Q1 2025 Schneider Electric SE Corporate Sales Call Transcript

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

Question: Alasdair Leslie - BernsteinSG - Analyst : Yeah, thank you. Good afternoon. So energy management, weaker-than-expected in Western Europe. Just maybe if you can elaborate more on data centers specifically there. You cite several factors behind, sort of, I guess, a negative impact on demand. And given some of those seem to be more structural in nature, I think you flag power availability, AI design. Realistically, how quickly does that turn? How quickly can you overcome those issues and return to growth there? Thank you.

Question: Simon Toennessen - Jefferies - Analyst : Yes, good evening, Hilary and Amit. I've got one on your guidance, Hilary. After the Q1, you clearly need to see an acceleration to reach the midpoint or even the high-end of your organic guide when energy management is facing the 400 basis points, tougher comp I think in the second half. So can you elaborate a bit more on how you're seeing the major building blocks at the times when it seems resi and process markets are weaker and Discrete, I guess, not strong enough yet to offset. So is your guidance-based case entirely driven by growth improving in H2, are you just based on a cyclical pick up or do you see any other drivers, for example, in energy management where growth could improve versus the Q1? Thank you.

Question: Jonathan Mounsey - BNP Paribas Exane - Analyst : Hi, good evening. Thanks for letting me ask a question. Maybe on the tariff side. I think, there's some helpful slides there in the back, talking about 83% region to region sourcing in the US or North America rather and hoping to go to 90%. But obviously, none of us expected, the last time we spoke, that tariffs on China would be 145%. And that kind of elevated level of tariffs feels like even if only a small part of your sourcing comes from China, it's probably going to require a meaningful price increase to recover the headwind. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 28, 2025 / 4:30PM, SCHN.PA - Q1 2025 Schneider Electric SE Corporate Sales Call And what have you got planned there? Give us any feeling on what has to happen to pricing to recover the margin, and will there be a lag around that? You did mention that maybe margins would be higher in the second half. Is that purely seasonal or is it somewhat linked to this? And then, just a very short one. Group orders and the backlog, are we still growing the backlog? Are orders still ahead of sales? That would be really helpful as well.

Question: Daniela Costa - Goldman Sachs - Analyst : Hi, good afternoon. Thank you for taking my question. I just wanted to follow up on capital allocation, and now you just completed Motivair. So what are sort of like the main areas of focus on how you think about M&A and versus buyback at the moment?

Question: Gael De Bray - Deutsche Bank - Analyst : Good afternoon. Thanks very much. Can I have two quick ones, please? Firstly, in which country specifically did you see the greater-than-expected sequential deterioration in residential buildings? And then, maybe just to follow up on Daniela's question around capital allocation. I mean, any news specifically on the Indian joint venture with Temasek. And specifically also, could you provide maybe an indication on the size of the new joint venture in Europe in the EV charging segment. Thank you.

Question: James Moore - Redburn Atlantic - Analyst : Hi. Keeping it to one. Can I just clarify on China? Are we talking how much percentage of the US businesses, local China and Mexico, I was assuming 75% for China, 25% for Mexico. And could you just comment on April orders as to whether in the last three weeks, you've seen any significant change in market dynamics, those tariffs.

Question: George Featherstone - Barclays - Analyst : Yeah, thanks for taking the question. Just on data centers. I wonder if you could just help us with how orders in that segment performed year-over-year. Some of your peers have cited mid-teens growth, and I just wondered how you compared to that level of activity, please.

Question: William Mackie - Kepler Cheuvreux - Analyst : Yeah, good evening. Thanks for fitting me in. My question relates to the flexibility to price the backlog. Implying your backlog is close to a new record. I mean, in the event that some of the tariffs and other factors create greater inflation within the cost structures for those contracts, what ability do you have to go back to customers and reset or reprice some of the backlog to mitigate the potential margin headwinds?

Question: Max Yates - Morgan Stanley - Analyst : Thank you. Just sorry to go back on tariffs. You've talked a lot about kind of the finished product that you export from outside of the US into the US. I guess what I was really curious about is some of your competitors, we kind of all know who I'm talking about, Legrand, have said that of their North America supply chain, around half of the components that they buy to manufacture in the US come from outside of the US, including quite a major portion of China. So I guess my real question is, is there an impact from buying components and shipping them into the US, where you have to pay obviously sort of tariffs on that and potentially high prices for components. And if not, do you think your competitive position versus someone like Legrand will give you an advantage and possibly an opportunity to take share? I guess, you're not that differently positioned to say in Eaton. But I'm just curious, A, on the competition and maybe, B, on I'm surprised given what others are saying that you don't have a reasonable amount of components shipped in for your North American production.

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Thank you. Good day, everyone. It's on the machine OEM commentary. I wonder what end markets and [use end markets], if any, that you're actually seeing a visible change in demand versus just kind of the end of inventory liquidation. Does any particular end use demand look like it's turning?

Question: Jonathan Day - HSBC - Analyst : Hi, good afternoon. Thanks for taking my question. I was just wondering if you could comment on, in terms of the order trends, whether you've seen any pre-ordering in Q1 ahead of tariffs embedded in those order trends or whether they're all, if you like, of underlying organic reflective of their market developments. Thanks.

Question: Delphine Brault - Oddo - Analyst : Yes, thanks. Good afternoon. Thanks for taking my question. How did your Q2 activity start for the first weeks of the quarter? Did you see any inflection, either positive or negative?

Question: Martin Wilkie - Citigroup - Analyst : Yeah, thank you. Good evening. It's Martin. A question just coming back to software. When you outlined the outlook at the Capital Markets Day, you obviously talked about the phasing of SaaS and how that could impact the earlier part of the four-year planning period. Could you let us know where we are in that process? Obviously, still a drag this quarter, but does that get less of a drag as the year progresses? Should we expect the sales growth to trend up towards the ARR as the year goes on or is it a much later time scale when we can think about software in terms of reported organic beginning to accelerate? Thank you.

Question: Alexander Virgo - Bank of America - Analyst : Yeah, thanks very much. Good evening, Hilary, Amit. I wondered if you could just talk a little bit about the sequential development in Europe and how we should think about that as we layer that in, I guess, over the coming quarters? Because [plus 7% in Q4 to minus 3%] in Q1 is a big move. And I'm just wondering if -- I guess I'm wondering how big an impact that resi business really has had and how much of it is data centers being pushed to the right. And at what point we might expect that to normalize or come through into the back end of the year. Thank you.

Question: Alexander Virgo - Bank of America - Analyst : Thank you.

Question: Ben Uglow - Oxcap Analytics - Analyst : Good afternoon. Thanks for taking the question. I guess can we just step back and look very, very high level at the kind of customer conversations that you're having? I think the press release kind of mentions on the system side one or two delayed investment decisions. I guess, Hillary, it doesn't sound as if things have massively changed despite the Liberation Day tariffs. Can you just give us a bit of color from your conversations, is it just business as usual and we should expect the second quarter to look pretty much like the first quarter? Is that a fair assumption?

Question: Ben Uglow - Oxcap Analytics - Analyst : Interesting. Thank you.