Schneider Reduces Targets as Chinese and Oil Markets WeakenFrancois de Beaupuy
Schneider Electric SE, the world’s biggest maker of low- and medium-voltage equipment, cut its 2015 forecasts for profitability and revenue as demand from oil companies and Chinese builders slowed more than predicted.
Schneider expects flat organic growth in 2015 revenue, compared with a previous prediction of low single-digit organic gains, the company, based near Paris, said Wednesday in a statement. It also sees a “stable to moderate decline in adjusted” earnings before interest, taxes and amortization margin this year instead of an increase.
“Headwinds from oil and gas and China are higher than expected,” Chief Executive Officer Jean-Pascal Tricoire said. For the second half, the company sees “continued growth in the U.S. construction market, sustained improvement in Western Europe and persistent weakness in China and in oil and gas related investments.”
The shares declined as much as 3.9 percent, the biggest fall in a month, and traded 0.8 percent lower at 62.14 euros as of 9:21 a.m. in Paris. That values the company at 36.5 billion euros ($40.3 billion).
Schneider, which is in talks to take a controlling stake in Britain’s Aveva Group Plc to expand its industrial software operations, is at the same time stepping up cost cuts at its infrastructure unit whose profitability is weighed down by lower demand from utilities.
Adjusted Ebita climbed 6.4 percent to 1.6 billion euros in the first half, representing 12.5 percent of sales, the company said. Schneider had expected the full-year margin to be in a range of 14 percent to 14.5 percent this year before the revision, compared with 13.9 percent in 2014.
The company this month agreed to take control of Aveva to create a business that helps design and operate engineering projects from nuclear power plants to diesel engines.
The deal is the second acquisition of a British software company by Schneider after the 2.4 billion-pound ($3.7 billion) purchase of Invensys Plc in 2013, as it adds technologies to its plant automation products and low- and medium-voltage equipment.
The acquisitions of Invensys and Aveva are two of Schneider’s biggest takeovers since the $6.1 billion purchase of American Power Conversion Corp. in 2006 as it looks to fend off competition from companies such as ABB Ltd. of Switzerland.