(AOF) – Rexel has successfully completed the placement of its senior sustainability bonds, unsecured and redeemable in 2030 for an amount of 400 million euros at a rate of 5.25%. The bonds, maturing on September 15, 2030, are subject to early redemption at Rexel’s option from September 2026. They will rank pari passu with the senior credit agreement and the other unsecured senior bonds. group collateral.
The distributor of products and services for the world of energy will use the proceeds of the operation for its general needs, including the financing of the acquisition of Wasco.
It indicates that this bond issue will enable it to improve its financial structure by extending the maturity of its debt at favorable financing conditions.
Rexel is committed to reducing greenhouse gas emissions related to the use of products sold by 45%, per euro of sales (scope 3) by December 31, 2025, compared to 2016 The company has also committed to reducing greenhouse gas emissions related to energy consumption in its operations by 38% (scopes 1 and 2) by December 31, 2025, compared to 2016.
These sustainable performance objectives are in line with Rexel’s objectives for 2030 to reduce the first KPI (in intensity) by 60% and the second KPI (in absolute value) by 60%.
The bond interest rate will be increased by 25 basis points to 5.500% per year from September 15, 2026 if Rexel does not achieve these sustainable performance objectives compared to 2016.
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Key points
– World number 2 in professional distribution of electrical equipment, with more than 6% market share, created in 1967;
– Distribution of sales of €18.7 billion between Europe for 51%, North America for 42%, ahead of Asia-Pacific (7%);
– Eight major product groups: electrical installation equipment (44% of sales), conduits or cables (22%), lighting (15%), HVAC engineering (6%), tools, renewable energy, software, security and communication;
– Business model based on 3 pillars: local roots and global coverage (60% of revenues in countries where the group holds 15% of the market share), power and agility of logistics, generalization of artificial intelligence in logistics and commercial processes;
– Split capital (20.2% for the Cevian fund and 1% for employees), Ian Meakin chairing the 12-member board of directors and Guillaume Texier being managing director;
– Solid balance sheet with net debt reduced to €1.5 billion, giving leverage reduced to 0.96 against €5.3 billion in equity and free cash flow of €873 million.
Challenges
– “Power Up 2025” growth strategy:
– 2 pillars: “the fundamentals of Excel” (talents, suppliers, supply chain, digital and productivity) and “a differentiated leader” (data & AI, advanced services, energy transition solutions, ESG and mergers & acquisitions) ,
– external growth generating €2 billion in additional sales,
– annual growth of 4 to 7% in sales (including 40% in digital) and operating margin of 6.5 to 7% of sales;
– Innovation strategy financed at €80 million, 2/3 of investments going into digital:
– multi-channel offer with platform dedicated to fluidity, Esker deployment of the Email to EDI solution and artificial intelligence for sales alerts, pricing modules and assortment optimization, resulting in 25% of digital sales,
– expansion of services to suppliers (data analysis, prediction, etc.),
– open innovation via the global Digital factory, clouds open to customers and Hi! Paris, center specializing in AI and data analysis;
– Environmental strategy included from product design with 48% green turnover and objectives validated by the SBTi:
– by 2030 (vs 2016), 35% reduction in CO2 emissions from operations and 45% reduction in those resulting from the use of products sold,
–
green borrowing and indexing of bond lines on the achievement of CO2 objectives;
– Positive impact on sales and operating margin of portfolio management (5 acquisitions, 4 disposals in 2022 and, in January 2023, 2 acquisitions and 1 disposal);
– New purpose: offering electrification solutions for a sustainable future.
Challenges
– Three major impacts – material inflation 1
time
notably copper needed for cables (17% of sales), shortage of electronic components and tensions in the availability of labor – offset by operational agility, the increase in selling prices;
– Strong disparity in margins (3.4% in Asia, 16.1% in North America and 13.6% in Europe)
– Continued rise in digital sales (25% of revenues) in the face of increased competition with Amazon Business in distribution to professionals;
– Uncertainties about activity in China (around 4% of sales), handicapped by the recovery from Covid;
– After sales up 14%, 2023 objectives of 2 to 6% growth in sales and 6.3 to 6.7% operating margin;
– Record dividend of €1.2, i.e. a distribution rate of 40% and continued share buybacks.
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Concerns remain
According to the Federation of Specialized Trade, Procos, in October 2022, activity fell by 1.5% year-on-year. However, the activity of beauty and health (+ 5.2%) and specialized food (+ 3.5%) are dynamic compared to October 2021. Attendance at points of sale was very impacted by the problems of fuel and bad weather. Compared to October 2019, a pre-covid year, the drop in attendance is very sharp (-20.9% in October). Shopping centers and the outskirts are more impacted than city centers with a gap of four to five points.
There are several reasons for concern for the future. The players are experiencing a very significant jaws effect given the increase in their operating costs while the evolution of demand is very uncertain. Very few brands can pass on the increase in their costs in sales prices. The federation therefore asks, among other things, to limit the indexation of the Commercial Rent Index to + 3.5% for the rents of all companies in 2023. It also invokes an absolute emergency: cap the price of energy for 2023 and retroact on contracts already signed to prevent the rate of failures from accelerating.