RUEIL-MALMAISON, France — Schneider Electric today posted its third quarter, 2024 financial results.
Peter Herweck, Chief Executive Officer, commented: “In Q3 we continued to focus on execution, growing across all geographies, while ramping our capacity to maximize on the unprecedented growth opportunities. Sales in Q3 are at record levels and were led by our Systems business reflecting particularly the strength of megatrends including Digitization & AI and the Energy Transition. The strength of our Systems backlog provides us excellent visibility for the coming quarters, while we begin to see a recovery in Product demand across the board which we expect to continue through Q4. I am also pleased to see strong performance in Software and Services, where we continue to focus on driving recurring revenues, with ARR at AVEVA up +15% and double-digit growth in Services for the Group”.
THIRD QUARTER REVENUES WERE UP +8% ORGANIC
2024 Q3 revenues were €9,311 million, up +8.0% organic and up +5.9% on a reported basis.
Products (51% of Q3 revenues) grew +2% organic in Q3. Product revenues were up mid-single digit in Energy Management with good growth in sales of electrical distribution products across many end-markets and segments, while consumer-linked segments such as residential buildings and distributed IT saw improvement against a low base of comparison. Industrial Automation product revenues contracted, impacted by continued weak Discrete automation markets, primarily in Western Europe. Across the Group, product volume contribution was positive.
Systems (31% of Q3 revenues) grew +19% organic in Q3, with strong double-digit organic sales growth in Energy Management supported by continued dynamism in Data Center and Infrastructure end-markets. In Industrial Automation, sales growth in systems was around flat, with positive growth in Process & Hybrid markets and strong growth in system drives sold into multiple segments, compensating for sharp declines with OEM customers as a consequence of market weakness in Discrete automation.
Software & Services (18% of Q3 revenues) grew +7% organic in Q3, of which Software & Digital Services (7% of Q3 revenues) grew +3% organic and Field Services (11% of Q3 revenues) grew +9% organic.
Agnostic Software (comprising AVEVA, ETAP and RIB Software):
- AVEVA
AVEVA delivered strong growth in Annualized Recurring Revenue (ARR), up +15% as of 30 September 2024, with continued strong traction in Software as a Service (SaaS) uptake with customers. Perpetual license revenues declined, as expected, due to the ongoing subscription transition which remains ontrack. ARR growth was broad-based by geography with strong contribution from the EMEA region and was driven by strong upsell to existing customers. - ETAP and RIB Software
Energy Management agnostic software offers delivered mid-single digit organic growth, with strong organic growth contribution from the Group’s eCAD offer (ETAP), while the Group’s software offer for the construction market (RIB Software) delivered good organic growth. Both businesses are transitioning to a subscription model, resulting in a planned decline in perpetual license revenue. ETAP in particular saw strong growth in recurring revenues, while RIB remained impacted by continued softness in the construction market in Germany.
Services (comprising Digital and Field Services offers) grew double-digit organic in Q3
- Digital Services delivered double-digit growth in Q3, driven by performance in Energy Management Advisors, Grid digitization and modernization offers and Cybersecurity services. The Group’s Digital Services offering comprises its internally generated EcoStruxure solutions and advisors, including Sustainability consulting and advisory offers, and its digital offers for prosumers.
- Field Services grew high-single digit in Q3, led by double-digit growth in Energy Management services. Energy Management services benefitted from strong trends associated with Data Centers, Infrastructure and the renovation of non-residential buildings in mature economies, and from backlog execution on U.S. public sector projects in the Sustainability business. Industrial Automation services declined slightly against a strong double-digit base of comparison. The Group’s Field Services offering includes safety, efficiency, sustainability and resiliency services across all four end-markets served by the Group, including its efficiency offers for Sustainability.
Q3 2024 PERFORMANCE BY END-MARKET
Schneider Electric sells its integrated portfolio into four end-markets: Buildings, Data Center & Networks, Infrastructure and Industry, leveraging the complementary technologies of its Energy Management and Industrial Automation businesses and supported by the focus on electrification, automation and digitization to enable a sustainable future.
- Buildings – The Buildings end-market continues to be a good driver of the Group’s performance with strong demand in non-residential, technical buildings, including for the Healthcare and Retail segments. This reflects the Group’s comprehensive offers across medium and low voltage technologies, Building Management Systems (BMS), EcoStruxure advisors and monitoring to deliver energy efficiency, decarbonization, comfort, safety, availability and reliability. The residential buildings market delivered stable to improving demand and growth in sales, though still varied by geography.
- Data Center & Networks – In Q3 both demand and sales growth remained very dynamic, both up strong double-digit. As expected, sales growth into pure Data Centers was relatively stronger than sales growth of Distributed IT products, sold through independent channels into B2B and B2C markets, however these did contribute good growth in Q3. Within Data Centers the strong growth was led by the North America and Asia Pacific regions, with strong contribution from Internet Giants and large colocation providers. The Group continues to benefit from its comprehensive end-to-end portfolio, including cooling, which was furthered by the recently announced acquisition of Motivair Corporation, a specialist in liquid cooling, with relevance to the rapid development of generative AI architectures in Data Centers.
- Infrastructure – Demand for the Group’s offers in the Electrical Utilities segment continues to be driven by the digitization and resilience agenda for Grid operators in multiple countries. Water & Wastewater (WWW) saw good demand growth, with particular traction in the Middle East relating to desalination projects. Transportation demand was down slightly, while sales benefitted from execution on a marquee airport project.
- Industry – The Group sells its unique combination of Energy Management and Industrial Automation offers into the Industry end-market. There was good demand and solid sales growth in Process & Hybrid markets, supported by good demand for Energy Management offers in the Energies & Chemicals (E&C) segment and by strong demand for services. Sales in Discrete automation continued to be down year-on-year remaining impacted by market weakness, particularly in Western Europe. There were some signs of demand recovery in certain Discrete automation products, against a low base of comparison, led by China and parts of Western Europe.
Group trends by geography:
North America (38% of Q3 2024 revenues) grew +15.1% organic in Q3.
Energy Management grew +18.3% organic. The U.S. grew strong double-digit, with continued strong growth in Systems revenues led by the Data Center and Infrastructure end-markets. There was good growth in Product revenues across end-markets with growth in residential buildings and good demand for power distribution products in other end-markets and segments. The Group continues to focus on executing capacity investments to support Systems and Products growth in an elevated demand environment. Field Services grew double-digit supported by the strong Systems delivery of recent quarters. Mexico was up mid-single digit with strong execution on projects, while Canada grew low-single digit with growth in sales to the residential buildings market.
Industrial Automation was down -4.9% organic. The U.S. was down mid-single digit against a double-digit base of comparison where strong sales growth into Process & Hybrid automation markets was insufficient to offset weakness in Discrete automation sales as the normalization of elevated stock levels at customers continues to progress. Growth at AVEVA in the U.S. was around flat. Mexico was up low-single digit, due to strong execution on projects for customers in Process industries. Canada declined low-single digit, impacted by weakness in Discrete automation markets.
Western Europe (22% of Q3 2024 revenues) was up +0.3% organic in Q3.
Energy Management was up +5.6% organic, with all five major economies of the region delivering growth. Performance was led by Italy which grew double-digit, boosted by execution on a Data Center project and with growth in Buildings. France, the U.K. and Spain each grew low-single digit, while Germany was around flat. There was good traction in Data Centers in the U.K. and Germany, and in non-residential buildings in France, with Infrastructure remaining well oriented across the region. Residential growth was positive in aggregate across the region, against a low base of comparison and varied by country, with Germany in particular still negatively impacted. Field Services was up double-digit benefitting from trends of modernization and renovation. The rest of the region delivered strong growth in aggregate supported by Data Center project execution in the Nordics.
Industrial Automation was down -15.6% organic. Discrete Automation markets remained challenged, impacting the major markets of Germany, France and Italy which all saw double-digit declines in sales, with the rest of the region following a similar, if less pronounced trajectory. Organic growth at AVEVA was down, facing a high base of comparison, while ARR growth across AVEVA’s EMEA region remained strong. Process & Hybrid markets were relatively better oriented though contrasted by country with France delivering mid-single digit growth while some countries were impacted by delayed investment decisions at customers.
Asia Pacific (27% of Q3 2024 revenues) grew +2.0% organic in Q3.
Energy Management grew +4.9% organic. India continued to deliver strong double-digit growth across the Buildings, Infrastructure and Data Center end-markets, including strong traction with customers for the recently launched Lauritz Knudsen brand. China declined mid-single digit, primarily linked with macroeconomic weakness impacting construction markets, while sales into the Data Center market saw good growth and positive momentum continued in power generation. Australia grew low-single digit with good growth in the Data Center end-market while residential buildings growth was around flat. Performance across the rest of the region was strong, delivering double-digit growth in aggregate linked with Data Center and Industry projects, with Korea, Indonesia and Singapore all contributing strongly to growth.
In Industrial Automation, which contracted -7.6% organic, China was around flat overall, delivering slightly positive growth in Discrete automation markets where some specific products have returned to growth, while sales into Process & Hybrid markets declined. India was down against a strong double-digit base of comparison. Korea grew double-digit supported by strong performance at AVEVA. Australia declined against a strong double-digit base of comparison. Japan was down with continued weakness in Discrete automation linked to OEM demand, including for customers exporting to China.
Rest of the World (13% of Q3 2024 revenues) grew +16.8% organic in Q3. Middle East & Africa, South America and Central & Eastern Europe all grew double-digit, with strong growth experienced in many individual countries throughout the region. While benefitting from price actions in the high inflation countries of Argentina, Egypt and Turkey, sales outside of these countries were up double-digit organic.
Energy Management grew +17.6% organic. Good execution on projects supported growth, including in Brazil and Serbia, primarily across Industry, Data Center and Infrastructure end-markets. Brazil also saw strong growth in the Buildings end-market (both residential and non-residential) led by further success for the Group’s medium offer. The Middle East was impacted by a very strong double-digit base of comparison due to project execution in the prior year, though customer investments across the Group’s end-markets continued.
Industrial Automation grew +14.6% organic. There was strong growth in Discrete Automation with contributions from multiple countries. Saudi Arabia (KSA) saw strong growth as did Brazil in the OEM segment, while countries in Central & Eastern Europe continued to experience similar trends to Western Europe. Industrial software at AVEVA grew double-digit led by customers in the Middle East. Sales into Process & Hybrid automation markets delivered solid growth, led by projects in E&C and WWW segments in KSA and contributions from several other countries across the Gulf region. Africa also reported good growth from E&C projects while growth in South America was attributable to MMM and E&C segments.
SCOPE AND FOREIGN EXCHANGE IMPACTS IN Q3
In Q3, net acquisitions/disposals had an impact of -€52 million or -0.6% of Group revenues, including the divestment of the Group’s industrial sensors business, the acquisition of EcoAct, along with the net impact of some smaller acquisitions and disposals.
Based on transactions completed to-date, the Scope impact on FY 2024 revenues is estimated to be around -€275 million. The Scope impact on adjusted EBITA margin for FY 2024 is estimated to be around flat.
In Q3, the impact of foreign exchange fluctuations was negative at -€113 million or -1.3% of Group revenues, mostly driven by the weakening of the U.S. Dollar against the Euro.
Based on current rates, the FX impact on FY 2024 revenues is estimated to be between -€450 million to -€550 million. The FX impact at current rates on adjusted EBITA margin for FY 2024 could be around -40bps.
The entire report can be found here.
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