Rexel Sa Unsp/Adr

Good morning. This is the conference operator. Welcome and thank you for joining the Rex Health third 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. 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 and good morning to everyone and thank you for getting up early this morning to join us for our third quarter sales conference. I'm here today with Laurent Delabarre, our CFO. I will make a few introductory remarks on our performance and Laurent will give you greater granularity on our numbers. And I'll conclude by confirming our outlook before handing you the floor for the Q&A session. So let's begin on slide three with the main highlights of the third quarter. So in Q3, we continue to demonstrate a solid momentum with same-day sales growth of 2.6%. And the Rexel teams once again proved their ability to deliver profitable growth. And what is particularly satisfying is that they achieved this in a more mixed environment and on the back of a high 2022 comparable base. We continue to be in solidly positive territory for volumes, up plus 2.3%, roughly in the same ballpark as in Q1 and Q2, but this time with less of a booster from electrification categories as we are starting to hit a high 2022 comparable base. This is very good news as it demonstrates how resilient our model now is, continuously gaining market share in some important countries, while at the same time benefiting from accelerating mid-term trends. In terms of pricing, we saw positive contributions from non-cable products, more than offsetting the intolerable impact of cable pricing. Another highlight of the quarter was the continued growth of our digital penetration. Digitally enabled sales rose more than 300 basis points and represented 28.4% of Rexel sales. If we look at our performance year-to-date, our same-day sales are up plus 6.3%. The year is unfolding as we had anticipated, both in terms of market evolutions and in terms of action plans, and this allows us to confirm our full year guidance, and I will come back to that in my closing remarks. On slide five, we focus specifically on the two acquisitions I briefly mentioned earlier. Beyond our Q3 numbers, I would like to highlight on slide 4, first of all, other strategic achievements in the quarter that form part of our Power Up 25 plan. We continue to actively deploy our capital allocation strategy, which seeks to strike a balance between value-creating acquisitions and shareholder returns. Concerning M&M, we closed the acquisition of Wasco in the Netherlands, which we announced last quarter. And we are also announcing today the acquisition of a 51% stake in Mavison, a small size French distributor of photovoltaic solutions. And I'll describe both deals in greater details on the next slide. At the same time, we also continue to execute our share buyback program. Over the first nine months of the year, we have acquired 4.4 million shares, representing 92 million euros. So over the 2022-2023 period, We target 200 million euros in share repurchases on a community basis. And on the financial side, we issued a new 400 million euro sustainability-linked bond, maturing in 2030 at a competitive coupon of 5.25%. This allows us to extend the maturity of our debt while also underscoring our commitment to achieving ambitious 2030 sustainability targets. With this issuance, all of our outstanding bonds are now linked to sustainability objectives. So coming to slide 5, we focus specifically on the two acquisitions I briefly mentioned earlier. The first is Wasco, that you know already, one of the leading distributors of HVAC products and services in the Netherlands. This acquisition, which we first announced in May and closed on September 1st, will double Rexel's size in the Netherlands. one of the most exciting European markets from an electrification perspective, benefiting from a fast-paced transition from gas, driven by incentives and regulations, notably the ban on gas boilers, both in new build and renovation. And Wasco is ideally positioned to be an active player in this transition. It's also best in class in terms of digitalization. We are very excited to start working with the Wasco teams to unleash the great opportunities that the association of both companies will create. And the second acquisition is Mavisan, a specialist of solar solution distributions in France. We sell over the last 12 months through May of 40 million euros. We are acquiring a 51% stake alongside its funders. And this acquisition will scale up our value proposition in solar by offering kits and technical assistance to our installer customers. We anticipate further growth acceleration as France adopted this renewable energy later than the other European countries. Both transactions allow us to continue to build our presence in electrification categories in Europe through small and mid-sized acquisitions and to enhance our mid-term growth profile through carefully selected synergistic additions. So let me now hand over to Laurent to detail our Q3 sales performance.

Thank you, Guillaume, and good morning to all. Slide 7 shows you the different building blocks of our Q3 23 performance. Our sales of 4.7 billion euros were down 3.1% on the reported basis impacted by Forex and up 2.6% on the same day basis. Forex exchange had a negative 4.5% impact, mainly due to the variation in the US and Canadian dollar versus the euro. The currency impact is now expected to be a circa minus 2% for the full year 23, assuming spot rates remain unchanged. The scope effects stood at minus 0.3%, resulting from the net effect of the disposal of our activities in Norway, Spain, and Portugal, and the positive contribution of acquired companies, including Horizon, Bucklesmith, and LTL in North America, as well as Wasco in the Netherlands, that has been consolidated as from September 1st. And we now anticipate the full year 23 scope impact to be close to 0.5% based on already announced operations. As shown on the graph, organic same day growth reached 2.6% driven by the combination of volume and price that I will describe in the coming slides. On slide seven, You see the breakdown of our growth by geography. As Guillaume mentioned, we saw same-day sales growth at group level with progression in Europe and North America. In North America, accounting for 45% of group sales, we posted growth of 2.7% in Q3. In Europe, representing 48% of group sales, we grew by 3.4% in Q3. And in Asia Pacific, accounting for 7% of group revenue, our sales were down 2.7%, resulting from two contracting situations. On the one hand, New Zealand was impacted by the difficult macro environment, and China was down on a more difficult base effect. Our sales caught up in Q3 2022 after lockdown, as well as the selectivity in strategy implemented and price deflation, in line with the producer price index. On the other hand, Australia and India did well, with India benefiting from very strong industrial demand, and Australia well-oriented in all three end markets, particularly industrial and commercial. Moving to slide nine, we focus specifically here on volumes, which contributed for plus 2.3% to growth in Q3 23, with solid performance both in North America and to a lesser extent in Europe. Indeed, volumes were up 4.3% in North America, boosted by reshoring of industrial production, and plus 0.9% in Europe on a high comparable base. Overall, volumes were boosted by the four product categories related to electrification, including solar, electrical vehicle charging infrastructure, HVAC and industrial automation, and representing circa 22% of sales, those categories were up plus 5% on the same day basis in the quarter on a very high comparable base. Moving to slide 10, the positive effect from non-cable pricing more than offset the negative contribution from pricing on cable products. Specifically on non-cable products, The positive 1.3% contribution to sales growth results from various situations. Europe is still ahead of other geographies at plus 2.6% compared to North America at plus 0.5% and APAC at minus 2.3%. This notably reflects the fact that Europe started to increase prices later and at a lower pace than North America post-COVID. I would add for non-cable products that overall, trends were favorable for the majority of products and more than half set some deflation and limited product categories, including piping and conduit in North America, solar panels, and some industrial automation products in China. The low contribution than in Q2 is explained also by lower carryover effects and by the negative pricing contribution in APAC. And specifically on cable products, the negative 1% contribution in Q3 is better than the previous quarter, but remains negative, largely due to the situation in North America, which should progressively improve over the coming quarters, assuming a constant copper price. Slide 11. focus on our performance in Europe, where our Q3 23 same-day sales growth was plus 3.4%. 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 continue to record strong growth in Germany, Austria, Switzerland region, and the UK, offsetting lower momentum in Nordics and Benelux, largely on a more difficult base effect. We recorded market share gains in France, Germany, and Switzerland. By product, we continue to record good growth on electrification categories, albeit a slower pace, as those categories grew by more than 80% in Q3 2022. By end market, Q3 2023 growth was largely supported by industrial and some commercial segments. Unsurprisingly, the residential market, and most specifically new builds, remains impacted by rising interest rates. On slide 12, we turn to our performance in North America, where Sunday sales grew by 2.7% in Q3. In the US, Sunday sales grew by 1%, We cite the robust industrial demand driven by production reshoring and good momentum in commercial segments such as entertainment, governmental spending related, or logistics. These offset the negative trend in the segments impacted by rising interest rates and notably the residential market and some commercial verticals. The quarter was marked by good backlog execution and market outperformance in Mountain Plains, Midwest, and Gulf Central. Canada saw robust 10-day growth of plus 10.9%, driven by strong industrial demand, and more specifically, the oil and gas and utility business, notably thanks to the business we acquired in 21, as well an additional effect in the quarter related to the servicing of our backlog. Our backlog in North America remains at a high level, still representing three months of activity, and it is gradually decreasing towards a more normalized level. Let's turn on slide 13 to our balance sheet and liquidity picture. As you know, we have successfully issued a new sustainability link bond for 400 million euros during 2030. First, the environmental objectives attached to this SLB are the new Scope 1, 2, and 3 objectives set a year ago to reach net zero emissions. Those targets have been validated by SBTI. Second, we obtained a very competitive rate for our WBplus rating for decisions of 5.25%. All our bonds are linked to sustainability objectives. We now have three SLBs for a total value of 1.4 billion. Fourth, with this issuance, we increase the maturity of our gross debt by almost half a year at close to three and a half years, including our bonds and our financing from accounts receivable securitization, which, as you know, is an asset-based solution at an attractive rate and no risk of interruption as we remain responsible for both the receivable generation and the collection. With our strong balance sheet and liquidity, we have no short-term refinancing needs. Thank you for your attention and I will now hand back to Guillaume.