February 21, 2013 12:12 pm

Schneider predicts increase in sales

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Schneider Electric, the power equipment maker, has predicted an increase in sales this year and stable profit margins in part because of an anticipated return to growth in China and a continued “slow recovery” in the US.

The French engineering group, a bellwether for sentiment in Europe’s manufacturing sector, said an “acceleration in the new economies” would help offset the continuing “complications” in southern Europe.

It said organic sales declined both for the full year in 2012 and the final quarter. But it increased net profit and free cash flow for the full-year because of cost cuts and passing on higher prices to customers.

Siemens, Europe’s biggest engineering group by sales, said last month that it did not expect “any help from the global economy” this year to reach its profits targets and will instead rely on a €6bn cost-cutting plan.

Schneider has targeted a more modest €900m-€1.1bn of cuts by 2014, €300m of which were made last year.

The French company’s 2012 sales rose 7 per cent to €23.95bn, though this translated to a 0.7 per cent decline when stripping out acquisitions and a positive impact from the stronger dollar.

Nevertheless its shares, which have gained 20 per cent in 12 months, rose another 3 per cent to €57.06 in Paris as analysts welcomed a 3 per cent increase in net income to €1.84bn and a 38 per cent jump in free cash flow to €2.1bn.

Speaking about prospects this year, Emmanuel Babeau, finance director, said: “A certain number of elements in the global economy are stabilising and giving the first signs of improvement by comparison with what we saw in 2012.”

He expected a return to Chinese growth for Schneider in the second half of the year. Schneider is trying to boost Chinese sales by moving westwards from the country’s coast and targeting inland cities.

A certain number of elements in the global economy are stabilising and giving the first signs of improvement by comparison with what we saw in 2012

- Emmanuel Babeau, finance director, Schneider Electric

On an organic basis, 2012 sales fell by 5 per cent in western Europe and by 1 per cent in Asia Pacific, while North American revenues increased by 2 per cent and the “rest of the world”, including Russia, Latin America, eastern Europe and the Middle East, rose 4 per cent.

Schneider benefits from the fact that 70 per cent of its sales are made outside western Europe, with 27 per cent coming from Asia Pacific, 25 per cent from North America and 18 per cent from the rest of the world.

The company increased margins on earnings before interest, tax and amortisation across four of its five divisions: power, infrastructure, industry and IT. However, margins at its buildings business fell by 2.9 basis points.

Schneider has said it is ready to return to the acquisition trail after a period spent consolidating previous deals.

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