Legrand Says It Can Ride Out Potential Chinese Building Slowdown
Legrand SA (LR), the world’s largest maker of wiring devices, said it can ride out a potential slowdown in China’s construction market and plans to remain independent as the low-voltage equipment industry consolidates.
“The quality of the positions that Legrand holds in China would not be affected by ups and downs in the economy,” Chief Executive Officer Gilles Schnepp said in an interview in Paris today. “The Chinese market as well as most new economies is due for long-term fast growth.”
The company, based in Limoges in central France, today reported 2011 earnings that missed analyst estimates and said its operating margin may fall in 2012 as like-for-like sales will probably stagnate because of the “uncertain” economic outlook. Revenue climbed 9.2 percent to 4.25 billion euros ($5.6 billion) in 2011, led by “new economies” including China, India and Chile, which accounted for 35 percent of the total.
Legrand, which makes switches, plugs and lighting controls, will continue to make small and medium-sized acquisitions in coming months as part of a plan to grow by 10 percent per year on average through 2015, the CEO said. Legrand may spend about 400 million euros ($531 million) on acquisitions each year through 2015 without affecting its financial strength, he said.
Larger transactions are “unlikely,” Schnepp said when asked whether he would consider a transaction of 1 billion euros or more in the next two years.
In 2011, Legrand spent almost 350 million euros to buy five companies in the U.S., Brazil, France and Malaysia, Chief Financial Officer Antoine Burel said during a press conference today. The acquired businesses make products such as inverters and video enclosure systems that will add more than 200 million euros to Legrand’s revenue.
ABB Ltd. (ABBN), the world’s largest maker of power-distribution equipment, based in Zurich, agreed to buy Thomas & Betts Corp. for $3.9 billion last month to expand its North American distribution network and boost sales of low-voltage gear.
“Legrand as a stand-alone company has a model of development that is very convincing,” Schnepp said, when asked whether it’s been recently approached by potential suitors.
Legrand was bought by private equity firms Wendel (MF) of Paris and U.S.-based Kohlberg Kravis Roberts & Co. in 2002, after its merger with French competitor Schneider Electric SA (SU) was blocked by European Union regulators. Wendel and KKR & Co. have progressively reduced their stakes, and each held about 5.8 percent of Legrand in November.
Legrand’s shares fell as much as 4.8 percent in Paris today, the biggest drop in three months, and were down 3.6 percent at 1:17 p.m., giving the company a market value of 6.7 billion euros.
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