Industrialist Schneider Electric on Thursday raised its annual profit and profitability targets for 2023, buoyed by “record” first-quarter sales and order backlog as supply challenges ease.
The group expects “organic growth (excluding currency effects and on a like-for-like basis) in adjusted EBITA for 2023 of between +16% and +21%”, compared with the 12% to 16% previously announced, as well as higher-than-expected annual sales and operating margin, after sales rose by 12% to 8.5 billion euros in the first quarter. The adjusted EBITA margin is expected to be between 17.6% and 17.9%, compared with 17.6% in 2022.
Organic growth in revenues of 16%.
Revenues grew organically by 16% in the first quarter, after +12% to 34 billion euros for the full year 2022. This “good start” to the year is “a continuation of the trends we saw in the fourth quarter” with “strong demand for most of our products,” commented Hilary Maxson, the group’s chief financial officer, on a conference call.
“The tensions on the supply chain, although still present, are gradually easing as expected, favoring a good execution of the order book,” the group noted in a statement, even though the core activities of the global giant in energy management and industrial automation are feeling the “slowdown observed in China.” The company expects this demand to “persist,” supported by “underlying trends” in electrification, digitization and sustainability, which are in turn aided by “government incentives worldwide.”
The company expects particularly strong growth in the United States
Growth should be particularly strong in the United States, supported by “industrial relocation”. Growth in the retail business will experience “some moderation,” Maxson said, against the backdrop of the global economic slowdown. Price increases were “an important driver of organic growth” in the first quarter, the statement said. Of the 16% growth in revenues in the first half of the year, some 5 points were due to an increase in volumes, the remainder being the price effect, said the CFO, who expects that for the remainder of the year volume growth will account for “a little more than the price effect” in the expected increase in revenues.
However, customers should remain “receptive” to price increases, Maxson commented. Schneider Electric also emphasizes the growth of its software offerings, including the “transition” of AVEVA, which was fully acquired in 2022, “to a subscription model” that has resulted in lower sales but higher predictable recurring revenue. On the Paris stock exchange, the group’s share price was up 2.4% in a market that was slightly up by 0.2% shortly before 1pm.
