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Schneider Cuts 2012 Sales Goal as Revenue Misses Estimates

Schneider Electric SA, the world’s biggest maker of low- and medium-voltage equipment, cut its target for 2012 revenue and said it may step up restructuring as austerity measures deepen Europe’s economic slump.

Revenue rose 7.1 percent in the third quarter to 6.1 billion euros ($7.92 billion), the company, based near Paris, said in a statement today. The figure missed analysts’ estimates, and Schneider abandoned a target for “flat to slightly positive” organic sales growth in 2012, predicting instead a “flat to slightly negative” business.

“Western Europe has been difficult in the third quarter,” Chief Financial Officer Emmanuel Babeau said in an interview. The company may lift its 2012 target for restructuring costs such as site regroupings and product redesign, initially set at about 150 million euros, by “several tens of millions,” he said.

Schneider, which spent $3.8 billion in 2011 on acquisitions, is stepping up an overhaul amid a “more pronounced slowdown” in parts of Europe and a delayed rebound in China. ABB Ltd., Schneider’s Swiss rival, also indicated today it’s seeing increased signs of an economic slowdown.

The stock rose as much as 72 cents, or 1.5 percent, to 49.23 cents in Paris trading. They traded at 48.91 euros as of 11:53 a.m., giving the company a market value of 27.1 billion euros.

Dividend Payout

Schneider may have to book a one-time non-cash charge of 100 million euros to 200 million euros on the assets of its building division, which would reflect weaker-than-expected prospects at its video-surveillance unit, the CFO said. The 2012 dividend, based on a policy of a 50 percent payout of net income, may be “adjusted to neutralize the impact of this potential charge,” the company said.

“The decrease in government spending in the U.K., the U.S. and Nordic countries has affected our building business,” the CFO said on a call with analysts.

Analysts surveyed by Bloomberg projected 6.15 billion euros in revenue for the third quarter. Excluding acquisitions and exchange rate fluctuations, sales fell 1.9 percent, the first organic drop since the last three months of 2009, with fewer working days accounting for about 1 percent in the decline.

More Deals

Schneider’s like-for-like sales in Western Europe fell 8 percent in the third quarter. On that basis, sales in France fell more than 10 percent as builders and manufacturers adopted a wait-and-see attitude on investment after the government raised taxes, Babeau said. Sales were stable in Germany, turned negative in the U.K., and continued to drop at “ strong double-digit” pace in Spain and Italy, he said.

Net acquisitions added 146 million euros to third-quarter sales, and the appreciation of currencies such as the dollar and the yuan against the euro added another 372 million euros.

Schneider continues to look for acquisitions and still prefers small and medium-sized acquisitions, the CFO said. The company is also capable of large deals, Babeau said, citing the $6 billion purchase of American Power Conversion Corp. in 2006 that was among Schneider’s “most successful.”

The company is “well on track” to reach its goal for an adjusted margin on earnings before interest, taxes, and amortization of 14 percent to 15 percent in 2012 as the company cuts costs to mitigate the impact of rising raw-material prices and more sales of systems and services that have lower margins than products, Chief Executive Officer Jean-Pascal Tricoire said in the release.

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