Schneider Reaffirms 2013 Growth After Quarterly Sales Decline

Schneider Electric SA, the world’s biggest maker of low- and medium-voltage equipment, reiterated a prediction that revenue will gain in 2013 as China and emerging markets make up for slumping demand in Europe.

“We’re expecting China to resume growth this year, emerging nations should grow this year, and we’re expecting a slight overall increase in North America,” Chief Financial Officer Emmanuel Babeau said in a telephone interview today. “Western Europe will be negative and complicated, and even very complicated in Southern Europe.”

Schneider’s first-quarter revenue declined 3.7 percent to 5.21 billion euros ($6.77 billion), hurt by demand in Western Europe and North America, the company, based in Rueil-Malmaison near Paris, said in a statement today. Analysts polled by Bloomberg projected 5.30 billion euros. Excluding acquisitions and exchange rate fluctuations, sales fell 2.7 percent as the euro strengthened.

Schneider reiterated a 2013 target for “low-single digit organic growth in sales and a stable to slightly up” margin based on adjusted earnings before interest, taxes and amortization. The French company is slashing costs by cutting jobs, regrouping sites, being more selective on services contracts, and redesigning products to adapt to a construction slump and government austerity measures in Europe.

Schneider shares rose as much as 3.9 percent and traded at 55.17 euros, up 3.7 percent, at 11:49 a.m. in Paris, extending the 12-month gain to 22 percent.

Cost Cutting

“We need to adjust in countries and businesses that suffer most, while we must invest in growth areas and businesses,” Babeau said. The company is sticking to cost-reduction targets and restructuring targets, the CFO said.

Raw material prices may hurt earnings by as much as 50 million euros this year, less than the range of 50 million euros to 100 million euros predicted in February, Babeau said. Schneider may pass some of that windfall to customers to gain or maintain market shares, he said.

First-quarter sales were hurt by a smaller number of working days in the first quarter and colder weather, notably in North America, the company said. Spending on government buildings and data centers was weaker, it said.

Foreign exchange fluctuations trimmed first-quarter revenue by 74 million euros as the European currency strengthened against the dollar, the yen, the Indian rupee and the Brazilian real, Schneider said. Net acquisitions added just 18 million euros to sales in the period, while the purchase of the 50 percent that Schneider didn’t already own in Russia’s Electroshield-TM Samara will be seen in sales starting in the second quarter.

Schneider is looking for targets “at the right price” and doesn’t see “any kind of pressure” to make acquisitions, the CFO said on a conference call.