Rexel Sa Unsp/Adr

Good morning. This is the conference operator. Welcome and thank you for joining the Rexel's first quarter 2024 sales presentation. 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, Please go ahead, sir.

Good morning to everyone, and thank you for joining us today for our first quarter 2024 sales conference. Thank you also for making yourselves available earlier than usual. In addition to issuing our Q1 sales numbers today, we are also hosting our annual general meeting this morning, so we moved up our call a bit. As usual, I'm here today with Laurent Delabarre, our CFO. I will focus on a few highlights of our performance. Laurent will give you greater granularity on our numbers, and I'll conclude with a confirmation of our outlook for 2024. So let's begin on slide three with the main highlights of our first quarter 2024 performance. So in the first three months of 2024, Rexel delivered a solid top line performance with all growth components very much in line with what we had guided to in February. We will talk in more detail during the presentation about the electrification-based effect as well as the commodities pricing effect. But what is very interesting is that beyond those two short-term elements, the underlying ED core business is holding up well with positive pricing overall, positive volume in North America, and good order intake as illustrated by the backlog. Residential new construction and also to some extent renovation are difficult, especially in Europe. but we see strength in non-residential and also in industrial automation. As the year progresses, we should see improving sequential figures with the base effect easing and market trends improving. I am also happy that the transformation of Rexel is delivering. We can see it in the market share gains that we have posted in many important countries. Our unique combination of value-added services and engaged teams is really making a difference. We can see it also in our digital progression, which continues steadily and which also helps make the difference. We can see it in the implementation of our M&S strategy, which continues to help us position the group on faster growing and more resilient segments. In this case, DataCom and Security in France with the acquisition of ITESA. Last but not least, the transformation is at play also in the way our teams react internally to a less favorable environment than in previous years. to protect our margin and adapt our cost base while still delivering great service to our customers. This is what allows us to confirm our guidance for the year, both in top line and in profitability. Moving to slide four, the 4.6% overall sales decrease breaks down into a 1.5% decrease in price and a 3.1% decrease in volume. And it's interesting to drill down into the details of the components of this figure. So if we go deeper in terms of granularity, as shown on the chart, our core ED business, representing 63% of our mix, held up well. Same-day sales were down a limited 0.8%. The performance in core ED was driven by a positive pricing contribution of 0.7%. while volumes were down by a limited 1.5% despite the weakness in residential, as I mentioned. And if we zoom specifically on North America, the core ED figure would be 2.4%, a positive 2.4%, with both price and volume contributing, with non-residential in particularly strong. Volume overall were also positive on cable which accounts for 15% of our mix rising by 1.2% while pricing in that segment was down 9.4% resulting in an overall same-day sales drop of 8.2% on cable. Electrification categories representing 22% of our sales were down 11.7% in the quarter. Most of the drop in electrification categories was from volumes down 9.8%, while overall pricing was resilient, down by a more limited 1.9%. Let's take a closer look at the reasons for this temporary softness in electrification on the next slide. So as shown on slide 5, electrification growth has slowed after having turned negative in Q4 2023. And the drop we recorded in Q1 is not unexpected and is linked to three main factors that we expect to ease in the near future. The first one, as I said, is a base effect. As mentioned in our previous earnings publication, demand for electrification categories reached a peak in H2 2022 and Q1 of 2023, when they grew by more than 30%. So we faced very tough comps this quarter. But as you can see, those comps will ease as of Q2 and should even reverse by the end of the year. The second factor is a lack of clarity on government regulations in several countries, as well as many other moving parts, like the price of electricity and the price of materials. And the consequence of this low visibility is that many end customers have chosen to postpone temporarily their investments. So this wait and see effect should clear as the picture stabilizes. And the third factor is a temporary oversupply situation in industrial automation activity in China since mid-2023. This situation is linked to a build-up inventory to counter supply chain issues, which coupled with lower demand drove down price and volume. However, that oversupply situation is easing, and price deflation should ease as well in the coming months. These are all temporary factors, but the longer-term growth factors remain intact, driven notably by a continued push by public authorities, as well as by corporate net-zero agendas. And it's, by the way, interesting to highlight that despite the negative Q1 figures, on a two-year stack, electrification categories have grown in double digits. So the trend is there, and it will continue. In this context, we continue to steadily implement our strategic actions, and in particular, the key pillar in our Power Up 2025 strategic program. As shown on slide six, a particular area of focus of the group is margin resilience, and I am quite happy with what is being done here in terms of reactiveness of our organization. There are several levels we can act on to ensure we maintain a good level of profitability, and this is just what we are doing. Just to mention a few. First, driving market share gains and volumes through selective customer targeting and offering higher margin value-added services. Second, leveraging our key role in the value chain to pass through price increases. Third, enhancing the efficiency of our operation, especially through continued digitalization. And fourth, remaining laser-focused on cost discipline, notably by adapting our staffing level to activity and strictly controlling our cost base. These actions, among others, allow us to confirm our 2024 targets, as we will see in my concluding remarks. In addition, as shown on slide 7, we also continue to actively deploy the capital allocation policy we outlined as part of Power Up 2025, which aims to balance organic growth, acquisitions, and shareholder returns. On the acquisition side, we are announcing today the signing of the acquisition of ITESA, which reinforces Rexel's position in the attractive security and communication business in France. ITESA generated nearly 80 million euros in sales last year through its network of 15 branches. It has a strong presence in the alarm and video segments and its activities are very complementary with Rexel's existing business in security solutions. The transaction should be accretive to earnings per share in year one and value creating in year two. This is in line with our strict criteria for acquisitions And the move is part of our PowerUp 2025 ambition to acquire companies in adjacent businesses, including the promising datacom and security business. Transaction remains subject to the approval by the French Competition Authority and is expected to close in H2. And continuing our policy of returning cash to shareholders, we repurchased 23 million euros in shares in Q1 as part of our 400 million euro share buyback plan over four years. bringing the total to date to 223 million euros. And with this, let me hand over to Laurent to go into our Q1 numbers in more detail.

Thank you, Guillaume, and good morning to all. Let's start on slide 9 with the different building blocks of our Q1 24 sales performance. Our sales of 4.7 billion euros were down 4.5% on a reported basis, notably impacted by the expected slow start of the year on a same-day basis, coupled with a negative calendar effect of 1.5%, which will reverse in the course of the year. The positive contribution from acquisitions stood at 3% in Q1 2024, resulting from our active M&A strategy that continues to pay off, and more specifically WASCO, which we acquired last year. The currency effect stood at minus 0.5% in Q1 2024, mainly due to the depreciation of the US dollar and is expected to be slightly above zero for the full year 2024, assuming spot rates remain unchanged. On slide 10, you see the selling price impact and the breakdown of our sales evolution by geography. First, the non-cable selling price was flat in Q1 2024, are up 0.7%, restated from electrification categories, and more specifically the deflation on solar panels that Guillaume described, as well as the temporary situation in China. So a positive start to the year in terms of pricing for our core ED families. As expected, cable pricing stood at minus 1.5%. I'll come back to that on the next slide. And by geography, we saw good sales resilience in North America at minus 1.1%, while Europe and Asia-Pacific were down respectively minus 6.9% and minus 7.7%. I will detail Europe and North America in the next slide. And more specifically on Asia-Pacific, accounting for 6% of group revenues, China saw weak market demand coupled with a temporary oversupply situation in industrial automation activity since mid-23, driving negative prices and volumes. In addition, the quarter faced a challenging base effect as Q1 23 benefited from the reopening of the country past COVID lockdown in Q4 22. Moving to Pacific, the region was down largely due to New Zealand, which faced a recessionary environment for the fourth consecutive quarters. Australia did well and was again positive in the quarter. Moving to slide 11 and zooming in on the copper price evolution. Let me remind you that cable pricing stood at minus 1.5% in the quarter and can be explained by two factors. First, the high comparable base as copper price hit a year high in Q1 23, as illustrated on the graph, with 8,900 USD per ton in Q1 23. Second, the price normalization starting end of Q2 23, largely in North America. As shown on the slide, copper price started to rebound in March 24, which is a positive factor. Slide 12. Focus on our performance in Europe. In Q1-24, someday sales were down 6.9%, mainly from challenging base effects in electrification, notably solar. Our core e-business was down a limited 3.2%, contributing for minus 2%, largely resulting from the trend in residential, while non-residential is more resilient. Let me highlight the key evolutions of the quarter. We further outperform the market in our key countries, including France, Germany, and Switzerland. The integration of Wesco is on plan, and business was very resilient in the quarter, driven by a favorable regulatory environment. Nordics, Benelux Germany, and Austria faced a high base effect on electrification, especially on solar. In this environment, we continue our strategy to adapt our cost base where needed. On slide 13, we turn to our performance in North America, where same-day sales were down a limited 1.1% in Q1, explained by the negative 2.3% contribution from cable pricing for the reasons just explained. Volumes were stable in the quarter, and non-cable pricing was positive. Both countries were boosted by their backlog execution. Electrification categories were down a limited minus 3.2%, contributing for minus 70 bps, mainly due to lower solar activity in California, while industrial automation was more resilient. Excluding electrification and cable, our core ED cells were up plus 2.4% in the quarter, contributing for 150 basis points. More specifically for our two countries, in the US, same-day sales evolution stood at minus 1.5%, with challenging residential activity and strong resilience in commercial buildings and industrial automation activity. Our diversified portfolio of non-residential activity remains a strong factor. We continue to benefit from favorable trends, for example in schools, entertainment, government, data centers, exports, water, wastewater. By region, we did well in Florida and the Southeast region, including Meijer, which continues to perform well. Canada, on the same day, saw a growth of 1%, driven by both projects in non-residential and industrial activities, more specifically mining and utilities. I remind you that our utility exposure is largely related to the latest acquisition on the Wesco business and LTL more recently. On slide 14, you see that we continue to enjoy a strong level of backlogs, which bodes well for the coming quarters. Similarly to previous quarters, this shows a strong underlying demand reflecting in both good author intake and good backlog execution. Let me illustrate this with our backlog in the US and Canada, which you see on the graph. In the US, our backlog grew by 4% in Q1-24 compared to Q4-23, notably driven by data centers, retail, wastewater, and entertainment. This gives us some visibility for the coming quarters. Let me now hand back to Guillaume.