Schneider Electric S.E.

Amit Bhalla - IR Emmanuel Babeau - Deputy CEO and CFO

Andreas Willi - JP Morgan Andre Kukhnin - Credit Suisse Gael de Bray - Deutsche Bank James Stettler - Barclays James Moore - Redburn Simon Toennessen - Berenberg Alasdair Leslie - Societe Generale Ben Uglow - Morgan Stanley Jonathan Mounsey - Exane BNP Paribas William Mackie - Kepler Cheuvreux Daniela Costa - Goldman Sachs Markus Mittermaier - UBS Wasi Rizvi - RBC Capital Markets

Well, thank you very much. Good morning, good afternoon to all.

Welcome to our Q3 revenue results this morning from Paris. We have with us Deputy CEO and CFO, Emmanuel Babeau, who will be guiding us through the presentation.

After which, we will open it up for question and answers. I would like to again remind you around the disclaimer on slide number 2, which is self-explanatory.

And with that, we get on with it. So, Emmanuel, over to you.

Thank you, Amit. Good morning, everyone.

Really glad to be with you to lead you through our numbers for our Q3 sales. I'm on page 4 and starting with the headline for our sales for this third quarter.

We've delivered good performance, certainly illustrated by the organic growth, plus 2.7% and actually we've been also experiencing during this quarter significant negative impact coming from the working days minus 0.6 points. So that would then mean that the underlying organic growth, same working day, would have been plus 3.3, which is showing a further acceleration on the organic growth, but I will elaborate on that later on.

The reported growth is minus 1.9%, because of negative ForEx impact and because of the Scope impact, but here again, I will come back to that in the course of my presentation. Reason for acceleration is clear and simple.

We've been delivering good performance on the businesses where growth is the objective. If you look at the group outside infrastructure, so if you look at the low voltage plus secure power plus industrial automation, we've been delivering an organic growth of plus 4.3% and working day adjusted, that would have been a 5% organic growth, so showing nice dynamism.

If you just focus on the two performers of the first-half, industrial automation and low voltage, while altogether, they have been growing 5.2% organically during the third quarter and industrial automation, same working day, was growing organically at plus 7.5% and low voltage growing at about 5%. So very nice performance for these two businesses.

Medium voltage, of course, has continued to be impacted by selectivity. Outside selectivity, medium voltage has reached an organic growth of about 1% and today, the good news is to see the new economy doing well and they are up 5% in the quarter with another very strong quarter in China, growing at 10%.

We've also continued to deliver on our strategic priority during this quarter. We've been delivering organic growth on product of plus 5%.

If you look at final distribution and wiring devices, it's another solid mid-single-digit growth. I think I'm not mistaken if I say that we are, have now been growing four years in a row without interruption on final distribution and wiring devices, quite a nice journey actually.

Industrial software revenue, going up as well, 3%. Service orders, so more moderate growth for the sales, but very nice growth for the order, growing high single digits and we are progressing well on our EcoStruxure, I will detail that later on.

But we are offering some progressing on the digital assets under management, reaching 1.5 million, which is plus 20% year to date. So nice growth.

Spending a little bit of time with you now on page 5. I think we highlighted that at the end of H1, and we wanted to come back on that, the fact that we are really today developing successfully the cross selling between our businesses and our technology and there are a few striking elements I think that illustrate that.

The first thing is that we are reaching double-digit growth in specific, targeted segments because we are precisely able to put together all our portfolio and maximize what we can bring to our customers. So that would be in term of segment, the case for food and bev, healthcare, cloud and service provider, for instance.

Another very interesting element I think is when we look at some of these targeted segments, well, you see that actually the technology which are being put through by the main technological are growing faster, so it shows that the kind of entry points that we have, the kind of natural, I would say, door opener is actually opening widely the door to develop even in an accelerated manner the other technologies. So just pick an example that you have other one, taken here, if you take food and bev where the main take is of course industrial automation and if you look at the sales coming from medium voltage, low voltage or secure power, these three businesses are going to even grow faster than industrial automation for the food and bev segment, quite an interesting element to show the success of this cross selling.

And then on the page, you have a few nice examples where we are bundling our technology for the benefit of our customer. I'm not going to detail all of them, but certainly looking at this large Indian co-location provider, we've been working on two large datacenter and supplying the UPSs that also the full LV/MV management for a nice bundle and you have other example that I will let you go through this example, when you have a second.

We also are doing some very good inroads on the deployment of EcoStruxure. There was a big event in Hong Kong a month ago now.

Some of you have been with us in this occasion, and I think it has been clearly regarded as a nice, full of learning event from all the people who participated in. You can catch up.

Actually, we have put a link on the website where you can have a good summary of what has been there and it's my teaser moment. Well, actually, more is to come, and we have our Digital Day on December the 12th at our headquarters in Paris, we'll be very happy to welcome you and we will talk more about EcoStruxure and how we are further accelerating on our digital journey, both for our product, for our customer experience and on the way, we digitized the way we work.

If you move to the next page and just to dig a little bit further, on EcoStruxure success in Q3, well, here again, you have a few examples of implementing our EcoStruxure solution for the benefit of our customers. So, if you take the Bainbridge Island School District example, we have been implementing an EcoStruxure IT architecture, which is enabling this school to do all their IT monitoring and really move to maximum power, reliability in a zone, which is subject to power interruptions.

So interesting one. I'm not going to detail all of them.

There is a nice one with EcoStruxure Plant & Machine for a customer in Algeria, where we bring global efficiency on the site. And there is a nice one, Bubolz Nature Preserve here where, with the EcoStruxure Grid, we are providing a solution to get to 0 carbon emission and achieve 50% saving on power consumptions through the last time of the site.

So nice one contributing to sustainability. Sustainability, that's of course the main theme of the next page.

I am on page 8, and this is our planet and society barometer. We keep doing progresses; we are now above nine out of 10.

We finished at the end of 2017 this three-year barometer. You have the full detail I believe in appendix on all of the KPIs and how we progress on them.

Just wanted to highlight a few of them on the page. When it comes to energy savings, we had an initial maximum ambition of 10%, we are getting there, we had 9.2% energy saving over the period, and another one which was very important was the avoidance of CO2.

We had initially an ambition of 120,000 tons where we are getting to 150,000. So, we actually passed the mark, but, of course, we're not going to stop there, and we continue to work on that direction.

As always, it is a moment of self-advertising on how pleased with the award that we received once again during the third quarter. We have been for the seventh year in a row on the CDP Climate A list and it is quite a remarkable achievement to have for seven years in a row this kind of ranking.

And there is a new award, which I personally find interesting, which has been awarded by European authorities, which is called the Integrated Thinking Award, where they look at how the companies are put together, strategic, financial and sustainability thinking and dimension. So, it means that we are working on the possibility to develop all of them in the right direction at the same time.

All right. So, let's move to the business performance and I am on page 10.

The global sales force this third quarter amounted to EUR5,904,000,000, it's down -1.9% versus the Q3 of 2016. You have a massive negative ForEx impact, representing -3.6%, mainly coming from the US dollar, the Chinese yen, the British pound and a few other emerging country currencies.

We believe now that for the full year 2017, the translation impact of the ForEx impact should be around minus 300 million on our sales, so that's our latest vision based on the current rates. We also have negative impact coming from the Scope, this is the DTN disposal.

Of course, we have ASCO, we'll have the consolidation of Aveva, but the deal has not closed yet, so that's why for the time being, we just have the negative impacts. Now, looking at the organic growth, the plus 2.7, again, without this negative working day impact is a growth of about plus 3.3% and you have here the detail for the four businesses on which I am going to elaborate right now.

And let me move to page 11 where I am actually going to talk about low voltage. So, sales of low voltage are up plus 0.6% at EUR2,632,000,000.

Organically, up plus 4.3%, plus 5% working day adjusted, but as you know, we are no longer consolidating the Delixi sales in China and Delixi, like the whole Chinese business, has been achieving tremendous performance, once again in Q3. That was already the case in H1 and actually the whole portfolio, which is really the one we're looking at internally and that one we are reposting that measure, the whole low voltage business has been growing with Delixi, not at 4.3%, but at plus 5.5% and that means that working day adjusted, this low voltage business has been globally for us growing at 6% and it shows the excellent dynamism that we are experiencing on the business.

We were surprised low voltage is growing across our four regions. I mentioned the very nice performance in final distribution and wiring devices.

It's real solid mix in the growth. We've seen a good momentum on commercial and industrial business globally.

So, it's many areas. It's both the residential and commercial and this building, which is progressing well.

North America has been nicely up, new residential doing well, sure, but good performance in targeted segments and notably in datacenter, we should see more of that in the coming quarters, but that was really the case in Q3 in North America. Western Europe, that was expected, but we have the confirmation it has notably been good in low voltage, very clearly.

Asia-Pacific has experienced growth in many countries, driven, of course, first by China, but not only by China, although it's smaller today, but Vietnam, Indonesia, for instance, our market where we are experiencing very nice growth when it comes to low voltage. And then looking at the rest of the world, it was still very strong growth and looking at Russia, looking at Eastern Europe, Africa, these are all markets, which have been clearly seeing a nice and positive development for low voltage in this third quarter.

I am now moving to medium voltage, infrastructure. I mean, you know that the business on which the name of the game for us for the time being is whether to improve the margin to really push the top line.

Now, we do confirm that we will have seen the end of the negative impact of selectivity at the end of 2017. Looking at the order intake, we believe that we have crossed and that we have probably turned the corner in terms of order intake evolution.

And when we look at the sales, they are negative by 4.4% organically, but without the selectivity, which we evaluate to be about EUR55 million on the quarter, the business has been marginally up about 1%. Looking now at a bit more detail on the performance, North America declined once again not necessarily so much reflecting the current environment, but much more what we have been seeing in the past and notably in 2016, we are invoicing orders that we took quite a while ago, so that was expected that we had the confirmation of a very negative number.

Western Europe was down as well, but certainly largely impacted by selectivity initiatives and when we look at places of growth where we have been growing in many new economies, in Middle East, China, Africa or even Russia, CIS, up strongly where we believe that probably some of the difficulties in the oil and gas sector are now behind us. And the good news is that we target strong growth, i.e., grid automation, we have been delivering strong growth with a particular success on the software business for grid automation.

Here, we are just confirming the fact that as announced, we are working on this implementation of new organization in order to take care of the project and equipment business, particularly targeting the utility segment. I would tell that there is nothing else to be added.

We are implementing the new organization and of course we are going to then monitor very closely how it performs in the coming months. I am now moving to page 13, the secure power IT and this is going to finish our energy management pool if you want.

Secure power IT, up 0.3%, around 1% working day adjusted and that's probably to be clear where we would have expected a higher growth initially and notably because the US has been down more than what we were expecting, but behind this number of underlying 1% organic growth, in fact you have a contradictory picture because North America has been disappointing, but many other places have been good. For instance, when you look at growth in distributed IT, we have some good results in many, many geographies or all our impact in the IT channel has been positively oriented in many, many places.

We also have seen a good dynamism in non-IT end market and that it's a priority for us, as a nice diversification for the business. Good growth in services as well, mid-single digits.

Western Europe growing nicely with Germany, Nordics and UK being up and in new economic, we also were up mid-single digits with good progress in Asia Pacific and Africa notably. So, US was a negative part and the reality is that we have seen, as expected, a significant investment in datacenter in the US during that quarter, but the architecture that we have been implementing where more for web giant or very large player, as you know, with more low and medium voltage and for that has been beneficial to our low and medium voltage business, but less UPSs, less cooling, less rack as well and that explains the negative performance in the US for IT on the third quarter.

We've got the confirmation that the secure power technology was fully playing its channel role with an impressive double-digit growth in LV and MV orders for cloud and service provider over the period, so that continued to deliver the expected benefit and that's definitely good news. Now, moving to the industrial automation business, which has been the best performer, so it is easy for me to finish with a best number.

Sales amounting to EUR1,395,000,000, it's up plus 4.6%. Organically growing plus 6.9% and again working day adjusted, you will be around plus 7.5%.

Quite an impressive growth and I would say across the board, so you remember that we're talking about a lot of dynamism in discrete automation and that has continued to be the case for drive, HMI, contactors, PLC. Globally, OEM offers have been firing up very nicely.

But the good news is that we also have been experiencing good growth in process automation, which is up mid-single digits, good development on EcoStruxure and I already mentioned the fact that the software revenues were up 3% organically. Growth here again like for low voltage across the four regions, North America, up with the US seeing good situation with OEM demand and some beginning of improvement in the oil and gas and end markets.

So, let's see how it evolves, but there were some first signs of an improvement there. Western Europe was clearly very, very good with good growth across the region.

China was, I would say, excellent with good growth on the OEM demand and continuing the execution on this new priority or new strategic segment on which we want to really perform strongly that has worked extremely well and the rest of the world was already - was also up, thanks mainly to the growth in Middle East, but not only in Middle East. Regarding the Aveva combination, so you certainly have seen that the Aveva shareholders has approved, I would say, in kind of unanimous way the combination with our software business, and we keep expecting a closing around the end of the year, so I would say nothing new in that respect, and things seems to be developing normally.

I am now moving to the page 15, and with a little bit of color, I would say by region, best performer I would say once again has been Asia Pacific. China growing 10%.

So here I am going to repeat what we said already at the end of H1, don't expect China to continue to grow at double-digit in the coming quarters. I'm not saying it's totally impossible, but it is not for us the most likely scenario, the most likely scenario that first we are going to start to face high accounts in China and second, we do believe that every single on industrial automation go into work to continue to work very nicely.

We have, as we already flagged, more uncertainty I would say on the construction market, so we do expect China to continue to deliver a nice performance. We are not expecting China to necessarily continue to grow at double-digit.

In the other nice performers for Asia-Pacific over the quarter, you have Australia, which has been resuming growth and that's good news. You have Vietnam that we have put here, where we have a good growth and we have quite an impressive trajectory in Vietnam, but Indonesia, Malaysia would have been positive.

For me, highlighting the fantastic potential of this Southeast Asia region, which for the future is a big priority for us. India was flat, does not reflect the trajectory of the country, but there was clearly during this quarter because of the reform, implementation of new tax, some headwind, we would expect India to resume growth on the short-term and South Korea was down, because of medium voltage business and selectivity and very high basis of comparison.

Moving to rest of the world, second performer, plus 4%, good to see many new economies performing well. Russia clearly delivering nice performance.

Turkey growing as well, but remember that Turkey Q3 2016 was disrupted by events in the country, so that's where the kind of catch-up during this quarter. Two countries we have difficulty, Brazil, which is still down and Saudi Arabia.

So, we no longer have the same kind of decrease, but it is still a significant decrease in Saudi Arabia. Western Europe, good to see Western Europe back to nice growth, plus 3, despite an important working day negative impact.

We announced that we are expecting Western Europe to be back to growth, but it is always nice to have the confirmation and notably with France and actually if you take all these countries, they have all been growing between plus 2% and to plus 5%. So, all the countries that you have here and of course which are the main countries for Western Europe have been delivering a pretty good performance.

The only market, which has been less positive are the Nordics, where we are about flat, largely on selectivity for medium voltage. And then finishing with North America, minus 1, probably close to flat in working day adjusted.

United States are actually flat. Mexico was down both for reason, very high comps last year and also because of the earthquake at the end of the quarter, which has been disrupting the business for the last days of the quarter.

When I look at the US and I spend a little bit of time, I think that's what I started to describe. You have clearly a very good situation when we look at low voltage and industrial automation.

We expect that to continue. You have medium voltage still being impacted by the very low backlog accumulated, notably in 2016.

We think that things should gradually start to improve, and we have this performance in IT, where we certainly also have the objective to improve the trajectory, so we would expect North America globally and the US in particular to have a much better momentum in the fourth quarter. All right.

Well, that leads me to page 17 and the revision of the guidance, based on these good numbers and very positive trajectory in many key areas for us that I described in the course of this presentation. So, following this Q3, first of all, we are revising up our target for top line growth.

We are not targeting an organic revenue growth around 4% outside infrastructure. Remember at the beginning of the year, first guidance was 1% to 3%.

So, it's a nice improvement versus what we thought we would be doing at the beginning of the year. For infrastructure, I would say nothing has changed.

Of course, margin improvement remains the priority and before selectivity that we continue to expect to be around minus 4 in terms of impact for the full year. We expect infrastructure to deliver low single digit organic growth.

We are also, based on this sales evolution, looking at the businesses that are progressing well. We are revising our guidance for the improvement of the adjusted EBITDA margin and we now target plus 60 to plus 70 basis point organic adjusted EBITDA margin improvement.

Remember that at the beginning of the year, the guidance was plus 20 to plus 50 bps. So, I think that it shows the world that we are doing in the right direction and what it can deliver at the level of the margin improvement.

We also are updating the impact coming from the ForEx, we were minus 10 to minus 20 bps in July. Here, we are just adjusting by 10 bps, minus 20 to minus 30 bps, coming from some currency, accelerating the depreciation versus the euro and we are clarifying the Scope impact versus the number published last year, the 14.1% of adjusted EBITDA margin for the full year 2016, that we reported last year.

You should take the deconsolidation of the solar business, the DTN disposal and some other minor impacts, you get to plus 20 bps positive impact versus last year margin. Well, that terminates my presentation.

Amit, back to you for a few comments before we start the Q&A.

Thank you for that, Emmanuel. We will move now to the Q&A.

We have exactly 30 minutes. So that's great.

I see we already have several requests for questions. [Operator Instructions] Operator?

My question is on price costs. Obviously, given your upgrade to the margin guidance, it seems like you are able to offset raw material increases.

Maybe, you could just give us a little bit more information around both, what you have been able to do on price and whether the raw material headwind guidance for the year's changing, given that we've seen some of the raw materials keep going up recently and basically how that whole process is going and passing that on to your end customers?

Yeah. Sure, Andreas.

So, we are, I think, quite in a disciplined manner, implementing the roadmap so far, which was to continue to price up and even improve further the situation versus where we were at the end of H1, 2017. Remember three months ago, we said 90% of the roadmap inflation has been compensated with price increase outside China.

We want to do better for the rest of the year and I would say that remains our ambition and I want to believe that that has been the case in Q3. So, roadmap, you're absolutely right, remains strong.

You know that we have a kind of average three months hedging policy, so I would say even if the latest events on the commodity market are not great in terms of looking at the future, because it means that more negative impact is to come. I think I'm able to say that the H2 should be around 100 million maybe a bit more negative impact.

But that was the kind of view that we had at the end of H1. So maybe it's going to be a bit more, but I don't expect a kind of sudden disaster in H2 when it comes to raw mat inflation.

But certainly, that will have some impact for next year.

Could you talk about the dynamics within the industry please and what are you seeing in a discrete segment by regions and maybe somewhat linked to that and to your comment on, I don't expect China to carry on growing double digits. Is there anything that you're seeing there or anything like maybe channels, stock build up that worries you?

Yeah Andre, I'm happy to elaborate on that. And as I said the dynamic that we have seen on the industry were really good momentum across the board.

So, I'm not saying that process is today at the level of a discrete. And clearly, on one side, you are high single, sometimes you're double-digit, growing for some of the family of products.

That's not the case for Process Automation on average today. But the first good news is that everything now is turning quite nicely positive.

Now we are growing across the region. I mentioned that in discrete I mean look at the drive, HMI, contactors, PLC, everybody is posting everybody is posting very nice performance.

Western Europe and China are two big market, I think that we can expect Western Europe to continue to do well. As I said China should continue to do well.

Now the kind of performance you know strong double digit, once we start to face higher comps, I mean of course the bar will be higher and I don't think that we can sustain that better. I would say we are today in a very healthy environment for Industry Automation globally and we see that continuing as far as we can see.

And the channel stock levels, you're not seeing anything concerning in that.

Well, difficult to say that the people are building inventory over a 9 or 12-month period, so you may have a hiccup at the end of the quarter. We know that and certainly always that's the case.

When you are in a positive momentum in the market, the distributor tends to overstock in order to not to run into shortages. And when the situation is bad, they tend to destock in order not to be with a level of inventory which is too high.

So, you have a risk of maybe accentuating some of the trends in a kind of specific manner you may have impact here and there, but I think that the trajectory seen over the last nine months not only in China is just reflecting the strengths of the market globally. Maybe again with here and there some element being magnified, but it doesn't change the trend.

Thanks Andre, next question please.

My first question relates to the US because we've seen early signs of slowdown in the nonresidential markets over there lately with mixed indicators and with some of your peers suggesting slower growth rates recently. So, I'd like to have your take on this.

And in relation to this, I'm not so sure I understood why you expect much better momentum in the US in Q4. I mean do you actually see better market conditions in T&D?

And what makes you confident that you will return to growth in IT?

On the US, on the early sign of slowdown you are leading to again, I don't mean that today we are going to look at the backload what we've been building over the past few months element of that. So, we see dynamism in the commercial and industrial building that's what we call a non-resi, it's not just commercial or… And therefore, that is giving us the kind of confidence on the fact that we are on solid trends for the coming months.

And we don't report orders, but as you can imagine, when we make comments about what we expect for the coming months of course we also look at our backlog and what we can see. So that's certainly is building confidence for us in what we can expect for North America four for building and again continuation of the solid trajectory for the residential and the and the commercial and industrial building.

On the medium voltage business, we're not saying that things are suddenly going to move to a nice positive thing, but it was extremely negative. And again, we've seen the order intake evolution.

We are going to face easier comps starting in Q4. So, I'm now seeing that medium voltage is turning positive to be very clear in North America in Q4, but it has been double-digit negative, and I think that the trend should improve if you want.

And then when it comes to IT, I do not see that we're returning to growth, it's a scenario, but I'm not saying it's going to be necessarily the case. I'm just saying that after a decrease, which was a significant one in Q3, we do expect better momentum and a better situation in the fourth quarter for the US.

So that's all these elements which if you put them together give us some optimism on the fact that North America should be able to post a better performance in Q4.

Well, just focusing quickly on the medium voltage division, you talk about continued strong growth in grid automation. Can you talk a bit about how big this business is today and where you see the opportunities?

You talk about when it comes really to what we define as grid automation, several hundred million on this out of 2.5 billion business which is positive. So, it's a sizable one, but of course on its own, it's not sufficient to create the double trend.

But when it comes to software for automation, protection relay, all the automate for the grid that's a few hundred million. Amit is telling me that we've been disclosing the amount in the past, so it's about 500 million.

So, it doesn't make the full medium voltage business for this 2.5 billion positive part, but it's a sizable part.

Is it a step change, though, in demand?

Well, we see - I would say no surprise. We see acceleration of people investing on the efficiency of the grid.

So, it is a step change, an acceleration? Maybe in many countries where investments are going to more efficiency for the asset, more efficiency on the grid, and less on building new capacity and that's what is benefiting this grid automation business.

plus, everything around sustainability capacity to support extreme weather condition and quite obviously what has been happening recently in many countries is bringing many I would say utility over the world to come to us and start working on that. So that, you know, everything ensuring, protecting the grid, making it more efficient to use a lower capacity of production and have a bit of return.

That's a kind of investment that we see today.

Next question please.

I wanted to get back to the new margin guidance, just clarify; you mentioned earlier that the raw materials will be close to 200 million for the year or maybe a bit more. But it's more an issue for next year.

A number of companies are talking about raw material headwinds next year being of a similar magnitude, and some are saying it might be half. I know it's early, but could you say where within that range it's looking.

And you also mentioned at the half that on savings you could do a similar industrial productivity in the second half to the first and you still stick with that. And do you still stick with the view that the IT margin will come up year-on-year in the second half after the decline in the first half.

Hi Jim, that's a lot of question in one question. But I think one global question to clarify the guidance.

So, on raw material frankly it's too early to say for next year. I don't want to give a number and then you know in four months, five months come back with a different picture.

But it is, I mean by yourself, I mean you get to the conclusion that of course, if the raw material prices and notably copper which is back to $700,000 return has been increasing towards second part of the year that will have an impact over next year. Now, will it be the same impact as this year, not necessarily, but it's because other commodities have been moving in other direction, but it's too early to say.

On the positivity, yes, we certainly intend to deliver another six months of strong productivity in H2 and of course Q3 is giving us already hint on that. Remember that beyond everything we do, and which already allow us to generate productivity in the absence of material topline growth as soon as we have some acceleration on the topline growth that is also mechanically helping the productivity, so that's going in the right direction.

And on IT, I can just repeat that it is our objective to certainly have a better performance during the H2 than in H1. So, I'm happy to confirm that and we'll see where we finish H2.

Next question please.

One more question on China, you talked about it quite a bit already, but obviously growth has been strong for quite a few quarters. Schneider is obviously quite present there, you've done early investment there in the part, but a long time you've restructured the business.

I think over the last couple of years particularly with regards to some of your sales channels. When you look at China growth right now and obviously there's a lot of debate on the sustainability on some of strong growth you're seeing there.

How do you review kind of the changes you've done over the past two years in relation to obviously some of the growth you're seeing right now? And when you talk forward, do you compared to maybe three or six months ago and you look at some of the maybe CapEx driven plans you're seeing versus which might be a bit longer term versus some of the sort of short-term cyclical part of your business.

Do you generally feel more confident about China growth that this could sustain also into '18 for longer maybe not at like obviously double-digit rate, but maybe for longer than what we've anticipated maybe three or six months ago? And lastly just on China, could you comment on how much - how strong the growth in low voltage was in China please.

Thank you, Simon, for that question. I mean you're right, we've been working a lot on our I would say Chinese footprint over the last two to three years at a time when the country was obviously going through a major transition and we're transitioning with the country.

I think today we have certainly a business which is benefiting from the effort that we've made notably in terms of capillarity in the country and capacity to be present in a much broader scale and notably much better in the central and western part of the country that is certainly giving us a better reach on the global capacity of the country. We have all this strategy of focusing on the new growth segments.

I mean, we've mentioned that pharmaceutical, healthcare, food and bev, wastewater, electronics and many other, we are, I think positioned on the right new big infrastructure work like metro, which is a big thing today where we are clearly making a very, very good inroad in term of business. So, I think we've been evolving our organization.

One element that I can add is that you have, even with the new markets remains a big, you have the development of retrofit for the construction that new space, in which we are doing well. So, I think we've been addressing to the market.

Then of course as by the global acceleration of the Chinese economy, and I want to finish by repeating that construction is going to stay a bit more volatile in the future, you will have ups and down. We see some very solid prospective for Industry Automation globally as China wants to get to the next step or milestone in its journey for industry leadership.

They need to strive for more technology, more quality and more wage inflation absorption so that we go through more automation.

And Simon, you would recall that there is a presentation that was made last month specifically on China, which is also available on the website. Thanks, next question please.

Just maybe a question on cross-selling opportunities because you've highlighted that again. It seems like the rise there in the opportunities has maybe coincided with the ramp up of connected product launches.

So, I was just wondering how important EcoStruxure is to maximizing those opportunities you talk about now. And then if you could maybe comment on the pace of new connected product launches this year, I think and whether that's kept pace with last year, I think you were talking about some 300 connected product launches last year for memory.

Thank you.

Crossing selling opportunity obviously in not isolated from EcoStruxure. EcoStruxure is a fantastic way to bring the full Schneider power to our customer in an integrated open efficient manner.

And you're absolutely right, I mean when you bring efficient platform, it is an easy way to integrate more Schneider technology for the benefit of the customer in a kind of end to end easy to use way. So, no doubt that this EcoStruxure proposal is helping the cross selling.

Not the only element, be very clear, I think we're also making sure that we are organizing ourselves in terms of sales force, the way we deal with the customer, maximize this capacity to channel, all our portfolio to our customer. But that's one element.

For the connected product, they're with us until the 12th of December. I don't want to kind of start a patchwork of elements on that.

I would prefer to come with a comprehensive view on the 12th of December, will share a lot of data on that date on how we are progressing in that respect.

Next question.

I apologize for being the tenth person to bang on and ask about China, but really it was a clarification. Earlier in the year I think that you were sort of giving some hints or some figures around the kind of relative growth rates in Industrial Automation.

And I think in one quarter Industrial Automation who growing at nearly 20%. What I'm curious about is, in the 10% China growth, is Industrial Automation growing mid-teens and low voltage growing mid-single digit or is it much narrower than that?

Can you just give us a sense, a calibration of where those two businesses are in China? So that's question one.

Question two, if we put aside all the comp effects, restock, destock and all this other stuff. And if you look into your China industrial business in 2018, do you think, do you see early signs, Emmanuel, of the Industrial Automation piece next year can still be quite good.

Are there any positive signals to how that business should trend next year?

That wasn't one question, Ben, but that's fine. Well, I'm not going to disclose, you know, because if I thought that with China I can do that for everyone.

But…

But we did it couple of quarter ago.

Yeah, but this is only for a specific purpose, but I'm happy to give a sense of what was going on. I mean we had a nice double-digit growth for Industry Automation in the quarter in China, but actually low voltage was also posting a nice high-single.

So, it's differentiated, but it's not, as you should know, there was a kind of phenomenal gap between the two. But again, I think that we highlighted the fact that we see low voltage and consumption globally as less clear in the evolution.

Now when I look at next year in China, I'm not going to say we're going to continue to fly at double digit, I don't know. But I think we are today expectation of a continuation of very solid growth, which is exactly how it materialized.

Next question please.

I want to just regarding the divisional name changes today. I guess whenever you sort of changed the description of division; maybe it changes your attitude towards all the assets within that division.

And perhaps, do the name changes imply there may be assets within those divisions now that appear as non-core. Low voltage is a very appropriately most specific title than building and partner was for instance.

Could you comment on maybe portfolio and whether there is some businesses we may see depart in the next year to 18 months.

No, I don't think that, Jonathan, you should take in the change of name more than a desire of clarifying what was sometime a kind of misunderstanding between is it an end market or is it a technology. And I think that we realized that when we are talking about building for instance, people thought that was a kind of all our sales to building and that was not the case.

So, I think we took a shortcut and called it low voltage, which is the bulk of what is within this business. As you know we also have building automation and it's very important for us.

But I don't mean you should read more than that in the change of name than a clarification that we are reporting by technology today and not by end market and that was the purpose of changing the names.

Thanks Jonathan, next question please.

Coming to medium voltage, could you just update us on when you expect the timing of completion for the formation of the specialized organization and specifically the sizes of the respective businesses. And in the past, you've talked about selectivity within medium voltage impacting the results something like negative 4% for this year and then largely complete.

Is that how you see the picture in the context of your updated guidance that it should about a minus four and nothing to 2018 or is there an adjustment there? And I guess specifically a clarification on the earlier questions around IT.

Is the level of growth within IT you said was good in all regions, excluding North America? Can you give a sense of what the aggregate growth was excluding North America for IT?

Thank you.

So, William, that is at least two or three questions, but I'm certainly going to take the first one on energy, where we are. I mean we started and I don't thing we want to give a date by which it will be done.

By the way for the kind of things which is done in one go and this is it, actually it's a gradual implementation. So hopefully by the beginning of next year, this new organization will be up and running.

But I don't thing we want to put more pressure than this kind of objective on the timeline. On the minus 4, I'm certainly happy to confirm that this is the full impact that we expect for 2017.

And by the way I think it's in the presentation and in the press release. And I'm happy to confirm that for 2018 we're not expecting any more material impact coming from the selectivity.

So, we will target for 2018 the performance which won't be impacted by selectivity. On the IT growth, no I'm not going to detail it out, I think I just now mentioned the fact that the decrease in the US was a significant one.

So, I'm sure you can make your assumption on what it means for the rest.

Thanks, Will, I think we've gotten another four minutes and maybe two or three questions. So, we try to see if we can fit them.

Next one please.

I just have one quick question, sort of following up on utilities in the US and I guess more broad than utilities probably. On the hurricane recovery impact, what are your expectations in terms of how much growth could come from that maybe in the near term it leaves a negative impact, but I guess events like Katrina was pretty for utility CapEx and for construction rebuild.

So what expectations do you have for the coming quarters on the back of that? Thank you.

Hi Daniela, good question. I'm not sure I have an answer, we are discussing with the team, we are trying to help as much as we can our customer and some of them are in very difficult situation.

We've been - I can tell you during this very difficult moment fully mobilized to people to face this tough situation. They should have some impact because indeed you have a lot of repairs, reworks to be done, both of course at the level of the utilities, but at the level of many new individuals, clearly have to repair their house.

I think there could be an impact in Q4, but I'm even not sure, I think it can take a little bit of time. So, I don't want to, you know, I don't have the number by the way [indiscernible].

Yes, there is, of course, a special effort that would need to be done. I'm not able to put a number, I'm not able to put a timeline on it.

How significant was Katrina?

Good question, we can try to, I don't have the numbers anyway. So, we can try to find that out for you and get back to you.

A quick question on your part, please. It seems that the bundle that you're selling in that market, IT plus the voltage is an attractive one.

But I'm thinking about IT alone, you've mentioned there for North America, you sell less rack, less cooling, less UPS. Is that sort of a like a new underlying trend in that market in the face of co-location, hyperscale, et cetera?

Has there anything changed in terms of pricing power that you have. I mean, if I look at margin expectation for next year, I think they're clearly up for IT.

But is that realistic given some of the underlying moves in that industry?

Allow me not to be dragged into discussions on the margin for IT for next year. No, happy to answer on, is it a kind of underlying trend, the answer is no.

So, it depends, when we talk about co-location traditional investor in data center it's very much a traditional architecture that apply. When it comes to big investment made by the web giants, I think we flagged that they are coming with different architecture.

And when you look at the past 18 months, we have had moments with we did two type of investments. We'd certainly not say that there was a kind of one trend one trajectory.

We had some very good movements in terms of IT business, for datacenter investment over the last 12 to 18 months.

I think we're running out of time, but I think we have one last question.

I was just hoping for a bit more detail on your process businesses within Industrial Automation, trying to understand where they are within the cycle. So, if you could tell us which bits are recovering quite well?

And other parts maybe that's by geography, maybe that's by sub segment, where you still think there's quite a lot of room for recovery.

I think we are probably at the beginning of the improvement on process. We know that it's more medium long-term cycle that we need, oil and gas and other industry like mining probably to resume investment.

What we can say is that our field devices are back to growth around mid-single digits, so that's a good news. We see also our Process Automation solution, so including Foxboro, Triconex, the DCS and the safety system, which are up nicely over the period.

So, it's, you know, and again I don't want to be bragging around here. We are probably facing easy comps as well.

But it's good to see more a positive trajectory. When I talk to team on the kind of where is a level of discussion with the customers, what should we expect for the future, they every much speak about, yes, things we know which are improving, probably order intake that are going to be taken rather probably H1 2018.

And I think that they are not saying that they necessarily see a kind of de-acceleration before the second half of 2018 at that stage. But I we will be happy to catch up after the end of the year.

I think that Q4 is going to be an interesting one in that respect.

So, thanks everyone, I think we'll probably close here because we've reached the hour, slightly crossed it, sorry for that. And thank you Emmanuel.

And just a reminder again for December 12th, please mark the date, invites to follow for the Digital Day.

We are expecting you in Paris.

And the IR team is of course available for follow-up questions as required. Thank you.

Thank you very much, bye, bye.