Sales Growth: 11.2% increase excluding FX, with 7.6% organic growth and 3.3% from acquisitions. FX Impact: Positive 1% impact on the quarter. Geographical Sales Performance: North and Central America sales up 18.7%, Europe sales down 0.3%, Rest of the World sales up 4.8%. Adjusted Operating Margin: 20.7% in Q1 2025. Net Profit: EUR293 million, representing 12.9% of sales. Free Cash Flow: EUR188 million, 8.3% of sales. Net Debt-to-EBITDA Ratio: 1.5 at the end of the quarter. Acquisitions: Two acquisitions totaling EUR50 million in connected healthcare and data centers. Proposed Dividend: EUR2.2 per share, up 5% from last year.

Warning! GuruFocus has detected 6 Warning Sign with OSTO:NYAB.

Release Date: May 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Legrand SA (LGRDY) reported strong sales growth in Q1 2025, with an 11.2% increase excluding FX, driven by a 7.6% organic growth and a 3.3% positive impact from acquisitions. The company achieved a solid adjusted operating margin of 20.7% in Q1 2025, demonstrating strong operational leverage. Legrand SA (LGRDY) confirmed its full-year targets, projecting sales growth between 6% and 10% organically and through acquisitions. The data center segment showed outstanding performance, with growth exceeding 40%, and is expected to continue strong growth throughout 2025. Legrand SA (LGRDY) announced two acquisitions in Q1 2025, totaling EUR50 million in acquired 12-month sales, enhancing its leadership in connected healthcare and data centers.

Negative Points

Sales in Europe were almost flat, with a slight decline of 0.3% organically, due to a sluggish building market. The rest of the world saw mixed results, with sales growth in India and the Middle East offset by declines in China and Brazil. The company faces challenges from US tariffs, with a significant portion of its US COGS being imported, leading to potential cost increases. Legrand SA (LGRDY) anticipates a negative impact on financial results due to rising corporate income tax and financial expenses. The building market in North America, excluding data centers, remains slightly down, with no recovery seen yet in the residential or office markets.

Q & A Highlights

Q: Can you provide more details on the growth in North America, particularly in the data center segment? A: Benoit Coquart, CEO, stated that the growth rate of data centers in the US and at the group level was higher than 40%. The data center segment experienced fantastic growth, and this trend is expected to continue due to a strong order book. However, the non-data center business was slightly down, both in North America and globally.

Story Continues

Q: How are you managing the impact of US tariffs, and what is the expected effect on margins? A: Benoit Coquart explained that the expected additional cost due to tariffs is between $150 million to $200 million. The company plans to mitigate this impact primarily through pricing strategies, with additional price increases already announced. Other measures include supply chain adjustments and cost optimization. The goal is to maintain stable margins compared to last year, despite potential temporary dips in quarterly margins.

Q: What is the outlook for the European market, particularly in France? A: Benoit Coquart noted that the European building market remains sluggish, with no signs of recovery expected until late 2025. In France, there are some positive leading indicators, such as an increase in housing permits and credit production, but these are preliminary. The company anticipates a potential recovery in the electrical market by the end of 2025.

Q: Are there any concerns about supply chain disruptions due to the current trade environment? A: Franck Lemery, CFO, stated that there have been no significant supply chain disruptions due to tariffs. The company has postponed some shipments between China and the US to await clarification, but this was a deliberate decision rather than a forced one. The supply chain remains stable, with no warnings from the supply chain department.

Q: How is Legrand handling potential market share changes in the data center segment? A: Benoit Coquart mentioned that while it's challenging to assess market share changes on a quarterly basis, Legrand appears to be performing better than most listed companies in the data center sector. The company maintains strong relationships with customers and is involved in significant projects, but precise market share assessments will be made on a yearly basis.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments