Schneider Says Sales May Not Grow in 2012, Will Slash Costs
February 23, 2012, 1:56 AM ESTBy Francois de Beaupuy
(Adds CFO comments on acquisitions, prices.)
Feb. 22 (Bloomberg) -- Schneider Electric SA, the biggest maker of low- and medium-voltage equipment, aims to reap as much as 1.1 billion euros ($1.46 billion) in cost cuts by the end of 2014 and said sales may not grow this year.
Earnings before interest, taxes, and amortization before restructuring costs and other items will make up 13 percent to 17 percent of sales in the years to 2014, the company said in a statement today. Earnings on that basis rose 7 percent to 3.18 billion euros in 2011, Schneider said.
Chief Executive Officer Jean-Pascal Tricoire, who spent $3.8 billion last year to expand in emerging markets and broaden the company’s offering in power-management systems, is paring costs and jobs after cutting Schneider’s margin outlook twice last year. Tricoire today predicted “flat to slightly positive” organic growth for sales this year, and an adjusted Ebita margin of between 14 percent and 15 percent.
Schneider aims to “improve equipment-cost competitiveness, reinforce execution while being more selective on projects, and boost service sales,” the company, based in Rueil-Malmaison near Paris, said as it reported full-year earnings.
The carry-over effect of price increases introduced in 2011 may add 100 million euros to 150 million euros in revenue this year, Chief Financial Officer Emmanuel Babeau told reporters. That will exceed the “slight increase” foreseen on raw material costs.
Digesting Takeovers
Raw-material inflation added 437 million euros to Schneider’s costs last year, while price increases added 241 million euros in revenue.
Net income climbed 6 percent to 1.82 billion euros in 2011, beating analyst estimates of 1.79 billion euros. Schneider will pay a dividend of 1.70 euros this year, up from 1.60 euros last year. The company said it will keep a payout ratio of 50 percent of net income through 2014.
Fourth-quarter sales rose 14 percent to 6.35 billion euros, Schneider said, beating estimates. Excluding acquisitions and currency effects, sales climbed 6.1 percent.
The CFO said he doesn’t expect “very strong activity” in terms of acquisitions “at least in the first half of the year” because the economic outlook is unclear. Instead the company will focus on integrating recent acquisitions, he said.
Last year’s takeovers included Spanish software company Telvent GIT SA, Chinese energy-savings drives maker Leader Harvest Power Technologies, and Indian maker of inverters and power-storage systems Luminous Power Technologies. Schneider also bought Areva SA’s power-distribution unit in 2010.
The growth of lower-profit solutions such as energy- management systems and services continued to outpace growth stemming from product revenue last year. Solutions made up 37 percent of Schneider’s revenue, up from 30 percent in 2008. Schneider plans to boost the adjusted Ebita margin of solutions by at least 2 percentage points, it said.
--Editors: Benedikt Kammel, Marthe Fourcade, Andrew Noel.
To contact the reporter on this story: Francois De Beaupuy in Paris at fdebeaupuy@bloomberg.net
To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net
