Schneider Surges on Higher Payout After Profit Beats Estimates

  • Company raises dividend, cost-cut target for 2015-2017
  • Schneider sees unchanged or lower like-for-like sales growth

Shares of Schneider Electric SE gained the most in almost six years after the world’s biggest maker of low- and medium-voltage equipment raised its dividend and reported profit that beat analyst estimates.

Profit adjusted for one-time items such as writedowns rose 6 percent to 2.12 billion euros ($2.4 billion), Rueil-Malmaison, France-based Schneider said in a statement Wednesday. This beat an average analyst forecast of 2.09 billion euros compiled by Bloomberg. The company plans to increase its dividend by 4 percent to 2 euros a share.

Shares were 9 percent higher at 52.39 euros at 10:00 a.m. in Paris, taking a drop since the start of the year to 0.6 percent.

Schneider said a plan to buy back shares that runs through the end of this year will be worth 1.5 billion euros, the high end of a range set a year ago. As the company grapples with a sluggish construction market in France, a slowing Chinese economy, and a slump in crude prices which is curbing investment in the oil and gas industry, it also raised a target to cut costs.

Bolt-on Acquisitions

The French company is now aiming to trim 600 million euros in costs from support functions between 2015 and 2017, up from a previous range of 400 million euros to 500 million euros, according to Wednesday’s statement.

“We’re rewarding shareholders and we keep saying that we can make bolt-on acquisitions. There’s no change in the message,” Chief Financial Officer Emmanuel Babeau said in a phone interview. “We’re very satisfied with our free cash flow generation of more than 2 billion euros.”

Schneider in December dropped a plan to take a controlling stake in British industrial software maker Aveva Group Plc.

Adjusted earnings before interest, taxes, and amortization increased 5.1 percent to 3.64 billion euros in 2015, representing 13.7 percent of sales compared with 13.9 percent the year before. Net income fell 28 percent to 1.41 billion euros.

“In 2016, we expect continued growth in Western Europe and the construction market in the U.S.,” Chief Executive Officer Jean-Pascal Tricoire said in the statement. He forecast “headwinds” in the oil and gas industry, overall weakness in the U.S. industry markets, difficulties in China, although less than in 2015, and “mixed trends” in other emerging economies.

Strong Euro

Schneider expects organic revenue to remain unchanged or grow by a low, single-digit rate due to a “higher selectivity” of project activities. It also forecast an improvement of 0.2 to 0.6 percentage point of its adjusted Ebitda margin before exchange rate fluctuations. Based on current exchange rates, the negative impact of exchange rates on the margin could be of 0.4 to 0.5 percentage point, the company said in the statement.

Schneider said a rebound in sales and profit margin this year may be held back by the stronger euro. The negative impact may trim revenue by 1 billion euro in 2016, the company said.

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