Legrand SA

Good morning, everybody. Franck Lemery, Roland Marc, and I are happy to welcome you to Legrand Q1 2026 conference call and webcast. As you know, this morning we published our press release, financial statements, and the slideshow that we will refer to during the call. After a few opening remarks, we will comment the results into more details. Let me start on page four with the key highlights of the quarter. First, Legrand delivered strong sales growth driven by data centers and acquisitions while maintaining excellent profitability. Second, we announced four very exciting acquisitions since the beginning of the year. Third, we confirmed a full year 2026 targets. Moving to pages six and seven, I will start with an overview of sales. Sales delivered strong growth of plus 18.3% excluding currency effects. comprising organic growth of plus 9.3%, with a strong contribution of data center offerings growing like for like around plus 30%, and growth through acquisitions of plus 8.2%. Based on acquisitions announced and the likely date of consolidation, the overall impact of acquisitions should be close to plus 7% for the full year. The FX effect was minus 5.8% for the quarter. Based on average exchange rates in April 2026, the full-year currency effect would be around minus 2%. On page 7, you will find the key takeaways per geographies on a life-for-life basis. Europe saw sales down minus 2.8% in a building market that remains contrasted. North and Central America delivered a strong plus 25.8% performance, driven by strong success of data center-related offerings in the U.S. Lastly, the rest of the world was down minus 1.8% in the first quarter, despite a very nice growth in India. Sales in the Middle East, which stood only at 1.7% of FY 2025 sales, were not impacted by the geopolitical situation in Q1. These were the main comments I wanted to make on sales. I will now hand over to Franck for more color on the financial performance. Thank you, Benoit.

And good morning, everyone. I will start on page eight with adjusted operating margin. Profitability remained very strong and resilient in Q1 with an adjusted operating margin of 20.7%. Despite inflation already impacting the cost base, this level of profitability reflects our solid execution, our adaptability, and the quality of our recent acquisitions. Of course, we remain fully mobilized to address the global geopolitical environment. Going now to page nine. First, net profit reached 335 million, up plus 14% versus Q1 2025. This increase was driven primarily by higher profit operating, a lower corporate income tax of 26% and the negative evolution of the financial results. Second, free cash flow came to 221 million euros, representing 8.7% of sales and our net debt to EBITDA ratio stood at 2.1 at the end of the quarter. This is it for the key financial topics I wanted to share with you this morning. I'm now handing over back to Benoit.

Thank you, Franck. We can move now to page 11. Confidence in our execution capabilities and our ability to adapt to an uncertain economic environment, we confirm our 2026 targets. With the following for the full year, sales growth excluding currency effects of between plus 10 and plus 15%, comprising organic growth between plus 4 and plus 7%, and growth through acquisitions of between plus 6% and plus 8%. Adjusted operating margin after acquisitions of 20.5% to 21% of sales. The CSR achievement rate of at least 100% for the second year of our 2025-2027 roadmap. On page 13, a reminder of the four acquisitions announced so far in 2026. All the four are in data centers and energy transition, representing combined annual revenue of around 275 million euros. These transactions, done at very reasonable multiples, strengthen our leadership position in buy-in markets and illustrate once again our ability to identify, execute, and integrate acquisitions with discipline. On page 15, Legrand benefits from very strong employee engagement. This is illustrated by the success of our second international employee share ownership plan. Now, a few words on the key topics on the agenda of our incoming general meeting of shareholders, which will take place on May 27 on page 17 and 18. Subject to the proposed renewals approval, the board composition will continue to be among the industry's best practices, with 80% of independent members, 60% of women, and seven nationalities. And as announced previously, the proposed dividend for 2025 is of 2.38 euro per share, up plus 8.2% versus last year, with a 50% payout. To conclude, I would also like to highlight that we will host a Capital Market Day in Singapore on September 29, 2026, to provide a progress update on a strategic roadmap with a particular focus on data centers. We would be very happy to meet you there, and you are all kindly invited. Those were the key topics of this release. I suggest we now switch to Q&A. Thank you.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on the top of the keypad and wait for a name to be announced. If you withdraw a question, please press star 11 again. To ensure everyone has the opportunity to ask a question today, please limit yourself just to one question and one follow-up question. Please don't bother to compile the Q&A roster. This will take a few moments.

And now we're going to take our first question.

And the first question comes from George Featherstone from Barclays. Your line is open. Please ask your question.

Hi, morning, everyone. Thanks for the questions. You started off with 30% like-for-like growth in data centers, and clearly that's above the guide that you gave previously of 10% to 20%. First couple of questions on this. I just wondered what you're seeing in terms of order intake, backlog, pipeline ahead, and whether you're sticking to that 10% to 20%. And if you can maybe compare the growth rates you're seeing in the U.S. versus Europe, that would be helpful.

Thank you. Well, the 30% is quite a good performance. And when we compare ourselves with the market trend, even though it's not completely, let's say, relevant on a quarterly basis, I think we are doing well. We are slightly above plus 30% in the U.S. The U.S. is clearly growing faster than the rest of the world. And I don't believe it's Le Grand specific. I think it's really market specific. The U.S. market for data centers is super hot. We indeed told you when we entered the year that we were shooting for 10 to 20% growth in data centers. Given the Q1 we did and given The large number of orders we continue to get, we will definitely be closer to the high end of the 10 to 20 than to the low end. So we are even more optimistic than we were on the data center business, and all KPIs are well-oriented. and demonstrate that once again, 2026 will be a good year. And I have to say that it will be a good year after 2025, which was a fantastic year. I remind you that we grew plus 40% in 2025, and after 2024, which was again a good year, it was plus 15%. So difficult to give you a precise number, but I can only confirm that we will see very nice growth in data center in 2026. Now, you may wonder why, despite the fact that the upper end of the data center guidance plus 20% is now more likely than the lower end, why we are not revising our global guidance up? Well, we have to admit at the same time that on the building front, we have probably more uncertainties than we had three months back because of the geopolitical situation, which did not impact Q1, but which creates additional uncertainties. So our guidance is kept at the same level, even though Q1 was probably higher than you may have expected, and despite the fact that the data center is going nicely, because we remain a bit cautious on the impact of the geopolitical situation.

Okay, thanks. That's really helpful. Just maybe one follow-up on that last point. Is there anything you've seen sort of further deterioration maybe in those buildings markets through April in the second quarter?

Well, I'll not comment on the month of April. You know, the impact of the geopolitical situation should, of course, come to at least two topics. Number one, the Middle East cells, which, by the way, is less than 2% of our cells, right? If you put together the whole zone, Saudi, UAE, Lebanon, Qatar, Oman, and a few other countries, it's less than 2% of our sales. So the impact at group level will be limited. And the second impact, and I'm sure that we'll have the opportunity to discuss that during the call, is the impact it has on purchase price and therefore on offsetting price. Now, again, even though there's a bit more uncertainty on the building front, we remain extremely confident in our ability to achieve our guidance and extremely confident on the fact that the data center business will deliver a very strong growth in 2020 and 2026. Needless to say, and we shouldn't forget it, beyond the short-term uncertainty, and I don't believe that the short-term uncertainty is higher for our sector than it is for others, the long-term prospects for the building business of Levant are very good there will be some recovery hopefully this recovery will happen as early as late 2026 there's a strong need for housing all across the world i mean in germany in france in the uk in india in the us we've been able to move toward new non-residential verticals which will support the growth Our energy transition business, by the way, is growing slightly in Q1. So all the growth is not coming from data centers. We also have some energy transition businesses growing, especially in the U.S., where our move toward new verticals away from the office and from the RISD building and more into healthcare, education, infra, industrial buildings, photovoltaic, shows pretty good results with a nice growth. So again, the fact that we have short-term uncertainty doesn't mean that we are not very confident in the fact that beyond data center, the rest of our business will at some point recover.

Okay, thank you.

Thank you so much. Now we're going to take our next question. And the next question comes from Max Yates from Morgan Stanley. Your line is open. Please ask your question.

Thank you. Good morning. Could I just ask on the gross margins? So the gross margin or the overall margins are flat. The gross margins are down sort of more or less 200 basis points. Could you talk a little bit about how raw materials, particularly kind of copper, silver, impacted the gross margin and how much that was maybe other factors? And would you still be confident to offset raw material inflation on an annualized basis when we look at 2026?

Yes, the gross margin is indeed down by close to 200 bps. It's actually 190 bps. And the main components are the fact that pricing is plus 2.3%, and pricing does not compensate inflation of plus 4.2% on raw material components and plus 3% on personal costs. So we have, let's say, a between the cost of input, if I may say, and our pricing. Is it a concern for us? No. We have started to adjust our price up to give you order of magnitude. When we entered the year, we told you that we intended, that we thought the purchase price would increase between plus 1 and plus 2%. We now think that it could be around plus 4% on a yearly basis. And as a result, we are adjusted up our pricing progressively. We thought that our pricing would be plus 1 to plus 2 on a yearly basis. And we now think that it could be plus 2 to plus 3. And if it did, we could do more than that. So it's a timing issue. And we have some pricing fees that are already executed, some of which are planned. And that's it. On top of that, I have to say that don't forget that even though our data center business has approximately the same EBIT margin as the building market, it has a lower gross margin and lower SG&A. So let's say the structure of the margin is slightly different. Yeah. Okay. Last comment. Last comment. Franck, do you want to add something?

Yes. For you, Mark, to understand well the momentum of the gross margin between Q1 and what it should be on the full year basis, among the 4% of purchase price increase, which has been mentioned by Benoit, half of that is tariff effect. And you have in mind that it is the last quarter where we have additional tariffs. So once again, sales price increasing 2% today could be 2 to 3 at the end of the year. Purchase price including tariff around 4% today should be around 4% at the end of the year. So gross margin pressure should ease.

Now we should also add that, of course, um the strong growth also comes with some significant leverage on on sgna um with a great productivity on headcount to give you a order of magnitude so uh our cells are up plus nine percent like for like and our uh head counts are slightly decreasing like for like so yes we have a gross margin declining but at the same time we have strong leverage on the dna and as a result quite stable margin. What counts at the end of the year is really the EBIT and adjusted EBIT more than the gross margin itself.

Yeah, very clear. And maybe just a very quick follow-up on the data center business. It's quite easy for us to get lost in the kind of quarterly year-over-year growth rates. I guess my question is, have you seen, when we think about the business sequentially, have you seen a sort of sharp acceleration? I ask because we've seen all these orders really accelerating, but are you actually seeing it in the sales And is there anything you think that's unusual about how your customers are behaving? Are they stockpiling ahead of price rises? Are they stockpiling at the start of the year? Do you get the sense any of it's sort of pulled forward demand for any reason when you have these conversations?

Well, I don't believe there's been anything exceptional in Q1. You may have noticed that we are no longer commenting on orders or book-to-bill because, frankly speaking, we have a lot of difficulty to bridge the orders with the sales. So we prefer to comment on sales. But we haven't seen any pre-buy, which, by the way, is not something easy to execute for project basis. But no pre-buy, nothing exceptional. No, it's just coming from the fact that hyperscalers are massively increasing their investments and that this wave of investment should last for a few years. But again, a quarter which was not impacted by – which wasn't impacted by something exceptional, let's say.

Okay. Fantastic. Thank you very much.

Thank you. Now we're going to take our next question. And the question comes line of Daniela Costa from Goldman Sachs. Your line is open. Please ask your question.

Hi. Good morning. Thank you. I will ask the question and then the follow-up separate. But maybe on the question starting in terms of the free cash flow performance, and I think we've seen some working capital build up again this quarter. Can you – I guess this is related probably to the data center business. Can you talk back about how we should think about the pattern of these working capital now through the year i guess we had a bit of of these last year and then uh is it does this seasonality on working capital increase how should we think about sort of still the old levels of cash conversion

I will take this question, Daniela. So starting with the free cash flow, the free cash flow of Q1 is not very meaningful. Q1 is always a soft free cash flow in our seasonality. At 8.7% of sales, we are very happy with this free cash flow. It's a normal seasonality around 8.5%, 9%. It's a typical seasonality for Legrand. By the way, it's growing versus last year. talking about working cap you're right uh so it's up it's 20.5 percent versus 11.9 last year there are many technical uh technical uh plus and minus but in a nutshell from a performance point of view only inventory to sell is increasing and the reason it's increasing is uh is actually a data center we are protecting the top line we are we want deliberately to serve well our customers so it's um it is what is driven the 12.5% of working cap versus 11.9% last year. And 12.5% of working cap is also pretty much consistent with the seasonality. Accordingly, on a full year basis, we are still shooting for the usual metrics of the group, free cash flow to sell between 13% to 15%.

Thank you. And then just on your M&A, you are sort of slightly ahead now for the guidance tracking. You've been very active. Can you talk a little bit about how you see that developing over the rest of the year? Is there a possibility that sort of you actually exceed and add more than the 8% like you did in 1Q?

Well, so indeed, We've been very active in M&A for now more than two years. And again, we've done four deals since the beginning of the year. It's highly likely that more will come because we have a lot of discussions going on with many interesting targets. And some of the discussions are pretty well advanced. So you should expect to see more deals coming before the end of the year. I cannot commit to a number of deals, of course, because it There's some uncertainty. Now, could we exceed the 8%? Well, it becomes increasingly unlikely, not because we wouldn't do more deals or because some of the deals couldn't be 50, 70 or 100 million euros of sales, but just because of the consolidation timing. We are already four months into the year. So we still believe that the 7 to 8 now is the most likely number. Yes, we could exceed, but I wouldn't put that into the machine if I were you, because for the deals to come, we will only have a few months of consolidation in 2026, so with very little impact on the parliamentary effect. But I confirm that... We still have a lot of discussions. And interestingly, I also confirm that from the Legrand standpoint, the multiples remain reasonable. So we're not communicating on precise multiples per deal, but we've been able to strike interesting deals for the past couple of years at 10, 11, 12 times EBDA. And those are the typical kind of metrics we are still looking for when we make deals.

Got it. Thank you very much. Thank you.

Now we're going to take our next question. And the question comes from Andrew Cookman from UBS. Your line is open. Please ask your question.

Yes, good morning. Thank you very much for taking my question, Philip. Can I just start with a broader question about the sort of quarterly cadence of growth for the year? Do we need to be aware of any comp effects or any kind of one-offs as we go through the rest of 2026 and we think about the Q1 run rate, given that we had quite obviously varied comp landscape through 2024 and 2025 in terms of organic growth. And the pre-buy effect that you mentioned wasn't there for data centers. Is that the case for the rest of the portfolio as well, or are you seeing anything elsewhere?

Well, I don't believe there's any technical factor that will play in 2026. So there's no quarter impacted by a number of days, for example, significant number of days, plus or minus. I don't think of any significant basis for comparison in 2025. So no, I don't believe there's going to be anything technical. the sales should reflect the underlying market trends and the gains in market share, but no technical topic. Well, only one factor that may come into play. It's the fact that we are increasingly in the project business thanks to our data center exposure. And of course, one quarter can be positively or negatively impacted by a very big project. But it's a very, let's say, candid and generic comment There's no reason it would play one way or the other in 2026. As far as the pre-buy is concerned, no, we haven't seen any pre-buy neither in data center nor in building, and we haven't seen distributors, for example, building significant inventory ahead of some price increase. This is not the behavior we see in our market, so no pre-buy, let's say, significantly impacting our quarter.

Thank you. And if I may, just a very quick one. I know it's a big topic, but has anything changed in terms of your stance on the 800 VDC architecture in the last two or three months since you spoke last time?

No, no. It's probably more a topic that we're going to discuss in September. So wait for me to a bit of teasing for our cmd but no those kind of technical change in architecture are not changing uh in two months so no change in our view we believe it's gonna it's gonna come uh we believe that it's gonna be more progressive than some of you expect and that we are well positioned because we already have a number of capabilities to address either the hybrid architecture or the ultimate holy grail of . So we see that more as an opportunity with more data centers, higher density data centers, more energy efficient data centers than as a FET, to make a long story short.

Thank you very much.

Thank you. Now we're going to take our next question. And the question comes from Alasdair Leslie from Bernstein. Your line is open. Please ask your question.

Thank you. Good morning. So first question is just actually on margins, North and Central America margins. We saw a good improvement there. I was just wondering whether we should kind of think of this as a kind of new, higher baseline level for sustainable margins in the region, particularly with the mix changing so much in favor of data centers. Or do you think we'll sort of see more investment now go back into... perhaps reinforcing the traction you're now seeing in that non-residential side in healthcare and infrastructure that you kind of flagged earlier. And then the follow-up would just be on data centers. Maybe just a little bit more color there. Do you still sort of see uniformly strong growth across kind of all product categories, or are we starting to see a bit of divergence now in the portfolio with some areas sort of standing out if we're starting to move to high-density data centers? Thank you.

Yeah. Well, so... About the first question, well, it's difficult for us to give you a guidance per geographical area or margin guidance at group level, not by geographies. Well, the fact that the North and Central America margin is doing good progress is, of course, coming from the fact that there's quite an impressive growth. And when we have growth, we have leverage, especially leverage on the ZNA. And the fact that the European margin is a bit weaker the other way, negative growth in Europe. So not only we suffer from the sort of discrepancy between purchase price and selling price, temporary discrepancy, but on top of that, we have negative leverage in the G&A. So the U.S. margin is indirectly coming from the test studies, coming from the fact that When you have such a strong organic growth, it delivers leverage. Now, mid-term, what matters is not the margin we're going to have in North and Central America, nor the margin we're going to have in Europe or the rest of the world. It's really the group margin. And for 2026, we confirm our guidance of 20.5% to 21%. And long-term, we confirm the fact that we should have an average margin above 20%. Again, our guidance and the way we steer the group is more at global level than zone by zone. As far as data center is concerned, well, there's always been a difference between product family. When we said plus 40% last year, some families were at plus 60 or 70, and some also even more than that. Some product families actually grew triple digits, and some others were at plus five. So there's no, let's say... consistency, if you wish, between the different product families. We have now many different product families. We do not depend on one or two. We have global coverage starting from medium voltage down to compute architecture and cooling. If I have to name a few products or a few families that probably grew faster than the average, cooling is one of them, clearly. And you know that we have many capabilities in cooling, especially the containment and so on and so forth. The whole power train is doing well. The load banks from Aftron is doing a fantastic growth. But again, don't read that as a fact that the architecture are changing fast. It's just a fact that on those product families, we are very well positioned. that we have a value proposition which is very compelling for our customers and that we are probably gaining market share.

Very helpful. Thank you. Thank you, Pam.

Thank you so much. Now we're going to take our next question. And the question comes from Phil Buller from JP Morgan. Your line is open. Please ask your question.

Hi, good morning. I guess it's a follow-up. To start, what does data center now represent as a percentage of group sales post the closing of the M&A on an annual basis? I guess it's now approaching 30%. And is this something that you're at all worried about being overly exposed to, or is this still the primary focus of the M&A pipeline? That's the first question, please.

Well, so it was 26% last year. I haven't done the math precisely, but Given the difference in growth and the fact that we are doing a number of acquisitions in data center, yes, it will be probably around 30% this year, plus or minus 1%. So it's probably the order of magnitude. Is it a concern? No, it's not. I mean, this is a position we have deliberately built. that will boost the group's organic growth in the years to come, not only in 2026, but given the massive investments which are done in data centers, this growth should continue in the years to come. By the way, our acquisitions in data centers also help us to grow into energy transition. If you look at some of the acquisitions that were made in the past 12 to 18 months, namely Aftron or Kratos in the U.S. or Link Busway in Malaysia. Those are acquisitions that are strong positions in data center, but that also bring additional complementary positions in photovoltaic, in industrial buildings, in healthcare. and so on and so forth. So by building our position in data centers, we also build complementary positions in energy transition. So how high could the 30% be? I don't know. It could easily be 35 or 40%. At some point, the gap in growth between data centers and the rest of the Grand Palais Alcove Ring will narrow. because the building will grow again, because energy transition will grow. So you won't have the same gap between the growth. But yes, it could easily be 35 or 40%. It wouldn't be a concern. It would be a great opportunity for Le Grand to continue to grow.

Great. Thank you very much. The second question, in relation to Q1, a number of companies exposed to building and markets have called out things like bad weather in Q1, which I don't think I've heard from you guys today. Would you say that there's been any adverse effects in Q1, perhaps in Europe or elsewhere outside of data centers? Any kind of one-off potential sources of weakness in Q1?

You know, yeah, I've read indeed some of those comments about bad weather, but, you know, we are sitting through sort of, it's a channel self, right? We are selling to distributors who sometimes sell to retailers, who sell to contractors. So we are not probably close enough to the end market to feel some of those impacts. So I wouldn't say that it had a significant impact on Le Grand QSL. If your concern is why is Europe's sales going down, I wouldn't call that a slowdown. It's only a quarter. Q4 in Europe was pretty strong, stronger than you might have expected. Q1 is probably weaker than you may have expected, but from an end market standpoint, we haven't seen any deterioration in Europe between Q4 2025 and Q1 2026. Markets remain muted. Southern Europe is okay. Northern Europe, including France, is still quite depressed, and our assumption has always been that you would see a progressive recovery in 2026, not a recovery as early as Q1 2026. So up to now, there's nothing that tells us that this scenario wouldn't materialize. The only question mark is, of course, how long will the Middle East crisis last? By the way, I have to add that, of course, short-term, the Middle East crisis is not a good news because it has some impact on the cost of our, you know, raw materials and components, because it creates cost of transportation, because it creates uncertainty, blah, blah, blah. Mid-term, it could also be an opportunity because it will push a number of countries to launch electrification plants. France, for example, just launched one. which will not have a short-term huge impact on Legrand, but mid-term, the move toward more electricity and move away from fossil energy is a very good news for Legrand, because if you have electricity growing in the energy mix, of course, you'll need more transformers, you'll need more switchgears, circuit breakers, load shedding, measuring and measuring products, and so on and so forth. But it's a long answer to a quick question, but to make a long story short, nothing specific impacting our European sales. The markets are still quite contrasted, but we still expect some progressive improvements, modulo the impact of the Middle East crisis.

That's great. Thank you very much.

Thank you.

Now we're going to take our next question. And the next question comes from Alexander Verger from Evercore. Your line is open, please ask your question.

Yeah, thanks very much. Morning, gentlemen. I wondered if you could just pick up a little bit more on that point on Europe. I appreciate your comments around the end market, so thank you for that. But just sort of picking apart the inflation issue and the margin issue, how much of the decline in Europe is volume versus the impact of inflation, because obviously the tariff impact is a North American issue rather than in Europe. So if you could pick apart that a little bit, that would be super helpful. And I know you don't really guide on the regions and margins, et cetera, into a quarter, but just to give us some sense of how you think it might sort of develop given your comps get marginally tougher, I suppose, as you go through the balance of the year in Europe. Thank you very much.

I will answer to this question. Currently, I think the two items that you have mentioned are unfavorable, the inflation balance, even if, as you rightly underlined, there is no tariff. there is a global inflation in plastics, in coppers, in aluminium and It's currently not helping the margin. And second, obviously, the volume, it takes time to adapt its DNA. And Europe is carrying also some corporate function. But all that is temporary. So don't see any structural moves for European margin. But the two elements are currently unfavorable.

Okay. All right. Thank you. And just as a follow-up, If I heard you correctly on pricing, the implication, of course, of not changing the full-year guide on organic growth is the volume assumption is a little bit lower if the pricing is a little bit higher. Is that the right takeaway here, or should we assume that actually it's a little bit more on price and volume assumptions remain the same, but because of the uncertainty around implications of the Middle East and your comments about economic backdrop, that you're just sort of giving yourselves a little bit of extra wiggle room, if you like.

Thanks. Yeah. Definitely, we will shoot for more pricing than the initial guidance, because we are expecting and assuming more inflation than the initial guidance. So, of course, mechanically, you may say there is less volume, but it depends on which part of the guidance you are looking at our life for life guidance isn't changed from plus four to plus seven percent plus four is clearly a very severe scenario where we will be close to a kind of recession which is not the most likely one but that we have to to factor in case of uh and the the the if we were in the the higher end of the guidance, then we think data center will be more supportive than initially forecasted. Pricing will be more supportive than initially guided. And volume in the building markets will be consistent or slightly less supportive than initially forecasted.

Very helpful. Thank you.

Thank you so much. And now we're going to take our next question. And the next question comes line of Aaron Cesarelli from Bank of America. Your line is open. Please ask your question.

Hello. Hi. Good morning. Thanks for taking my question. I have a question on the U.S., which grew 29%. You mentioned that data center grew slightly above 30%. So perhaps can you help me understand the growth in the other part of the business as well? Thank you.

Yeah, so you have three phenomena. So data center, as you said, grew slightly more than 30%. Resi and the office market remains quite depressed. If you look at the numbers, no change. So resi numbers, official numbers are down. The office vacancy rates are still down. high and at the same level as the quarter before. So, unfortunately, no change. And in between, you have the energy transition business growing nicely. Of course, not as strongly as data centers, but growing nicely. And this is a result of the move we did, or we are currently doing, in the non-resi to develop... verticals with more potential than resi or office so i named some of them healthcare industrial buildings a bit of power generation a bit of microgrid pv and so on so we've developed those verticals organically but also inorganically with some of the acquisitions we made in the us in the past couple of couple of quarters so this piece is growing nicely, and it is more tied to energy transition than to the traditional, let's say, building market.

Thank you. As a follow-up on Europe, you mentioned that you are still expecting second-half slow recovery. Are you still expecting France to turn positive as well?

I don't know, frankly speaking. Yes, that's what the numbers would suggest. And if you look at the housing starts, housing permits, the number of transactions, the production of credits, all those KPIs would suggest that France, as the rest of Europe, should see some recovery. Now, we should also take into account the fact that there's quite a lot of political uncertainty. in France as elsewhere that we are quite late cycle. So I wouldn't commit to a significant growth in France in H2. But the early indicators would suggest that some recovery would happen either in 26 or in 27 actually.

Thank you.

Thank you.

May I add that France is now about 10% of our sales. I remember when I started working for Legrand, France was about 1% of our sales, and we were having a lot of discussions on France. Now it's 10%. So it remains a very important market. It's a home market, and we are very proud to be a French company, blah, blah, blah. But it does not impact that much, not as much as it used to, the group's metrics.

Thank you. Now we're going to take our next question. And it comes from Eric Lemery from CIC CIB. Your line is open. Please ask your question.

Yes, hi. Good morning. Thanks for taking my question. I've got one question on the EU, which has recently decided to ban inverters from some countries, some of the inverters from China. And I was wondering what could be the consequences for Legrand And I was wondering whether Legrand makes some inverters, inverters internally for its UPS offering, or if Legrand sources them from elsewhere, notably from China.

Thank you. We are not a significant inverter player, so no impact on Legrand.

All right. Thank you.

Thank you.

We cannot be impacted by all megatrends. DASA Center is one of them. The move toward energy transition is one. And by the way, I can only insist on what I said a little bit earlier. There is a global move in Europe towards being less dependent upon oil and gas and developing electricity usage. Midterms, this is a fantastic opportunity for Legrand, again. But inverter will not be an opportunity.

But you make some UPS, right?

We make UPS. We are not a big, big UPS player. UPS are more today for industrial use or for data center increasingly. But again, we have a small market share in UPS. So I don't believe you'll see any significant impact on our European set.

Thank you.

Thank you. Now we're going to take our next question. And the question comes from James Moore from Rothschild & Co. Redburn. Your line is open. Please ask your question.

Yes, good morning, everybody, and thanks for the time. I wondered if I could start, Benoit, with the Americas. And if you take out your fantastic data center business, could you help us just understand the quantification of the kind of rough organic sales growth in the quarter for buildings, ideally split, resi, non-resi, but just the buildings business, what sort of speed is that growing at?

Well, I cannot give you a precise number, but if you assume that the data center was last year more than 40% for an NCSL and that it grew, if you want, more than 30%, you are left with a small growth. So if you carve out data center, North Central America business is slightly growing with, as I said, resi and office going down, and other verticals related to energy transition going slightly up, mid-single-digit order of magnitude. So I can hardly be more specific than that.

That's very helpful. I'm just playing around with numbers, and it looks to me like you might be closer to 50 in your U.S. data center business, which, would it be fair to say your European and your rest of world data center businesses, just due to the volatility and timing, happen to be down in the quarter? Might that explain some of the decline in the European and the rest of world organic sales declines? Is that not the case?

Well, I mean, it's I haven't done the math again myself, but you are probably underestimating the fact that the building in the U.S., Office and Resy, is down. So probably after points of decrease, and then the numbers will match, but I confirm that our data centers in the U.S. are not going 50%. No, I mean, the data center in Europe and in the rest of the world um is not supporting our growth uh enough um but it's technical the fact that it represents a small part of ourselves it represents about 10 percent of european cells and less than 20 percent of the rest of the world so the vast the largest part of our performance in those two zones is coming from the traditional building market europe we already commented the building markets are down in most of the countries, but a few countries in Southern Europe. In the rest of the world, it is, as usual, a very contrasted situation. You have India going up sharply. You have Africa Middle East being up, and you may be surprised, but Middle East is up again in Q1. And then you have China, who continues to be down, which is not a surprise because the metrics for the housing market, especially the big condos, are still down. And Latin America is also negative. But, you know, again, nothing to worry about. And hopefully we'll see some improvement in Europe and in the rest of the world going forward.

Thanks very much. Could I try something on profitability? Your gross margin, you gave a really helpful answer earlier, but when we think ahead for the full year with your new ambition of two to three price and 4% raw material and component cost inflation, do you think that the gross margin for the full year can be up in that kind of environment?

I haven't been able to do that. I'm sorry, but we cannot, I mean, We cannot guide on the precise gross margin. We are really – that's not the way we steer the group. The way we steer the group is to deliver our commitment on the adjusted EBIT margin, and then whether it's with a little bit more, a little bit less gross margin, a little bit less leverage in the GNA is really not, I think, a strategic topic. So you can count on us to deliver the margin guidance. because that's what we've always been doing and that we are committed to. Will it come from a positive gross margin, negative gross margin, more or less leveled in the GNA, restructuring, more or less, blah, blah, blah? We'll comment that in February 2027, but I cannot guide on that.

Thanks. And just finally, Franck, you gave a helpful bit of colour on the European marginal weakness in the quarter. I wondered if there's anything to add

the rest of the world it's a complicated business a lot of mix just just behind that declining margin no no no no no i gave you a color on on europe and uh we gave you a colors on the north and central america and and that's it for for for the q1 and for the full year we are not guiding per geography as we are not guiding a line by line it's a global target

That wasn't really the question. My question was that the margin decline in the quarter, year on year, in the rest of world business, was there any additional color behind explaining that?

It's a mix of the margin of many different countries. I don't want to sound disrespectful, but we said two questions, and we're entering into a Q&A mode. many different items to make a long story short the rest of the world margin is a mix of countries improving countries decreasing their margin nothing specific and you would you should see the same phenomenon so more pricing coming in to compensate for additional purchase price thank you very much thank you and now we're going to take our next question

And the question comes from the line of Gail Debray from Deutsche Bank. The line is open. Please ask a question.

Well, thanks very much. Good morning, everybody. The first question I have is I'm wondering if you have enough capacity to address that huge acceleration in data center demand that we're seeing in the U.S., or whether you will have to step up CapEx significantly at some point, and how are you dealing with the ramp-up costs, which are apparently waiting quite a lot on the margin performances of some of your peers? That's question number one.

Well, it's a challenge to increase capacity. We've been able to do it. We've been able to do it without... Significant change in our ratio of capex to sales, which last year remained at about 2%. Q1 is a bit soft, but you know that there's some seasonality in the capex. You usually have bigger capex in H2 than in H1. So yes, we are able to do it without much changing our ratios because data center is not, our business at least, is not a capex-intensive industry. So look at the capex numbers of the last two or three years, and you'll see the same 2% than the one we had before the stronger growth in data center. Did it impact the cost base in Q1 and in 2025? Yes, probably, because it comes with a number of inefficiencies. When you are growing, uh 30 40 percent in volume sometimes 60 70 80 percent we are you are not as efficient as you are when you are going to three percent and when you are able to do uh you know the the the usual productivity and so on and so forth you sometimes have to deliver by plane to meet the customer's timeline. You sometimes have to subcontract additional load, which is a little bit more expensive than doing it internally. You sometimes have to pay extra remuneration for your people to do extra time. So all that comes with a bit of inefficiency and a bit of cost. But did it have a significant impact on the Q1 margin, the answer is no. It's our day-to-day job to manage those inefficiencies. So to make a long story short, it's a challenge, but we've been able to do it without significant impact on our capex spent and without hurting our P&L significantly.

That's great. Thank you. And if I may, I'm wondering if you have any strategy, any any plan to grow potentially bigger in the medium voltage segment and within that specifically in the power utilities market? Because it's obviously a big market and it's tightly connected with the data center boom.

Well, we don't intend to be a big player and go head front against the big guys, the ABB, the Schneider of the world. But if we find some niche opportunities to participate a little bit more to this business, Why not? Actually, we're already a small player. We used to have a range of cast resin high-efficiency transformers, which we bought a couple of years back, and which we are nicely selling, some of them in data centers. We bought recently Kratos Industries, which is active in, let's say, medium voltage and low voltage switchgear, which is doing well, growing nicely, and addressing mostly, but not only the data center market. those businesses are niche markets if we find additional niches to add to tackle the data center and the energy transition especially in the us at reasonable price yes why not but don't expect the ground to be ever a big significant player in in transformers this space is already well occupied by big guys so we will focus on issues only

Okay, very clear. Thanks very much.

Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Benoit Cocard, for any closing remarks.

Well, thanks a lot for your interest in NeuGran, as usual. Should you have more questions, please contact Ronan, Antonia, and the RR team, and please put in your calendar September the 29th. We are not used to do off-site CMDs such as this one, but it will be a fantastic opportunity to get to know a little bit more of the data center market, as well as to interact with the whole management team and with a number of people. So it's far from your home for most of you. It will be very interesting. So please book your date. We'll be happy to welcome you in September in Singapore. Thank you.