Schneider Electric, the French electrical equipment group, has warned that coronavirus has already inflicted a €300m hit to its revenues this quarter.
“It seems to me that the figures we get [coming out of China] are more encouraging. So it’s too early to say, but it will impact the first quarter and it will impact the second quarter but we think we’re going to repair or catch up on the impact within the year,” chief executive Jean-Pascal Tricoire told the Financial Times.
Schneider, which generated 15 per cent of its revenues in China in 2019, has now reopened 80 per cent of the factories that were forced to shut this year due to the coronavirus outbreak. However, the closures had cost the company $300m.
The outlook from Mr Tricoire came as the group, which has a market capitalisation of €60bn, reported better-than-expected results. Revenues were €27.16bn last year compared with €25.7bn in 2018, while the group generated earnings before interest, taxation and amortisation of €4.24bn in 2019 compared with €3.87bn the previous year. Both figures were just ahead of consensus.
Free cash flow grew 65 per cent to €3.5bn, and Mr Tricoire said the company was on track to hit a target of improving margins by about 200 basis points by the end of 2021.
Shares in Schneider, whose products range from circuit breakers to industrial automation software, have risen more than 40 per cent in the past 12 months and have move than tripled since Mr Tricoire took over.
The Schneider chief said 15 years ago the company made bets on three areas in which to invest — sustainability, digitisation and developing economies — and they had all paid off.
The first phase involved acquisitions, the second involved integration and, the current one is “the scale phase, the deployment phase, where it’s about selling what we’ve put together”, Mr Tricoire said.
Schneider has been expanding rapidly into software, most recently buying the UK’s Aveva in a reverse takeover worth €3bn in 2017. This month, the group agreed to buy RIB of Germany, which specialises in construction software, for €1.4bn.
Mr Tricoire has defended the price of the deals, arguing that combining the group’s existing software assets with Aveva, for example, boosted their value. Digital services now account for about a quarter of the group’s turnover.
Analysts have also been broadly supportive. Wasi Rizvi, of RBC Capital Markets, said the RIB deal made strategic sense as it “extends Schneider’s capabilities in the build phase of industrial assets into the wider buildings market”.
“While industrial investors may balk at software multiples, this is the price of growth,” said Ben Uglow at Morgan Stanley.
Asked about his future, Mr Tricoire made a pitch for the benefits of a long tenure: “When I look around in our industry, most of our competitors eventually have tended to reduce and shrink and reposition, and many of those were coming from a lack of continuity in their strategy.”
About Schneider Electric
Schneider Electric is leading the Digital Transformation of Energy Management and Automation in Homes, Buildings, Data Centers, Infrastructure and Industries. With global presence in over 100 countries, Schneider is the undisputable leader in Power Management – Medium Voltage, Low Voltage and Secure Power, and in Automation Systems. We provide integrated efficiency solutions, combining energy, automation and software. In our global Ecosystem, we collaborate with the largest Partner, Integrator and Developer Community on our Open Platform to deliver real-time control and operational efficiency. We believe that great people and partners make Schneider a great company and that our commitment to Innovation, Diversity and Sustainability ensures that Life Is On everywhere, for everyone and at every moment.