Rexel Sa Ord

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?

Okay, thank you Will. You were a little bit cut, but I will fill in the void and try to imagine your questions and give answers. The first one was, if I understand well, on drop through and do we see any effect at growth margin level? I'm not sure it's the right math to compare it to the previous guidance, but broadly what we have seen compared to the profitability last year, very clearly. is a drop-through effect on volume, very clearly. And this drop-through effect, since we are moving the guidance from basically 0% to minus 2% to minus 2.5%, it's obviously having a large impact on the profitability. On the growth margin side, what we have seen is also a negative evolution for basically three reasons. One of them compared to last year is the one-off effect of sequential deflation on certain categories of product on inventory. You know that it is a one-off effect that we flagged on the way up, but that we didn't flag on the way down because we felt it was more moderate than on the way up. So there was a little bit of that, especially in the first part of the year. The second thing that we are experiencing during the whole year is an effect of a delta between the inflation of the products, which is basically slightly negative at the end of Q3, and the inflation of our cost base, which is around 2.5%. So that has an impact too, which is continuing into Q3 and Q4 with a price level which is probably just a little bit lower than what we expected at Q2. And the last element is in select countries in Europe, we are seeing a little bit increased competitive pressure, but it's concerning mostly select countries in Europe. So that's what I would say on gross margin. Now the cash flow upgrade, the reasons for the cash flow upgrade is twofold. First of all, there is a small capex effect, which is the fact that since we are in cost savings mode, cost savings, it includes SG&A, it includes also capex in reality. which means that we have less projects, we are doing a little bit less, and that will have an impact at the end of the year in terms of the cap expense. But the bigger effect is, as you said, on working capital, and it's a little bit, I mean, there is a little bit which is due to our efforts to reduce inventory, but there is also a lot which is going to be a little bit mechanical. If you remember well in the way distribution works, If the end of the year is less good than the beginning of the year, you end up the year with usually less working capital because of mechanical effects. And so it's mostly due to that. In terms of inventory reductions, I understand your question, but there is no particular space that I would identify in which we would aggressively reduce inventory. We pay a lot of attention in this effort to conserve cash, to maintain also the service level to our customers. which means holding the right level of inventory. And if you remember, I was very constant in my previous course to say that we hadn't increased the inventory that much. I mean, we always stayed around 60 days, and we feel it's the right level to be at overall. So not much to say on that. Now, your questions about QXO. Are there lessons to be taken from the approach of QXO and Brad Jacobs? I mean, first of all, the approach of QXO was to pay basically the price that we reached during the year, the share price that we reached during the year. So it's not clear that they were planning to add much value to Rexel as it is today, probably more taking advantage of the moment in the cycle. Now, in terms of the strategic thesis, from what I understand from Brad Jacobs, it's all about M&A and about technology, as you mentioned. In terms of M&A, we have the same mindset. So, if anything, it gives us more incentive to continue to go in this direction. In terms of technologies, There is no particular different vision of what should be done. But I have to say it pushes us even more to go fast on this topic of technology. Maybe in the past we were very happy to be one, if not the leading distributor in terms of technology. And today the way we are thinking after the approach of QXO is maybe it's not enough to be the best. Maybe we need to accelerate even more. So that's the way I would say it. But basically, in terms of strategic direction, it's not as if QXO had come with a totally different strategic direction. So from this perspective, the learnings are a little bit limited. I hope I answered your question. Thank you. Yeah. Thank you very much, Gil.

The next question is from Martin Wilkie with BITI. Please go ahead.

Good evening. It's Martin from Citi. The first question I had was just on sequential trends, and you've highlighted a lot of them in the call. But just to clarify, obviously at the group level, you've mentioned that the quarter got progressively better. It sounds like September is back to 0%, and I think if the math is right, that's sort of what you imply for Q4. But just in terms of which specific markets were worse, it sounds like solar was definitely there. But just to clarify on industrial automation, was that just a basic comparison effect, or did industrial automation also get worse in the quarter? Thank you.

So, look, I mean, the markets which clearly show a negative sequential trend are mostly in Europe, and they are mostly Germany, Austria, and I would probably add to that Benelux a little bit, and the UK. So it's mostly central and northern Europe. which showed sequential negative evolution. The rest, even solar, the reality is that solar continued to drop, but we had anticipated that at some point when we were hitting easier comparison base from 2023, the figures would start to decrease, and it was not the case. So solar continues to drop, but it's not a change of trends in reality. When it comes to your question about industrial automation, yes, we had negative figures in North America and in China, and there are two different effects, I think. In North America, I would say there is a little bit of weakness of the U.S. industrial markets as people are mostly waiting for the elections to start investing and to understand what the global economic context is going to be. So there is a little bit of that. I think at the OEM level, we had flagged an inventory effect in the past a few quarters, but at the OEM level, what I hear is that we are very close from being over in terms of the inventory effect correction on that perspective. The more important effect that is particularly true for Canada, but also a little bit for the US is that last year in Q3, there was a big change in terms of the availability situation with one of our very large manufacturers being able to deliver a big part of the backlog. So they made a dedicated default into three last year to push products, and therefore we had a difficult base effect. So it's not specifically a market effect, it's more a comparison effect. So that's what I would say for industrial automation in North America. In China, the situation is a little bit different as the market continues to be weak and maybe a little bit weaker than it was in Q2 sequentially. So the situation is slightly different in China, which is a smaller market for us. But in North America, I would say it's a little bit of market-related evolution in a wait-and-see situation, but a lot of comparison-based.

Thank you. That's really helpful. And if I could have a follow-up just on looking into next year. I know obviously you're not going to guide on 2025 at this stage, but it sounds like you've got $30 million of the cost savings out of the 45. Is there anything else that you can flag at this stage in terms of the phasing of synergies so we can do things like that that you can point to at this stage that will incrementally benefit you in 2025?

In 2025, no. I mean, what we try to, I mean, the most we can do in reality is to give you indications about what is completely in our hands. That's the reason why we flag those actions, which are 100% self-help actions, and on which it's relatively easy to say how much they're going to be worth next year. For the rest of the building blocks, which are very much about gross margin, sales evolution, et cetera, you'll have to wait a little bit more as we get more clarity into next year. What I can say also maybe is to give you an update on M&A to say, but Laurent already said it in his prepared comments, that the integration of our most recent acquisitions is doing very well. So if anything, it's going to deliver better than what we had anticipated at the beginning, but since we didn't guide on what it would be, I don't think it helps you very much in terms of modeling next year. So for the rest, it's going to be important to wait a few moments to give guidance into next year, especially because of one of the comments I made, which is that The situation is a little bit of a paradox because on one hand, you have interest rates going down both in North America and in Europe, which is always a good sign for our market, at least for the construction part of our market, which includes resi and non-resi. And on the other hand, you have some things that I would love to be able to call a temporary dip. I'm not completely sure about that. but you have a weakness in the market. So to reconcile that, I think a few moments are going to be important to see where the things are going.

Great. Thank you very much.

The next question is from Daniela Costa with Goldman Sachs. Please go ahead.

Hi. Good afternoon. Thank you. I have three as well, if it's possible, but I ask one at a time. The first one, just wanted to go back to the comments you gave regarding the savings, the new savings that you're anticipating, the cadence of that, and also the cadence of your sequential commentary during the quarter that each month has been better. So is it your margin downgrade, mainly a downgrade of where you expected originally Q3 to be? And is that just mechanically what you're downgrading on the margin, or you think Q4 margin will still have a significant dampening impact?

If I understand well your question, no, it's an H2. It's an H2 downgrade, which means that I wouldn't go as far as to say Q3 was an exceptional event and then everything comes back to normal in Q4. I'm not sure it is the case. The weakness in the markets that we have seen, especially in the geographies I was talking about in Central Europe and Northern Europe, they give no particular sign to change. And as far as the electrification, which is the second big event we changed compared to our Q2 vision. I don't think that I have seen any particular rebound or evolution in the next few weeks. So it's really a downgrade which is impacting both Q3 and Q4, if I understand well your question.

Yeah, I was alluding at that exactly. And then just second, what time of the year normally would you be negotiating the prices with suppliers? Would it be right now, I guess, have those things started? Do you have any visibility on prices into next year at all?

It's a little bit early. You know, the thing is, to enter into the details, we don't negotiate price increases directly with suppliers. I mean, there are two different negotiations taking place. One is about the rebate that we get to the public price increases and the other one is about price increases. What we start usually a little bit later in the year is to discuss the structure of the rebate and to discuss the volume objectives for next year. So that's mainly the first part of the negotiation. And then beginning of the next year, we will have visibility on where the suppliers are going to be in terms of their own list price evolution, which is something slightly different. So at this stage, it's very difficult for me to tell you what are the intentions of the suppliers getting into next year in terms of pricing. What I can tell you is what we have seen this year, which in reality is fairly consistent with what I had told you at the beginning of the year at one or two exceptions. In core electrical distribution, we are slightly positive, between 0% and 1%, which is, if I remember well, exactly what we had told at the beginning of the year. What is more negative is, first of all, the electrification categories and especially the PV categories, where we have seen double-digit price decreases since the beginning of the year, very consistently. And also a few commodities, especially steel-based commodities in the U.S., where things have gone proportionally to the price of steel in the U.S., basically. So this is the biggest driver, I mean the main driver for the negative price evolution this year. So at this stage, I have no better insight than to tell you that for core electrical distribution categories, which is most of the suppliers that you are following, the best guess would be zero plus like this year. But it doesn't come from specific insight that I have from suppliers. It could be more, it could be less. It comes from the fact that this year was very consistent with that.

Got it. Thank you. And final one, just slightly off the quarter, but I guess we've been hearing a lot about taxation and budget and municipal cuts in France. Can you give us some light on how you think about that in terms of impact for your business?

So in terms of municipal cuts to start with, I don't think it's going, I mean, it's very early. I mean, first of all, you have to understand the political situation in France. There is a government which proposes laws, but the government doesn't have a clear majority at the assembly, which means that between the proposals and the end result, there could be many differences. So it's a little bit early to comment on the project. Now, in terms of the budget reductions, in terms of reducing the level of investment of municipalities, I don't see any meaningful impact at this stage. I don't think it's going to be meaningful. The type of works that we see are usually not impacted that much by that. When it comes to the mechanical effect on taxation and on share buybacks taxation, we are in the middle of evaluating what it means. It will be much more important and meaningful on the income tax rates in France than on the share buybacks taxation. should be something around 2% to 3% of the share buybacks, if I understand well the initial calculation that were made. But depending on what the end result is on net income, you could see a few percentage points increase in the overall taxation rate of the group going into next year, but it's a little bit early to have a stabilized evaluation of what it is, because once again, it's going to be discussed by every party in France, and we won't know for sure until the end of December.

I appreciate the comments. Thank you.

The next question is from Alexander Virgo with bank of America. Please go ahead.

Uh, yep. Thanks. Thanks for squeezing me and hopefully you can hear me. Okay. Um, I guess I was just trying to reconcile the, positivity around sequential improvement through the quarter and the comments you gave in respect to gross margin pressure, i.e. increased competitive pressure in Europe and also the continued deterioration of solar pricing, it doesn't sound like it's a particularly good environment, I guess, is where I'm coming from. So I'm just trying to think about how you've described the customer conversations with respect to 2025 and just trying to reconcile reconcile the kind of positive comments versus what what you've then said in terms of gross margin pressure I guess that's where I'm it's a it's a question about why we should oh I lost you completely sorry the gentleman has been cut off oh okay by us or by himself

His line just dropped, I'm afraid.

Oh, his line just dropped. I can answer his question anyway and hopefully he can listen to the record of the call. Let me be a little bit clear on the margin pressure we are talking about. The margin pressure we are talking about, once again, is threefold. There is one effect, which is an effect which is mostly from the beginning of the year, which is the mechanical effect of negative categories in terms of pricing on inventory. We shouldn't call it margin pressure in reality. It's a one-off margin effect in reality. The second margin effect is the mechanical effect of Gross margin inflating at a certain rate because of pricing and costs inflating at a different rate. And this is not typically a gross margin effect. It's also an SG&A effect. And the third one is in some select countries in Europe which are very much impacted by the negative evolution of sales, namely Germany, namely the UK, we are experiencing an additional pure commercial margin pressure due to additional competition. So that's really what we're talking about and I want to make the difference between those elements because the first two are more or less mechanical and they don't have anything to do with the market evolution. is due to market evolution, but is limited to a few countries in Europe. So that's what I wanted to make clear.

The next question is from Andre Kupnin with UBS. Please go ahead.

Hi, good evening. Thank you very much for taking my questions. I'll just list them out all three in a row in case I get cut off as well as I'm in the airplane. We talked about headcount reductions. Could you give us some numbers in terms of what you're planning to do in the second half? You did 400 in H1, and the average number of plays went down by 100. So I just wanted to understand what happened in the second half in terms of the actual headcount. And then the second question I had was on the China industrial automation market. Did that show a sequential improvement? Sorry, am I coming through?

Yeah, you were talking about the China automation market, but you were cut.

Yeah. Cool. Thank you. Yeah, I was just getting some feedback here. So on China automation market, you said it's worse. in the third quarter than the second quarter. How did that evolve sequentially month by month as you gave color for the group? And the final question I have is, you talked about this feeling like a dip before recovery. Could you just give us a bit more detail around that on the conversations with customers and what regions and sub-verticals were you seeing that? Thank you.

What was the third question? Can you repeat the third question, please?

Headcount reductions, if we could get some numbers. So the third one was more about the, you talked about this feeling like a dip before recovery. I just wondered if you could give us a bit more color on that, which kind of regions and sub-verticals where that feels like we're on the verge of recovery. Thank you.

Maybe I'll let Laurent comment on the first question on the headcount reduction and the second one on China automation, and I'll take the last one. Yes, first on the headcount reduction, compared to the first half, we'll continue to have an action plan, and at the end, we'll have around more than 200 people down in the second half. But last year also, in the second half, we reduced our headcount. So the gap at the end of the year would be around a bit more than 400. Second question was about industrial automation in China and what we are seeing month after month in the last few months. If there is any detail you want to share additionally to what we shared already. No, but well, in Q2, China was positive and turned to negative in Q3. On that, we are a bit more favorable pricing environment. But the volumes are getting far lower. There is a weak demand, especially, as I pointed out, with key customers in industry with EV charging station batteries. And on the other side, we are holding with our customers more around food and water, wastewater. That being said, the volumes in September were better than the rest of the quarter, but it's very erratic in China. So, I mean, for us, at least, it's very erratic. So I'm not sure I would take that as a challenge, but it was better in September than in the rest of the quarter. Maybe last point is my comment about a dip before recovery. You shouldn't take it to face value. What I'm saying is that it doesn't feel like the start of a big recession because of the global environment, because of the interest rates reductions, because also of the fact that in the residential markets, for example in the U.S., we are now seeing positive figures. So things are going in the right direction for many of our markets, which means that it could very well be a temporary thing, and the most probable scenario is that it's a temporary situation. In terms of how long is the temporary going to be, in terms of how deep is it going to be, in terms of what the guidance is for next year, I'm three months too early to be able to tell you that. So it's a very, very qualitative comment that I wouldn't want you to take for a promise.

Great. Thank you very much. May I just follow up on the headcount numbers? Because I thought you had a 400 reduction in H1 from the beginning of H1 to the end of H1. And then you talked about further 200. So that should be 600 year-on-year, rather than 400, no?

Yeah, but as Laurent mentioned, we had started last year to reduce headcount in the second part of the year. So this is the reason why it's not as simple as the number of headcounts that you reduce between the beginning and the end of the year. You have to compare it to the evolution last year also.

Okay, so the 400 is the average.

No, the end of the year, the end of December. Okay, got it.

Thank you very much.

Thanks. For any further questions, please press star and 1 on your telephone. The last question is from Miguel Borrega with BNP Paribas. Please go ahead.

Hi. Good afternoon, everyone. Thanks for taking my questions. So last time we met, this was two months ago, you were very confident on the sequential margin recovery. which I think was mostly on the assumption that non-table pricing would be stable in the second half. Now, obviously, it has been negative. So can you maybe help us understand what happened and to what extent should this be the bottom? In other words, what is the risk that deflation will continue in 2025 when you look at, for example, inventories in the solar panel segments among the distribution chain?

Yeah, so on pricing, let me make probably two comments. The first one to say that it's mostly a story about the negative pricing evolution is very much concentrated and uniquely concentrated on everything which is outside the core ED categories, which is in the core ED categories, sorry. Because what you have seen is that if you look at the traditional electrical distribution categories, including cables, the price is relatively stable as you have seen in the presentation. I'm looking for the figures on the presentation as I'm doing it. You see that the price was minus 1% in Q1, minus 0.6% in Q2, and plus 0.3% in Q3. So really what we are talking about is the electrification categories, which is contributing negatively to pricing by 0.5% in Q1, 0.9% in Q2, and 0.7% in Q3. In terms of this negative pricing evolution, there are two elements, I think. One at the beginning in Q1 was industrial automation in China. I think that is behind us and price has stabilized in China like in other markets in terms of industrial automation. The second and remaining one is photovoltaics, which is one category which for us today, it starts to be relatively small. It represents 4% of our cells, and I didn't do the math recently, but probably the same proportion of our inventory in terms of value. So what is going to happen to the price of panels? I'm certainly not going to predict that too much. What I hear when I discuss with suppliers is that they are very, very, very close to the rock bottom where they are hitting the variable cost and it's impossible to go lower. But I wouldn't take that for an absolute truth. But that being said, in terms of global impact, it becomes smaller and smaller as the category is shrinking. So that's basically what I'd like to say. Today, the electrification impact in Q3 is minus 0.7%. I see that as decreasing over the next few quarters. And by the way, I'm not sure I remember having said that the price would be stable in the H2, but I look at the transcripts. Thank you.

And then the fact that Cable pricing contribution turned positive. Did that have any negative mixed effect to your margins?

No, not particularly I don't think so. I mean, you know the cable margin like for any products Like for any product the cable margin is different from country for the two countries There are countries, and I won't mention them because I know that there are competitors on the court, but by the way, they know that already. There are countries in which cable is very profitable, and there are countries where we sell cable because it's important to sell the rest of the mix. It depends on the countries. And overall, the fact that the fact that cable price is increasing is not having a big impact on the mix on the EBITDA profitability. No, no.

Thank you. And then if I can just squeeze in one last question, coming back to the bid of QXL. So they are convinced there's a lot of deals to be made. And the last sizable deal that you did in the US, for example, was in 2021. In Europe, you obviously bought Wasco for nine times. Is there any reason why you're not doing more deals in the U.S. at the moment?

First of all, we did a fairly sizable one with Tally, which was this year and which was quite sizable in terms of size. So it's our last big deal, which was this year in the U.S. Secondly, what I would say is that we are always interested in consolidation in the U.S. What we are very disciplined on is the arbitrage between synergies and price. We want to buy high-quality assets with interesting synergies with the rest of Rexel at a reasonable price, which means that the price can be high if the synergies are high and the quality is high, and has to be lower if the synergies are lower. So the reality is that we are selective based on that, and there are deals that we do and that there are deals that we don't do because of that. Now, coming back on the comment of QXO, I think the comment on QXO in general was from a time when Brad Jacobs was interested in all kinds of categories in professional distribution in the U.S. So we are talking lumber yards, we are talking roofing distribution, we are talking HVAC distribution, we are talking electrical distribution. I'm not sure, at least I have not seen, any specific comment on the electrical distribution space. So that's what I would say on those two comments. I think, you know, when you look at the landscape of electrical distribution in the U.S., it's still relatively dispersed between competitors. The biggest player in the US still has approximately 10% of market share, which means that there is space for additional consolidation. We are going to be active in this space, but we are going to be active while disciplined on the price we paid, especially in regards with Rexel's own multiple. It makes sense in terms of value creation. Thank you very much. Thank you.

Mr. Texier, there are no more questions registered at this time.

Thank you very much. So the next time we will talk to each other is at the beginning of next year, in February next year, for the full year results as well as for the 2025 guidance. Thank you very much for your attention today, especially on such a short notice.