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Schneider Sees Rising Margins in 2014 After Gain in Profit

Feb. 20 (Bloomberg) -- Schneider Electric SA, the world’s biggest maker of low- and medium-voltage equipment, predicted U.S. and Chinese demand will help boost margins excluding currency effects this year after 2013 profit met estimates.

Full-year net income climbed 4 percent to 1.89 billion euros ($2.6 billion), the company, based in Rueil-Malmaison near Paris, said in a statement today. Analysts had forecast profit of 1.90 billion euros, according to the average of 12 estimates compiled by Bloomberg.

“We delivered solid results in a challenging environment in 2013,” Chief Executive Officer Jean-Pascal Tricoire said in the statement. “Looking into 2014, we see a rather positive economy in North America and China, initial signs of stabilization in Western Europe, while uncertainty remains in several new economies.”

The French company, which is cutting costs to adapt to a construction slump and government austerity measures in Europe, plans to add more manufacturing and support functions in faster-growing markets such as India, Russia and Brazil to be less exposed to the euro’s appreciation that dented sales and profitability in 2013.

Schneider rose 0.1 percent to 63.68 euros at 9:36 a.m. in Paris trading, while the benchmark CAC 40 index declined 0.4 percent.

Margin Growth

Schneider forecast low single-digit organic sales growth this year and a 0.4 percentage point to 0.8 percentage point advance in adjusted margin for earnings before interest, taxes, and amortization, excluding currency effects, from the 2013 pro forma level of about 14 percent, which includes Invensys Plc.

The negative currency effect is currently estimated at 0.4 point for 2014, with most of the headwind concentrated in the first half, the company said.

Schneider last month completed the acquisition of Invensys, a U.K. maker of software and control systems used in the chemical, oil and gas, and mining industries.

“We shall now focus on integration” of Invensys and Russia’s Electroshield-TM Samara, “capitalize on our technology innovation in products and solutions and optimize efficiency across the company,” Tricoire said.

Adjusted Ebita fell 3 percent to 3.41 billion euros in 2013, representing 14.5 percent of sales compared with 14.7 percent a year earlier, Schneider said today. Earnings were hurt by weaker currencies in Russia, India, Brazil and Indonesia.

The margin rose 0.3 percentage point excluding currency swings and the effect of acquisitions, Schneider said.

Sales Miss

Fourth-quarter sales fell 3.4 percent to 6.22 billion euros as the stronger European currency shaved 370 million euros of revenue, Schneider said. Analysts polled by Bloomberg projected 6.36 billion euros, according to the average of eight estimates. Excluding acquisitions and exchange rate fluctuations, sales rose 0.6 percent.

Schneider’s focus on organic growth “should allow a strong earning-per-share performance and the continuation of an attractive dividend policy,” the company said. “In 2014, the integration of Invensys is expected to be high single-digit accretive on a cash EPS basis.”

Schneider plans to improve return on capital employed by 1.5 percentage points to 2 percentage points in two to three years, and the measure will help to determine management compensation.

The company proposed a dividend of 1.87 euros a share this year, unchanged from a year earlier.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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