Schneider Electric S.E.

Anthony Song - Head, IR Jean-Pascal Tricoire - Chairman and CEO Emmanuel Babeau - Deputy CEO, CFO and Legal Affairs

James Moore - Redburn Partners Alfred Glaser - Oddo Securities Gael De Bray - Societe Generale Andreas Willi - JPMorgan Martin Wilkie - Deutsche Bank

Welcome everybody, to come here. So please take a seat and we will start momentarily.

But before we start just I’d say two housekeeping items. First, I’d like to review the agenda for today.

So today we have our fully pack agenda. We start 9 to 10 our full year 2014 result release.

Then from 10:15 to 4:30 we will go launch our new company program at the theme of our capital market today. And in between that is from 12 to 1:30 we have lunch and open market place for all the people who would like to visit to show our latest technology as well as our offers.

So second thing is for the journalists we have a dedicated Q&A session for you for full year result as well as capital market day strategy and the finance presentation. So if you have any questions please hold up until 12 O’clock we have a dedicated session for you.

So with that I’ll hand it to our CEO Mr. Jean-Pascal Tricoire for full year 2014 results.

Thank you, Anthony, so good morning to all of you. Thank you for making it today, this is a pretty full room.

So thank you for being with us today. For us it’s a very important day because not only we’re going to speak about 2014 but we’re going to be speaking about the next company program is pretty much a roadmap of execution we have in front us for the next coming five years.

So I want to share that review and to have a steady discussion about that. So I’m going to be sharing the presentation about 2014 with Emmanuel Babeau, our CFO and the head of our Investor Relationship Anthony Song.

And you see on China has become important of Schneider because we are closing 2014 and starting 2015 the day of the Chinese calendar so, Happy New Year Anthony. Let’s move on the look back together at 2014.

On the broader perspective 2014 has been a complicated year from external factors to the company started with massive shifts in currencies which affected us in H1 principally that all over the year I would say with carry overs and a pretty big if you put together H2 2013 on 2014 it has been hit on our bottom-line due to currency swings of €400 million. You have to that new dynamics in China they are in the [indiscernible] to a certain number of on the geopolitical issues in Middle East in the East of Europe including of course Russia.

So we can’t say that we lack surprises on swings in the external environment in 2014. As we like to face even more challenges here 2014 was also an year of considerable reworks on adjustment inside the premise of Schneider.

We brought on board one of our largest and most strategic acquisition Invensys and that’s going to be something that we shall report as one of the top highlights of 2014 the first of steps of Invensys inside Schneider are flawless. But we also divested proper tool part of our portfolio with function the exit of CST, or the exit of the appliance part of inventories.

So, pretty volatile entry environment outside and pretty heavy duty works inside the company. With that general observation I will jump into that presentation I’m now going to start the presentation with the strategy on the business update and Emmanuel will go into the real stuff, the figures in the second part and then we’re going to be taking questions and answers.

So two titles to the year certainly the equation delivering full year target in the environment that I was describing pretty much with many moving parts on the second big title which was extremely important for us in 2014 is Invensys integration well on track both target. For headlines strong H2 performance which lifted the full year revenue growth, if you focus on Q4 which is new news on the side of revenues.

Total growth of 13% and organic growth of 2.5% H2 within -- with that growth of more than 2%, on the total year with the growth of 6.6% of which 1.4 organic. So few elements to highlight here is that one business only was down, it was infrastructure.

If you take those three on the business of Schneider all of them are growing so those three business grew by 3.2% on the total year of 2014. The interesting scene is that we’ve benefited once again of our balance foot print I’ll make sure in H2 countries grew more than new economies and that can be summarized to the fact that the U.S.

was extremely dynamic China slow down as we have anticipated. On finally one of the key growth engine of the company services kept its space on other group the rest of the business by more than 7%.

Second title is that the gross margin was up 20 bps, 60 bps if you exclude ForEx and the EBITA margin improved at constant ForEx by 40 bps as we were impacted by a negative effect of ForEx by 40 bps of mix 30.9 at the end of the year for our adjusted EBITA. That was due to a very strong work on industrial productivity and I remind you that we globalized all supply chain two years ago on the Annette Clayton he is here in the room and that you are going to be able to interact with during the day, great job done there and we managed a price and we call it the positive net price because adjust prices also in function of raw materials on the addition of the pricing which we had on products which was negative was more than offset by the raw material impact which was very positive.

Now third I told the net income grew by 3% if we wouldn't have suffered this [heavy] negative price we would have grown double-digit by 11%. So that's a disappointment that we were facing so adverse headwinds.

And we delivered a solid free cash flow at EUR1.7 billion which is pretty much in line with the model of Schneider. Probably the biggest headline of this year 2014 as being the integration of Invensys which is moving well on track delivering a revenue growth of 2%, a profitability including in the first year of more than 5% and this contributes to a double-digit accretion of the EPS in the first year.

So there we struck every aspect of the integration of Invensys. We don't speak enough about that together but one of the biggest motivation for satisfaction in this first year is the fact that the people of Invensys have joined Schneider and they are leading now very significant part of our business.

They have taken more responsibilities inside our company and I am very confident they will help us to progress in the field of software and in the field of automation. So now briefly if we take a more precise look at our business that the group organic growth what you see that the quarters Q3 and Q4 have been growing is that fundamental trend difficult to say we have had very strong and precise execution particularly of projects in Q4 that justified a rather good organic growth in Q4.

What is most important is to see that three of our business which are the early cycle business are back to a pretty solid growth we're going to go into the detail of that but you see partner at 3.5 on its large business for us, it's almost 45% of our business. 4.3% of gross industry Clemens is here and he will speak about both Invensys and the industry today.

IT with a strong rebound at the end of the year in particular Q4 at plus 6% and we're going to speak about that. On infrastructure at minus 4.4 if you want to summarize 90% of the issues that we faced in infrastructure has been mostly utilities in West Europe that we have been compensating by different actions.

Frédéric Abbal who is the head of this business is here in the room and will be able to take your questions. Building and partner I am going to scroll quite fast on that one you have got all the details in the communique as you see will it has been a pretty steady pace of growth all over the year 3.4, 3.5, helped and served by the dynamic construction market res and non-res in the U.S supplemented by strong dynamics of data centers -- when we take large data centers in which medium voltage and low voltage portion or part is important this is reported in infrastructure business and partner business .

So our business in the IT field is larger than what we reported in IT you know it but I want to repeat it because the growth that we have had in 2014 in the IT space generally was larger than what you see in the growth reported by our IT division. We experienced a slowdown in China which is a big market for our partner business, Australia and India improved of course West Europe stabilized and that is probably a general remark that we're going to have in many places except for infrastructure and the rest of the world was experiencing mix trends.

We launched quite a lot of new products you see here smart panel which is with a marginal cost you can connect your electrical panel on the plug and get a simple and very efficient reporting of your all electrical distribution. And we have got also a medium range of products that we launched into new economies and this growing faster than we average today in new economies as we go into secondary series.

Moving on to industry pretty dense year for industry integration of Invensys, strong development of our historical operation in industry, 5% growth in the first half 3.5% growth organic in the second half. That's mainly due to high base of comparison in Q4 if you remember we had started a strong rebound of industry in Q4 of 2013 but I would say the fundamentals are remaining steady and solid, solid demand in the U.S.

especially on the OEM market, sub-China market which is mostly for us an OEM business offset by growth in Japan, growth in Australia. And what we have seen in Europe is a sustained OEM market for those OEMs who are export oriented we are speaking about Italy, Germany, North Europe which has been rather good at the end of the year, lot of new products that just launched that you see PLCs are the renewal for our large size PLC platform on one more version of our machine solution business which has been growing fast today simple platform to automate machines.

Going into IT is a tends to move okay so much better so on the ALF respect as far as ALF due to a recovery of mix sized data centers in the U.S. as a growth factor.

Again we had never abandoned good dynamic in the IT business in past two years but large parts of the growth in the U.S. was driven in large size what we call ExCel data centers which are mostly medium voltage and low voltage system.

Now we see a re-balance of that market on more private data centers that are benefiting to the reporting of our IT business. We always have good dynamics in West Europe good IT investments in Asia in Australia in Southeast Asia like to mention also one thing that we have tough times in Russia which is a significant market for us at the beginning of the year and this seems to be stabilizing gradually so that has been the factor of stabilization in our IT business.

Infrastructure so again pretty difficult year due mostly to utilities to West Europe, again infrastructure will benefit from data center on construction market in the U.S. again growth in Australia and India thanks to project execution, they always go medium voltage low voltage the customer logic in the large part of our infrastructure market is making packages and we have mix trends in the rest of the world but most of the issue again utilities in West Europe.

Again we launched also some new product print set which is a kind of revolutionary breaker on the switchgear which is now starting to take off but as it revolutionizes quite a lot of rules of the market we need first to specify it also and get is accepted on the market. Now I move on to the geographic part of 2014, so strong U.S., mild improvement in Europe actually we were disappointed in Europe if you rewind one year ago many of us were more bullish on Europe on 2014 was disappointed us and we’re going to speak also of course we were more optimist than we should have been at the beginning of last year on Europe.

We have a good news -- well bad news that we saw China slowing down which we had forecasted, so no crash here but it’s really a soft landing of China comparing to very high base of comparison coming from 2013. The day of the balance a geographical balance of Schneider that we’re going to describe again on again today has been a great help because if you look at H2 mature countries that we are regaining especially through the U.S.

on stabilization of Europe as does to counterbalance the negative effect of the slowdown of China. Want to mention place for investment continuous investments which are services.

Due to our specialization due to our large market share, due to our pass D&A which is to be a product company and then we our products are somewhere in the sales we’ve been in the past not too active on our installed base of services and we have plenty of breakers that we saw that I sold that many of us sold in this room 20 or 30 years ago that needs repair, retrofit upgrading on why we upgrade those products we can bring connectivity, we can bring the values that you as a customer used to have this lost system that now will be connected and you get a digital image of it, so that you can make plenty of maintenance, asset management on those kind of things. This has been growing consistently over the past few years although the average of the group we can do more, want to do more it’s a large part of the investment that in course that we are doing because to do that you need to recruit people, between that time you recruit them, train them on the things that first of all there you’ve got something like 18 months, but it still remains a large potential and we’ve not finished speaking about services, the whole team is taking an active part on it, the guy who's heading that at the level of the group so Daniel and again he is in the room and we’ll be able to turn to you today.

Big highlight here I want to pay a tribute to all the people who worked on that Emmanuel and Clemens in the room who are the lead of that but I think everybody had a contribution on that his Invensys journey in Schneider, so with a bombarded view is the rationale of this acquisition but I reminded about reinforcing our automation capability, reinforcing lot our software portfolio boost the group position in electro-intensive segments while we can say that after one year Invensys is fully integrated in our business. The value proposition has been upgraded to integrate the pluses of Invensys to segments we serve, the Invensys software has been completely embedded in the group, has been major reinforcement actually a major development in our software story at China.

And we’ve got in the room the head of Invensys software Ravi with me will be able there again to answer questions. Break into more detail about Invensys and we’ve got some examples here of synergies that we started to establish just after the acquisition we managed to package completed energy on automation in India with the Reliance Refinery in Jamnagar the more hybrid system in wastewater treatment plans in Invensys you are the controlled part doing PCBs for repetitive machines called Eliwell that we integrated into our OEM and that has been serious out for everything we do for instance.

And then construction, in construction of coal to liquid plants for Coal Enterprise in China where we meet there gained energy on the business. As I told you many times it’s not about automation, plus automation mainly it’s about automation on power, helping customers to manage an all efficiency equation reducing their energy consumption which is very big in Electronic Invensys processes and also managing on diminishing the waste of the process into one integrated system.

Remind you also that 2014, in 2014 we kept investing in R&D. We are technology company and we’re attached to keep our advantage in terms of R&D.

I think this slide simplifies quite well what we're doing today, of course we do product but those products are part, they’re building such systems which are integrated directly modular systems into our customers' installations. You’ve got a new PLC platform here you got the smart panel I was referring to.

Secure power plant to secure offices or decentralized facilities. On the large investment to integrated software platform connecting our Internet connected products into local automation software then are connected to our clouds unable to activity analytics on the key segments we want serve.

Again I want to pay a very special tribute our supply channel to the work done by its team, we’ve taken a pretty bold step two years ago to globalize all of our supply chain under one roof to work into better synergies with our plans with our logistics centers with our suppliers are not fundamentally leveraging better the competency that we have been this part of the company which is ALF of the account. Once again and why the volumes were not absolutely great, we delivered a strong, the team has delivered the strong productivity which means we have reached our objective of 1 billion productivity in three years but also the inventory to revenue keeps improving and we’ve reached the improvement level of two points of sales over three years.

So great achievement there which is helping us to form some initiatives also to compensate for the adverse ForEx effect that we have to face, the headwind that we had to face in 2014. Finally, Schneider once we'll at the forefront of sustainability as the company want more and more and we do that every day, want to be the sustainability advisor of our customers to make sure that they progress with us in sustainability, to do that we have the barometer that you know well.

We’ve almost shut our targets respecting in the Connect plan. Now, this has been also recognized by number of rewards on premiums that we received in Davos two weeks ago we're recognized as the ninth more sustainable corporation or industries founded in the world on we’ve received a number of recognition which is subject of loyalty on the subject of, loyalty for our customers on the big subject of pride for our employees on the big argument to recruit the best talents in January, we see that as very positive on the top of it the all mission of a company is geared on directed to making this planet on the world we live in more sustainable.

That finishes about the year-end review from the strategy point of view. And now I’m going to hand it to Emmanuel Babeau.

Thank you, Jean-Pascal. Good morning everyone.

So let’s enter into a bit more details on our numbers and let’s start by our sales looking at our sales by region. First of all global amount of our sales almost €25 billion of sales for 2014 for our group it’s the growth of plus 6.6% two big effect from scope and ForEx as expected we have been thanks to the evolution of the currencies versus the euro in the second half moving to neutrality in the second part of the year and of course the big scope impact is largely coming from Invensys.

Now when we look at our organic growth plus 1.4% by region three regions have been growing and best performer has been Asia-Pac and rest of the world. Asia-Pac started the year with a lot of dynamism, it continues in some countries but as Jean-Pascal highlighted we've seen the expected slowdown of China happening towards the end of the year and that has been slightly curbing the performance of Asia-Pac for the full year.

North America at the same time was accelerating, it was a negative slightly minus 1% in the first half, it delivered a stronger H2 and ultimately a very strong Q4. The U.S of course and that is the biggest impact but we also have seen some improvement in Mexico which started the year with a lot of difficulty and which improved in Q4.

Plus 8% from North America in Q4 that was a quite remarkable performance. When we look at rest of the world well as you can expect it's more of a mixed bag, we've seen growth globally for the year in Middle East, in South America it has been tougher, in Africa where we were facing some high comps.

And regarding Russia at the end of the day it has been of course a tough year with all the event that we all know, but we nevertheless are close to stability and when we look at Russia it's a mixed picture with some businesses such as building, partner and industry growing and growing nicely and it has been much tougher as you would expect for our medium voltage activity nevertheless an Electroshield, Samara was around flat year-on-year which was quite an achievement. And as you know and we flagged that during the first half of the year we had some very important destocking in the IT business.

Western Europe minus 2 still negative -- I would say slightly negative only in Q4. We no longer see the kind of big drop that we have experienced during several quarters in Spain, Italy and to some extent in France.

So we are seeing some improvement of the situation, most of the countries are around stability and we have seen some pockets of growth in Q4 like in the UK, so too early to move to kind of global positive situation but we seem to be heading to stability. I am now moving to the analysis of the gross margin to understand what has happened on our gross margin globally in 2014.

You see that globally we have been growing by 20 bps and in fact that corresponds to the organic evolution of the gross margin. You first have two big impact -- the first one is a positive contribution coming from Invensys, so Invensys is coming notably with software but not only with higher gross margin rate and in front of that as expected we experienced a significantly negative impact coming from the currency.

Then you look at the detail of the organic evolution, volume around zero impact net price plus 0.2, so when you take the combination of the price evolution which remained a bit negative on H2 and the positive contribution coming from the raw material you have a net price positive for the full year. Then productivity it has been largely commented by Jean-Pascal so I don't come back on it.

And then the mix impact negative which accelerated in H2, we had more solution in the mix of our sales and that has been impacting, we can say also that we have been seeing some pressure on price for some businesses, there was some drift in some margins for some projects but we really want to highlight the fact that we also consciously take project at low margin because this is the name of the game you take Greenfield at low margin but this Greenfield will generate in the future some nice services business with nice margin. So there is also this element in the impact of the solution.

And then of course the geographical mix, Western Europe continued to be a poor performer that has been adding a negative impact on the mix clearly. And another element of development of the business that we see globally as positive which is a very nice growth that we see in our mid-market offering notably in the new economy which is coming at a margin which is a bit lower than the average of the product of the group today.

And then you have the traditional inflation and other element. Now that means gross profit of EUR9.4 billion it's up plus 7%, organically plus 1.7%.

And we're now moving to the support function cost which is almost EUR6 billion organically growing by plus 2.4%. And Jean-Pascal mentioned the fact that we started the year with plan of investment certainly expecting an environment that would be a bit more positive notably in Western Europe.

We've been adapting but we've not been fully adapting to the final evolution of the top-line, so we have this 1% difference on the top-line and the SFC evolution, you will see the company program that you have -- we have in front of us some clear plan and program to generate efficiency on our cost in the future. That gives an adjusted EBITA of EUR3.460 billion, it’s up a little bit more than 3%, that would have been up plus 8% at constant ForEx.

And we tried to and exceed as clear as possible on the evolution of the margin. Last year, we published and we reported a margin of 14.5%, we have two big change of parameter which restate 2013: the first one being the disposal of CST, the other one being the full consolidation of Delixi.

So the comparable without inventories was 14.3% for 2013. Then we have integrated the numbers of inventories for 2013 to build a pro forma and that give you the 13.9%, so that’s fully comparable business for 2013.

And then you have the two evolution the ForEx minus 0.4 which is in line with our expectation at the beginning of the year, and then the margin improvement of 40 bps at constant ForEx. Looking now at the margin by business.

Starting with building and partner, you have a decrease here, it’s mainly coming from the ForEx. So this division has being the one really, this business has been the one with the biggest impact coming from the ForEx evolution.

And in addition to ForEx, you also have what explained on evolution of this main market offering which is positive and I think a negative impact on the mix. And then there was also a number of initiatives that has been financed by this business.

Industry, nice growth at same scope year-on-year plus 0.7 point of course then you introduced Invensys and a decrease in margin. But on a like-for-like basis, the margin has been growing.

Infrastructure which of course has been the pain point for us in terms of evolution of margin, mainly because when you have a poor top-line evolution, you have a difficult absorption of fixed cost and that reflect into the erosion of the margin. And then IT which is stable year-on-year and that’s quite a remarkable performance.

There was some growth, but it was limited. And we remain significantly higher than any of our competitors.

On the rest of the P&L, I’ll try to go fast, other income and expenses it’s a lot of pluses and minuses, but you have the big minus, minus 81 million which are cost of integration of Invensys, very much expected. Restructuring the 202 million reflect that looking at the evolution of the infra business, we have to adjust, we have to react, so we started the reaction.

And you will see in the company program that there is more adjustment to come. Then amortization impairment of purchase accounting intangible is just the impact of the acquisition of Invensys.

Net financial expense charged is going down as expected. The cost of the debt continue to go down.

And that’s a trend that we expect to continue. We will come on that later on, so that explain why we’ve been influencing.

Income tax, a significant decrease of the tax rate of the group at 22.7% that was 25.5% last year. This is expected impact from Invensys, so we are indeed materializing the tax synergy on this acquisition.

Then the discontinued operation, CST and appliance from Invensys impact, so it’s both the profit generated before disposal and it's also the capital gain that we generated on the disposal. Equity investment minority interest that gives a net profit of €1.941 billion plus 3%.

At constant ForEx we would have been growing by plus 11%, so strong progression on a like-for-like basis for net income, if we exclude the ForEx. And then just for your reference, we highlight the impact of the integration cost of Invensys and the growth would have been by 6% without that.

The free cash flow €1.7 billion, €1.8 billion without the integration cost of inventories. Just a few issues I would like to mention on CapEx, the amount is higher, this is firstly inventories impact.

And also the fact that last year, we had some disposal which was of course -- it is a net impact of the CapEx. And in addition this year we had one significant project in the U.S.

in Boston that is impacting the CapEx. The change in trade working capital, well, we’re not that far of what it should be given the growth of the top-line.

Last year, it was particularly good because of a strong performance on the payable, that of course we did not reproduced this year. For the rest, I mean we’ve been paying the dividends the net impact of acquisition.

Here you have the net impact between the share buyback and the employee shareholder plan. And then you have other effects which are mainly the negative ForEx impact as you know it’s a picture of the debt at the end of the year.

It was an increase of the dollar versus the euro, with a significant ForEx impact on the debt. So that give us at the end of December 2014 a debt of approximately €5 billion.

On Invensys, that has been largely commented and I don’t see I need to go into lot of detail. All lights are green, revenue are going up, adjusted EBITDA was growing significantly and Invensys was accretive in fact on our margin from the first year.

The cost synergy you have there as Jean-Pascal mentioned, the top-line synergy, tax synergies are also delivering. So, all lights are green once again on the inventories.

Regarding the cash conversion for the full Connect program, we are absolutely in line with our objective of transforming 100% of the net profit into free cash flow through the cycle, through this three year period, it clearly have been the case. And then we have this ROCE objective that we take as a priority.

We’ve been really improving significantly the ROCE on the like-for-like basis and fortunately for criteria as well, we’ve been negatively impacted by the ForEx. Without the negative evolution of the ForEx, we would have been moving from 10.9 to 11.7, so compared to the ambition we first would be back in one year to two years to pre-Invensys level, we would have been well on our way.

Unfortunately, we have a negative impact which is being explained quite easily by the fact that we have negative edited impact, which is coming largely from energy in country currency. And in front of us when we look at the capital employed without the equity of the debt, we have a much lower exposure to this energy in country currency, the level of the capital employed.

And we have much more exposure to the dollar notably and the Chinese yuan, which has been growing against you at the end of the year. So you have a kind of severe effect on the ROCE for the year.

And we will propose to the Shareholder Meeting, an increase of the dividend by 3% at €1.92 per share, reflecting both the growth of the year and the strong contribution from Invensys. Connect a lot of success, we’ve been commenting that service was a success, productivity was a success, inventory efficiency was a success.

Two area where we have not delivered, we have only partially delivered. On solution, we have done half of the improvement that we were targeting, so one point only.

And on SFC, we've been largely commenting the investment that we’ve been making. The fact that the top-line has been lower than what we anticipated at the beginning of the program and that’s why we maintain the level of SFC on salary issue, but we did not generate the improvement that we were targeting.

And that leads us to the full year 2015 target, Jean-Pascal, I hand over to you.

So when we look at 2015, we expect North America to continue grow solidly. Western Europe we are cautiously becoming more optimist, so we could see sign of improvement.

New economies show a mixed picture, so we see places that can be accelerating. Russia will face difficult environment.

Then China will have a soft start of the year and should gradually, our estimation is that it should gradually improve during the year, also the base comps will become a bit more favorable. Invensys will contribute to the group performance, but the group -- the Invensys performance would be impacted in Q1 by the fact that last year it was last fiscal term of that year, so you have a kind of in this industry which is a project industry, customers tend to push you or to push invoicing in the last quarter of your year.

So last year at Invensys, we had two end of the year, the one with Invensys previous group and the one with Schneider. So that bumped up for the year 2014.

So our target in this context in 2015 is low single-digit or getting growth in revenues. Adjusted EBITDA margin between 14.5, assuming no negative ForEx impact, it may seem strange to say that at the beginning of the year, but we've become pushers seeing the past year on those swings.

And expected significantly positive FX impact this time, it is a euro decrease principally in respect of dollar, which -- it should take an estimated level of the dollar for the euro at the present level to drive to a positive effect on our revenue of 1.5 billion around. But no material impact on the EBIT line because if you remember a large part of our actions in the past has been to rebalance our base of cost and revenue between the U.S.

dollar on the euro, but probably in the past ten years, that I have been at the lead of this company, first time that the euro in terms of translation would be positive news for the company. Okay.

That closes the presentation on 2014. We are ready to take your questions.

My name is James Moore from Redburn. A couple of questions if I could.

One on China and one on mix. You talked about a soft start to the year and then some gradual improvement.

What gives you confidence on the improvement in China, is it just the basis of comparison? Or do you see some genuine sequential improvement coming in China?

And could you help us dig a little deeper to what's happening within China in terms of tier 1 versus other areas different end markets to give us a flavor for that important market for you. And secondly on mix, the number of the second half I think 155 if I remember was a bit high than I thought and explain why perhaps the number was a little more at the lower end of your 40 bps to 80 bps clean range.

You mentioned the mid-market, you mentioned Europe, you mentioned solutions, I am really thinking as we look forward on mix into 2015. How do you see those pieces or mix in general moving?

And is there anything exceptional in that mix effect that might flip out?

Well I am going to take the first question and Emmanuel will answer on the mix. On China what -- of course there is a comparison with the comps to which we are going to be going through 2015, we had a very strong year at the beginning.

Very strong H1 and H2 was much slower, so that in itself is the reason. But what we see also from the environment point of view, 2014 has been characterized by certain of number things, restriction on credits.

There was also the anti-corruption campaign which is a good thing for the country, but which has slowed down a number of decisions of investment. And that has stopped a lot of projects as a collateral of those decision on very large projects, so they has been a slowdown that really happened -- and that really affected us from the second part of 2014.

What we see is that the government and the regions releasing some credit and tightening some of the conditions slowly-slowly and very selectively and very professionally re-stimulating parts of the economy. On the side of shadow what we see also is that the investment we've done over the past two years of going into more cities, there again you recruit people, you put people into place, it takes a lag on the time to come and translate into sales.

And where we do it and its valuable according to the regions and according to the places where results are good, but it takes time to go through. So we see it -- we don't expect huge room in China, of course, we expect beginning of the year that will keep being tough and gradually recovery based on the macro of the country.

By the way China will be one of the first beneficiaries of the new price of oil in the first place, that will free a lot of purchasing power in the country. And then due also to our own efforts in investing selectively into more remote places of the country.

Regarding the mix and I foresee still pressure coming from the geographies and I mean good development of the mid-market, I think that the mid-market offer is going to continue. And regarding the solution, there was some brief moving margin compared to expectation that may ease, but globally I would remain cautious on the impact of solution on the mix.

So we certainly work hard in order to improve that dimension, but you should continue to expect mix to play negatively in 2015 and beyond.

Gael De Bray from Soc. Gen.

Two questions please. The first is on the margin performance at the partner and buildings division.

I think it's been a bit disappointing year at least relative to margin performance at the other divisions, given the good growth you had there. So could you elaborate a bit on the key reasons behind the decline in margin?

And maybe talk a bit more about your mid-market type of strategy and how it affect the year and the margins? The second question is on the solutions business.

And so you are clearly a bit short of the year -- the targeted margin improvement for solutions. What's the margin profile right now for solutions?

And what kind of actions could you take to improve performances? And in a structural way, I mean is there anything that can be done to potentially refocus your solutions offering maybe exit some of the lowest profitable solution areas for example?

Well I will take first one again. So on building and partner, we've got several parts in that business, but the large part of it is really what we call low voltage that goes from plugs on sockets to low voltage panels.

On that part of the business, we are in a very strong worldwide position, okay. It's a leadership which is twice -- we are twice larger than any other competitor in the world.

We have a very-very established global footprint. And we keep developing there.

Well on the level of profitability that we have in this business is second to none, okay. But what we faced in 2014 is there are several aspects into it: First it was one of the places where we have the most -- it's one of our most internationalized and new economy twisted whatever directed business, so the ForEx impacted us quite a lot, okay.

On that one. The second thing was geographical mix than this is a place for composition in China the slowdown didn’t have much this season between the cost and the margins didn’t up.

This is the year when we launched a lot of medium products in the new economies when you go into those secondary CDAs that we do not only in China but in other places you need more ruggedized low price point product that steal a very nice margin but that eventually decrease the mix. On the last point is that we invested into new technologies on new offers when we go into smart panel launching this initiative on worldwide scale is something that takes a toll on the results.

When we launched simple home automation low cost home automation systems for energy efficiency connected to the cloud connected to the Internet that’s also an investment that we do. And it’s a vehicle today yes it’s not making money, charging stations but this is an investment that we do for the future with this we are putting some nice out to see what it will leave.

Server is a place where we’ve gone a long way and now are on a good trend, good I would say good catch up and good recovery but still it’s quite dilative for the business. So that is a part of investment for the future which is taking a toll.

But the main one remains the ForEx on the direct connects.

And then on solution and how can we improve the margin in the long term. The first thing of course is to push as much as we can and also this is software where we’re enjoying this solution packaged DIS margin.

And then looking at the project it certain for us to focus on what we like in terms of project, which is smooth in its size. So a few of the 1,000 a few million easily that we put.

We take some time project at a few 10s of million that is still coming with generating more competition, more pressure and more week as a whole. So we don’t want to give up on that because there is a lot you can learn from this project but it’s true that it’s not our precious kind of beauty I would say in terms of solution.

Then of course to develop as much as we can solution on shares so we develop one solution we sell it many times that’s why you optimize the margin that’s very clear. But having said that there should be a number of projects and I think inventories is very clear on that front where when you take the Greenfield that was before 20 to 30 years and you have accept that you take the initial project at the low margin so you have to take it and as you know we have the ambition to put inventories back in the rate gaining market share on Greenfield that’s one of the element of the success of the acquisition of inventories and when you do that you maybe reported at the beginning and then you are able to service your client in better condition on the long term.

So we have to take that into account as well.

Again this is anyway a very good question I’ve seen in the past two years we should have done better on that that we are running and I am quite confident that very strong inventories brought a lot knowhow in controlling the project it also brought lot rate in [indiscernible] which was significantly different from what we have in the company mutual discipline and we want to take that recipe on the project to other parts of the group [upgrade] the infrastructure part of the company. So not happy of what we’ve done in the past two years on that front or all the reasons that Emmanuel explained on the right ones and I think are on the right track to get much better at the -- on solutions.

And we are focusing much more I mean we are really focusing on very precise segments and every time we repeat the addresses I am saying them we really deliver a much better performance.

All right. And Andreas Willi.

The first question is on inventories the [indiscernible] projects in China if you could provide an update on that and whether there was any positive impact of provision release in the 2014 results for inventories? And the second question on China in industry you know is a bit of weaker second half of Q4 is this a market share issue or an underlying slowdown given that others reported very strong Q4 numbers in PLCs in China.

Thank you.

Let’s start with Q4 in industry in China our further and positioning in China is not on the end user market in industry for the PLC part of the business it’s on OEMs and the market has been more difficult in the second part of the year. So as we embark or bring more inventories it’s a way for us to build muscles around end users and the better position on the Chinese market for automation.

And then we’ve got in the short so large part of products that we set on the market on all of those products almost being three key industrial applications are going into the construction market on those has been affected and reported into our industry business. We report still more by technologies and by markets we report by technology.

On China Nuclear I will let Emmanuel to take it.

Yes. So on China Nuclear I mean things are improving at the end of project but technology fields are again [indiscernible] as we said and the project is coming at a more normal margin which certainly have been helping versus the present situation.

So that doesn’t of course explain the global improvement, just one element among many other that contribute to the improvement on Invensys margin.

We share that when we lead the operation in China Nuclear was the kind of question mark on the technology process where due diligent the situation but it’s always easier when things are working, technologically we all good. We have already brought three power plants online so that works.

Now we see that to manage all commercial relationship with the customer.

I’ll take two more questions in the room then we’ll move to the --

Can you just say little bit in general terms about pricing because the price less raw materials obviously being the positive which is good, what I’m curious are you actually getting price increases in absolute terms in any of your divisions I think you called out industry, but what is the general move at the moment in terms of pricing. And in the past you’ve talked about this idea of tactical pricing is that something that you’re still pushing or is this some we’re going to get back to old days where Schneider consistently generated price increases, that was question number one.

Question number two, is just only the kind of full process around the adjusted EBITDA margin and given that you expect some organic growth what conditions would we see Schneider performing at the bottom end of that ‘14 to 14.5% range is this to do with concern about solutions or why not have a slightly more aggressive EBITDA margin target what let you to put us at the bottom end of the range.

Okay. Well, on pricing I may question your memory, because you’ve been following Schneider for long time and I have been in Schneider for longer time.

So what will be and always good at is to make sure that the net pricing will be positive. It takes us a bit of time to catch on raw material that we always make it and then it decreases when competition is kind of bringing it on prices when raw material are easing I don’t think there is nothing abnormal at the near end at the moment.

This story of like it always price up doesn’t, it’s not true. I can bring you to some of the presentations you never listen to me attentively enough.

But it has been a kind of traditional story. Now on this is which we are doing.

So if you take a look at 2014 we’ve been pricing up in most of the regions especially the places or otherwise a combination of raw material and FOREX and we’ve been doing that quite efficiently I would say there have been two places where pricing has been more competitive, one is not from America, where there has been a more intense competition I would say at the beginning of the year. I think could have played a bit more smartly in this but we’ve reacted well, the last quarter shows it in terms of growth, in terms of dynamics.

On China has been also more difficult in H2 but because of this -- we have placed it in many places and those are limit to the place very early in it anyway when your gap with your competition is two way. Now back to the story of tactical pricing I’ve seen so many interpretation of what I’d say on that one.

So I’m trying to be very cautious in my way to express. We are price dealers on our market.

We are pricing up sometimes when there is an obvious case where we’re applying too much volume against the two way price then we’re going to make a special move into that, mostly on the project part of our business and we keep on working on pricing capability that is bringing more functions into our new lines of products valuing those functions those new facilities, those new services being very selective on discounts we can offer on very specific project. So be ensure that it is at the top of our agenda.

On the margin adjusted EBITDA target, I don’t know what you mean by the more aggressive little bit narrow down the bracket, that will be more precise -- for end of the bracket it will not appear, I mean what I can see that we give guidance which indicates that all companies on the margin and I’m sure that everyone -- we are in challenging environment with the lot of uncertainties so we have to take that into account when we see our objective for the full year. And then you have many uncertainty of course the top-line depending on what's going to happen in the various markets, we have uncertainty on the way we're going to see the evolution of the mix between businesses and products and solution.

We have as you will see later on an important ambition in terms of positivity and SFC efficiency but then the speed with which it's going to be implemented is having a number of doubts. So I feel that if you take everything into account that bring us to be cautious in the kind of magnitude of the bracket of our lending, so that's why we go for this 40% to 45%.

It's Martin Wilkie, Deutsche Bank. Just coming back to the question on the impact of FX on your margins.

You commented the EBITA shouldn't have a material impact from FX but your guidance does say assuming no negative FX impact, am I reading too much into that that you think if there is an FX impact it would be negative?

No, we are just saying we don't want -- let's suppose there is a new collapse of the currency from new economy we don't want to be back in front of you in six months from now saying oops by the way we forgot that this guidance was given assuming no negative ForEx impact, so that's why we just want to be very clear on that but you should not read anything else behind that.

And just following on to that, you commented [indiscernible] a more balanced cost base and therefore it should reduce your FX impact. But obviously historically there has been a drag where you have emerging market currency weakness.

In your thinking for 2015 is any positive then for the Euro essentially offset by the weakness in the ruble and so forth is that how we should think about it -- it's just that at the group level these are netting each other out?

That's exactly right. When we look today at the various trends, you have some positive element in your country where the Euro is mainly the currency of the cost of goods but then I mean we buy all our copper in dollars so when you look at the ForEx impact it says even if copper evolution is positive and it's a negative impact so when you take everything into account we get to some which is close to neutrality in terms of impact and that's what we've been mentioning.

We have a truly global foot print right in terms of sales and in terms of cost. I mean Asia-Pac has become our first region in 2014 above West Europe right just passing West Europe.

The North America is roughly at the same level. So yes anyway the first time that the euro is going down into my 10 years, so I am -- I like the idea but let's make no mistake I mean we're very balanced, we're the product of many currencies.

We will take two questions from the people on the phone, so first one. Is there anybody on the phone for questions.

Well no ..

One more question in the room.

Then we take one more question in the room, yes.

Yes, Alfred Glaser from Oddo Securities. So I just wanted to know in Invensys you have been performing pretty well.

What's the outlook in terms of growth for the Invensys business for 2015? And also regarding the margin evolution, you really made the jump in terms of margin profitability for Invensys in 2014.

What can we expect now looking forward into 2015, 2016? And one other question here, on oil and gas exposure, that didn't seem to hurt that much the Invensys business so far, and Schneider overall.

Could you comment a bit on the overall impact you'd see or you expect, coming from the oil and gas businesses?

Let's take the oil and gas question. Including Invensys direct sales or the indirect sales to the oil and gas industry represents roughly 7% of the turnover of Schneider.

Now when you look at it there is 60% which is pure downstream there is 40% which is upstream but almost nothing in exploration. The all upstream that we is about mid and it's really on and its production, okay.

As we see today we see -- well first we're cautious, okay because it's been long time that had been through such a change into the oil barrel price but we are having intense very intense discussions with all our customers. What we can feel that probably the impact will be more limited in 2015 and if there is a stronger impact that's going to be more in 2016 because the projects we're working on are already launched and already progressing.

On the 50% of what we do is OpEx, 50% of what we do is CapEx. So it's we feel that here there will be a slow impact coming -- but yes I am cautious on that one.

Anyway the total impact that we would see in 2016 and this our worst estimation, the estimation of the worst would be a maximum impact of 1% negative on the total turnover of the company. Now the low oil price is helping plenty of other sectors of the company.

It will free purchasing power for contraction; it's good for what we do in food and beverage it’s good for everything we do in many other industries so all in all in we see the effect as relatively on when we see the mix of countries also we are seeing more in the countries which are helped by oil price decrease and in the countries which are benefiting from those resources. For inventories I mean we just done a part of the cost synergies we daily started the revenue synergies 2014 has been an year of intense destruction because you have to put all the teams together particularly in end user to mention now on the other side on the equation remember that 2014 has been boosted by two end of year so that establishes high grades of comparison for Q1.

But globally I find that the teams are in place now they have emerged and we’re quite together and we still have a bit of an help of the cost to be delivered and the synergies are just starting to kick in there actually in 2015 but more into 2016 on top it.

But don’t expect the same kind of improvements in 2015 as what we’ve experienced in 2014. Nevertheless I think we said since the beginning that fully synergized Invensys should have a positive contribution to the margin of the group so it’s not coming as a surprise when you see the beginning that Invensys because of software, because of the synergy and the capacity to nicely contribute to the growth in margin.

[Multiple Speakers]

Maybe I would like to have the same granularity on Russia because for ’15 I mean you commented I think IT getting better through ’14 but at the same time…

Stabilizing…

Yes, stabilizing, so improving for the year and still difficult so in your guidance what have you put in as a better risk for Russia at least? And -- that's nice.

And secondly on the mix side I was a bit surprised that it’s still quite negative because at the same time you said you hope is stabilizing which having to go into past was a sort of mix pressure geographically so maybe it’s certainly now and also in terms of short cycle versus long cycle I was in the impression that your short cycle is still leading the way for you so it’s helping. How do you see that dynamic short-term essentially in ’15?

Thank you.

On Europe it’s still minus 1 with group growing at plus 2.5 so it’s still a drive the direction on Q4 so even if it’s improving it’s still drive and the group in the Europe which has growing about 3% so it’s still pretty negatively. On Russia I mean we don’t expect great teams and certainly is going to be a tough year economy expected to decrease by 4% to 5% GDP decrease so we’ve being cautious I mean we’re not give you what are the assumption of course that we have been taking but we’ve been cautious on Russia now we see what other scenario that materialize.

I think the teams are working well. We are adapting our cost to the new volumes but we are very local in Russia in respect too many places that has been anything conventionally the local activities are being trending better than imported activities on four of these regions.

But it’s a place of maximum consciousness now it’s not a dominating part of the portfolio and it’s overlapping with the impact of oil and gas I was mentioning before to a large extent. He is talking about [indiscernible]… Thank you for your attention.

I guess we are very pleased so let’s go back to the conversation [indiscernible]. Thank you.

Yes, we’ll be back in ten minutes. So stay close, we will restart at 10:15.