Sitting in the sweet spot of automation control and energy management, Schneider Electric reported double-digit growth in its second quarter, which helped fuel a strong financial performance for the first half of 2008.
In the second quarter ended June 30, 2008, sales totaled €4.6 billion, up 11.6% on a constant structure and exchange rate basis.
In the first half of 2008, the company reported a 17% jump in net income to €851 million, from the €729 million it earned in the year-earlier period. Earnings per share reached €3.56, up from €3.16 in the first half of 2007. Meanwhile, first-half sales hit €8.9 billion, up 10.6% on a constant structure and exchange rate basis.
Acquisitions contributed €360 million to the top line in the first half, or 4.4% of sales growth, mainly from the APC and Pelco deals. Schneider Electric’s APC-MGE power-backup business unit reported a 60% increase in EBITA to $249 million. The unit’s two main business lines, Home & Distributed and Enterprise Systems & Services, recorded 11% and 15% organic sales growth, respectively. And just nine months after its integration into Schneider Electric, Pelco, a maker of video security, improved its EBITA by more than 50% to $48 million, the company said. However, the divestiture of MGE’s small systems business reduced sales by €90 million.
Acquisitions have been a strategic part of the Schneider Electric build-out, as it positions itself as a global specialist in energy management.
“Our job is to make sure we connect energy production to energy usage in the smartest way … to deliver active and efficient architectures from plant to plug … [and] to have people make the most out of their energy,” Jean-Pascal Tricoire, Schneider Electric’s president and CEO, told financial analysts on a conference call.
APC, which Schneider Electric acquired late in 2006, is a significant addition to the company’s technology portfolio and was part of a larger effort over the past few years to add to its energy management capabilities. According to Tricoire, 27% of Schneider Electric’s business is generated from areas such as critical power and energy efficiency, which is a very different picture from a few years ago.
“We doubled in size in the past four years, and 50% of the activities we do in Schneider Electric today were not in the group portfolio at the beginning of the century,” Tricoire said. “People have not understood this change of the company.”
Continuing its transformation, Schneider Electric recently added renewable energy into the mix. Earlier this week, the company announced it would acquire Xantrex Technology Inc., a player in the solar and wind inverter market, in a deal estimated at about $412 million. The inverter is the key entry point for solar and wind systems solutions, converting raw electrical power from renewable energy generators (such as solar photovoltaic panels and wind turbines) into high quality, grid-worthy power.
This was a missing link in the Schneider Electric business, Tricoire said. “We have everything to connect sources of energy to energy usage; we were just lacking those inverters,” he said.
But Schneider won’t stop there. Tricoire suggested on today’s call that more acquisitions are on the horizon.
The company is also diversifying geographically. In the second quarter, sales in Europe grew 10.9%. Asia Pacific was up 19.1% — with particular strength in critical power and services — and there was also strong demand for the company’s medium- and low-voltage products in Africa, Middle East, and South America due to infrastructure build-out, the company said. Strong growth around the world offset sluggish North American sales, which grew only 4.7%, impacted by some supply chain issues and softening demand in some segments, the company said.
In the second quarter, Schneider Electrical Distribution group generated €2.6 billion in revenue, while the Automation & Control group reported sales of €1.3 billion, and Critical Power & Cooling notched €663 million.
Going forward, the overall outlook remains positive, Schneider Electric said. Based on current economic conditions, company executives revised their guidance upward for the full-year 2008 to a minimum of 8% organic sales growth. Earlier forecasts targeted 6% to 8% growth.
