Q3 2024 Schneider Electric SE Corporate Sales Call Transcript

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

Question: Simon Toennessen - Jefferies International Ltd. - Analyst : I've got one question on what you're seeing in the discrete market recovery. You mentioned the signs of demand recovery in discrete. Maybe you can just elaborate a bit more on that? And maybe do you think that's just a low comparison reason? Or do you think there's actually some higher demand, for example, in China? It seems Western Europe is still very weak. And if I look at what you said on the slide at the Q2 stage, it seems the US has really been the main difference, I would think. You talked in the year from down now down mid-single digits versus, I think, it was about flat in the second quarter. So maybe just a few words on that as well. Thank you.

Question: Jonathan Mounsey - Exane BNP Paribas (UK) - Analyst : Maybe one on the sign. Obviously, I mean, just looking at the value, it's far below the theoretical maximum, I think, that could have been levied. But I just wondered, does the judgment impact the way you can operate in France going forward? Obviously, France is maybe not quite as big as India anymore. They're still third/fourth biggest territory across the group. Are you going to have to change your business practices as a result of the sign and the implications in terms of how you can trade there?

Question: Alasdair Leslie - Sanford C. Bernstein & Co. - Analyst : I was just wondering, first of all, if you could confirm that the backlog increased sequentially again. But then, really, I was wondering if you could expand on data center trends just globally outside of North America, but particularly in Europe. That's one region where it seems the commentary around growth is a bit more mixed and perhaps muted. We've seen plenty of major announcements on the web giants there. So really, what are you seeing in terms of pipeline quotation activity? And is this one area potentially where growth could maybe materially accelerate next year? Thank you.

Question: Philip Buller - Joh. Berenberg, Gossler & Co. KG - Analyst : The demand and current growth in US on data centers is very strong. I'm wondering if there are any constraints to growth repeating at this level in 2025 that we should consider, please -- be that capacity trend -- or are you hearing anything from your suppliers and customers in terms of the potential constraints for growth repeating at this level in 2025, please? Thanks.

Question: George Featherstone - Barclays Capital Securities Ltd. - Analyst : I just wanted to see if we could get an update on where you're at in terms of the capacity expansion in terms of the percent that you completed? And then as we turn to 2025, you have added, I think, about 5% to your incremental Industrial in the square meters. Can you help us understand what the difference will be in terms of volume outlook? I'd assume that they would be higher with these are state-of-the-art facilities.

Question: Andre Kukhnin - UBS Limited - Analyst : I'd like to ask about pricing. Could you talk about how that's developed in the second half so far, maybe versus first half, where I think in product pricing, we only saw about 30 bps? And what level should we expect for product pricing for the full year? I appreciate that there's quite a lot of price coming through in the mix in the systems part of the business, but I just wanted to check on the products side.

Question: William Mackie - Kepler Cheuvreux SA - Analyst : My one question would relate to tariffs and trade regulation specifically in the USA or North America. To what extent have you considered the various scenarios of what may happen about trade inflows and outflows that relate to your business? I'm aware that Schneider is a very localized business with regional hubs, but to what extent could you potentially be exposed to changes in trade tariffs?

Question: James Moore - Redburn Atlantic - Analyst : My question is on data centers and AI. Is it possible just to give us a flavor for what the share of AI is now in orders versus the share in revenues? And have you done any work on the rack density of training versus inference? And are you seeing any difference there. I ask because the sense that training might be very rack intense, but we might then see intensity fade once we move to a more inferenced style operation.

Question: Gael de Bray - Deutsche Bank Equities - Analyst : Most of your electrical peers have guided for or even already reported pretty strong margin performance this quarter. And your guidance continues to imply a deterioration in H2 on a sequential basis. So could you elaborate again, perhaps specifically on the expected negative impact that you REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 7:30AM, SCHN.PA - Q3 2024 Schneider Electric SE Corporate Sales Call expect to come from the execution of capacity investments in the US? And in relation to that, perhaps, do you confirm that the EUR207 million penalty will be booked below the adjusted EBIT line and is not included in the margin guidance?

Question: Max Yates - Morgan Stanley & Co. International Plc - Analyst : I just wanted to ask on the shape of second half margins between the divisions because, I mean, I see some of the other competitors in Industrial Automation, I mean, I think ABB is now not making money in their machine automation business. So I guess when we look at -- and maybe this is more of a qualitative question, when we look at the shape of margins and we look at industrial automation at 15.4% in the first half, within the context of your overall guidance, that you have for the full year, would you expect the Industrial automation bit to take a meaningful step down in the second half and that to be mitigated by a broad flat Energy Management piece? I'm just wondering how -- whether we can get at least any qualitative guidance on how those divisions may start to shake out within the context of the overall guidance. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 7:30AM, SCHN.PA - Q3 2024 Schneider Electric SE Corporate Sales Call

Question: Martin Wilkie - Citigroup Inc. - Analyst : It's Martin from Citi. The question I had was on the Motivair acquisition that you did. It sounded like you're paying a mid-single digit multiple of sales. Just to understand, is that primarily a revenue synergy strategy behind that, so most of you're plugging into the larger footprint of Schneider? Or should we expect other synergies as part of it? And is it a systems business, so just understand a bit more about the go-to-market that Motivair has? Thank you.

Question: Jonathan Day - HSBC Bank Plc - Analyst : I was wondering if you could just update us on where we are in the subscription transition? I know you've mentioned before that AVEVA, I think, is further along than plan on meetup. I'm just wondering if you could talk about that and also where we are on the profitability journey there, too. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 7:30AM, SCHN.PA - Q3 2024 Schneider Electric SE Corporate Sales Call

Question: Alexander Virgo - BofA Securities - Analyst : I wondered if you could talk a little bit more broadly about the software dynamics. You obviously talked about SaaS transition there, and the ARR growth is obviously still pretty healthy. But you do have been a pretty material slowdown in software and digital services. So I wondered if you could just give us a sense of what's going on there more broadly. And perhaps as we look at tough comp, I think, in Q4, just wondering how that transition looks like as we move into 2025. Appreciate that's a qualitative question, rather than quantitative given guidance for '25 isn't until February. Thank you.

Question: Ben Uglow - OxCap Analytics - Analyst : It's really about the dynamics in data centers. And specifically on the pricing side, I appreciate that price cost is normalizing for the group. But could you just give us a general sense on your customer conversations in data centers in the last 6 to 12 months? How are they evolving? Because when I look at lead times, and we had an update from one of your US competitors last week, they're not coming down. So it strikes me that things are still probably very, very robust from a Schneider standpoint. But please could you just give us a sense on those conversations? Thank you.