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43
The market experienced exceptional growth in the
Asia-Pacific region, where Chinese demand was
buoyed by direct foreign investments and exports.
Japan's machine builders benefited fully from this
trend, doubling their exports to China. The Southeast
Asian market stepped up its growth despite stronger
competition from China.
Energy-Infrastructure Market
The Energy Market continued on the path to deregu-
lation in a very mixed environment. Serial blackouts,
climate change, bankruptcies and forecasts of power
shortages led to heightened concern throughout the
electricity industry.
At the same time, power grid infrastructure needs
generated strong growth in newly industrialized coun-
tries, notably in Asia and Eastern Europe, while new
energy technologies and demand for high quality,
secure power lifted the market in the developed
nations.
The Infrastructure Market was driven by the develop-
ment needs of newly industrialized countries. The
market comprises cyclical segments, such as
telecommunications, where investment remained
strong and growth was in line with the industry's matu-
rity, and steady-growth segments, such as water
treatment, which represents a major opportunity.
Statement of income items
2004 highlights
Changes in the scope of consolidation
In 2004, the Group strengthened its position in secured
power by acquiring 48.7% of MGE UPS Systems, a
world leader in uninterruptible power supplies. The
acquisition increased the Group's stake in the com-
pany to 84.8%.
The Clipsal Ultra Terminal businesses acquired from
Gerard Industries in December 2003 and located in
Australia, New Zealand, India and South Africa were
fully consolidated as of January 1, 2004. The 50-50
Clipsal Asia joint venture created with Singapore's
CIH was accounted for by the equity method on the
same date.
Building automation specialist TAC, which was fully
consolidated as of September 1, 2003, contributed to
sales and earnings over 12 months in 2004 versus 4
months in 2003.
TAC's lineup was extended with the full acquisition of
Andover Controls in July 2004. Primarily present in
the US market, Andover was quickly folded into TAC's
operational management to form Tour Andover
Controls. Andover was fully consolidated as of July 1,
2004.
In May 2004, the Group acquired all outstanding
shares in California-based Kavlico, a major player in
sensing technologies. The company's products will
complement Crouzet's lineup of sensors and detec-
tors for repetitive machines. Kavlico was fully consoli-
dated in the second half of 2004.
Changes in the scope of consolidation added 1,169
million to 2004 sales, equivalent to 13.3% of 2003
sales, and 152 million to operating income, with an
average operating margin of 12.9%.
Exchange rate trends
Fluctuations in the euro exchange rate reduced sales
by 3.2%, or 333 million. The negative impact on
operating income came to 103 million, lowering the
operating margin by 0.6 point.
The euro's appreciation against the US dollar and
Chinese yuan was the main factor in the currency
effect:
USD CNY
Average 2003 rate 1.1280 9.3455
Average 2004 rate 1.2425 10.2869
At constant exchange rates, the 2004 operating mar-
gin stood at 13.2%.
Sales
Consolidated sales totaled 10,365 million at
December 31, 2004, up 18.1% on a current structure
and currency basis and up 8.5% on a constant basis.
This record performance was driven by both strong
organic growth of 8.5% and a significant contribution
from acquisitions.
Breakdown by region
Data by region includes the contribution from the
Growth Platforms.
Sales in Europe rose 11.9% to 5,370 million on a
current basis. On a constant structure and currency
basis, the increase came to 3%.
In a mixed business environment, Schneider Electric
benefited from the upturn in corporate capital spend-
ing and buoyant demand in the residential building
market. Operations in Eastern Europe sustained their
high growth rate with an increase of nearly 15%. After
a difficult 2003, Italy and France reported gains of
nearly 10% and 4%, respectively. Growth in the
Iberian zone held steady at around 5% and was pos-
itive in all the other countries in the region.
Sales in North America increased by 14.9% on a
current basis to 2,500 million and 9.6% on a con-
stant structure and currency basis. The Group
enjoyed broadbased growth in all its businesses, sup-
ported by a very favorable business environment.
Sales in the Asia-Pacific division totaled 1,811 mil-
lion, up 46.2% on a current basis and 21.0% on a
constant basis.
Business Review