Schneider Electric SE, the world’s biggest maker of low- and medium-voltage equipment, reported first-half profit that beat analyst estimates and reiterated 2014 forecasts, helped by the purchase of Invensys Plc and cost cuts.
Net income declined 1 percent from a year earlier to 821 million euros ($1.1 billion), the company, based in Rueil-Malmaison near Paris, said in a statement today. Analysts had forecast 804 million euros, according to the average of five estimates compiled by Bloomberg.
“In the first half of 2014, we delivered 3.2 percent growth despite strong currency headwinds, and expanded the gross margin by 0.9 point organically thanks to manufacturing productivity,” Chief Executive Officer Jean-Pascal Tricoire said in the statement. “Invensys also contributes strongly to the group’s performance in the first half”
The French company, which is cutting costs to adapt to a construction slump and government austerity measures in Europe, is adding more manufacturing and support functions in faster-growing markets to be less exposed to the euro’s appreciation that’s curbing sales and profitability.
Adjusted earnings before interest, taxes, and amortization was little changed at 1.5 billion euros, representing 12.9 percent of Schneider’s revenue compared with a restated 13.3 percent a year earlier. The depreciation of the dollar and some emerging market currencies against the euro shaved 162 million euros off Ebita.
Second-quarter revenue fell 0.7 percent to 6.14 billion euros, hurt by falling demand from utilities in France, Germany and Spain, delayed investment in Russia, South-east Asia and Africa, and the stronger euro. That offset the purchase in January of Invensys, a U.K. maker of software and control systems used in the chemical, oil and gas, and mining industries.
Schneider reiterated its prediction for low single-digit organic sales growth this year, and a 0.4 percentage point to 0.8 percentage point advance in its adjusted Ebita margin, excluding currency effects, from the 2013 pro forma level which includes Invensys. The negative currency effect is still estimated at 0.4 point for 2014, with most of the headwind concentrated in the first half, the company said.
“We expect continuous growth of our early cycle businesses, sequential improvements in IT and Infrastructure and a strong contribution from Invensys,” Tricoire said.
Schneider said today it will buy back about 6 million shares in the second half.