Legrand SA Q1 2025 Earnings Call Transcript

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

Question: Max Yates - Morgan Stanley - Analyst : Thank you very much. Good morning. Maybe I could just start on the North America business. So it looks like from your chart that you showed on the data center growth, we should maybe think that sort of data centers grew at something like 40%. But that only really explains maybe two third of the North America growth. So I'd be curious kind of, A, is the data center growing at about 40%, is that right? And then B, if that's the case, it does look like either the non-residential was a bit better, maybe it was commercial, maybe it was the other bit of non-res or maybe it was resi. So maybe if you could just walk us through sort of some of the growth rates in the other North America just to better understand how we build up to that 18.7? Thank you.

Question: Max Yates - Morgan Stanley - Analyst : Okay. So just to make sure I really understand that all of your growth in North America essentially was from your data center business and none of it was from the other construction -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 7:30AM, LEGD.PA - Q1 2025 Legrand SA Earnings Call

Question: Max Yates - Morgan Stanley - Analyst : Okay. Understood. And just secondly, I just wanted to understand, there's a kind of Reuters interview this morning where you talk about or you mentioned kind of up to $200 million impact from tariffs. So I guess what I want to understand is how much of that are you kind of countering with pricing? So how much are you putting up prices? And maybe also within that, do you expect a sort of temporary dip in margins? So if we think about the second quarter, might you drop below kind of 20% because it takes time to try and align these prices with the actual sort of tariff cost impact? Any clarity there would be helpful. Thank you.

Question: Max Yates - Morgan Stanley - Analyst : Okay. Just one very final one because I think you're going to get it anyway. Just on the 1% to 2% extra price, your organic growth guidance, I guess, is 2% to 4% still. How do we interpret how that price increase has been embedded into your organic guidance? And I assume the answer is we're not assuming lower volumes. So just help us understand that.

Question: Max Yates - Morgan Stanley - Analyst : Well, that's all very clear. Thank you very much.

Question: Ilaria Buricelli - Goldman Sachs - Analyst : Hi, morning, thanks for taking my question. On the US COGS being imported, you mentioned industrial footprint adaptation. So I was wondering which proportion of this do you think you could potentially move domestically to the US? And then I'll ask my second question.

Question: Ilaria Buricelli - Goldman Sachs - Analyst : (technical difficulty) market share in data centers, if you can comment on like how you see it evolving, both in Europe and US. And like what do you look at to assess that?

Question: Gael de-Bray - Deutsche Bank AG - Analyst : Oh, thanks very much. I have 2 questions, please. The first one is on the margin guidance for the full year. So it now takes into account progressively normalizing tariffs. So I guess my question is what happens if that's not the case? I mean do you have enough flexibility and adaptation measures, enough pricing power in the US relative to the competition to protect margins if the reciprocal tariffs on China remain at 125%?

Question: Gael de-Bray - Deutsche Bank AG - Analyst : Okay. And then on the pricing side, I mean, could you provide some indication on the magnitude of the price rises you've passed on to customers in the first wave in April and what you have in mind for the second wave in the US specifically?

Question: Gael de-Bray - Deutsche Bank AG - Analyst : Okay, thanks very much. Okay. Can I have actually the final one? Just I was looking at the rest of the world growth performance and it seems that sales decreased by around 15% sequentially, which seems a bit higher than the usual seasonality between Q4 and Q1. So any remarks on that, what's going on at maybe country by country?

Question: Gael de-Bray - Deutsche Bank AG - Analyst : Okay, thank you very much, Benoit. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 7:30AM, LEGD.PA - Q1 2025 Legrand SA Earnings Call

Question: William Mackie - Kepler Cheuvreux - Analyst : Very good morning to you, gentlemen. Thanks for the time. My first question perhaps relates to Europe. If you could throw a bit more color on the growth trends you're seeing in some of your main European markets, particularly France. And I think if you could talk to that with respect to trends across the residential markets, which seem to have been a bit softer with some of your competitors than expected?

Question: William Mackie - Kepler Cheuvreux - Analyst : Thank you. That's helpful. The follow-up question relates to some of your sort of trends going through Q1. It looks like your inventory levels were a little higher than I was expecting in the first quarter and the working capital was a little bit lighter -- sorry, the free cash flow was a little bit lighter than expectation. I mean, were there prebuy activities ongoing across your North American businesses to try to get ahead of the tariff changes -- and perhaps on top of that question, I don't know if you will, but if you'd give any flavor for how the trading has developed, perhaps in the first five weeks of Q2?

Question: William Mackie - Kepler Cheuvreux - Analyst : Thank you, Franck. Thank you very much.

Question: Ben Uglow - Oxcap Analytics - Analyst : Good morning, gentlemen. Thank you for taking the question. I had a couple. Can I ask us -- I don't want to challenge too much here, but on this prebuy issue, I mean, obviously, 19% growth in North America is exceptional. And obviously, a lot of your sales go through distributors in North America. I guess my question is how -- why are you so confident that there's not been a prebuy? How do you know? And what gives you the confidence that all of that growth is true demand? That would be my first one.

Question: Ben Uglow - Oxcap Analytics - Analyst : That's very clear. Thank you. And I guess my next question is it's a difficult one to convey. But when you're in your customer conversations. Your customers have been subjected to exceptional price increases now really since 2020. I mean they had double-digit price increases in '22, mid-single-digit price increases in 2023. How easy is it to sit down again and just say this price increases coming through, less prices are going up. Is there any customer resistance this time? Is it any different from what we saw during the COVID period? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 7:30AM, LEGD.PA - Q1 2025 Legrand SA Earnings Call

Question: Ben Uglow - Oxcap Analytics - Analyst : That's very helpful. Thank you very much.

Question: Alasdair Leslie - Bernstein Autonomous LLP - Analyst : Yeah, thank you. Good morning. So I guess a quick follow-up then on pricing in the US. I was just wondering how you assess that price elasticity across your end markets and product categories in the US? I know you've got strong pricing power generally, but I imagine there's still some variance there. So kind of any potential areas you'd flag the way you have to kind of push harder on productivity, cost savings, supply chain adjustments? And then a sort of follow-up on tariffs. And I kind of -- I suppose, a worst-case scenario, if we can call it that. with regards to China, just assuming things don't change. I was just wondering if you could update us potentially on the total impact relative to the 150 million to 200 million you flagged in a kind of worst-case scenario and maybe some sensitivity that you gave last time out, you talked about $20 million for every 10% incremental increase in China tariffs. Is that still the right level to think of? Thank you.

Question: Alasdair Leslie - Bernstein Autonomous LLP - Analyst : Alright sir, thank you.

Question: Martin Wilkie - Citigroup - Analyst : Thank you. Good morning. Yes, it's Martin. Just coming back to the US market, obviously, very strong growth in the US, both on sales and orders. Obviously, during the quarter, we did hear many reports of hyperscale is changing the phasing of their own investment. It doesn't seem to have impacted you. But could you help us just understand if you did see any changes in the investment plans of your customers? Or was that growth that you saw really kind of across the board in terms of the customers in the US?

Question: Martin Wilkie - Citigroup - Analyst : Thank you. That's very helpful. And if I could just sort of follow up, just also on the US business. You mentioned that the other buildings markets have yet to see any growth. There does seem to be signs of green shoots within the office market in some of the indicators that we look at? I know you don't have huge amounts of lead times and so forth there. But in your conversations with agents or even if you're getting project proposals, are you also beginning to see some of those green shoots when you talk about the potential recovery in the second half? Or how should we think about that market developing?

Question: Martin Wilkie - Citigroup - Analyst : Great thank you very much.

Question: Jonathan Day - HSBC - Analyst : Hi, good morning. Thanks for taking my question. I was just wondering, coming back to data centers, if you could talk a bit about -- I know you said activity was fairly even across the board, but whether there are any particularly large projects in the orders or in the execution this time? And also just comment a bit around lead times and capacity in that market as well, please? Thank you.

Question: Jonathan Day - HSBC - Analyst : Great, thank you very much.

Question: Eric Lemarie - CIC Market Solutions - Analyst : My first question is on M&A. Do you think the political environment could be a headwind maybe for your M&A business? Maybe some sellers could hesitate to move in the current climate? Well, that's not what we're seeing today, I have to say that.

Question: Eric Lemarie - CIC Market Solutions - Analyst : Thank you. And I've got a follow-up one, if I may. Regarding your action plan, what is the cost of this action plan? So not the price increase, of course, but you're mentioning some maybe additional saving plans or the supply chain adjustment or maybe should we expect -- and should we see some higher restructuration charges this year?

Question: Eric Lemarie - CIC Market Solutions - Analyst : Thank you. Thank you very much.

Question: Alexander Virgo - Bank of America Merrill Lynch - Analyst : Oh yeah, thanks very much good morning gentlemen. I appreciate the opportunity. I wondered if I could just follow up a couple of -- on a couple of your statements so far. The first one would just be in terms of the sequential development ex data centers, if I -- my math is correct, then actually, you have seen a fairly clear weakening both in North America and at the group level from Q4 to Q1. I think North America ex data center is up about 5% in Q4. So what is it that is driving that sort of sequential weakness is the first question? And then the follow-up just on your inventory common and prebuy. If I interpret you said correctly. I appreciate your point on building inventory for the data centers, but you prebought inventory. So what gives you so much confidence that your customers and distributors haven't done the same? Thank you.

Question: Alexander Virgo - Bank of America Merrill Lynch - Analyst : Okay, thank you.

Question: Andre Kukhnin - UBS - Analyst : Yeah, good morning. Thank you very much for taking my questions. I just have a couple of follow-ups on the tariff impact calculations of the $150 million to $200 million. I think we've got about EUR1.7 billion, EUR1.8 billion of US COGS, and you just said it's 15% to 20% supplied out of China. So I was just wondering -- I'm kind of arriving at a higher end or even slightly above higher end of that number when I put 55%, the midpoint of 50% to 60% of the tariff scenario that you presented. So just wanted to double check that and double check that this impact calculation does not include any kind of relocation of manufacturing that you're already doing?

Question: Andre Kukhnin - UBS - Analyst : Okay. Great. So it's not annualized. Okay, I get it.

Question: Andre Kukhnin - UBS - Analyst : Yes. And can I just check in terms of that flow of COGS out of China, the 15% to 20%, is that kind of similar across the data center products and

Question: Andre Kukhnin - UBS - Analyst : Great. Thank you. And just a final one. On the price actions so far, we done the calculation sort of around 6.5%, 7% implied in the guidance that you gave of 2 to 3 with mainly coming from that. Does this cover the kind of China tariffs so far as well as steel, in aluminum and the general everything kind of pre reciprocal or --

Question: Andre Kukhnin - UBS - Analyst : Great, thank you very much for your time.

Question: George Featherstone - Barclays - Analyst : Hi, morning, everyone. Couple of follow-ups, if I can. Just on the data center market. In Europe, some of your peers have noted some delays there, and I just wondered if you could give some color on anything that you're seeing in the market there? And then on tariffs and the current trade environment, I wondered if you're seeing or are concerned at all about any supply chain disruption as a result of the current situation? Thank you.

Question: George Featherstone - Barclays - Analyst : Just some of your peers there we're talking perhaps some delays in project activity and --

Question: George Featherstone - Barclays - Analyst : Yeah. Just along those lines. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 7:30AM, LEGD.PA - Q1 2025 Legrand SA Earnings Call

Question: George Featherstone - Barclays - Analyst : Okay. And you're confident that you're going to be able to get those components from other areas just because everyone seems to be making a similar comment at the minute that they are --

Question: George Featherstone - Barclays - Analyst : Okay, thank you.