident that we can deliver a full year free cash flow objective. H1 is always a little bit lower. At Schneider Electric, as you know, we have a couple of exceptional one-offs also in H1, but still confident that we can deliver a robust performance in terms of cash flow for the full year. Now, as usual, we show you these slides, and that's not the first time you see it. You see it on my side for the Investor Day in India, and we try to give you an update on how we see our end market, which reflects really the positioning of Schneider Electric for the mid- and long-term. So I'll start with data center, where we had a lot of questions. since the beginning of the year on how do you see the dynamic of this market. Look, we have been very consistent. We see a double digit growth opportunity for Schneider Electric. We don't see any major change versus last time when we communicated with you. Of course, the market is always changing because there is a change of mix between the different geographies. And of course, between the hyperscaler and the colo and so on and so forth. But overall, when we look, number one, at the backlog that we have, it's still a very robust backlog to deliver this year and next year. But also, when we look at our pipeline, it confirms really this double-digit growth opportunity in data center. And of course, Schneider Electric is ideally positioned. We are a market leader, and I'll come back on that later. later to capture that opportunity. When it comes to building, it has been always a bit lower, definitely, especially in residential where we have a low exposure at Shutter Electric. But we continue to focus on buildings because we have assembled all the technology to make buildings more efficient. And that's a place where we continue to see good growth opportunity. But definitely, we would hope that there will be some acceleration within the future, in particular on the residential. When it comes to industry, I said it already, we have started to see a good recovery. We said that probably we reached the bottom of the cycle in Q4 last year. And step by step, even if it's a slow recovery, we see more and more opportunity to grow faster in industry. And as I said, we already see that happening. in our discrete business. But again, here we are talking more about the mid-term. We see really, really a positive trend in the mid-term from a market standpoint. And last, when it comes to infrastructure, and it has been a consistent message we've given, robust growth opportunity. And in particular, everything which is really around digital grid, power infrastructure, business we are doing, with utility, always a little bit slower in decision making, but we see definitely an appetite for stronger digital solution to electrify also the grid, so which is overall a good news. So end in end, that confirmed really a pretty strong positioning for Schneider Electric and a good confidence to deliver really a good medium and long term growth as a company. So if I go, what is our focus and where we are working with the management team right now? Priority one, of course, is to deliver very strong performance in H2, but how we are doing that? In H2 and beyond. Number one, extremely strong focus on energy management, on innovation and technology. I've shared already with you in different events I've participated, all the investments we have made in R&D, how we are positioning Schneider Electric to be the best company to make the most of the energy landscape. You know, it's very, very important. We want to be the global energy tech partner of our customers. We believe we have a unique portfolio, unique technology to help our customer to electrify, automate and digitalize home, industries and buildings. And it's super important because the positioning that we have created help us to deliver strong growth today. But even more important, we want to get ready for the next phase and continue to invest in R&D. So, the next point, which is very, very important for us, is to leverage all the investments we have made. And definitely, we have invested in R&D, SF63, and all the R-set range we have launched in the market in medium voltage is helping us to capture really good growth opportunity to make our customer more efficient and more sustainable. And we are very pleased with the launching in the past two years. We've mentioned really a strong position in Data Center. As you know, it has been reinforced by the acquisition of Motiver that we have closed in the first part of the year. And I'm very, very pleased with the start of Motiver. We are above our business plan so far, and we are leveraging all the technology of Motiver to reinforce our long-term partnership with our customer. And that's a unique positioning that we have. Of course, mainly in the U.S. at that stage, but we are getting prepared for the next phase outside of the U.S. And of course, I was talking about the focus on performance in H1, extremely focused really to deliver a strong backlog. When it comes to industrial automation, which has been a bit more of a challenge because of the market slowdown and also a certain number of things we have been doing on our side on repositioning in R&D. We are very, very confident that we can capture most of the growth support in discrete in H2. We are confident with the transition that we have launched in subscription with Aveva. You know, we always said that we plan to be in line with our objective we fixed for Aveva transition to subscription by 27. And we see really a good acceleration on that side. What is super important is also to make sure that we create strong synergies between the two businesses of Schneider Electric, and we see that moving really in the right direction. And we've communicated a lot in Hanover this year about EcoStruxure Automation Experts, which is really our software-defined solution we are launching in automation, and I'm very, very pleased to see really the pickup in different parts of the world and the strong positive feedback from our customers. Last but not the least, we have a very strong plan to focus on the recovery of our margin in industrial automation. So when you combine all of that, this portfolio we have created, the acceleration we have R&D, we accelerate everything we can do at the digital level. We have a very strong position, as you know, in hardware, in equipment. Historically, we are the number one worldwide in electrical distribution. We have added secure power, which is very important. For us, what is now the next phase is how we can leverage this huge positioning to bring more digital solutions to our customers. We've communicated a lot about what we do with EcoCare, which is our franchise in digital services, and I'm very pleased to see the report. What are the other focuses for us as a team? Pricing, productivity, to deliver a strong H2, but also to get prepared for the future. And in a world which is very fragmented, and I'm sure there will be a lot of questions of the volatility of the market, the tariff, it's super important that we take our multi-up model to the next level. And of course, I'll come back in a minute on our India acquisition, which reinforced this strong position. So, pretty good and dense agenda for the management team to deliver a strong H2, but also to get prepared for the future. I mentioned a lot about what we are doing on top of hardware really to deliver the more digital solution to our customer. As you know, the digital flywheel is for us a way to measure the progress. That's something that you have seen and we have been very consistent over time. I'm very pleased to report that it represents now 60% of our revenue. in H1 2005, and a strong acceleration compared to last year. We look at all elements of the flywheel, as usual, making sure all our products are connectable by design. We can leverage this native connectivity to give more services, more software-defined applications to our customers. So all the four elements of the flywheel are very important, and I remind you that this is what makes Relish Analytics unique. the combination of the portfolio in automation and energy management, but being able to support our customer all along their life cycle. So this is a really strong feedback, a strong feedback, I would say a strong performance in H1 that demonstrate our commitment to this strategy. And of course, when we speak about AI, all our digital solution can be accelerated with AI technology. So very pleased with the report on that. Of course, you've seen the news already yesterday. We are very pleased with Hillary and the team to announce really the 100% ownership of our India joint venture. You know, I had the privilege myself to spend five years of my life in India, and I remember being sent in India in 2008. It was a bit less than 100 million business for Schneider Electric. Last year, it's a 2.5 billion euro business for Schneider Electric in a market where we have seen and we continue to see a double digit growth opportunity. So it confirmed really that we have a unique platform now in India, not only to grow in the Indian market and to benefit from this important growth opportunity, but also to leverage India as our fourth largest hub in the world. to deliver more supply chain, more technology for India and the rest of the world. So, very strong positioning and we'll continue to operate with our two-brand strategy in India. So, very pleased with this acquisition that reinforced again our position in India and very excited by the opportunity for the future. I've mentioned that Schneider Electric has a leading position in data center. We are very pleased with Motiver to be able to provide a full solution from grid to chip and chip to chiller. I said it already, very pleased with the start. Let's keep working, not only on the massive opportunity we have in the US, but also preparing really by investing in capacity outside. So really, that was for me a very important one. The first acquisition actually under my mandate, but very pleased with the start and the strong results and synergies we are delivering in H1 2005 with the rest of the company. Now, talking a bit more about a few other partnerships, customer success that we have, we continue to have a very strong partnership with NVIDIA. It's very, very important. We don't want to be just a solution provider. We want to work on the architecture of the future that will make data centers more efficient with the latest AI technology. And you know, it keeps changing by the day. So for us, this partnership with NVIDIA is extremely important because it helps us to be upstream in the value chain to work with NVIDIA on what will be their next chips, what are the design we need to provide in terms of data center to make sure data center are more efficient. And how to make a data center more efficient? It's a combination of power, building management, cooling, and of course Schneider Electric has all the technology to make it happen. We have been working also on a very interesting innovation with ETAP. recently and we will get back to you with more demo by the end of the year on how we are helping to create a digital twin of the future data center which will make them even more efficient. So great partnership that we continue to deploy with NVIDIA. I mentioned building markets when I was talking about the exposure of Schneider Electric. Just to reinforce that, even if it's a market which is a bit less attractive, I would say, from a growth standpoint compared to the others, we continue to see robust growth, but we see opportunity for energy efficiency. And that has been really a strong positioning of Schneider Electric. Thanks to all the portfolio that we have, all the technology we are bringing to our customer. And now with the combination of all our building management system, the acquisition of Planon last year, that gives us a full portfolio to make building even more efficient. We are testing that in our own building. We have just opened recently. Our new office in Dubai, we have done it in France, in Grenoble. But, of course, with many customers around the world, we continue to work hand-in-hand with them to make sure we can deliver more efficiency. Of course, we do it also for new buildings by designing, helping design, optimize the design for buildings, both with ETAP on the electrical side and with RIB on the construction side. We have, as I mentioned, invested a lot in services in the past 10 years, but more than services itself, what we have done, and it's part of our flywheel, we have made all our products, all our equipment connectable. It took time, really, to transform all this portfolio. I mentioned what we've done with air set in medium voltage, but we've done that with all the portfolio of shared electrics. So now we have all those hardware equipment which are connectable. We have created common gateway to make sure we can leverage data and amplify now those data with AI to deliver more services, more digital services to customer. And that's what we call EcoCare. And you start to pay and we see a very strong appetite. From our customer, we have two business model, one which is really scalable and repetitive and one which is more customized. For instance, when we have a large contract with Compass in data center, it's associated with a customized contract in digital services that generate also recurring revenues for Schneider Electric. So a very strong part of our strategy, very unique, very differentiated when you look at the entire portfolio and we continue to see a good momentum and a good feedback from our customers and we continue to represent a double digit growth opportunity for Schneider Electric. You have here as usual a couple of customer stories that we like to share. going through what we do in digital grid optimization, for instance, with Tata Power in India, to Data Center in Saudi, but a few other good examples in other parts of the world. What is really, really, really important, we are positioned in Schneider Electric as a solution provider. We go in front of our customer, we understand their standpoint, And we combine all the solutions. It can be in one geography. It can be in multiple geographies. It can be in one part of our portfolio, several parts of our portfolio. But we solve their problems to deliver more efficiency and sustainability. And we see more and more really appetite for those full solutions. And, of course, we're quite excited to continue the journey with all our customers and partners everywhere in the world. When it comes to investment, we continue to make responsible investments. We mentioned last year that we were ramping up our investments definitely to increase our capacity. We are always adjusting, depending of course on the mid-term demand. But we continue to be very, very responsible. There are a couple of examples of announcements we've made for H1 2025 to reinforce our capacity going from the US to Europe to, of course, India, which is very, very important for us. I said it, we continue to have a robust investment in R&D. It's very, very important for me. We have been living in an industry, you know, which has been stable for a long time. But the energy industry, the electrical industry is transforming by the day. And it's super important for us that we are always prepared for the next cycle. And we bring to our customers solutions which are differentiated. that create unique value proposition. But it's not only at the product level. This is a full application to our customer, amplified by digital. And you have a couple of examples of what we call the hero offer, which are the new products we are launching to the market that contribute really to the strong growth we have in H1. And I said it, very important. Since we are moving more and more with digital solutions, we amplify those solutions with AI in all parts of our portfolio, from the digital services to our software business with ETAP, RIB or AVEVA. That's a unique opportunity to make our customers more efficient at the end of the day. Moving to the last part of my presentation, we continue to be very focused. I started the meeting by saying that we have been awarded most sustainability, most sustainable company in the world. It's the past. We focus always on the future. Priority one, deliver a strong performance for 2025. And as we said last time, preparing the next cycle of commitment since 2025 is the last year of the previous program. We continue to be focused. recognized in different parts of the world, not only in sustainability, in diversity and inclusion, in technology, in innovation. And, of course, all those external awards are a good recognition that Schneider Electric continues to be an impact company, a company that delivers strong results in the short term, but which has also a strong commitment from the midterm. So if I wrap up on H1, robust performance, good growth, What we continue to do as a management team is preparing the future of Schneider Electric, creating this unique value proposition between the combination of energy management and industrial automation, providing solutions to all the four markets that I've described, which are all very promising in front of us. And of course, with a big strategic intention to continue to deliver more digital solutions to our customers in services, in software. I want to mention, and I said it last time, that we are preparing the next company story of Schneider Electric. So there are a lot of things we are implementing already to continue to reinforce our leadership in technology, to continue to build a unique model supported by multi-up model to deliver unique solution in all the geographies with our customer. Multi-up model is a differentiating factor of Schneider Electric. And last but not the least, a very, very strong focus on competitiveness. from the design of our product to industrial productivity that should deliver results in H2, but also very important that we continue to prepare the future, but we'll get back to you with the management team to disclose the full plan in the coming months. So on that, I'd like to hand over to Hilary, who will give you much more details on the financial results for H1.