Rexel Sa Unsp/Adr

Thank you very much for being available on a short notice. As you saw, we have decided to anticipate by a few weeks the release of our Q3 figures. During the quarter, we have experienced a change of trends in the European markets, which is leading us to adjust our initial guidance. And rather than issuing a press release without any additional comments, we thought it would be a better solution to expedite the production of our full quarterly figures so that we can discuss the geographical details of the situation with you, which we are doing tonight. As usual, I am holding this call with Laurent Delabarre, our CFO, who will enter into the details of the figures. But let me say a few additional words of introduction. As I just mentioned, and I'm here on slide three, we saw a change of trends in the European markets during the summer. You remember that our assumption was for stable markets at a relatively soft level between Q2 and the end of the year. This proved true in Q3 in North America, with even a slight recovery if you exclude the negative effects of Hurricane Helen in September. This is a bright spot, and you will see when we comment on the backlog that the prospects in this region remain healthy. But the story was different in Europe. where we experienced a further deterioration in most markets, especially in Central Europe and Northern Europe. This is due both to the macroeconomic environment, which is not good, and also to a specific photovoltaic effect as we continue to experience a double-digit decrease in this category, higher than the increase we had benefited from last year. And even though this segment is now quite small for us, it still has a meaningful impact on the year-over-year figures. Two remarks on this evolution. Firstly, it is totally market-related and not Rexel-related. We are facing this just like our suppliers, our customers, and our competitors are facing it. And in this context, I see evidence of us gaining ground in most of our markets. This is not unexpected. In soft volume moments like this one, as distributors providing the best added value, we tend to do better. And this is what is happening. It looks like a temporary dip before recovery. I am cautious and certainly not giving any guidance for next year, but the feeling I get from customers and suppliers is not one of us entering into a deep downturn in our markets. And this makes total sense with the central bank starting to lower interest rates, which historically always had a positive impact on us. A positive indication from this perspective is that while the quarter was negative overall, sales improved month after month over the quarter, And we were close to breakeven in September. In this context, and I am now commenting on slide four, I can tell you that our teams are all hands on deck on cost and margin control. They were prepared for that, and I am very happy with the way they have reacted. One metric I can communicate on is headcounts. We are reducing headcount in line with volume. and will end the year probably even better than that, which is an incredible performance, as in classical distribution economics, a part of your headcount are fixed. And we are doing that on a basis which is quite optimized already, as we are serving basically 40% more turnover than in 2019 with the same number of people. The reason we are able to do that is that we are taking the downturn opportunity, if I may say, to accelerate our transformation. We have been preparing for that, and there are several plans that we are activating to optimize even further our cost base. It is true in logistics, like in Germany. It is true in Salesforce organization, like in Austria. It is true in back-office optimization in several countries, and you will see more of that going forward. The sum of these actions would result in an annualized structural savings of 45 million of which approximately 15 million euros in 2024 and 30 in 2025. Restructuring charges are expected to be close to 30 million euros in 2024. These measures deepen the focus on efficiency that is embedded in our power-up plan and will help enhance Rexel's resilience over time. So even though the guidance revision is moderate, even though it is 100% market-related, I am not saying that I or the teams are happy with the figures, but I am quite satisfied with the way we are facing a less supportive market environment. And let me now hand over to Laurent to detail our Q3 sales, and then we'll return to comment on our outlook. Thank you, Guillaume, and good evening to all. Let's start on slide six with the different building blocks of our Q3 24 sales performance. Our sales of 4.8 billion euros were up 2.1% on a reported basis, a positive performance achieved thanks to our acquisition strategy, which contributed to plus 3.1% and offset the limited minus 0.7% evolution in actual day sales. The scope impact included the positive contribution of Wasco in the Netherlands and Talay and Electrical Supply Inc. in the U.S., And for full year 24, we anticipate the scope effect to be a bit lower to 2.5% based on already completed acquisitions with WASCO consolidated since September 2023. And the current effect, the current CFX to that minus 0.3% in the quarter and is expected to be broadly flat for the full year, assuming spots rate remain unchanged. Slide 7 focuses on the price and volume breakdown of our sales by product family and by quarter to give you a better idea of the dynamics we are seeing. The table allows us to highlight a few trends. First, our core ED business, including cable, representing close to 80% of the mix, is stable in volume and progressing in price, notably helped by cable. This is a better performance overall than in Q2-24. Second, the electrification market remains challenging and deteriorated sequentially with a minus 2% contribution to same-day sales evolution in Q3 after minus 2% in Q2-24. This was notably driven by lower volume and prices, which remained negative with sequential deterioration, especially on the PV segments. On slide eight, you see the selling price impact and the breakdown of our sales evolution by geography. First on pricing, as presented in the previous slide, selling price were down 0.4% in the quarter, and this can also be broken down between cable and non-cable, as presented every quarter. So non-cable selling prices, including electrification and core, stood at minus 0.8% in Q3 24, reflecting deflation in solar, piping in North America, and industrial automation in China. Cable pricing on the other side returned to positive territory at plus 0.4%, benefiting from the more favorable copper price. And by geography, we saw North America returning to growth at plus 0.2%, Europe remaining negative, and the deterioration in APAC at minus 0.9%. I will detail Europe and North America in the next slides. And more specifically for Asia Pacific, accounting for 7% of group revenues, China returned to negative territories, down minus 1.5%, due to a sequential deterioration in volume compared to Q2, notably with our industrial and market customer in solar, EV batteries, and transportation. selling price was still negative, but improved sequentially compared to Q2, thanks to a more normal level of inventory in the value chain. Moving to the Pacific, performance is mixed between our two countries, resulting in slightly positive performance in Australia, more than offset New Zealand, where the macro environment remains very challenging. Slide nine focused on our performance in Europe. Our Q3-24 same-day cells were down 4.4% compared to the minus 4.5% in Q2-24, reflecting a sequential drop considering the easier base effect we benefit from in H2-24. It results from two factors. Electrification has deteriorated in segments such as solar and specifically in Benelux. Second, our core ED business, including cable, deteriorated compared to Q2-24 due to worsening macro conditions with loss in volume partly compensated by better pricing. And more specifically, let me highlight the key evolution of the quarter. And the quarter was negatively impacted notably by the dark region and Benelux. The DA region was down minus 8.3%, deteriorating versus previous quarters. Germany and Austria were strongly impacted by the very challenging macro environment, notably due to the lower level of export to China and growing competition from Chinese manufacturers in the electrical vehicle industry, impacting both electrification and co-activities. Benelux was down minus 11.2% and remained under pressure despite an easier base effect. The quarter also recorded green shoots in France and the Nordics. And indeed, in France, we continue to significantly outperform the market. It's also worth highlighting the growth in solar and the better performance in September after a more difficult summer. And Nordics were back to positive territory, up 2.6%, improving sequentially, notably from an easier base effect on electrification. On slide 10, we turn to our performance in North America, where same-day sales were up 0.2%, returning to positive territory. As in the first half of 2024, activity continued to be boosted by good backlog execution, with project activity up in double digits. And more specifically for our two countries, In the US, same-day sales took at plus 1.1%, with favorable trends in residential, broadly stable activity in non-residential, and a slight decline in industrial activities. And more specifically, the positive ED activity in industrial buildings offset the negative trend in industrial automation, which faced very difficult comps. And in addition, Tally did very well in the quarter and the integration is well on track. Canada saw same-day sales evolution of minus 3.7%, explained by the negative momentum in industrial automation, impacted by a challenging comparable base effect and low level of activity in segments such as oil and gas, mining and automotive. This is partly offset by good momentum in non-residential, driven by large contractors in the public sector. And on slide 11, as in previous quarters, we continue to enjoy a strong level of backlogs compared to pre-pandemic situations, despite the very high level of execution. Active segments include data centers, wastewater, or entertainment. This gives us some visibility for the coming quarters. And let me now hand back to Guillaume. Thank you, Laurent. The new environment we have faced in the last three months leads us to revise our guidance downwards for the year. And I am now commenting slide 13. At the end of July, we had already flagged that our leeway had diminished, and we had positioned ourselves at the low end of the guidance. With the recent evolution, we have to revise that, and we now expect full-year life-for-life sales to decrease between 2.5% and 2%. with a sharp contrast between North America and Europe, the former being more or less sluggish for the year, with positive volumes, and the latter being mid-single digit negative. This overall drop in sales translates into less profitability at EBITDA level, and our best estimate is now to be around 5.9%, with cost savings actions offsetting partially volume drop through and margin pressure. On the cash flow side, We think that in this context, we will do better than our guidance, and we are upgrading the figure to 65% plus. Before I leave the floor to questions, I wanted to finish on slide 14 with a more midterm perspective on the results. First of all, to look at the past and to remember that the last two times we were in negative sales evolution, we delivered a beta margin of 4.2%. Being in a position to deliver this year close to 6% in a similar environment is a great proof of how Rexel is a different company today. And this is very consistent with what we have been saying all along. The self-help efforts implementing over the last five years are paying off. Looking into the future now, I'd like to take the opportunity to say that today's guidance adjustment doesn't change anything as to how we see the potential of the company going forward. It goes without saying, but it is better to say it. the same self-help levels that we have activated over the last few years continue to have a lot of potential and will be used to climb the next step on our journey and if anything today's circumstances are an additional incentive for us to do it faster with that being said laura and i will now take your questions this is the conference operator we will now begin the question and answer session anyone who wishes to ask a question may press star and one

their touch tone telephone to remove yourself from the question queue please press star and two please pick up the receiver when asking questions anyone who has a question may press star and one at this time the first question is from william mackie with kepler sugar please go ahead uh yeah good evening thank you very much for the explanation um a couple of things first of all

Thank you for the detail on the revision, the location of where it's coming from. I mean, broadly, if I'm using my simple arithmetic correctly, you're lowering the guide by around $400 million of sales and around $100 million of profit, so 25% loss contribution. So the question is, is that approximately right? So your working assumption is that's the lost contribution. And specifically, when we talk about the business development, have you seen any shift in gross margin in the underlying business? That's the first question. The second relates to the cash flow upgrade. I think good counter-cyclical trends in Rexel. Should we expect most of that is coming from inventory reduction, and if that's the case, where... are the excess inventories in your view. And the last question which you may not answer relates to your lessons that you have learned from the approach from QXO. I think they see an opportunity in North America like you to roll up the business and to apply more technology in distribution. I mean, I know that your level of digital penetration fell in Q3, but what's happening there and were there any lessons that you take away from that experience?