Bloomberg News

Rexel Refinances Debt to Lower Costs as Profitability Stagnates

February 12, 2013

Rexel SA will refinance its debt to exploit low borrowing costs as the world’s biggest listed distributor of electrical equipment predicts stagnating profitability this year amid Europe’s economic woes.

The Paris-based company will save as much as 20 million euros ($27 million) in 2014 versus this year as it calls a 8.25 percent bond maturing in 2016 and replaces it with a bond with a coupon of less than 5 percent and a longer maturity, Chief Financial Officer Michel Favre said at a conference today. Calling the bond will lead to a small charge this year and then have a “very good” positive impact in 2014, he said.

The price of Rexel’s 2016 bond rose 0.8 percent to 109.3 as of 12:51 p.m. in Paris today. Rexel also said that from the end of this year, 82 percent of its debt will mature in more than four years, up from 45 percent at the end of 2012, as it also refinances other borrowings

Rexel, which sells electrical products such as installation equipment, lighting and cables, is cutting costs as economic “uncertainties” in Europe are heightened by elections in Germany and Italy and political turmoil in Spain, Chief Executive Officer Rudy Provoost said. For 2013, the French company predicts little change in profitability and a ‘slight’ increase in organic sales, helped by rising construction in North America and emerging markets.

Rexel also proposed paying a dividend of 75 cents per share, up 15 percent from last year. That represents a pay-out ratio of 53 percent of the group’s “recurring” net income, according to the company.

Higher Dividend

Rexel shares rose as much as 6.6 percent to 16.33 euros, and were up 3.9 percent at 15.78 euros as of 1:06 p.m. in Paris, giving the company a market value of 4.3 billion euros.

Rexel confirmed its dividend policy of paying at least 40 percent of its recurring net income. The company can increase its payout because it will be “a bit more modest on acquisitions” this year than in 2012, when it spent 620 million euros, the CEO said.

The company forecasts its margin for adjusted earnings before interest, taxes and amortization will represent 5.7 percent of revenue this year, unchanged from last year.

Rexel’s net-debt-to-Ebitda ratio remains below 3, the CEO said.

The Ebita margin should exceed 6.5 percent of sales in 2015 as Rexel raises prices and sells more valuable products, and at the same time reduces costs and working capital requirements, Rexel reiterated today.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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