Schneider Electric S.E.

Cash flow generation during the first half of 2020 remained strong. The group's free cash flow generation increased by 15% compared with the same period in 2019. We expect revenue and margins to continue to recover during the Q4 2020, and predict continuous growth, margin expansion, and strong free operating cash flow (FOCF) both in 2020 and 2021. Our stable outlook on France-based Schneider indicates that even though the group's multiple sizable acquisitions caused key credit metrics to weaken in 2020, we expect that it will still generate strong FOCF and improve its credit metrics in 2021. In our view, adjusted FFO to debt of comfortably above 30% and debt to EBITDA of no higher than 2.5x is in line

...We believe Schneider Electric S.E. (Schneider) has performed well during the pandemic, and we expect the group to continue to show stable operating performance and cash generation over the next 12 months. Schneider has shown resilience in the current crisis and we expect its performance to continue to improve during the last quarter of the fiscal year 2020 (ending December 31). After a difficult first half of the year, the group's performance improved during the third quarter (Q). Overall, Schneider reported a topline decline of 9.1% compared with Q1-Q3 of 2019. However, compared with Q3 2019, Q3 2020 resulted in an organic revenue increase, driven by energy management demand and fast recovery in China after the first wave of the COVID-19 pandemic. During the first six months of 2020, sales declined by 12.1% compared with 2019, however EBITDA margins only declined modestly, by 120 basis points. We expect Schneider's sales to catch up further, with year-end sales declining 7%-8%, while we...

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