• Revenue: EUR38 billion, up 8% organically for 2024.
• Gross Margin: 42.6%, up 80 basis points organically.
• Adjusted EBITA: EUR7 billion, with a margin of 18.6%, up 14% organically.
• Net Income: EUR4.3 billion, up 7%; Adjusted Net Income up 15%.
• Free Cash Flow: EUR4.2 billion, surpassing EUR4 billion for the second consecutive year.
• Cash Conversion Ratio: 99%, including non-cash impairment.
• Dividend: Proposed EUR3.90 per share, marking the 15th consecutive year of progressive dividends.
• Backlog: EUR21.4 billion, up 12% from 2023.
• AVEVA Annual Recurring Revenue (ARR): Up 15%.
• ROCE: Approaching 15%.
• Energy Management Revenue: Up 15% organically in Q4.
• Industrial Automation Revenue: Up 1% in Q4.
• Adjusted EBITA Margin in Energy Management: Up 110 basis points.
• Adjusted EBITA Margin in Industrial Automation: Down 150 basis points.

• Warning! GuruFocus has detected 7 Warning Signs with TGS.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Schneider Electric SE (SBGSF) reported a record level of sales at EUR38 billion, with an 8.4% organic growth, slightly above their guidance.
• The company achieved a high level of profitability with a 14% increase in adjusted EBITA, reaching EUR7 billion for 2024.
• Schneider Electric SE (SBGSF) has been named the most sustainable company in the world by Corporate Knights for the second time in five years.
• The company continues to see strong demand and growth in Energy Management, particularly in Data Centers, contributing to a robust pipeline for 2025.
• Schneider Electric SE (SBGSF) has a strong focus on innovation and technology, with significant investments in R&D and the launch of new products like EcoStruxure and AirSeT, enhancing their competitive edge.

Negative Points

• The company faced a non-cash impairment impacting net income, although adjusted net income showed strong operating results.
• Schneider Electric SE (SBGSF) experienced negative growth in Discrete automation markets, affecting Industrial Automation sales.
• The company was impacted by adverse FX translation, particularly due to the weakening of the Chinese yuan, affecting revenues by around EUR400 million.
• There is continued weakness in the construction markets in China, impacting sales in the region.
• Pricing in Systems is expected to normalize in 2025, which may lead to more muted gross margin progression compared to previous years.

Q & A Highlights

Q: Have you seen any changes in customer behavior or order trends, especially with the recent acquisition of Motivair? A: Olivier Blum, CEO, stated that there have been no changes in customer behavior, and the pipeline remains robust. The acquisition of Motivair is expected to meet the increasing demand for AI infrastructure, which requires more power and cooling, confirming a positive outlook for Schneider Electric.

Q: With the low net debt ratio, how do you plan to manage leverage, and are there any plans for share buybacks or M&A? A: Hilary Maxson, CFO, explained that the company focuses on maintaining a strong investment-grade credit rating and progressive dividends. While they remain opportunistic about M&A, they also plan to neutralize employee share plans through buybacks and are open to special distributions if cash builds up.

Q: Can you elaborate on the growth in Energy Management in North America and the impact of new capacity? A: Olivier Blum, CEO, noted that the growth in North America is driven by both new capacity and improved supply chain execution. Hilary Maxson, CFO, added that the company expects more normalized industrial productivity and pricing in 2025, with continued investment in capacity to support growth.

Q: What is the outlook for the Data Center business, and how significant is the growth from hyperscalers? A: Hilary Maxson, CFO, indicated that the Data Center segment, particularly hyperscalers, is experiencing healthy growth. The segment represents about 20% of the company's business, with less than half attributed to hyperscalers, and is expected to continue growing as infrastructure needs expand.

Q: How is Schneider Electric addressing potential geopolitical impacts, particularly in North America? A: Olivier Blum, CEO, emphasized the company's commercial agility and preparedness to adapt to geopolitical changes. Hilary Maxson, CFO, mentioned that the company has a strong regional manufacturing presence, including in Mexico, and is prepared to implement commercial actions to protect profitability if needed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.