Schneider Electric Q3 2024 $SU (-3.65%)

Financial performance

Q3 2024 Group sales: Schneider Electric generated revenue of EUR 9.3 billion in the third quarter of 2024, representing organic growth of 8%. This growth was mainly driven by the strong development in North America and the Rest of the World regions.

• Energy Management: Recorded organic growth of 11.6% and generated sales of €7.7 billion.
• Industrial Automation: On the other hand, suffered negative organic growth of -5.9% and achieved sales of 1.7 billion euros.

Key figures and profitability metrics

• Adjusted EBITA margin: Expected to increase by 60 to 80 basis points, resulting in a margin of around 18.1% to 18.3% for the 2024 financial year.

Segment information

Geographical performance:

• North America: Recorded organic growth of 15.1%, driven by high demand in the data center and infrastructure segment.
• Western Europe: Achieved moderate organic growth of 0.3%.
• Asia-Pacific: Achieved organic growth of 2.0%, supported by a strong performance in India.
• Rest of the world: Strong organic growth rate of 16.8%.

Competitive position Schneider Electric maintains its competitive position through its broad portfolio in energy management and industrial automation, particularly in the data center, infrastructure and industrial markets.

Forecasts and management comments

• Financial targets for 2024: Schneider Electric confirmed its targets for 2024 with organic EBITA growth of 9% to 13% and organic revenue growth of 6% to 8%.
• Market trends: Strong demand is expected in the data center and network infrastructure segment in particular.

Risks and opportunities

• Exchange rate effect: A negative exchange rate effect of EUR -450 to -550 million is expected for the 2024 financial year.
• Restructuring costs: These are expected to be reduced to around EUR 100 million per year.

Summary of the results Schneider Electric showed strong sales growth in the third quarter of 2024, particularly in North America and the "Rest of the World" regions. While the Energy Management segment recorded significant growth, the Industrial Automation segment faced challenges. The company reaffirmed its financial targets for 2024 and expects demand to remain high in key industries. However, exchange rate fluctuations pose a risk to sales and profitability. Future growth is to be further driven by strategic investments and sustainability initiatives.

Positive aspects

• Sales growth: Schneider Electric achieved record sales of EUR 9.3 billion in the third quarter of 2024, which corresponds to organic growth of 8%. This growth was primarily driven by strong demand in North America and the "Rest of the World" regions.
• Energy Management segment: The Energy Management segment recorded robust organic growth of 12% in the third quarter of 2024, supported by strong demand in the data center and infrastructure segments.
• Sustainability targets: Schneider Electric exceeded its target of providing 50 million people with access to green electricity, achieving this goal over a year ahead of schedule in 2025.
• Strategic acquisitions: The acquisition of Motivair Corporation and the joint venture with StarCharge are in line with Schneider's strategic priorities and strengthen the company's position in data center cooling and the European prosumer market.
• Growth in software and services: The Software & Services segment grew organically by 7%, with AVEVA's recurring revenues increasing by 15%, indicating strong demand for SaaS offerings.

Negative aspects

• Decline in industrial automation: The Industrial Automation segment recorded an organic decline of 6% due to weaknesses in discrete automation, particularly in Western Europe.
• Exchange rate effects: The company recorded a negative exchange rate effect of -113 million euros in the third quarter of 2024, with the overall effect estimated to be between -450 million and -550 million euros on revenue for the year.
• Performance in Western Europe: Western Europe grew organically by only a minimal 0.3%, with significant challenges in discrete automation. This led to double-digit declines in key markets such as Germany, France and Italy.
• Penalty from the French competition authority: Schneider Electric received a fine of 207 million euros from the French competition authority due to activities in the electrical distribution sector in France.
• Macroeconomic weaknesses in China: The Asia-Pacific region, particularly China, struggled with a mid-single-digit decline in industrial automation due to macroeconomic weaknesses and problems in the construction sector.