Schneider Electric S.E.

Our stable outlook on Schneider indicates that even though the group's sizable acquisitions caused key credit metrics to weaken in 2020, we expect that it will continue to generate strong FOCF and improve its credit metrics in 2021. In our view, adjusted FFO to debt of 30% and debt to EBITDA of no higher than 2.5x is in line with the current ratings. Our stable outlook also incorporates our assumption that the group's financial policy will remain supportive. We do not expect Schneider to restart share buybacks or proceed with acquisitions of significant volume before meaningful deleveraging has been achieved. Schneider's operating and financial performance proved resilient during the COVID-19 pandemic. We would consider raising the rating if Schneider further

...Expected economic revival and long-term industry trends will fuel recovery and profitable growth for Schneider Electric S.E. (Schneider) from 2021, after revenue and EBITDA declined in 2020. After a difficult 2020 dominated by the COVID-19 pandemic, S&P Global Ratings expects Schneider's operating performance will fully recover in 2021, which is faster than the wider sector. We forecast revenue growth of about 9.0%-10.0%, given the low base in 2020 and an expected catch-up in demand following the economic recovery. Over the longer term, we think Schneider's revenue will benefit from structural trends such as increasing demand for energy efficiency, decarbonization, decentralized power production, and connectivity. Similarly, we forecast adjusted EBITDA margin will improve and reach close to pre-COVID-19 levels in 2021. We forecast adjusted EBITDA margins will expand about 60 basis points (bps)-80 bps to 17.1%-17.3% in 2021, supported by increasing volumes, cost-saving initiatives, and the...

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