405 Life Is On | Schneider Electric www.se.com Financial Statements 5. Chapter 5 – Consolidated financial statements at December 31, 2021 Industrial Automation generated revenues of EUR 6,726 million, equivalent to 23% of the Group’s revenues and was up 10.7% organically, with performance contrasted between strong growth from sales into Discrete automation markets and continued weaker sales into Process & Hybrid markets, although with strong demand recovery towards the end of the year. Sales growth was supported by price actions taken throughout the year, although impacted by supply chain pressures. Discrete automation markets saw strong demand with growth in many markets including packaging and material handling and across all regions. Sales into Process & Hybrid markets remained challenged, impacted by a slower recovery in mid-to-late cycle industries, although second semester saw a strong evolution in demand trends including in Consumer Packaged Goods (CPG) and O&G. Gross profit Gross profit was up 12.5% organic with Gross margin reaching 41.0% in 2021 (down 10 bps organically) mainly driven by the pricing actions, positive mix and industrial productivity, notwithstanding additional costs incurred due to raw material inflation and continued pressures on global supply chains. Support Function costs: Research and development and selling, general and administrative expenses Research and development expenses, net of capitalized development costs and excluding research and development costs booked in costs of sales, increased by 19.1% from EUR 718 million for 2020 to EUR 855 million for 2021. As a percentage of revenues, the net cost of research and development increased slightly to 3.0% in 2021 (2.9% for 2020). Total research and development expense, including capitalized development costs and development costs reported as cost of sales (see Note 4 to the Consolidated Financial Statements) increased by 9.4% from EUR 1,407 million for 2020 to EUR 1,539 million for 2021. As a percentage of revenues, total research and development expenses decreased slightly to 5.3% for 2021 (5.6% for 2020). In 2021, the net effect of capitalized development costs and amortization of capitalized development costs amounts to EUR 68 million on operating income (EUR 66 million in 2020). Selling, general and administrative expenses increased by 8.9% to EUR 6,001 million for 2021 (EUR 5,512 million for 2020). As a percentage of revenues, selling, general and administrative expenses decreased slightly to 20.8% for 2021 (21.9% for 2020). Combined, total support function costs, that is, research and development expenses together with selling, general and administrative costs, totaled EUR 6,856 million for 2021 compared to EUR 6,230 million for 2020, an increase of 10.0%. Support functions costs to sales ratio decreases at 23.7%. Other operating income and expenses For 2021, other operating income and expenses amounted to a net expense of EUR 21 million. This is mainly due to gains on disposal of business for EUR 196 million being partially compensated by costs of acquisitions and integrations for EUR 166 million. The main scope changes of the year are described in the 2021 highlights. Restructuring costs For 2021, restructuring costs amounted to EUR 225 million compared to EUR 421 million for 2020. In 2020, these costs were mainly attributed to initiatives to decrease support function costs. EBITA and Adjusted EBITA EBITA is defined as earnings before interest, taxes and amortization of purchase accounting intangibles. EBITA comprises operating profit before amortization and impairment of purchase accounting intangible assets and before goodwill impairment. Adjusted EBITA is adjusted as EBITA before restructuring costs and before other operating income and expenses, which includes acquisition, integration and separation costs. Adjusted EBITA amounted to EUR 4,987 million for 2021, compared to EUR 3,926 million for 2020, an organic increase of 23.2%. As a percentage of revenues, adjusted EBITA increased at 17.3% with margin improving 140 bps organically. EBITA increased from EUR 3,295 million for 2020 to EUR 4,741 million in 2021. As a percentage of revenues, EBITA increases at 16.4% in 2021 (13.1% for 2020). Adjusted EBITA by business segment The following table sets out EBITA and adjusted EBITA by business segment: (in millions of euros) Full Year 2021 Energy Management Industrial Automation Central functions & digital costs Total Backlog 9,088 2,688 – 11,776 Revenue 2 2,179 6,726 – 28,905 Adjusted EBITA 4,501 1,242 (756) 4,987 Adjusted EBITA (%) 20.3% 18.5% 17. 3% On December 31, 2021, the total backlog to be executed in more than a year amounts to EUR 640 million.