Full Year 2024 Schneider Electric SE Earnings Call Transcript

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

Question: Simon Toennessen - Jefferies - Analyst : My first question is just on sort of order trends you're seeing. I'm presuming you're not surprised that since DeepSeek, there's a lot of questions around this, and I know you historically haven't given orders, but have you seen any changes in customer behavior at all? Or is it basically just confirming the trends that you've seen generally throughout Q4, the majority of '24 as you as you enter '25. And maybe just as an add-on to that, obviously, Motivair is a recent acquisition from you. Well, lots of chat obviously, what complies in the end. But I think the concern, I guess, lies around less power intensity potentially and maybe air cooling for longer, less liquid cooling, just a bit of a comment on that, I guess, and then your views since Motivair.

Question: Jonathan Mounsey - BNP Paribas Exane - Analyst : So many. I will try to stick to one. The net debt ratio, it's just one now. And given the guidance of the P&L and the excellent free cash flow conversion rate you're expecting for 2025. Just wondering in the absence of M&A how that leverage is going to get very low by the end of 2025. Have you got any thoughts on where the ratio should be? How you might maintain it and any more buybacks, why haven't we had those today? Or perhaps is the M&A pipeline such that you expect to relever via more spend?

Question: Alasdair Leslie - BERNSTEIN - Analyst : Quick question just on Energy Management. Clearly, very strong growth again in North America. so just another step change. Just kind of curious how much of that further acceleration was down to new capacity coming online. I suppose more importantly, how much more is still to come in terms of the ramp-up and higher loading of those new facilities? And if I could just attach on to that, how much do you kind of sort of still bake in, in terms of kind of maybe a negative impact on margins from productivity in H1 from these measures? Or is that headwind now largely behind you?

Question: James Moore - Redburn Atlantic - Analyst : I hope you can hear me. I wanted to ask a question about data centers. I think you mentioned that we've gone from 21% to 24%. And last year, you very helpfully said distributed IT was 7% and hyperscale of 5.5% behind that 21%. Could you give those splits behind the numbers for '24. 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 20, 2025 / 7:30AM, SCHN.PA - Full Year 2024 Schneider Electric SE Earnings Call And I'm really trying to get down to hyperscaler. You say most of the growth is cloud. Would that be fair to say that cloud has gone from 5.5% to say 9% of group, which I calculate would mean hyperscale is growing 70%, 75% in orders in 2024? I really love some confirmation that that's the kind of magnitude of order growth in hyperscale and how do you see that number growing in the coming three to five years?

Question: Andre Kukhnin - UBS - Analyst : I just wanted to take the opportunity to dig into Medium Voltage systems a bit more. Could you just remind us of the exposure to that segment if we put the whole data center piece aside and think about just Medium Voltage for kind of utilities and industrial and other building applications? And could you talk about the kind of the normalization of lead times and the pricing comment you made earlier, effectively, do we need to worry about the sort of pricing of those rush orders that we've heard some of your peers and some of the industry experts talk about? Did you take an advantage of that during 2024? And is that what's normalizing? Or is it more of a normal trend? And is there like an SF6 free kicker to expect in 2025, if I can pack all of that into one question.

Question: William Mackie - Kepler Cheuvreux - Analyst : My question relates to some of your comments earlier about commercial agility and the actions that you might take as sort of geopolitics and particularly tariffs evolve. I want to go to North America specifically, where you said you have 83% in region for region, but I'm guessing that includes Mexico, which is a large manufacturing base for view into North America. So maybe generally, to talk about how you might adjust specifically with relation to tariffs and particularly how the Mexico USA. relationship could develop?

Question: Gael de-Bray - Deutsche Bank - Analyst : If we start to see an acceleration towards inference and perhaps less training, taking DeepSeek into consideration. So what does that mean exactly for you in terms of the content, in terms of the type of product or maybe the margin differential between what you have with large-scale AI training data centers and what you would have for the rest, maybe more on the enterprise and at the hedge level?

Question: Philip Buller - Berenberg - Analyst : My one is really a follow-up to Jonathan's earlier question, but for Olivier, if I may. Given the balance sheet optionality and given how good everything is organically, I guess the question is, what is the next leg in terms of strategic priorities for you over the medium term? I'm wondering if there are going to be some inorganic avenues that you could be pursuing via M&A? And where would you like to focus those efforts, be that technology, end market or geography, please? Thanks.

Question: Max Yates - Morgan Stanley - Analyst : Could I just ask about your Data Center business? So it looks like you did around EUR9.7 billion of orders in Data Centers. Could you give us a feel for how much of your sales are Data Centers today? And would we be right in thinking maybe the percentage of orders last year at 21% is a good reflection of where sales are today? And then as an extension of that, when we look at your growth through the year in that Data Center business, was there any major deviations? Was there any single quarter where the Data Center growth rates were much larger than others and that obviously influenced the overall growth rate for the group? Thank you.

Question: Alexander Virgo - BofA Global Research - Analyst : Maybe I could just come back on Andre's question on pricing. If the 400 basis points of gross margin in the bridge is predominantly driven by Systems' gross margin pricing, that sounds like it's sort of 15% or so or more given the rush pricing that Andre mentioned. So I wonder if you could just comment on that with respect to 2025. Is that what we're talking about in terms of moderation? 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 20, 2025 / 7:30AM, SCHN.PA - Full Year 2024 Schneider Electric SE Earnings Call

Question: Ben Uglow - Oxcap Analystics - Analyst : Yeah, I guess it was more color on the situation in China. Hilary, I remember back in October, November, you were indicating that you had seen a sort of pickup in the smaller discrete automation products. And it sounds as if that's continued. But when we look at the overall China number, it still looks pretty muted. So could you give us an update on what's going on, on the ground? Why we're not seeing a more broad-based recovery on the Industrial Automation side? And then if there's time once you've done that, can you just give us an overall sense, how would you describe, in very broad terms, the kind of recovery that we're seeing in China, i.e., is it broad-based? It seems very different from end market to end market. Thank you.