Legrand: Penalized by a difficult building market, Legrand’s results disappoint

(BFM Bourse) – The electrical infrastructure specialist is falling on the Paris Stock Exchange as its sales fell more than expected by analysts in the first quarter.

Small form for Legrand on the stock market this Friday. The electrical infrastructure specialist dropped 2.8% around 3:30 p.m., showing the second biggest drop in the CAC 40, after publishing its first quarter results.

From January to the end of March, Legrand generated a turnover of 2.03 billion euros, down 5.6%. In organic data, that is to say excluding scope and exchange rate effects, sales fell by 5.4%. However, according to the consensus cited by Royal Bank of Canada and Oddo BHF, analysts were counting on a less pronounced drop, of only 3.1% in organic data.

“In a construction market (around 80% of Legrand’s turnover) in marked decline in most geographies as expected in the first quarter, the limited drop in turnover and the resistance of our margins and our cash -free flow illustrate the resilience of our business model, the solidity of our market positions and the execution capacity of the teams,” declared Benoît Coquart, the general manager, quoted in a press release.

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A gap with competitors

“Unlike most of its peers (Legrand’s peers on the stock market, Editor’s note), the United States did not play its role as a shock absorber with a 6.1% decline in organic turnover, and Europe is down 4.7% In Asia Pacific, the decline reached 5.8% and 5.1% in South America (despite a rebound in Brazil)”, explains Oddo BHF.

Adjusted operating profit fell 12.8% to 416 million euros, or 2.4% less than the consensus, notes Morgan Stanley. The corresponding margin held up well, standing at 20.5%, in line with expectations.

Free cash flow in the first quarter also missed the mark, standing at 146 million euros, compared to 282 million euros expected.

“Legrand’s underperformance in terms of growth continues to highlight the challenge its end markets face, with a notable growth gap compared to its peers in electrical products and the sector as a whole”, analyzes Royal Bank of Canada. “On a more positive note, we welcome Legrand’s good control of margins despite headwinds to growth,” adds the Canadian bank.

Acceleration to come in growth

Legrand has confirmed its objectives for the year 2024, in particular growth in its turnover excluding exchange rate effects and the impact linked to its disengagement from Russia, increasing “low single digit”, i.e. between 1 % and 4%.

“Given that the group achieves at least 2-3% growth through acquisition, the objective set means that it foresees organic growth of between slightly negative and slightly positive,” explains Oddo BHF, adding that the consensus expects a organic growth of 0.3% in 2024.

Morgan Stanley emphasizes that the company will need to accelerate its growth throughout the year to meet its objective. But the American bank notes that the basis of comparison will greatly soften. Legrand had achieved growth of 7% in the first quarter of 2023, then 2% in the second and 0% in the third and fourth, she recalls.

Legrand also intends to generate an adjusted operating margin this year before acquisitions of between 20% and 20.8%.

Julien Marion – ©2024 BFM Bourse

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