Distributors

Rexel Posts Solid 3Q 2021 Sales

Rexel Posts Solid 3Q 2021 Sales

PARIS — Rexel today posted its third quarter 2021 financial results.

→ Sales of €3,555.1m [USD 4,139.38m] in Q3 2021, up +11.5% on a same-day basis

  • All geographies above pre-crisis level (+6.7% vs Q3 2019)
  • Same-day sales growth largely benefiting from positive pricing on both cable (contribution: +6.3%) and non-cable products (contribution: +5.2%)
  • Confirmed ability to pass on price increase in all geographies and more specifically in Europe where price increases on non-cable products have accelerated in Q3 21
  • Excellent performance in France, good sales in Central Europe, still room for further recovery in North America. Volumes above pre-crisis level in Europe; still behind in North America and Asia Pacific
  • Digital same-day sales up +21.6% in Q3, now representing 22.4% of total sales (and 33.2% in Europe), up +183 bps compared to Q3 2020

Leveraging data, optimized supply chain and expertise to navigate the current supply environment – limited impact of product availability to date
Agreement to acquire Mayer (USD 1.2bn sales over the last 12 months through end-August 2021, 68 branches, 1,200 FTE) for an Enterprise Value of USD 456m. A new chapter for Rexel, scaling our local presence in the Southeastern part of the US
2021 guidance confirmed; on track to achieve mid-term ambition

Guillaume TEXIER, Chief Executive Officer, said:

With a solid third-quarter performance, Rexel grew above its pre-crisis levels for the third consecutive quarter, demonstrating its ability to capture demand in renovation markets, electrification and the energy transition.

The current environment, marked by inflation and limited product scarcity, is a great opportunity for Rexel to demonstrate the strength of its model and the depth of its offer to better serve its customers. This quarter’s performance makes us very confident in our ability to reach our 2021 objectives.

These robust numbers show that we now have a strong platform on which we can build, as we are doing with Mayer, a great company whose acquisition marks a step-change for Rexel in one of its key geographies, North America.

SALES REVIEW FOR THE PERIOD ENDED SEPTEMBER 30, 2021
Unless otherwise stated, all comments are on a constant and adjusted basis and, for sales, at same number of working days.

SALES

In Q3, sales were up +12.6% year-on-year on a reported basis and +11.5% on a constant and same-day basis, reflecting positive trends in Europe and North America while Asia-Pacific is slightly negative from challenging comparable base effect.

In the third quarter, Rexel posted sales of €3,555.1m [USD 4,139.38m] up +12.6% on a reported basis, including:

  • A positive currency effect of €29.7m [USD 34.58m] (i.e. +0.9% of Q3 2020 sales), mainly due to the appreciation of the Canadian dollar and the British pound against the euro;
  • A limited net scope effect of €3.2m [USD 3.73m] (i.e. +0.1% of Q3 2020 sales);
  • A neutral calendar effect of (0.1) percentage point.

On a constant and same-day basis, sales were up +11.5%, as a result of:

  • An excellent performance in France, good sales in Central Europe and further improvement in the US.
  • Strong underlying demand for electrical products, notably driven by the proximity and renovation business in the construction market. In addition, our underlying growth remains supported by strong price increases on our entire range of products as well as increased electrical usage and greater complexity of installed solutions.
  • A favorable pricing environment on non-cable (+5.2% contribution in the quarter with an acceleration in Europe) and cable (+6.3% contribution in Q3 2021 vs +0.5% in Q3 2020) products.
  • Further growth in digitalization in all 3 geographies, with digital sales now representing 22.4% of Group sales, up +183 bps compared to Q3 2020. This comes despite a challenging base effect, as digital sales surged during the pandemic. Trends were positive in Europe (up to 33.2% of sales, an increase of +283 bps), in North America (up to 9.4% of sales, an increase of +77 bps) and in Asia-Pacific (5.1% of sales up +91 bps).

The quarter was also marked by some tension on the supply chain and some scarcity of products and components, even though we consider the impact on our growth to be very limited. This “scarcity environment” continues to be an opportunity for Rexel, notably thanks to our ability to offer customers alternative brands and to leverage our data management to better anticipate customer needs and enhance our partnerships with key suppliers.

Volumes reached pre-crisis levels in Europe, but are still behind in North America, and, to a lesser extent, in Asia-Pacific.

At Group level, we posted same-day sales growth of +6.7% versus Q3 2019, with Europe at +10.4%, Asia-Pacific at +1.8% and North America at +2.5% versus Q3 2019. The +6.7% same-day sales growth posted in Q3 21 (vs Q3 19) was slightly lower than the +9.6% in Q2 21 (vs Q2 19). It can notably be explained by a vacation effect (more vacation in 2021 after an exceptional year in 2020 during which holidays were curtailed), the new Covid wave in countries like the UK, Australia and New Zealand as well as the tension on the supply chain (projects in North America and China).

In 9m 2021, Rexel posted sales of €10,612.9m [USD 12,357.13m], up +15.3% on a reported basis. On a constant and same day basis, sales were up +17.0%, including a positive impact of +5.2% from the change in copper-based cable prices (vs a negative impact of (0.2)% in 9m 2020).

The +15.3% increase in sales on a reported basis included:

  • A negative currency effect of €(84.4)m [USD (98.27)m] (i.e. (0.9)% of 9m 2020 sales), mainly due to the depreciation of the US dollar against the euro;
  • A negative net scope effect of €(17.0)m [USD (19.79)m] (i.e. (0.2)% of 9m 2020 sales), mainly resulting from the disposal of Gexpro Service in the US and a small business in France offsetting the acquisition of the Utility business in Canada;
  • A negative calendar effect of (0.4) point.

Europe (56% of Group sales): +10.2% in Q3 on a constant and same-day basis
In the third quarter, sales in Europe increased by +10.3% on a reported basis, including a positive currency effect of +0.6%, or +€11.2m [USD 13.04m] due to the appreciation of the British pound against the euro and a negative scope effect of (0.5)%, or €(8.7)m [USD (10.13)m] from the disposal of a small business in France. On a constant and same-day basis, sales were up +10.2%.

Overall in Europe, activity remained robust, still driven by proximity and renovation activities as well as price increase acceleration in Q3 21 on non-cable products. When compared to Q2 21, we also note temporary impact from local lockdowns and the summer break in several countries, as well as possibly lower contribution from the “stay-at-home effect” and more selectivity on projects (especially on cable). More specifically, in our larger countries:

  • Sales in France (38% of the region’s sales) were up +10.0% (or +14.5% compared to Q3 19), driven by market outperformance from customer gains, price increases on non-cable products and strong activity in the HVAC business.
  • Sales in Scandinavia (12% of the region’s sales) were up +5.2% (or +5.8% compared to Q3 19), with robust underlying demand in Sweden (+7.4%) especially with small contractors partially offset by the impact of the summer break (limited number of days off in 2020).
  • Sales in Germany (10% of the region’s sales) posted strong +16.2% growth (or +27.1% compared to Q3 19) with all end-markets above pre-crisis levels and a further recovery in Industry, still running below construction level. The growth is limited by resource scarcity.
  • Benelux (10% of the region’s sales) grew by +7.5% (or +10.1% compared to Q3 19), with Belux (+4.8%) benefiting from a strong underlying performance offsetting lower sales of Photovoltaic products (end of subsidies in Flanders).
  • The Netherlands were up +11.3% despite a summer vacation impact with a
    a limited number of days off in 2020.
  • In the UK (9% of the region’s sales), sales increased by +12.8% (or (6.6)% compared to Q3 19), despite a third wave of Covid which temporarily impacted demand. Better Q4 expected.

North America (35% of Group sales): +17.4% in Q3 on a constant and same-day basis
In the third quarter, sales in North America increased by +19.6% on a reported basis, including a positive currency effect of +0.8%, or €+7.9m [USD +9.2m], due to the appreciation of the Canadian dollar against the euro and a positive scope effect of +1.1%, or €+12.0m [USD +13.97m], from the acquisition of the utility business in Canada. On a
constant and same-day basis, sales were up +17.4%, driven by the US and Canada.

In line with the Q2 21 trend, North America was notably helped in Q3 by robust demand in proximity and favorable price increases.

  • In the US (76% of the region’s sales), sales posted solid +18.2% growth on a same-day basis, with business now above pre-crisis levels (+2.8% compared to Q3 19), notably thanks to strong momentum in regions driven by proximity business and further improvement in the Midwest (Industrial MRO) and Gulf Central (commercial and industrial contractors). Project execution was impacted by supply chain tensions. We saw a healthy and growing backlog month after month. Volumes remain c.20% below Q3 19, largely from our large exposure to project activity, leaving room for improvement.
  • In Canada (24% of the region’s sales), sales grew by +15.0% on a same-day basis, as activity in the commercial and residential businesses exceeded pre-crisis levels (+1.4% compared to Q3 19) offsetting lower industrial activity. By region, trends remain heterogeneous with strong proximity activity in the regions of Quebec (+15% vs Q3 2019) and Ontario (+3%) more than offsetting the West region, down 10% from lower industrial projects (mining, Pulp & Paper, petrochemicals…). Lower momentum vs Q2 21 can notably be explained by temporary supply chain tension. Volumes remain c.7% below Q3 19 but the order backlog reached a record level.

Asia-Pacific (9% of Group sales): (1.3)% in Q3 on a constant and same-day basis
In the third quarter, sales in Asia-Pacific were up +2.1% on a reported basis, including a positive currency effect of +3.4%, or +€10.6m, due to the appreciation of the Chinese renminbi and Australian dollar against the euro. On a constant and same-day basis, sales were down (1.3)%.

  • In the Pacific (51% of the region’s sales), sales were up +1.9% on a constant and same-day basis or down (1.3)% compared to Q3 19, with both Australia and New Zealand being impacted by the severe lockdown. More specifically:
    • In Australia (84% of Pacific’s sales), sales increased by +4.1%, notably driven by residential.
  • In Asia (49% of the region’s sales), sales decreased by (4.3)% on a constant and same-day basis:
    • In China (85% of Asia’s sales), sales were down (6.2)% due to lower growth from the absence of the aero contract contribution (-900 bps) in Q3 2021 and a slowdown in the industrial business, notably explained by product scarcity (c. -650 bps contribution).

AGREEMENT TO ACQUIRE MAYER
As disclosed in our Press Release issued on October 6th, Rexel has reached agreement to acquire Mayer, a major distributor of electrical products and services in the Eastern part of the US, further building up its presence in the world’s leading market for electrical supplies.

Headquartered in Birmingham, Alabama, founded in 1930 and owned by the Collat family, Mayer operates 68 branches in 12 states, with a strong presence in Alabama, Florida, Georgia and Pennsylvania. It counts 1,200 employees and generated turnover of USD1.2bn over the last twelve months through end-August 2021.

Based on an Enterprise Value of USD456m, the transaction is projected to be accretive to Rexel’s Earnings Per Share in year 1 and value-creating in year 2, fully in line with the Group’s commitment, notably thanks to targeted synergies of c.1.5% of acquired sales as of year 2. The transaction will leave Rexel’s indebtedness ratio below 2.0x EBITDAaL on a proforma basis.

FY 2021 OUTLOOK
We are highly confident of reaching our 2021 guidance.

Leveraging on our continuous efforts, we target for 2021, at comparable scope of consolidation and exchange rates:

  • Same-day sales growth of between 12% and 15%
  • An adjusted EBITA1 margin of circa 5.7%
  • Free cash flow conversion2 above 60%
1 Excluding (i) amortization of PPA and (ii) the non-recurring effect related to changes in copper-based cable prices.
2 FCF Before interest and tax/EBITDAaL
NB: The estimated impacts per quarter of (i) calendar effects by geography, (ii) changes in the consolidation scope and (iii) currency fluctuations (based on assumptions of average rates over the rest of the year for the Group’s main currencies) are detailed in appendix 2.
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