Full Year 2024 Legrand SA Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alasdair Leslie - Bernstein - Analyst : So maybe just starting on the organic sales guide for '25. It was kind of much better than I expected from you at this stage of the year. So maybe perhaps you can just give us a sense of how you've constructed that? How much is data center growth? What are the assumptions around pricing? I guess, that probably still excludes tariff-related impacts. And maybe any firm views that you have on regions. Any additional color, I suppose would be great. Maybe start there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 8:30AM, LEGD.PA - Full Year 2024 Legrand SA Earnings Call

Question: Alasdair Leslie - Bernstein - Analyst : Thanks for the color. It's very helpful. Maybe if I could just sort of follow up maybe just on data centers. I think it's slide 23. You give these kind of project examples. There's quite a range there, I suppose, in terms of size. I was just wondering do you sort of see a trend towards kind of larger projects now at Legrand, just given the kind of portfolio that you've built, the breadth of the offerings there, you're moving into the gray space,

Question: Alasdair Leslie - Bernstein - Analyst : I know you have a slightly different approach to M&A accounting to peers. So just was there any kind of noticeable catch-up impact actually on organic growth in Q4 from consolidating many of these acquisitions in the final quarter of '24?

Question: Daniela Costa - Goldman Sachs - Analyst : Thanks for taking my question. I have two actually, but I'll ask them one at a time. The first one is kind of like following up on the point of data centers that you were just talking about. Can you talk a little bit about like the visibility you have at the moment in terms of like backlogs or weeks of visibility and how that kind of impacts, I guess, the first part of the year, given the easy comps.

Question: Daniela Costa - Goldman Sachs - Analyst : What you had was on the -- in the new economies in Europe. Is that your -- can you talk about like where -- if you're seeing any green shoots towards Europe and awards that just like easy comps? What's caused that?

Question: Daniela Costa - Goldman Sachs - Analyst : (technical difficulty) 18%. What drove that? Is it just easy comps is underlying? How are the various countries doing to contribute to that?

Question: George Featherstone - Barclays - Analyst : Thanks for taking the question. First, just a real quick follow up on the guide. 6% to 10% on the sales growth. You've mentioned 4% on the M&A side. Your 6% to 10%, that doesn't include any unannounced maybe pending M&A that's on top of that? Just as a clarification point, that would be really helpful.

Question: George Featherstone - Barclays - Analyst : That's helpful. The complete clarity. You said [4%] M&A that would imply based on a 6% to 10% that the organic is not 2%, 3%, or 4%, as you've just said it, then it's more like 2% to 6%. So can I just get a clarification on that, just the (inaudible)?

Question: George Featherstone - Barclays - Analyst : Okay. Thank you. Maybe then just turning to the cash margin, which was very good, obviously, with what you did in 4Q free cash flow. Can we think about how the -- I'll get some color on the level for 2025, that would be super helpful thing.

Question: Phil Buller - Berenberg - Analyst : Thank you for the question. And thank you also for the data center disclosures. That's very helpful. I have two questions, please. One, in terms of the phasing of the year, I'm assuming that given the [comp sets] and the carryover, we should be assuming a relatively strong start in 2025? Or is that the wrong way to interpret it, please? That's the first question.

Question: Phil Buller - Berenberg - Analyst : Just to focus on two key markets, European resi, US office, are you more confident on office today than previously? And if so, why? How does that compare to confidence levels in European resi? I guess I'm wondering if you're seeing anything tangible from the ground in either of those markets that gives you confidence in a recovery. I know you said wouldn't assume a recovery in the first half of 2025, but are you implicitly assuming a recovery in either or both markets in the second half of 2025? Or is that, I guess, a more upside scenario as opposed to something that you've baked into guidance?

Question: Gael de-Bray - Deutsche Bank - Analyst : So I have two questions. So the first one and then the follow up. So I guess I wanted to lever a bit more the point around data centers. Given there was such an acceleration for data center growth throughout last year, presumably, this is creating a very positive momentum for 2025. And so would you say now that it is more likely than not that data center growth will exceed the 15% growth rate you had in 2024. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 8:30AM, LEGD.PA - Full Year 2024 Legrand SA Earnings Call

Question: Gael de-Bray - Deutsche Bank - Analyst : The question is on the restructuring spend you had in 2024. So apparently pretty high, close to EUR75 million. So could you talk a bit more about the different actions there and maybe provide some color on the expected savings for 2025. And also shall we expect this level of restructuring spending to decrease now to a more normalized level of maybe EUR30 million, EUR35 million? Because if that's indeed the case, it would mechanically improve the group margin by 40 bps, right? So why is the margin outlook seen only flat?

Question: Max Yates - Morgan Stanley - Analyst : Just my first question was around the fourth quarter. And do you get any sense that your organic growth benefited from any restock across your distributors? I don't know how good visibility you have on their inventory levels. But do you think ahead of potential tariffs, there was any restock across your distributors and that boosted your North America growth?

Question: Max Yates - Morgan Stanley - Analyst : At your -- just a follow up. At your Capital Markets Day, you gave quite a helpful split between your energy transition business and your core electrical infrastructure business. And I was just wondering, could you update us sort of how both of those performed in 2024? Did you still see that kind of high-single-digit growth in the sort of power protection energy transition stuff and the core infrastructure stuff was much more flat? So how did those two segments that you gave an update on evolved in 2024?

Question: Martin Wilkie - Citi - Analyst : Martin from Citi. Just coming back to tariffs. As you say, it's still on search that we don't really know where you want to end up being applied. But in terms of your sourcing into the US, has that changed at all? I know you and the industry do obviously source from China. Has there been any change in that in anticipation of tariffs? Or are you waiting to see what happened and effectively rely on your past actions, which has meant pricing has offset it. Just to understand how you're thinking about protecting from tariffs into 2025.

Question: Martin Wilkie - Citi - Analyst : Helpful color. I appreciate that, thank you. Can I just ask a second question on data center. Obviously, a lot of debate over the last few weeks on DeepSeek and energy efficiency and these kind of things. But obviously, it's too early to really tell what might happen. But if we do see the spending in data center going more towards the applications in AI as opposed to training and therefore perhaps a change in the mix of where the data center investment goes, is that a better opportunity for Legrand in terms of the products that you sell and the customers that you sell into?

Question: Alexander Virgo - BofA Global Research - Analyst : Thanks for taking the question. I wonder if I could just dig a little bit into margin guidance. There's obviously quite a lot of confusion around the Q3 results and then the strength of Q4 (inaudible) pronounced, especially in Europe, where you saw margins expand on a bit to 24% again. So I wondered if you could just give us a sense of how we can better understand how this cadence goes through 2025? And whether or not that expansion in Europe is something that we need to think about in 2025 as being a big tailwind because I think that was probably the biggest surprise notwithstanding the North American data center-driven growth.

Question: Alexander Virgo - BofA Global Research - Analyst : Right. Thank you.

Question: Andre Kukhnin - UBS - Analyst : Thank you very much for taking my question. I wanted to ask about the acquisition pipeline and how the pricing on those deals is looking at the moment versus the prices that you paid in 2024 and maybe putting that also into a broader historical content -- context, sorry. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 8:30AM, LEGD.PA - Full Year 2024 Legrand SA Earnings Call

Question: Andre Kukhnin - UBS - Analyst : A follow up, if I may. More on the Q4 margin performance. Could you just confirm that this is entirely operational? There was nothing of one-off nature there? Or even if it's a one-off kind of operational nature, maybe closing out of particularly process projects or anything like that, so that we can really take that as a step up in underlying performance going forward.

Question: James Moore - Redburn Atlantic - Analyst : Thanks for squeezing me in. I missed the very start, Benoet. I don't know if you gave the US and European growth in the fourth quarter for resi, nonresi and data centers at a regional level. If you didn't and you could, that would be great. That's my first question. Maybe I come back for the other one?

Question: James Moore - Redburn Atlantic - Analyst : Energy was flattish in '24. I was a bit surprised by that in the sense that unlike the essential infrastructure business, which is perhaps more wiring devices, cable management, audiovisual, I would have thought with that being more exposed to things like circuit breakers, industrial UPS, that that would be more linked to say, electrification and secular themes where we've been seeing perhaps in sort of high-single-digit growth rates in

Question: Eric Lemarie - CIC Market Solutions (France) - Analyst : One question and one follow up. Do you think your exposure to building renovation compared to new build that change in 2024? And maybe that could explain your relative resilience in Europe in your view? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 8:30AM, LEGD.PA - Full Year 2024 Legrand SA Earnings Call

Question: Eric Lemarie - CIC Market Solutions (France) - Analyst : And just one follow-up on operating margin. So your guidance is basically around 20.5% in 2025. And it looks to me -- has this level of 20.5% looks to me like a new normal. And I would like to understand or just to understand if you -- maybe you should now maybe upgrade a bit your capital market, the long-term guidance on profitability?

Question: Jonathan Day - HSBC - Analyst : I've got a couple. I was wondering on data centers; you mentioned that you have to fight quite hard to win some of the projects. And I was just talking -- I'm wondering if you could talk a bit about the competitive environment in that market and maybe shed some light on pricing. And then my second question was if you could just talk a little bit about some of the trends that you're seeing in the rest of world areas, in particular, South America and the Middle East, where growth seems to have been quite strong.

Question: Jonathan Day - HSBC - Analyst : Great. Thanks. And then just the strength in the rest of the world in Africa and the Middle East and South America?