Rexel Sa Unsp/Adr

Good morning, this is the conference operator. Welcome and thank you for joining the Rex Health first quarter 2023 sales conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star and 1 on your telephone. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Guillaume Texier, Group CEO of Rexel. Please go ahead, sir.

Good morning to everyone and thank you for joining us this morning for our first quarter sales conference. This call is taking place a bit earlier than usual because Rexel is also holding its annual general meeting this morning in Paris, which you are all welcome to follow online. I'm here today with Laurent Delaba, our CFO. I will make a few introductory remarks on our performance. Laurent will give you greater granularity on our numbers. And I conclude by confirming our outlook before handing you the floor for the Q&A session. Let's begin on slide three with the main highlights of the first quarter. So Rexel has gotten off to a strong start of the year with double-digit growth of 10.1% in same-day sales. This growth was very well balanced with positive trends in all three of our geographies. Growth was driven both by volumes, notably in North America and in Europe, and by a favorable pricing environment, reflecting our continued ability to pass through inflation. Driving this growth, as we had foreshadowed at our Capital Market Day in June, last June, is a strong and sustainable trend toward electrification as the energy transition continues to advance. This is reflected in our business, where we saw product families tied to electrification, such as solar panels, electric vehicles, charging stations, HVAC, and industrial automation, outperforming overall growth. These trends are notably visible in Europe in terms of solar equipment and EV charging solutions. This pickup of electrification, which has been going on now for several quarters, is a game changer for us, as it clearly enhances our growth profile and our resilience to market conditions. This puts us on track to achieve the full year guidance we presented in February and that I will reiterate in conclusion. And I will now hand over to Laurent to detail our Q1 sales performance.

Thank you, Guillaume, and good morning all. Let's start on slide 5 with a look at our overall Q1 2023 sales performance. Our sales of 4.9 billion euros were up 12.6% on a reported basis and 10.1% on a same-day basis. These reported sales were boosted by a favorable foreign exchange effect of 0.7% and a scope effect of 0.5%, resulting from the positive contribution from acquired companies that more than offset impact of disposals. Acquisitions include Horizon and Bucklesmith, two specialists of industrial automation distribution in the U.S., as well as Twilek, the number three player in Belgium, and LTL in Canada. Taking into account the disposal of our activities in Norway early March, we now anticipate full year 23 scope impact to be close to minus 0.6% based on already announced operation and in the absence of new acquisition that could be made this year. Concerning foreign exchange, the current impact is now expected to be minus 2.3%, assuming spot rates remain unchanged. On slide six, you see the usual breakdown of our growth by geography. As Guillaume mentioned, we saw double-digit same-day sales growth at group level with progression in all three geographies. In North America, accounting for 42% of group sales, we posted growth of 8.7% in Q1. In Europe, representing 51% of group sales, we grew by 12.7% in Q1. And in Asia-Pacific, accounting for 7% of group revenue, our sales were up a limited 1.3%, resulting from two contracting situations. On one hand, Pacific is progressing well, as illustrated by Australia, up 9.1%. On the other hand, Asia is impacted by a negative trend in China, down 3.5%, due to increased business activity in a favorable business environment. Moving to slide 7, volumes rose, with a good contribution of 410 basis points to our Q1 growth, reflecting favorable trends in Europe and North America. More specifically, volumes grew by 4.3% in Europe, boosted by strong momentum in electrification. In North America, volume growth stood at 4.6%, showing positive development, notably from good backlog execution and favorable underlying trends. Moving to slide 8, the 6% pricing contribution to same-day sales growth includes 6.6% from non-cable products and minus 0.6% from cable products. Specifically on non-cable products, the 6.6% effect is a good level of price increases benefiting from both carryover effects and additional prices passed during the quarter. Of course, the carryover will ease as we go forward in the quarters. Europe at 8.1% is slightly above North America at 5.8% as European countries started later to increase prices. Specifically on cable products, the negative 0.6% contribution in the quarter reflected lower copper prices in Q1-23 compared to Q1-22. Also note that, as shown on the graph on the right, the base will become easier in H2-23, with the lower average copper in H2-22 at 7,761 euro per tonne, down from 8,913 euro per tonne in H1-22. Slide 9 focused on our performance in Europe and illustrates how we capture the sustainable electrification trends. Our Q1-23 same-day sales growth was up 12.7%. You have all the details in the press release on a country-by-country basis, so I will just highlight the key evolutions of the quarter. By country, we recorded strong growth in Germany, BELX, and Sweden, and have outperformed the market in France and Germany. By product, solar, EV and HVAC were up 57% to reach 19% of sales. In total, their contributions stood at 770 basis points, corresponding to more than 60% of the total growth in Europe. By end market, we benefited from the positive trends in commercial and industrial segments. As far as residential is concerned, It has improved despite decreasing demand in the traditional ED business. This was supported by renovation activity and also by the electrification trends and the related halo effect. Let me also say that we completed the disposal of our Norwegian operations on March 1st, slightly ahead of plan. On slide 10, you see that this electrification momentum is driving solid and sustainable growth. We used external studies and reports to illustrate how sustainable the trends could be. Even though some parts of the business may not be distributed or attributable to Rexel, it shows directionally the very positive trend in the specific segments to which we are exposed. On the left-hand side of the slide, you see that installed solar capacity is expected to grow at the compound annual rate of 26% over the 2022 to 2025 period. This represents a major growth opportunity for Rexel, not just for panel products, which account for about one quarter of the value of a typical solar solution, but for the entire solution we offer as it drives demand for other related products, such as batteries, inverters or circuit protection. On the right hand side, you see that we have another major growth opportunity in electrical vehicle charging stations, which are expected to grow at a compound annual rate of 32% over the same period. Similarly, this opportunity not only drives demand for charging stations, which account for 62% of a typical EV solution, but also boosts additional demand for other product categories that belongs to our more traditional product portfolio such as cable, accessories or security protection. It is also worth highlighting that on top of these new opportunities, we also benefit from a strong complementary halo effect as the growing adoption of electrical vehicles and solar energy often requires an upgrade of the existing ED installation to allow it to support load management and enable monitoring, for instance. On slide 11, we turn to our performance in North America, where same-day sales grew by 8.7% in Q1. In the US, same-day sales rolled by 8.6%, driven by robust demand in our commercial and mutual end markets and by good project execution. This more than offsets the declining trend in residential activity and the more difficult base effect in the southeast. A key highlight in the quarter was that Rexel was awarded a multi-year contract from the US Postal Service to supply it with up to 41,500 EV charging stations. Canada also saw robust sales growth of 9.3%. This was largely driven by diversified industrial segments such as mining, transportation, OEMs, farmland food, and sawmills, which helped offset more subdued activity in commercial and residential markets. Overall in North America, our backlogs are stable versus Q4 of last year, but it's important to note that this results from both good project execution and healthy underlying orders intake in the quarter. This provides good visibility for our business. Lastly, we are also very pleased with the first steps of integration of our most recent North American acquisitions, namely Bucklesmith and Horizon in the US, as well as LTL in Canada. These acquisitions strengthen our presence in industrial automation and allow us to offer a complementary range of products and services to our existing electrical customer base. On slide 12, we would like to illustrate the resilience of our portfolio and the diversified end markets we are exposed to by looking at the building blocks of our North American backlogs. We have a broadly diversified exposure to different segments with no market greater than 20%. It includes utility, hospitals, education, infrastructure, environmental services, or entertainment. Many of these markets are either directly or indirectly exposed to different stimulus plans, such as the Inflation Reduction Act, the CHIPS Act, or the Infrastructure Act, and therefore are driven by favorable tailwinds. More specifically, some of these markets, such as industrial automation or manufacturing facilities, benefited from the reinsuring trend. Let me now hand back to Guillaume for our outlook. Thank you, Laurent.