APC 2007 Annual Report Download - page 75

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4
Business review
Joint venture MGE China, consolidated as from October
1, 2006
GET Group Pic, consolidated as from December 1, 2006.
On October 31, 2007, following a decision by the European
Union's anti-trust authorities, the Group finalized the sale
of MGE UPS's small systems business (less than 10 kVA)
to Eaton Corp.
Together, these changes in scope of consolidation added
2,154 million, or 15.7%, to revenue and 289 million, or
14.3%, to EBITA (1) for the year.
The average EBITA of newly consolidated units stood at
13.4%.
Other changes in the scope of consolidation
On October 31, 2007, Schneider Electric announced that
it had signed an agreement to create a joint venture with
Chinese partner Delixi Group called Delixi Electric. The 50-
50 joint venture manufactures, markets and distributes low-
voltage products in China via a dedicated network. It has
been accounted for by the equity method as from Novem-
ber 1, 2007.
Exchange rate fluctuations
Fluctuations in the euro exchange rate had a significant
impact in 2007, reducing consolidated revenue by 421
million and EBITA by 63 million (conversion effect only).
Revenue
Consolidated revenue totaled 17,309 million for the year
ended December 31, 2007, up 26.1% on a current struc-
ture and currency basis from the year before.
The Group achieved record organic growth of 13.9% for
full-year 2007. Acquisitions accounted for 15.7% of growth,
while the currency effect had a negative impact of 3.5%.
Breakdown by region
Revenue from Europe increased 22.5% to 7,846 million
on a reported basis. On a constant structure and currency
basis, the increase came to 12.0%.
This excellent performance reflects the development of
new activities focused on services and energy efficiency.
Demand was most vibrant in the Energy & Infrastructure
and non-residential buildings markets, lifting sales in East-
ern Europe by nearly 30%. In Western Europe, the Group
continued to perform strongly despite weaker conditions in
the residential markets in the second half of the year.
In North America, revenue increased 29.0% on a current
basis to 4,770 million, with organic growth of 13.1%. This
increase confirmed the North American operations’ ability
to amply offset lower demand in the residential market.
Business was buoyed by the Group's repositioning in such
attractive market segments as data centers, water treat-
ment, hospitals and power supply and by high demand for
energy efficiency solutions.
Revenue from the Asia-Pacific division totaled 3,233 mil-
lion, up 28 6.% on a current basis and 16.0% on a con-
(1) The Group measures operating performance on the basis
of EBITA (Earnings Before Interest, Taxes and Amortization of
purchase accounting intangibles).
stant basis. Top performers were China (up 22%), South-
east Asia and India. Across the region, the very favorable
economic environment has generated a high level of in-
vestment in infrastructure and construction.
Revenue from the Rest of the World rose 30.8% on a cur-
rent basis, to 1,460 million, and 23.3% on a constant
structure and currency basis. The markets for Schneider
Electric's solutions in Electrical Distribution, Automation &
Control and Critical Power & Cooling Services were very
firm across the Middle East, Africa and South America due
to the substantial revenues from natural resources in these
regions.
Breakdown by business
Electrical Distribution generated revenue of 9,869 million,
or 57.0% of the consolidated total. This represents an in-
crease of 14.7% on a current basis and 15.7% like-for-like.
Automation & Control revenue rose 10.8% on a reported
basis to 4,937 million. Like-for-like growth came to 9.4%.
Revenue from Critical Power & Cooling Services came to
2,503 million in 2007 versus 668 million in 2006, due to
the consolidation of APC on February 14, 2007 accounting
for 1,737 million of the increase.
EBITA and operating profit
EBITA (Earnings Before Interest, Taxes and Amortization
of purchase accounting intangibles) rose a reported 26.9%
to 2,562 million from 2,019 million in 2006. On a con-
stant structure and currency basis, the increase came
16.1%. Reported EBITA margin widened 0.1 point over the
year to 14.8% from 14.7%. Restating the 2006 data for the
acquisition of APC, the EBITA margin rose by 1.2 points, to
14.8% from 13.6%.
In 2007, operating profit (EBIT) included a 79 million
charge for amortization of intangible assets recognized as
part of a business combination, compared with 18 mil-
lion in the year-earlier period.
In the Group’s historic businesses (excluding Critical
Power & Cooling Services), the 199 million increase in
raw material costs over the year was amply offset by
higher selling prices (impact of 307 million) and produc-
tivity gains in manufacturing operations (impact of 295
million). The product mix had a negative impact of 191
million, reflecting the growth of services, projects and so-
lutions businesses.
Operating profit included 142 million in non-recurring ex-
penses related to asset impairment (40 million) and re-
structuring programs (98 million). At December 31, 2006,
non-recurring impairment and restructuring expenses to-
taled 116 million.
Non-recurring expenses primarily stemmed from contin-
ued industrial reorganization in Europe, for 40 million, re-
organization of the Critical Power & Cooling Services
business in Europe and the United States, for 22 million,
and reorganization of the Building Automation business in
the United States, for 10 million.
Other operating income and expenses also included a cap-
ital gain on the divestment of MGE UPS's small systems
business, in an amount of 60 million, and a provision of
72 million to cover difficulties and delays in deploying IT
systems.
During the year, the Group recorded total gross gains of
38 million on the disposal of property assets, notably in
the Paris area.