APC 2013 Annual Report Download - page 177

BUSINESS REVIEW
REVIEW OF THE CONSOLIDATED FINANCIAL STATEMENTS
The Industry business generated revenues of EUR4,311million, supported by the success of Luminous and sustained demand for
or 18% of the consolidated total. This represents a decrease of critical power in some new economies. The Solution business
-3.8% on a reported basis and an increase of +1.3% on a declined, as North America experienced slow project activity for
like-for-like basis. The product business was up slightly, reflecting small to mid-sized data centers and demand in Western Europe
good demand from OEMs (machine manufacturers) across all was soft.
regions after a soft start in mature countries in the first half. The The Buildings business generated revenues of EUR1,594million,
solution business posted good growth, driven by the success of or 7% of the consolidated total. This represents a decrease of
SoMachine OEM solutions and installed base services. -5.2% on a reported basis, while organic growth was flat at -0.2%.
The IT business generated revenues of EUR3,442million, or 15% Products declined due to the continuing challenging external
of the consolidated total. This represents a decrease of -6.4% on a environment. Solutions business was up driven by services growth
reported basis and -1.4% like-for-like basis, with mixed trends that offset the decline of building management systems, impacted
between Products and Solutions. The Product business grew, by low public investments in mature countries.
Gross profit
Gross profit decreased from EUR9,057million for the year ended revenues, gross profit remained stable at 37.8% in2012 and 2013
December31, 2012 to EUR8,891million for the year ended thanks to the industrial productivity that was the key driver along
December31, 2013, or -1.8%, the performance being weighed with positive pricing for the organic improvement despite a low
down by negative scope and currency effect. As a percentage of volume environment and unfavorable mix effect.
Support Function Costs: Research and development and selling,
generalandadministrative expenses
Research and development expenses, excluding capitalized Selling, general and administrative expenses decreased by 1.8%
4
development costs and development costs reported as cost of from EUR5,035million for the year ended December31, 2012 to
sales, increased by 5.5% from EUR507million for the year ended EUR4,944million for the year ended December31, 2013. As a
December31, 2012 to EUR535million for the year ended percentage of revenues, selling, general and administrative
December31, 2013. As a percentage of revenues, the net cost of expenses remained stable at 21.0% for both 2013 and 2012, as
research and development increased to 2.3% of revenues for the operational efficiency had compensated most of investments.
year ended December31, 2013 (2.1% for the year ended Combined, total support function costs, that is, research and
December31, 2012). development expenses together with selling, general and
Total research and development expenses, including capitalized administrative costs, totaled EUR5,479million for the year ended
development costs and development costs reported as cost of sales December31, 2013 compared to EUR5,542million for the year
(see note4 to the Audited Consolidated Financial Statements) increased ended December31, 2012, a decrease of 1.1%. Consequently to
by 8.2% from EUR1,058million for the year ended December31, 2012 the investments in research and development expenses and
to EUR1,145million for the year ended December31, 2013. As a commercial initiatives for new economies and services, in line with
percentage of revenues, total research and development expenses the strategic plan, our support functions costs to sales ratio
increased to 4.9% for the year ended December31, 2013 from 4.4% increased from 23.1% for the year ended December31, 2012 to
for the year ended December31, 2012. 23.3% for the year ended December31, 2013.
In2013, the net effect of capitalized development costs and
amortization of capitalized development costs amounts to
EUR179million on operating income (EUR153million in2012).
Other operating income and expenses
For the year ended December31, 2013, other operating income For the year ended December31, 2012, other operating income
and expenses amounted to a net income of EUR73million, and expenses amounted to a net expense of EUR10million,
including costs linked to acquisitions for EUR52million, a including costs linked to acquisitions for EUR52million, a
EUR173million gain on the curtailment of employee benefit plans EUR21million gain on the curtailment of a U.S. employee benefit
in the U.S., in France and in Norway and miscellaneous other plan and miscellaneous other operating incomes and expenses
operating incomes and expenses amounting to a net expense of amounting to a net of EUR21million. Costs linked to acquisitions
EUR48million. Costs linked to acquisitions are acquisition, are acquisition, integration and separation costs on 2011 and 2012
integration and separation costs on 2013 acquisitions, notably acquisitions, notably Telvent and M&C Energy Group. Net other
Electroshield – TM Samara and acquisition costs linked to Invensys operating income includes mainly reversal of provisions for litigation
(see note30, Post-closing events). Net other operating expense or claims that expired on December31, 2012.
includes mainly provisions for litigation or claims and gain on
disposal of fixed assets.
175
2013 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC