Rexel Shares Plunge Most in Seven Years on Downbeat Guidance

  • French company sees revenue growth between -3 and 1 percent
  • Plans to spend EU1.5b on bolt-on acquisitions over four years

Rexel SA shares dropped the most in almost seven years after the French electrical-equipment company said volatile economic conditions in North America and China and persistent low commodity prices could cause sales to fall this year.

"Taking into account low copper and oil prices, the slowdown of the Chinese economy and the uncertainty around the North American industrial market, the start of 2016 leads us to be cautious in our guidance for the year, even if Europe could experience a slight gradual recovery," Chief Executive Officer Rudy Provoost said in a statement on Thursday.

Revenue will be between 3 percent lower and 1 percent higher in 2016, while the dividend was almost halved to 0.4 euros per share, the Paris-based company said in the statement. Whether Rexel reaches the lower or top end of its revenue targets depends on a recovery of industrial demand and the direction of copper prices, Provoost said on a conference call.

"Undoubtedly, guidance for 2016 is lower than expected and the dividend reduction is probably larger than thought," Morgan Stanley analysts including Lucie A. Carrier wrote in a note to clients.

Rexel shares fell 14 percent, the most since February 2009, to 8.449 euros as of 12:26 p.m. in Paris, the lowest since September 2009. The stock is down 48 percent in the past 12 months, valuing the company at 2.6 billion euros ($2.9 billion).

Rexel cut its outlook in October when an economic slump and low oil prices caused its sales to slow. The company on Thursday posted a 2015 revenue decline of 2.1 percent and an adjusted earnings before interest, taxes and amortization margin of 4.4 percent, both of which were in line with those revised targets.

The company also announced the targets it hopes to meet by 2020, which include annual organic sales growth of 1 to 2 percent on a constant and same day basis, while setting aside a budget of 1.5 billion euros ($1.7 billion) for bolt-on acquisitions.

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