Schneider Cuts 2015 Outlook on China, Oil Industry Slowdown

  • Company cuts outlook for organic growth to `slightly negative'
  • Schneider bought back EU410 million of own shares last quarter

Schneider Electric SE lowered its full-year outlook and said it may cut costs faster as the biggest maker of low- and medium-voltage equipment faces a slowdown in China and weakening U.S. oil industry as well as a recent rebound in the euro.

Schneider expects “slightly negative organic growth” in revenue and “a moderate decline” of the margin of its adjusted earnings before interest, taxes and amortization, the Rueil-Malmaison, France-based company said in a statement on Thursday. It already lowered its expectations in July when it predicted no organic growth in revenue and a “stable to moderate decline” in its adjusted Ebita margin.

“China remains very complicated and we’re still falling double-digit,” Chief Financial Officer Emmanuel Babeau said in a phone interview, referring to a drop in sales in the country.

The stock rose as much as 1.51 euros, or 2.8 percent, to 55.47 euros in Paris, and traded at 55.18 euros at 9:39 a.m. The shares have lost about 9 percent of their value this year.

Like General Electric Co., ABB Ltd and Rexel SA, Schneider is grappling with a weakening Chinese economy and a U.S. oil and gas industry that’s curbing investment after crude prices slumped. The French company, which is in talks to take a controlling stake in Britain’s Aveva Group Plc to expand its industrial software operations, is also suffering from a decline in French construction.

Currency Headwinds

Third-quarter sales rose 4.9 percent to 6.59 billion euros compared with last year, Schneider said. Sales fell 1.6 percent on a comparable basis.

“The U.S. performance is impacted by weakened markets outside construction,” notably oil and gas and information technology, Chief Executive Officer Jean-Pascal Tricoire said in the statement. “China should remain difficult” and the U.S. weak in the industrial and information technology sectors, he said.

Currency fluctuations will cut the 2015 adjusted Ebita margin rate by about 20 basis points compared with a neutral impact estimated previously, Schneider said. The strengthening of the euro against the dollar, the Chinese yuan, and several other currencies of “several new economies” means Schneider now expects a positive currency impact on its 2015 revenue of about 1.8 billion euros, 200 million euros less than previously forecast.

Schneider bought back 410 million euros of shares in the third quarter as part of a plan for the purchase of between 1 billion euros and 1.5 billion euros worth of stock by the end 2016, according to the statement.

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