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Third quarter sales on 30th October Schneider will report Q3 results on 30th October. We adjust our numbers ahead of the event. Schneider Consensus estimates for FY25e sit slightly lower than they did in January. The stock has lacked positive earnings momentum. For the first time in several quarters, we see no risk of downside to Consensus for the Group''s organic performance. Modelling further FX headwinds - expecting new guidance for this within the Q3 release Schneider guides for an FX headwind to sales of -EUR1.25bn to -EUR1.35bn and related margin impact of -40bps. The USD has continued to weaken since this guidance was given in late July. We expect management to update guidance for FX alongside the group''s Q3 results. Ahead of this, we move to model a rising FX headwind above the current guidance. Capital Markets Day on December 11th Schneider will hold a Capital Markets Day on December 11th. We hope that management will address this year''s struggles to deliver organic operating leverage; perhaps going as far as to announce a new productivity programme. On balance we therefore view the event as offering a positive balance of risk/ reward. Adjusting forecasts; new TP EUR275 p/s We update our estimates for recent trading and FX, including rising translational and transactional headwinds. Our target price rises to EUR275 p/s, a reflection of the unwind of our discount to our SOTP26e. We remain Outperform rated. With this note we initiate coverage of Schneider Electric ADR with an Outperform rating and TP of EUR65 p/s.
Schneider Electric Schneider Electric SE
A broadly in line print, but the lack of operating leverage needs to be addressed in H2 Schneider delivered a broadly in line Q2 Sales print. Energy Management was a little better than expected (10.5% osg vs. Cons at 9.3%), for which Western Europe where the business had declined in Q1, moved back to growth. North America remained strong, as was Asia Pac. Industrial Automation missed Consensus (-1.1% osg vs. Cons at -0.3%). Across the Group Products were up 2% organically, Systems grew 17%, while Software/ Services grew 11%. Divisional profitability was a little light. Energy Management''s H1 margin missed by -30bps and Industrial Automation margins missed by -90bps. Central costs came in lower than Consensus, allowing the Group to deliver an inline adjusted EBITA print at the Group level. Divisional margins appear to have been impacted by a negative net price development. Management spoke of this during the conf call, stating that actions have been taken and they expect stronger pricing going forward, leading to better operating leverage. Focusing on quarterly rates of Datacentres growth is to risk missing the bigger picture Unsurprisingly analyst questions during the conf call focused on Q2 sales growth to Datacentres and the outlook for this segment across the different regions. As usual management responded to such questions with strong statements about a very healthy and long-dated outlook for demand. We would broadly agree within management''s statements, and add that in our view, there is generally too much focus on companies'' respective quarterly growth rates within the DC segment. The comps have become tougher, a few customers make up a lot of the volume and DC is a project business - growth is bound to be lumpy, but if we stand back, the helicopter view, in the context of hyperscalers'' combined spending intentions, seems to suggest that demand is and will remain robust for the foreseeable future. Updating numbers; TP unchanged at EUR260...
Schneider Electric''s H1 sales conference call has just ended. Key takeaways include... Data Centre Growth: Unsurprisingly many questions revolved around the growth outlook and quarterly performance of Schneider within the data centre market, particularly in different regions, and the Company''s backlog. Key Points: Schneider management asserted that they continue to see a robust pipeline and retain a solid and growing backlog for data centres, with contributions from all regions (North America, India, the Middle East, China, and Europe). The Company is cautiously positive about Europe despite challenges. There was an acknowledgement of some backlog rephasing from a major customer, but the CFO sated that this is not expected to impact FY performance. Industrial Automation (IA) outlook, especially for margins: The focus of questioning was on the potential for demand and margin recovery, including the impact of pricing, mix, and restructuring costs. After a long period of slow demand, management was challenged on whether something has changed structurally or whether it remains confident that the issues are cyclical. Key Points: Management believes the issues are cyclical. They have a plan to return to higher profitability in IA, addressing issues like mix, pricing translation, and costs. The SaaS transition at AVEVA and the return of discrete automation volumes are expected to provide a margin uplift. Gross Margins and Pricing Actions: The discussion centred around an expected improvement in gross margins in the second half of the year, driven by pricing actions. There was a focus on how much of the pricing actions have already been announced and implemented, and how much is still uncertain due to final tariff levels. An analyst asked why Schneider has taken longer than some peers to protect margins via price actions. Key Points: Management stated that most pricing actions have now been implemented as new list prices, and the Company is confident...
What happened? Schneider has just published H1 results; key takeaways include... Q2 Sales: In line. Energy Management solid. Western Europe which declined in Q1, just about moved back to growth. North America remained strong, as was Asia Pac (10.5% osg vs. Cons at 9.3%). Industrial Automation missed Consensus (-1.1% osg vs. Cons at -0.3%). Products up 2% organically. Systems grew 17% organically. Software/ Services grew 11% organically, with Software and Digital Services up 10% and Field Services up 12%. H1 Operating profit: In line with Consensus. Margin was 18.2% (in line too). Energy Management margin missed by -30bps. Industrial Automation margin missed by -90bps. The central cost was lower than Consensus at EUR373mn vs. Cons. At EUR443mn. This allowed the Group to make up for the weaker margins in both divisions and still deliver an in line EBITA print at the Group level. H1 FCF: As is often the case in H1 FCF is weak seasonally. The Group generated EUR889mn in H1 vs. Consensus at EUR857mn. FY25e guidance: Management has updated its expectations for FX; they also slightly increase the expected scope effect for the year. All other guidance is unchanged. See table below for more information. / The results conf call is webcast from 8.30 CET here BNPP Exane View: While other have delivered beats, this is an in line print, only achieved thanks to lower central costs; divisional margins were light. There are unlikely to be Consensus upgrades tomorrow. The shares may be affected by the capex messages of hyperscalers reporting overnight; the impact of these may be more meaningful than this release. But on the face of it, based on this release alone, the shares should be down today. Consensus and Exane BNPP table (Company Consensus) /
What happened? Schneider Electric has announced an agreement to acquire the remaining 35% stake in Schneider Electric India Private Limited (SEIPL) from Temasek for EUR5.5bn, aiming for full ownership. The transaction is expected to close in the coming quarters, subject to regulatory approvals. Schneider Electric anticipates double-digit organic sales growth for SEIPL and plans to expand its RandD and supply-chain capacity in India. Schneider states that India has been delivering strong revenue and margin growth since the initial acquisition of LandT EandA with some acceleration in the past few years: India is now the third largest market for the Group and one of its four hubs; In 2024, SEIPL had statutory revenues of EUR1.8 billion (including export sales); total sales in India; were EUR2.5bn across subsidiaries; Schneider Electric has adopted a ''2 brands 2 sales'' strategy post the initial transaction in 2018 with LandT EandA now rebranded as Lauritz Knudsen. BNPP Exane View: In effect, while Schneider already consolidates all of SEIPL, there is some sense acquiring 35% of stake in SEIPL. Therefore, the deal values those sales, (roughly EUR875mn in FY24, and perhaps as much as EUR950mn in FY25e) on c. 6.3x sales24 and 5.5x sales25e. For point of reference, ABB India is on 3.8x Sales25e, but of course, here Schneider''s deal is for full control of SEIPL. This deal has been telegraphed for some time. Reported on Bloomberg as close to happening on several occasions, while the Group''s CEO stated that full ownership was the end game, when I asked him for comment at our CEO Conference on June. The price paid is probably at the top end of expectations. The price paid of EUR5.5bn is larger than consensus FY26e and likely limits Schneider''s ability to do further large deals in the near-term.
H1 results on 31st July Schneider will report H1 results on 31st July. We adjust our numbers ahead of the event. While management has repeatedly reiterated FY25e guidance across a couple of recent conferences, we note that seasonality has also been flagged. We adjust our estimates to reflect a higher degree of seasonality than previously forecast, especially regarding FCF, where we now expect a shape somewhat akin to that of FY22, when c. 15% of cash was generated during the first six months of the year. Rising FX headwinds - transactional impact, especially in H1 Schneider guides for an FX headwind to sales of -EUR1.15bn to -EUR1.25bn and related margin impact of -40bps. The USD has weakened considerably since this guidance was given. We move to model a rising FX headwind, above that signalled by the Company for both sales and adjusted operating margins. We expect management to update guidance for FX alongside the group''s H1 results. Expecting Motiveair to have made a strong start under Schneider ownership We upgrade our forecasts for FY25e scope effect to Group sales from EUR250mn to c. EUR300mn, reflecting a strong start to Schneider''s post-deal ownership for the recently acquired Motiveair datacentres cooling business. Adjusting forecasts; TP EUR260 p/s We update our estimates for recent trading and FX, including a rising transactional headwind. Our target price remains EUR260/s. We remain Outperform rated.
Speaker: Olivier Blum, CEO What we learned: . Data Centres: Schneider sees data centres as a major long-term opportunity, calling demand very solid both short and mid-term, with new projects emerging in the Middle East and Europe. Capex commitments from hyperscalers remain encouraging. Schneider has been in DC for over 20 years and sees its global service capability and technology partnerships like with Nvidia as clear USPs. Staying ahead in DC means continuously evolving the offering, and Schneider is committed to doing so. . Services: Schneider sees an almost limitless opportunity in data services as its hardware portfolio becomes more connectable. With sensors in most products, predictive maintenance and digital services are growing in relevance. Schneider''s strong performance over the past five years includes strength in field services, but digital services are now the next wave of growth. As digitalisation expands, Services is expected to become even more central to the value proposition. . Tariffs: Tariff-related costs could be c.EUR200m, but Schneider is confident these will be offset through pricing and other levers, with no impact on guidance. The company reaffirmed its strategy of producing 90% of what it sells in the same region. Its multi-hub model is designed to handle such shocks. While margins and guidance are protected, the biggest concern is the uncertainty tariffs bring for customers. Overall tone: Positive
Schneider Electric''s Q1 sales conference call has just ended. Key takeaways include... Datacentres: Management confirmed that Western Europe remains challenged by datacentre delays linked to permitting and energy connection issues, in line with commentary over the past year. Growth is still expected longer term supported by the government, but delays continue for now. By contrast, datacentre demand globally remains strong, with Schneider seeing strong double-digit growth in both orders and sales in Q1. Residential and industrial OEM: Continued softness in residential building was flagged, notably in Western Europe and North America. Meanwhile, machine OEM demand is showing early signs of recovery, particularly in China and parts of Western Europe, as destocking pressures ease. Management sees this as a reflection of underlying demand rather than just inventory correction. Guidance: Schneider Electric reiterated FY organic growth guidance of 7-10%, noting that pipeline and backlog underpin their confidence despite a slower Q1 (the Q1 B2B was said to be 1x) and acknowledged that reaching the midpoint/ high-end would require acceleration in H2. It expects discrete automation to improve in H2, while the existing three-point guidance range captures uncertainty around the pace of recovery. Tariffs: Concerns around the US tariff hikes were addressed by highlighting that Schneider has 83% North America to North America sourcing, with limited China exposure. Even so, the gross tariff cost impact is estimated at ''several hundred million'' euros at Group level. New pricing actions and repricing clauses in customer contracts were mentioned as levers to protect profitability, though it sounded as though there may be some timing lag before full offset is achieved. BNPP Exane View: The Western European Q1 revenue decline across both divisions will no doubt lead investors to question the ability of Schneider to deliver organic sales growth at the Consensus...
What happened? Schneider Electric''s Q1''25 results have just been published; key takeaways include... Q1 Sales: -1.5% light of Company Cons, with Energy Management organic sales growth of 9.6%, -146bps light and Industrial Automation organic sales growth of -0.9%, -103bps light. Overall Group org sales came in at 7.4%, 146bps light. Energy Management was strong in North America, and Asia Pac, but missed in Europe and ROW. EM European organic sales growth missed by over 900bsps! Industrial Automation''s European business was also weak, with organic sales growth missing by over 400bps. Sales by nature: Products up 1% organically; Systems up 21% organically; Software and Digital Services up double-digits and Field Services up HSD. AVEVA ARR is up 14%. ETAP and RIB in EM were up double digits. Sales by end market: Buildings: Resi down, Non Resi up; Datacentres and Networks: up strong double digits; Infrastructure: up strong; Industry: Down slightly, with Discrete into Machinery up, into industrial manufacturing down, and process (AVEVA) down. Outlook for FY25: Schneider Electric still expects +7% to +10% organic sales growth for FY''25 (vs Cons: +8.9%) and +10% to +15% organic adjusted EBITA growth. The expected FX impact on sales has been lowered from EUR +600-700m to EUR -1.15bn to -1.25bn and its impact on EBITA margin lowered from +10bps to -40bps. This has led to a guide down in adjusted EBITA margins from 19.2-19.5% to 18.7-19.0%, implying Company Consensus margins would come down -45bps.The expected scope impact on sales has been increased from EUR +100m to EUR +250m. Taking all of this together, the implied absolute impact to Consensus headline EBITA25e is c. -6.4% and that''s assuming Consensus doesn''t trim its organic sales growth forecast to the lower end of the range - something that might happen given the Q1 organic sales growth miss. In terms of expected trends, market demand from various end markets (data Centre and networks, buildings,...
Schneider will report its Q1 25e sales figures on 28th April. Ahead of the release we update estimates to reflect our latest thoughts. We expect a print which is close to current Consensus, albeit skewed slightly more towards Energy Management, with a somewhat weaker start to 2025 for Industrial Automation than that which is modelled by the Street. We expect FX to have become a materially larger headwind to full year numbers than is currently guided for, something management will likely address with this print. Another strong quarter for Energy Management, while Industrial Automation slowly recovers We expect Energy Management to deliver another strong quarter, however, we do not expect a North American sales print on the level of Q4 when an unlocking of the supply chain boosted revenues to record levels. We model a slow start to the year at Industrial Automation, below that of post-FY24 Consensus. We suspect that sell-side forecasts for IA''s Q2 performance are also a little high, though perhaps too low for H2. Moving to model Motiveair We move now to model the completion of the acquisition of Motiveair. We include ten months of consolidated results for the business (two in Q1), pushing our forecast for scope effects beyond those guided for back in February. Adjusting forecasts; TP EUR285 p/s We update our estimates for recent trading and FX. Our target price moves to EUR285/s from EUR290/s. We remain Outperform rated.
A strong end to 2024 - what next? Schneider delivered a Q4/ H2 beat. Q4 sales were 5% ahead of Consensus, with beats at Energy Management and Industrial Automation. IA finally returned to growth in Q4. H2 Operating Profit came in 5% ahead. The H2 margin was 40bps ahead, with the beat driven by EM profitability and a lower central cost line. Industrial Automation actually missed Consensus. The Company issued first guidance for FY25e, an FX tailwind and higher than the Street margin combine to suggest a c. 3.5% upgrade to Consensus at the mid-point. Datacentres (will remain) in focus During the results conf call management was asked to comment on the DC market outlook. It was clear that management''s main goal was to reassure that it remains healthy and in this they succeeded. Analysts probed further, asking whether the non-repeat of ''rush'' pricing from 2024 implies a margin headwind in 2025. While the CFO acknowledged that gross margin expansion will moderate, management still expects progress on profitability, supportive of the guidance for 2025. Balance Sheet - a new pillar of the investment case? Based on initial FY25e PandL and FCF conversion guidance, and in the absence of large MandA, the Group''s financial leverage will fall below 1x by year-end. We asked how management plans to address this ''nice to have'' problem. Regarding MandA, the CEO highlighted that ''We''ll still be opportunistic every time it makes sense to achieve our strategy.'' Beyond this the CFO stated that ''We''re not averse to some sort of special distribution to our shareholders...'' These comments are intriguing. Such a move could yet become an additional pillar of the investment case. Updating numbers; new TP EUR290 We update our estimates for recent trading and to reflect the latest FX. We now derive our target price via an FY26e-based SOTP. Our new target price rises to EUR290/s (from EUR280/s).
What happened? Latest Datacentres trends and outlook: Management was asked to comment on various aspects of the DC market such as whether the orderbook continues to grow, the potential impact of DeepSeek to demand for cooling, the move towards more inference etc... Questions around orderbook momentum were artfully talked around, without ever saying anything too meaningful. It was clear to us that management''s main goal was to reassure that the outlook remains healthy - this was the message they wanted investors to take away. Analysts went further, asking whether the non-repeat of ''rush'' pricing in 2025 would create a margin headwind. While the CFO acknowledged that pricing had been healthy, and that gross margin expansion will moderate this year, it''s clear that management still expects to make progress on profitability, supportive of the Group margin guidance for 2025. Tariffs: Management was asked about the potential impact of tariffs on its North American business. The operation utilises 83% in region sourcing, but with 11% of the Group''s headcount in Mexico (as of 2023) Schneider still screens as at risk if the US were to impose tariffs on Mexican sourced products. The CFO responded by highlighting how not all Mexican factories are exposed to the same risk. Some are in zero tax zones, which may remain protected from tariffs. If these zone agreements hold, then the impact from Mexican tariffs was characterised as immaterial. If these agreements don''t hold, then the impact to Schneider would be ''higher than that few hundred million.'' In readiness for such a scenario, the CFO stated that ''we''re really preparing the commercial actions that we would put place to protect our profitability.'' Balance Sheet - a new pillar of the investment case? We highlighted that based on PandL and FCF conversion guidance for 2025, in the absence of large MandA, financial leverage is set to end 2025 below 1x. We asked how management planned to respond to this. Regarding...
Schneider has just been published H2 24 results; key takeaways include... Q4 Sales: 5% ahead, with beats at Energy Management and Industrial Automation. IA is finally returning to growth as of Q4. The regional standout of the print was EM''s North American organic sales growth of 25.3%! Products sales grew 4% organically. Systems sales rose 27% organically. Software and Services rose 11% organically (both up double digits). AVEVA ARR rose 15%. ETAP and RIB saw a small organic decline. H2 Operating Profit: A 5% beat. H2 revenue was 2.5% ahead, so there is some operating leverage. The H2 margin was 40bps ahead of Company Cons. The beat was driven by Energy Management profitability and a lower central cost line. Industrial Automation actually missed Consensus. H2 FCF: 3.5% ahead of Consensus. Initial FY25e guidance: The Company guides for organic sales growth of 7-10%; Cons sits around the midpoint of this range. Schneider guidance for an FX tailwind to sales of EUR600-700mn. C. EUR350mn higher than Cons at the midpoint. A small upgrade. In terms of Group margin a combination of a stronger than Consensus FX tailwind and better operating leverage results in a 3.5% upgrade to Consensus at the mid-point of the guidance of 19.2% to 19.5%. The Company offers extra colour to its guidance by way of ''expected trends.'' Schneider sees: Strong and dynamic market demand to drive growth, with contribution from all four end-markets. Continued strong demand for Systems offers, led by the Energy Management business. A demand recovery in Discrete automation, with sales growth weighted towards H2. Further progress on subscription transition in Software; strong growth in Services. All four regions to contribute to growth, led by U.S., India, Middle East and Africa. Execute on previously communicated capacity investments to support growth. Preparing for agile commercial actions to counter the impact of fast-evolving geopolitical developments and associated fiscal costs. ...
We have adjusted our estimates. We do not consider the changes to be material; our rating is unchanged.
Peter Herweck removed from CEO position; Oliver Blum appointed in his place Schneider Electric announced this morning that its Board of Directors has decided to remove Peter Herweck from his position as CEO due to ''divergences in the execution of the company roadmap at a time of significant opportunities.'' Herweck has been CEO since May 2023. Olivier Blum has been appointed as his replacement with immediate effect. The 54-year-old French citizen currently leads the Energy Management business. He has previously held several positions within Schneider Electric, including Group Chief Strategy and Sustainability Officer; Chief Human Resources Officer; and a number of operational roles such as Country President of Greater India and as a strategy and business leader in China. He has been a member of the Executive Committee since 2014 and an AVEVA board director for the last five years. Company CFO Hilary Maxson has this morning held a short group call with Sell Side analysts. Maxson said some prepared words and answered a couple of questions. This was not a disagreement about a strategy. There is no expectation of a change to the plan. Rather, the Board believes that the Company relies on two drivers of future growth: (1) Schneider is exposed to accelerating end markets, able to capture growth from electrification, digitalisation, and automation structural trends; (2) razor-sharp execution, while being ready to capture future opportunities. It is with regard to the second driver that today''s change in has been made. In recent months the Board has deliberated about whether a change of management was needed. There seems to have been a feeling that while everyone was agreed on the plan, ''the Company roadmap was not being executed in a necessary and speedy manner.'' The Board concluded that Mr Herweck''s style of management did not fit with the task for which he had been appointed. Particularly for the areas of the business where the growth opportunities are...
Third quarter Group sales in line; Energy Management beats, Industrial Automation light Schneider''s Q3 sales came in 0.6% ahead of Consensus, with Energy Management 2% ahead and Industrial Automation -5.4% light (-5.9% organic sales decline vs. Consensus at -1.8%). Energy Management was strong in North America, where organic sales growth was 18.3%. Industrial Automation was weak everywhere expect in RoW. Products sales were up 2% organically, with EM Products up mid-single digits, while IA product sales contracted. Systems sales rose 19%, with EM up strong double digits supported by Datacentres; IA Products sales were flat, with growth in Process and Hybrid and sharp declines for Discrete Automation. Software and Services sales were up 7%. French Competition Authority fines Schneider EUR207mn Following a longstanding investigation, the French Authorities have fined Schneider EUR20mn. The Company reserves the right to appeal, but in the meantime, it is probable that Schneider will accrue for the fine in its H2 results and likely must pay it in FY25e. The figure will be taken below the line and so does not impact FY24e adjusted margin guidance. It is non-tax deductible. Reasons to believe in 2025 - negatives to become positives Analysts'' questions on the Q3 sales conf call focused on two key topics: Energy Management''s current margin headwinds and Industrial Automation''s volume and AVEVA related margins weakness. In our view, these could become reasons to own the shares in 2025. EM''s capacity additions are adding an as yet underutilised fixed cost into that business. As these new factories ramp up, we believe EM operating leverage could surprise to the upside. At the same time an improvement in IA''s Discrete volumes could combine with an early phase AVEVA-SaaS tailwind to drive a bounce back in IA margins by H2 25e. The shares remain a key long for us into 2025. Updating numbers; TP EUR280/s (from EUR275/s) We update our estimates for recent...
Schneider held a Q3 sales conference call this morning. The QandA hot topics were... Datacentres - current trading and outlook: While Datacentres remains strong, the CFO was asked whether a variety of constraints would collar its rate of sales growth in 2025. The CFO acknowledged that a number of constraints exist such as Schneider''s own capacity in North America but stated that Energy Management is ramping up on this. Ms Maxson added that ''We expect good strong growth for some time going forward. Maybe not exponential growth, there are constraints.'' She listed access to power, building permits, industrial capacity in Cap Goods etc... as limiting factors. Industrial Automation: Discrete and AVEVA: Analysts were clearly concerned about the current weakness in Industrial Automation''s Discrete business. The CFO tried to reassure by confirming that the Company has seen some signs of a demand improvement in late Q3 and early Q4, but that the main benefits of this trend will not manifest until 2025. There was a follow up question about the impact of the worse than Consensus Q3 sales decline on IA''s H2 margin. The CFO acknowledged that IA margins would be impacted by the weakness in Discrete Automation, timing of AVEVA sales and its SaaS transition, but stopped short of giving any colour on the magnitude of the H2 margin decline. The Consensus H2 margin sits at 15.3% - following IA''s Q3 sales miss we''d expect the Street to cut this estimate by 100-200bps. French fine: The Company reserves the right to appeal the EUR207mn fine imposed on it by the French Competition Authority, however, it is probable that Schneider will accrue for the fine within its H2 results and likely must pay the fine in FY25e. In terms of the accounting, the figure would be taken below the line and so does not impact FY24e adjusted margin guidance. It is non-tax deductible, so could impact the Group''s effective tax rate. BNPP Exane View: The first two ''hot topics'' (Energy Management''s...
What happened? Schneider Electric''s Q3''24 results have just been published; key takeaways include... Q3 Sales: 0.6% ahead, with Energy Management 2% ahead and Industrial Automation very weak at -5.4% light. Energy Management was strong in North America, where organic sales growth was 18.3%. Industrial Automation was weak everywhere expect RoW. Backlog: While no comment is given as to whether the Group''s overall backlog position and whether its growing or shrinking, the Firm does state that its ''Systems backlog provides us excellent visibility for the coming quarters.'' Sales by nature: Products were up 2% organically, with EM up mid-single digits, while IA product sales contracted. Systems 19%, with EM up strong double digits supported by Datacentres and IA flat with growth in Process and Hybrid and sharp declines for OEM discrete Automation customers. Software and Services up 7%, with Software and Digital Services up 3% and Field Services up 9%. AVEVA ARR is up 12%. ETAP and RIB in EM were up mid-single digits. Sales by end market: Buildings said to be a good driver of Group performance with strength in non-resi, technical including Healthcare and Retail. Datacentres and Networks sales growth remained very dynamic. Both up strong double-digits. Infrastructure: Strong growth driven by demand from Grid operators. Industry: Solid in Process and Hybrid. Discrete down, particularly in Western Europe. Competition Authority investigation and fine: The French Competition Authority has ordered Schneider to pay EUR 207m relating to electrical distribution activities. The decision relates to a previously disclosed investigation initiated in 2018. Schneider disagrees with the finding, rejects the allegation that its distribution practices are not compliant with competition rules and reserves the right to appeal. The fine would be c. 5% of FY''24 Consensus FCF. Outlook for FY24: The FY''24 outlook has been reiterated. Schneider Electric still expects +6% to +8% organic...
Energy Management delivers a DC-driven beat; Industrial Automation declines slow Schneider''s Q2 Sales came in slightly ahead. Energy Management a little ahead organically (9.8% osg vs. Cons at 8.8%). Industrial Automation a little ahead too (-5.1% osg vs. Cons at -5.8%). Growth was supported by strength in Systems and Software/ Services - both of which enjoyed double-digit organic growth. We understand that the backlog continues to grow. First half operating profit came in 4.5% ahead. Energy Management delivered an ahead of Consensus margin (90bps beat), however, Industrial Automation missed on profitability by -90bps. The central cost line came EUR29mn lower than Consensus, supportive of a Group level headline margin beat of 70bps. As is often the case in H1, Group FCF came in below Consensus (-17% light). It seems the Sell Side never quite models the seasonality correctly. We don''t view this as an issue that should affect full year Consensus for FCF. Guidance unchanged The Company upgraded guidance for full year profitability. Schneider now expects organic adjusted EBITA growth of +9% to +13% (previously +8% to +12%) and an adjusted EBITA margin of 18.1% to 18.3% (previously 18.0% to 18.2%). FY24e organic sales growth guidance of +6% to +8% was unchanged. In terms of the outlook for key markets: (1) China faced a tough comp in Q2 but was up in H1 and is still expected to contribute to Group growth this year too; (2) Discrete Automation is expected to begin to recover during H2. The CEO stated on the conf call that he was not worried about inventories at Industrial Automation''s OEM customers or the distributors and still sees volumes recovering in H2 - although he did admit that this would likely be in the second half of H2 (Q4). We expect limited change to Consensus Group full year estimates - current Consensus numbers are already in line with the mid-point of the new guidance range. Updating numbers; TP EUR240 We update our estimates for...
Two Electricals, selling off in line with their listed French compatriots. Is this even a time to consider their fundamentals? Within this note we try to. We find Consensus for Legrand''s North and Central American business models a worst-case scenario for Q2 - we see upside risk for this business. Investors are far more optimistic for Schneider Energy Management''s H1 performance - can that business deliver a beat? We think it can. Will it be enough? We think so. Legrand: US non-resi and Datacentres in focus Legrand reports Q2 on 31st July. Investors are likely to focus on the Group''s North and Central American business, where it''s fair to say, performance in Q1 was disappointing. We see two areas of concern: (1) US non-resi construction; and (2) Datacentres. US Non Resi: We review Q2 peer commentaries so far this quarter and examine the evolution of Legrand''s comps as we pass from Q1 to Q2. We believe the Firm''s US non-resi comps are likely to get easier, supportive of a slowdown in the YoY rate of decline in that business. Datacentres: Legrand''s US DC business suffered a small decline in Q1, while peers grew rapidly. The business must return to healthy growth in Q2 to allay investors'' rising fears that there''s something uniquely wrong with Legrand''s DC business. Legrand management remains bullish on the outlook for its DC businesses and US Census Bureau data confirms that US-based Datacentres'' investment is booming. Hence, we expect a far better DC print by Legrand in Q2. Schneider: Energy Management to beat on sales and margins Schneider reports H1 on 31st July. We review recent end market data and peer commentaries which are supportive of a top line beat in Q2 at Schneider Energy Management. We also highlight that recent peer margin prints are very supportive of an EM profitability beat too. We show how the gap between Energy Management''s H1 Consensus margin and that of peers sits at an historically extreme level. We suspect this is because EM is...
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Chinese Automation returns to growth; AVEVA suffers from a dual transition headwind Group Q1 organic sales growth at 5.3% beat Consensus by 80bps. Energy Management grew in all geographies, but Western European growth slowed partly due to fewer working days, partly because of weak resi markets, and a higher base of comparison. Energy Management''s North American business grew 10.2% organically, despite a double-digit basis of comparison, supported by ongoing strength in Data Centres and Infrastructure markets. The standout news is that Industrial Automation has returned to growth in China. At the same time, were large declines in sales for IA in North America. The Company cites the timing of AVEVA''s SaaS transition, as well as the realignment of its yearend to that of Schneider''s. The second effect should be limited to Q1. Management confirmed the full year outlook, while tweaking down the expected FX headwind. Hard for management to reassure on a possible ''strategic'' deal for Bentley In the aftermath of Friday''s news regarding Schneider''s talks with Bentley, management used the event to remind investors of its commitment to disciplined capital allocation. Then, during the conf call QandA the CFO was asked to comment on the rationale behind Schneider''s software strategy. She stated that ''customers would like to have an environment where everything can talk together, and everything is controlled by the software layer.'' The CFO went on to say that any deal for Bentley would involve no loss of control of the Group''s software portfolio. In our view, all this implies that assets such as Bentley are very strategic in nature and there are only so many assets/ opportunities to acquire that have the right exposure. Unfortunately, the current trading performance of AVEVA appears poorly aligned with the timing of these discussions. Yet, whether the timing is right or not, the strategic considerations ensure that there is likely some pressure on Schneider to...
What happened? Reuters / WSJ reported yesterday after market that Bentley Systems, the US-based engineering software company with a market value of c. USD 16bn, is exploring options that include a sale, after a number of companies, including Schneider Electric and Cadence Design Systems, expressed interest in a deal. Just this morning Schneider has issued a press release confirming that it is ''holding discussions with Bentley Systems with regards to a potential strategic transaction.'' Sources said other bidders, including Siemens (which held talks to buy Bentley Systems in 2020), could emerge. Siemens pension scheme holds a stake in Bentley Systems and signed a strategic alliance in 2016. It reportedly has a right to bid for Bentley if Bentley holds talks with a potential acquirer. Bentley chose to IPO in 2020 after deal talks with Siemens failed to progress. The Bentley family controls Bentley Systems through a special class of shares. It is reported that the company has formed a special committee of its board to explore options including an outright sale as well as a JV. Bentley Systems makes software to manage engineering projects for infrastructure, design, and construction industries. It has more than 5,200 employees in over 40 countries. In 2023, Bentley Systems generated adjusted operating income (inc. stock-based compensation) of USD 325m at a margin of 26.4% and free cash flow of USD392mn at a FCF margin of 32%. Accordingly, it trades on rich multiples (c46x EV/EBIT24E; 44.0x EV/EBITDA24E using Visible Alpha estimates). BNPP Exane View: The news that Schneider could be interesting in bidding for Bentley will likely come as a surprise to many of the French Company''s investors. Schneider''s CEO Peter Herweck took on the role at the beginning of last year. Since then, he has spoken at a number of events, including last November''s Capital Markets Day. On each occasion to our ears he has emphasised how happy he is with the current Schneider...
We refresh our Schneider Eletric presentation pack to include bull, base, and bear scenarios.
Ahead of Q1 reporting (25th April) we move to update our forecasts for Schneider. In particular we cut our Q1 organic sales growth to reflect a slower than previously anticipated start to Industrial Automation. Post FY results Consensus modelled IA to deliver organic sales growth of +0.6% in Q1, whereas we now see IA sales down -9% in the quarter. Despite this change in our Q1 forecasts, we leave our expectations for the full year broadly unchanged. Industrial Automation: Discrete slow start in Q1; Process still conducing the SaaS transition While our forecasts for the full year remain broadly unchanged, we now move to model a more H2 weighted volume trajectory for Industrial Automation''s Discrete businesses (c. 15% of Group sales). We also understand that AVEVA''s SaaS transition will continue to impact sales growth in Q1. As a result we now model an organic sales decline at IA of -9% in Q1 (post FY results Consensus for IA sat closer to 1% growth). We see some risk of a low double-digit decline for IA in Q1. Limited impact to FY24e group numbers After modelling a slower start to 2024 for IA, we now see Q1 organic sales growth of around 4% (vs Consensus at around 6%). Despite this, we continue to forecast Group organic sales growth for FY24e for 7% (the middle of the Company''s guidance range). Updating numbers; TP stays at EUR240 We update our estimates for recent trading. Our target price is EUR240/s.
Schneider''s ambitious target for a 4-year organic sales CAGR of 7-10% was met with scepticism; Sell Siders are now downgrading the name. So is the journey over? We don''t think so. We reassess the outlook for the Firm''s key end markets and find that Data Centres and India could contribute over 1/3 and 1/4 of sales growth respectively through to 2027. We conclude that Schneider can deliver growth within the target range in 2024 and 2025. Our new approach to forecasting key end markets drives a more granular SOTP-based TP of EUR240. In a Bull Case where Schneider achieves EUR50bn in sales, the shares could rise to EUR300 by 2026, suggesting 40%+ upside.
A mixed Q3; strong Energy Management, weakening Industrial Automation Schneider delivered a mixed Q3. Group organic growth in the quarter came in at 11.5%; 56bps ahead of Consensus. Energy Management drove the beat with organic sales growth of 13.5%, c. 220bps ahead. The beat was driven by North America and Rest of the World, with small misses to growth in Western Europe and Asia Pac. Industrial Automation missed Consensus with organic sales growth of only 4.8%, c. -500bps light of Consensus. Both Europe and Asia Pac delivered significantly weaker performances. Backlog still growing, but FY24e Consensus for Industrial Automation likely to be cut Despite the strong EM Q3 sales growth and the emergence of pockets of weakness across IA, the Group''s overall backlog continues to build, buoyed by Systems order intake (Datacentres and MV). This news, at a time when other companies'' backlogs are already shrinking should be taken well by investors as it is supportive of Group Consensus estimates for FY24e. Although faster Systems growth is likely to weigh on the Company''s margin (poorer mix). We''d now expect Consensus to start to model a slower progression for IA in FY24e. CMD: Will they upgrade their growth expectations just as the world starts to slow down? The Company will hold a CMD on November 9th; the first under new CEO Peter Herweck. We expect the event will address capital allocation, sales growth, and margin ambitions. The current organic sales growth target (+5% to +8%) runs to 2024; the Company also has a through-cycle ambition of 5% pa. Peers such as Eaton have talked of future growth above 5%; we wonder whether Schneider management will feel comfortable in matching such ambitions ahead of a potential cyclical slowdown in H1 2024. Updating numbers; TP stays at EUR190 We update our estimates for recent trading and to reflect the latest FX. Our target price is EUR190/s.
Schneider Electric’s Q3 revenues slightly missed the company-compiled consensus but were ahead of them on organic growth. This miss is largely attributable to Industrial Automation, considering that Energy Management was in line with expectations. The currency headwinds were also slightly stronger than expected. The organic growth was positive in all regions and most end-markets. With this result, the group confirmed its 2023 targets. Given the recent correction in the stock, we believe the next quarter could throw up a buying opportunity.
Solid H1 PandL, cash below Consensus - but no need to revise FY23e FCF expectations Group Q2 organic sales growth of 14.8% was 140bps ahead of Consensus. A beat at Energy Management was the driver of this. H1 operating EBITA was in line, the margin was 18.0% (10bps ahead of Consensus). The small margin beat was partly thanks to a central cost line which was below Consensus; divisional margins were both 10bps light of the Street''s expectations. H1 FCF was EUR820mn, well below Consensus. As mentioned in our preview, this doesn''t mean FY23e FCF estimates need to come down, only that the Street''s H1 vs. H2 split wasn''t weighted enough towards the back half of the year. FY23 guidance upgraded; needs a rise in IA OEM intake by Q4 to support FY24 IA numbers Management upgraded its FY23e guidance. Organic sales growth is now seen at +11% to +13% (previously 10% to 13%). Pre-results Consensus sat at 11.7%. This year''s adjusted EBITA margin is seen up organically by +120bps to +150bps (previously 100bps to +130bps). The FX headwind to margins is now seen as -80bps (up from -70bps). Guidance for the adjusted EBITA margin rises to 17.7% to 18.0% (previously 17.6% to 17.9%). Pre-results Consensus sat at 17.9%. At the mid-point, new guidance brings management expectations in line with pre-results Consensus. The Company''s backlog is now said to provide six months of PandL visibility. Many will wonder ''what happens beyond that?'' Will weaker discrete OEM demand stabilise before the IA backlog is depleted? The CEO stated that management expects OEM demand to improve by Q4 - including in China. Such a scenario would be supportive of FY24e estimates for Industrial Automation. November CMD will be in focus when we return from the summer break The Company will hold a CMD in November; the first under new CEO Peter Herweck. We expect the event will address capital allocation, sales growth, and margin ambitions. The current organic sales growth target (+5% to +8%) runs...
Schneider Electric’s H1 23 results were broadly in line with the company-compiled consensus except organic growth which slightly beat expectations. As expected, organic growth was sequentially lower with a higher contribution from pricing than volume. All regions registered good organic growth with Energy Management outpacing Industrial Automation. The gross profit and adjusted EBITA margin expanded due to strong pricing. CFO improved slightly, whereas FCF generation was better thanks to improved working capital. Lastly, the group has modestly raised its 2023 outlook.
A sales beat, driven by Energy Management; Asia Pac weaker than expected The Group delivered 15.8% organic sales growth in Q1, 440bps ahead of the Street. Both divisions contributed to vthis, although Energy Management far more than Industrial Automation. Asia Pac was weak for both divisions. Group B2B is said to still be above 1x. Thus, at the Group level Schneider is still building the backlog. ARR 16%. Field Services +14%. Guidance upgraded; FX headwind limits upside to Consensus margin Guidance for FY23e was raised at both the sales and headline EBITA levels. However, the Consensus margin was already close to the mid-point of the new guided for margin range, so any upgrade to Consensus is likely to be mainly the result of the higher sales guidance, which is an extra 200bps at the mid-point. The message on margins was supressed by new guidance for an FX headwind to margins of c. 70bps (previously 40bps). FY23e sales guidance and Q1 pricing implies healthy volume growth in H2 During the conference call the CFO commented that volumes grew at c. 5% YoY in Q1. Implying price/ mix was c. 10-11%. In terms of the outlook for pricing throughout the coming quarters, she stated that while inflation is easing, the environment is still good for raising prices. And that Schneider will continue to price to protect its gross margin. Looking at the new guidance for FY23e organic sales growth (11% to 13%) and in the context of Q1 YoY volumes of 5%, it seems as though the new guidance implies healthy YoY volume growth in H2. Updating estimates; TP at EUR180/s We update our estimates for recent trading and latest FX. Our target price remains EUR180/s.
Schneider Electric dealt a consensus beat on its Q1 revenues and organic growth. This beat was driven by the Energy Management business, whereas Industrial Automation was in line. The demand was good across most end-markets and geographies. Another highlight worth noting was the very strong growth in the group’s Systems business. On the back of this strong Q1 result, the group upgraded its 2023 revenue and margin ambitions. However, a stronger headwind from currency fluctuations negates much of the upside.
Q4 PandL slightly ahead; H2 FCF strong Schneider delivered a 6% Q4 Sales beat, thanks to a beat by Energy Management. Group organic sales growth came in at 16%, some 750bps ahead of the Street. The H2 operating profit margin was 17.9% (10bps below Consensus), but adj. EBITA came in 2% ahead thanks to the better top line. Second half FCF came in at EUR2.9bn, c. 18% stronger than Consensus. A new boom? Guidance - exciting message on top line growth, but margin headwinds exist Guidance on sales was significantly better than the Street had modelled for FY23e (+9% to +11% organic sales growth vs. Consensus at only +2.8%). The message followed that from Siemens; while PMIs have weakened, Electricals'' end markets appear to be booming. Margin guidance was below consensus (17.4% to 17.7% vs. Consensus at 17.8%) due to FX and MandA headwinds of up to 40bps and 30bps respectively. The implied upgrade to Consensus adjusted EBITA is therefore only c.3%. A new broom: Change of management - implications, especially for strategy Schneider announced that Jean-Pascal Tricoire will step down from the role of CEO and retain his position as Chairman. The outgoing CEO of AVEVA, Peter Herweck, will take up the Schneider CEO seat. During the Q4 conference call, a couple of analysts went fishing around the content of the upcoming 2023 CMD. We note that it will take place in Q4 of 2023, giving Herweck enough time to get up to speed and develop his strategic message. Ahead of the event, many may wonder whether the Company will announce a new savings programme. When asked about the Group''s long-term margin potential, CEO Tricoire stated that progress will now come from mix and ongoing productivity savings. While he didn''t signal a new programme, we would highlight that over the past 20 years Schneider ran a series of performance improvement initiatives which tended to include an element of savings (ONE, Connect, Schneider is on etc...); such actions appear to be part of...
Schneider Electric’s 2022 results delivered a strong beat on organic growth with marginal beats on revenues and adjusted EBITA courtesy of another solid showing in Energy Management. Organic growth in IA was good too. The group also made good progress on its digital flywheel targets laid out at its last CMD, completed its divestment programme and delivered targeted structural savings. Most importantly, the group announced the separation of the Chairman & CEO roles. For 2022, the board’s dividend proposal is €3.15.
A sales beat, but mostly thanks to pricing Schneider''s Q3 sales came in 3.6% ahead of Consensus, with organic sales growth of 12.1%, 240bps ahead. However, the beat was driven by a strong pricing progression, rather than an exciting volume growth story. Excluding the drag effect from Schneider''s Russian operations, volumes in Q3 were up 2.5%; including the declines in Russia, volumes were only flat YoY. Guidance for FY22e seems to imply little-to-no YoY volume growth in Q4 Guidance for FY22e was left unchanged. Group organic sales growth guidance of 9-11% in FY22e implies management expects to deliver a Q4 organic sales growth between the wide range of 4.3-11.6%. The mid-point of the range (8.0%) is bang in line with pre-results Consensus. As of Q4, Schneider''s Russian operations will move from organic activities to the scope effect line of the Group''s sales bridge. Group volumes will no longer be held back by Russian business declines; however, after witnessing the strength of Schneider''s YoY pricing in Q3, we would suggest that an Q4 organic sales print of 8% (as per Consensus) would imply little-to-no volume growth in the final quarter of the year. Given the purported size of the Group''s current backlog (said by the CFO to be at a record level) we would hope for a YoY rise in volumes during Q4. Guidance for FY22e margin appears cautious - could still surprise positively Management expects Schneider to be net price positive this year, but that even so it now sees full year margins at the low end of its 17.7% to 18% guidance range. While the Street already sits at 17.7% this news was probably mildly disappointing to some investors. It could be that the message on H2 margins was designed to keep a lid on Consensus into FY22e results; perhaps an attempt to ensure a profit beat for H2. We struggle to hold our FY22e margin forecast down at 17.7% whilst simultaneously modelling no fall in volumes and a net positive price contribution to EBITA....
º Strong 3Q22 organic growth of volumes thanks to the diversified end-market exposure of Schneider Guidance confirmed, sale of Télémecanique for EUR723m EV to finance Aveva take-over
Schneider Electric’s Q3 revenues and organic growth beat consensus and our estimates. Both divisions registered similar organic growth with good demand across all end-markets and all geographies except Russia. Its digital flywheel comprising Services, Software and Sustainability grew well and the group expects to continue making good strides in this area. In this quarter, the group also reached its divestment target laid out in 2019 and divested its Russian operations. Following the release, the group confirmed its previously revised outlook.
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