(News Bulletin 247) – The growth of the specialist in infrastructure and electrical equipment disappointed in the third quarter due to a sharply declining construction market. Legrand is now targeting the bottom of the range of its annual growth announced in July. Which disappoints the market, despite an increase in the margin objective for the current year.

Once again, investors are scrutinizing the smallest detail in this intense results season and this is the case for Legrand, which is suffering the blow on the Paris Stock Exchange. The title of the specialist in electrical infrastructure and equipment limits its decline to 1.7% around 11:50 a.m. after disrupted trading at the very start of the session.

The company is sanctioned on the stock market after having refined its annual growth forecasts downwards. The company had a slow third quarter “in a clearly declining construction market”, according to its manager Benoît Coquart.

Quarterly growth (still) disappointing

Once again, Legrand slowed down in the third quarter. The Limoges-based group published quarterly growth of 1.8% in organic data, after already weak growth of 2% in the second quarter. And compared to the first three months of the year, the comparison is even less flattering since Legrand achieved organic growth of 7.4% between January and March (+9% in published data).

Between July and September, the group particularly suffered in North and Central America, a geographical area which represents 38.9% of Legrand’s overall turnover. The activity of the French company contracted by 2.9% on a comparable basis in the third quarter alone, due to a sharp decline in activity in the residential market. The turnover therefore stands at 2.012 billion euros in the third quarter.

Despite these headwinds, the company’s profitability remains at a more than honorable level. Adjusted operating profit increased by 1.6% year-on-year to 408.8 million euros with a margin rate increasing by 0.8 points to 20.3% of sales in the third quarter. The group’s share of net income increased by 8.6% over one year, to 286.3 million euros.

The bottom of the range for annual sales

For the rest of the year, the group has “specified” its annual objectives. In other words, in its case, one of the indicators has been revised downwards, namely the growth of its activity for 2023.

Legrand is now counting on growth in its turnover of 5%, at the bottom of the range which was raised in July (5% to 8%). This objective excludes exchange rate effects and effects linked to Russia’s disengagement and always includes a scope effect of “around 2%”.

The adjusted operating margin, before the impact of acquisitions (at 2022 scope) and the disengagement in Russia, is slightly increased. It is expected between 20.5% and 21%. In July, the company targeted an operating margin “close to 20.5%” of sales after “around 20% of sales” announced in February.

The group has not provided an outlook for 2024. For JP Morgan analysts cited by Reuters, management’s clarification on a “generally declining construction market” could have potential implications on next year’s forecasts. .

But Legrand still remains active in terms of external growth. In 2023, Legrand made four acquisitions, including the one announced today, namely the purchase of ZPE Systems, an American company providing equipment for data centers. This purchase comes after that of the Chilean Teknica in July, also specialized in integrated electrical solutions, in particular for data centers and infrastructures.

At the start of the year, Legrand management indicated that the company had a list of 300 companies likely to interest it for 2023.