APC 2012 Annual Report Download - page 155

2012 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 153
BUSINESS REVIEW
4
REVIEW OF THE CONSOLIDATED FINANCIAL STATEMENTS
impacted machine builders and general manufacturing segments.
The business’ organic decline was much less pronounced in the
second half than in the fi rst half.
The IT business generated revenues of EUR3,677million, or 15%
of the consolidated total. This represents an increase of +13.6% on
a reported basis and +2.7% like-for-like. Solutions showed modest
growth on the back of solid trends for services, partly offset by
customer cautiousness towards new datacenter investment in the
mature countries. Products were slightly positive, primarily driven by
sustained demand for secured power from new economies, such
as Russia or South East Asia, and by the success of the Luminous
offer in India.
The Buildings business generated revenues of EUR1,682million,
or 7% of the consolidated total. This represents an increase of
+8.4% on a reported basis and -3.1% like-for-like. Products were
impacted by tough market conditions for video security products
and Solutions were slightly negative due to lower related public
spending in Western Europe and a decline of advanced services
in the US.
Gross profit
Gross profi t increased from EUR8,387 million for the year ended
December 31, 2011 to EUR9,057 million for the year ended
December31, 2012, or 8.0%. This increase was gathered through
2011 acquisitions and through the price actions as well as costs
discipline led since the second semester of2011. As a percentage
of revenues, gross profi t increased 0.3 points from 37.5% in2011 to
37.8% in2012 due to the signifi cant price actions and to the industrial
productivity that had more than offset the negative effects of mix.
Support Function costs : R esearch and development and selling,
general andadministrative expenses
Research and development expenses, excluding capitalized
development costs and development costs reported as cost
of sales, decreased by 5.9% from EUR539 million for the year
ended December31, 2011 to EUR507million for the year ended
December31, 2012. As a percentage of revenues, the net cost of
research and development decreased slightly to 2.1% of revenues
in2012 (2.4% in2011).
Total research and development expense, including capitalized
development costs and development costs reported as cost
of sales (see note 4 to the Audited Consolidated Financial
Statements) increased by 8.1% from EUR979 million for the
year ended December 31, 2011 to EUR1,058 million for the
year ended December31, 2012. As a percentage of revenues,
total research and development expenses remain stable at 4.4%
for the year ended December31, 2012 and for the year ended
December31, 2011.
In 2012, the net effect of capitalized development costs and
amortization of capitalized development costs amounts to
EUR153million on operating income (EUR122million in2011).
Selling, general and administrative expenses increased by 8.1%
from EUR4,658 million for the year ended December 31, 2011
to EUR5,035million for the year ended December 31, 2012. As
a percentage of revenues, selling, general and administrative
expenses represented 21.0% for the year ended December31, 2012
(compared to20.8% for the year ended December31,2011), cost
control allowing compensating most of infl ation and investments.
Combined, total support function costs, that is, research and
development expenses together with selling, general and
administrative costs, totaled EUR5,542million for the year ended
December 31, 2012 compared to EUR5,197million for the year
ended December 31, 2011, an increase of 6.6%. However, our
support functions costs to sales ratio decreased from 23.3% for
the year ended December31, 2011 to 23.1% for the year ended
December31, 2012.
Other operating income and expenses
For the year ended December31, 2012, other operating income
and expenses amounted to a net expense of EUR10 million,
including costs linked to acquisitions for EUR52 million, a
EUR21million gain on the curtailment of a U.S. employee benefi t
plan and miscellaneous other operating incomes and expenses
amounting to a net of EUR21million. Costs linked to acquisitions
are acquisition, integration and separation costs on 2011 and 2012
acquisitions, notably Telvent and M&C. Net other operating income
includes mainly reversal of provisions for litigation or claims that
expired on December31, 2012.
For the year ended December31, 2011, other operating income
and expenses amounted to a net expense of EUR8million, including
costs linked to acquisitions for EUR99 million, a EUR45 million
gain on the curtailment of a U.S. employee benefi t plan and
miscellaneous other operating incomes and expenses amounting to
a net of EUR46million. Costs linked to acquisitions are acquisition,
integration and separation costs on 2010 and 2011 acquisitions,
notably Areva, Telvent and Leader&Harvest. Net other operating
income includes mainly reversal of provisions for litigation or claims
that expired on December31, 2011.