Schneider Electric Sa

Good morning. This is the conference operator. Welcome to the Schneider Electric's 2025 Q3 Revenues with Hilary Maxson, Chief Financial Officer, and Amit Bala, Head of Investor Relations. Thank you for standing by. I would like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. As a reminder, all participants are in listen-only mode, and after the presentation, there will be an opportunity to ask questions by pressing star and one on your telephone. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero. At this time, I would like to hand you over to Amit Bala. Please go ahead, sir.

Well, thank you, operator. Hello, everyone, and thanks for your time to be with us this morning for our Q3 results. Without further ado, I will hand over to our CFO, Hilary Maxson, and then we come back for a Q&A session as well. Hilary, over to you.

Thanks, Amit, and good morning, everyone. Happy to be here with you all today to comment on our Q3 2025 revenues and also update you on our expectations for the rest of the year. Starting on slide number three with a quick summary of our results. I'm happy to report another strong quarter with sales of around 10 million euros. Energy management continues with strong growth, close to 10% for the quarter. And in industrial automation, we turned to positive growth in the quarter and for the year to date, up 6% and 1% respectively. And we're quite pleased to see the positive demand we've been mentioning in discrete automation for the past couple of quarters, translating into good growth in sales. Overall, we were up 9% for the Q3, reflecting our strong portfolio positioning tied to electrification, automation, and digitalization. Before getting into some more details on sales, I'll make some comments on the demand trends we're seeing in our end markets. First, in buildings, and as you know, the majority of our exposure in buildings is to non-residential, where we continue to see good demand, particularly in technical buildings like retail and hotels. In residential, we start to see slightly positive demand globally, but with continued weakness in the US and China. In data center, our pipeline and order trends remain strong, particularly in North America and China, with continued high demand from hyperscalers and strong and accelerating demand from new AI-related players. In industry, where we sell the full portfolio of Schneider, we continue to see demand trends and discrete improving, and in process and hybrid, we've returned to strong demand across industries. In infrastructure, we continue to see strong demand trends, although somewhat stabilized against a high base. So, net-net, we remain in a primarily strong demand environment with good improvement in discrete automation and process and hybrid, and some small signs of improvement in residential in some geographies. Of course, the environment does remain uncertain, and I'll address that in our expected trends later in the call. Turning now to the details of our Q3 revenues. We finished the quarter at 9.7 billion euros in revenue, up 9% organic year over year, with particularly strong contribution from our systems business. In terms of geographies, North America was at plus 14.5% organic, with particularly strong performance in US and Canada, driven by data center and services. Asia Pacific was up 6.4%, with China up low single digit and India up double digit. Western Europe was up 5% for the quarter and returned to growth on a year-to-date basis, with good growth in both businesses and most countries. And rest of world continued with solid growth against a strong base of comparison. FX impacts were negative for the quarter, driven by continued weakness in the U.S. dollar, the Chinese yuan, and Indian rupee. Based on today's rates, we see a slightly higher full-year impact than what we showed in the H1, with an estimated full-year impact on our top line of minus 1.4 to 1.5 billion, and estimated impacts on our adjusted EBITDA margin of around minus 50 basis points. In terms of business models, in products, which reflects our shorter cycle business and sales through partners, we were up plus 3%, primarily driven by volume, with some positive pricing in North America in response to tariff headwinds, offset by continued deflation in China. In energy management, product growth remained at low single digit, with good demand across most product offerings, offset by weakness in residential in the U.S. And we do see the good demand trends in discrete translating into high single-digit sales growth in products and industrial automation. Our systems business continues with strong double-digit growth driven by continued strong demand trends, particularly in data center, power and grid, and across other segments as well. Software and services was plus 8% for the quarter, with ARR at Aviva at plus 12%. And we saw a good contribution from Aviva in terms of revenue growth after timing and transition impacts earlier this year. In services, we saw strong growth in our EcoCare digital services and good growth in field services across both businesses. Turning now to Q3 revenues by business and geography. Energy management was up around 10% for the quarter to 8 billion euros. We saw continued double-digit growth in North America, up 17%, with double-digit growth in U.S. and in Canada, driven by data centers, as well as good demand in non-residential buildings, partially offset by market weakness in residential in both geographies. Mexico was particularly weak across end markets due to macroeconomic issues tied to tariff uncertainties. Western Europe was up 5% organic with good growth in residential and data centers against a relatively low baseline. Spain, France, and some smaller countries contributed to the growth with low single-digit declines in UK, Germany, and Italy. Asia-Pacific was up 5% with China up low single-digit driven by continued demand in data center with the building and construction market still subdued. India was up double digit with strong growth in energy management products. Australia was also up double digit driven by demand in data centers with continued demand in residential. Rest of world was up 6% with double digit growth in the Middle East supported by project execution and services. Turning now to industrial automation, sales were up 6% organic to 1.7 billion with the improving demand trends we've seen in previous quarters in discrete translating into growth and sales, plus good contribution from software. North America, where we have relatively lower exposure, was still negative at minus 2%, with the more mature markets of U.S. and Canada together around flat, with a return to some growth in discrete and growth in software, offset by weakness in process and hybrid, due to some delays in decision-making from tariff uncertainty earlier this year. Mexico was quite weak due to tariff uncertainty impacting the economy there. Western Europe was up 6% with a good return to growth in discrete automation across all key geographies against a relatively low baseline. Process and hybrid and software also contributed to growth with some weakness still in Germany. Asia Pacific was up 11%, with China up high single digit, supported by strong growth and discrete. India was up double digit, again supported by strong growth and discrete, and the rest of Asia Pacific was also up double digit. Process and hybrid sales were negative due to some delayed projects earlier this year. The rest of the world was up 6%, supported by project execution in Middle East in process and hybrid, by good performance in software. Discrete sales were negative, primarily in South America, where we had a high base of comparison. Turning now to our own sustainability performance. As you know, this is our final year of our current Schneider Sustainability Impact Program, and we continue to expect to finish at close to 9 out of 10 versus some very aggressive goals we set for ourselves at the end of 2020. Of note in Q3, the Zero Carbon Project has officially reached and surpassed its 2025 target ahead of schedule. Our top 1,000 suppliers have reduced by 53% their operational emissions since 2020. This is an important step forward in our Scope 3 decarbonization journey and a powerful example of how we can accelerate climate action in our value chains. Our focus on trust is also showing good progress, with 85% of our employees reporting they're confident to speak up, a two-point increase versus last year. This is a strong foundation to secure robust ethical standards everywhere we operate. And finally, we continue to progress on our longstanding commitment to provide access to clean electricity to all. Over 60 million people now benefit from green electricity through our programs. Before sharing our expectations for the remainder of the year, I'd like to highlight two successful financings completed in Q3 to support the India transaction. In August, we placed €3.5 billion of bonds in the European market, €2.5 billion fixed rate at 3.14% and €1 billion floating. Then in September, we issued €750 million in convertible notes at a 1.25% coupon. We believe this financing strategy, a balanced mix of fixed and floating rate bonds complemented by a measured level of convertible debt, is well aligned with our capital allocation priorities. It enables us to optimize financing costs while broadening and diversifying our investor base. Moving now to slide 11 with an update on our market dynamics. I mentioned the relatively strong demand trends we see across our end markets earlier in the call, with a continued good demand dynamic and discrete automation expected in the Q4. And all four regions are expected to contribute to growth. The environment does continue to be one of heightened uncertainty, and I called out a few areas during the call where that's impacting us in the Q3. The last point I would make is that in terms of tariffs, we are seeing our actions and pricing take some effect in Q3, and this will continue in Q4. However, we wouldn't expect to fully offset tariff and inflation with pricing within this calendar year. With this backdrop, we're reiterating our full year 2025 guidance of growth in our adjusted EBITDA of 10% to 15% organics, driven by revenue growth of between 7% and 10% and adjusted EBITDA margin improvements of 50 to 80 basis points. Based on our current estimates, we'd expect to be towards the lower half of both of those ranges as already reflected in our currently published consensus. And you might recall we had a strong Q4 2024 driven by an unlocking of the supply chain in North America, and accordingly, we have a relatively high base of comparison in Q4. The last point I'll make is that we unveiled a new vision for the company at a customer event in Copenhagen last week to be the energy technology partner for all of our customers, to electrify, automate, and digitalize every industry, business, and home. And we expect to speak more about this at our upcoming Capital Markets Day in December in London. And for those of you who haven't yet signed up, we include the link here and look forward to seeing you there. With that, I'll turn the call back to Amit for Q&A.