Schneider Growth & Expansion Continues by Jim Pinto

Schneider, the aggressive French giant, has posted its 2006 annual results, making it a clear No. 3 in the automation business, after Siemens and ABB. Here are some highlights:

Revenues $18B, 18% growth
Profit: $2.7B, 28% growth
Organic sales growth: 10.7%
Average annual organic sales growth (3 years): 9%
Operating margin: 14.6%, up 1.2%
Earnings per share: up 31%
Dividend: up 33%

Schneider reports that growth comes through geographical coverage, plus R&D and innovation and new businesses. During 2006, organic (non-acquisition) sales growth by geographical region was:

Europe +9.6%
North America +7.5%
Asia Pacific +15.7%
Rest of World +17.6%

Sales Breakdown: 63% Electrical Distribution; 32% Automation & Control 5% Critical Power (APC acquisition Feb 2007).

Key strengths:

Leading positions in Power & Control
Wide geographical coverage with strong local presence
Capacity to play a consolidation role through acquisitions

Schneider is investing heavily in fast-growth emerging countries: Eastern Europe, S. America, Africa & the Middle-East, India, China and Asia Pacific. The contribution of emerging countries to Group sales has grown to 31% in 2006.

About 5% of revenue is invested in R&D. There are 6,500 R&D team members in 25 countries, with consolidation in high-tech countries. There are 60 Application Centers in 18 countries, plus R&D partnerships with 50 private university labs.

Schneider's 2007 Mantras:

Quality, customer satisfaction (and emotion!) first
Priority for solutions - Energy Efficiency, Critical Power
Automation: strategic and execution shift

Schneider continues to move aggressively with strong acquisitions. Unlike Siemens and some others, it doesn't screw them up. The aggressive French giant has no serious market share in process controls and, if it chooses to, is certainly one of the very few which has the bucks to accomplish an acquisition of Invensys (Foxboro/Wonderware). At the very least, look for Schneider to pull off some good strategic acquisitions in 2007.