Schneider warns on 2013 results as forex weighs

October 25, 2013

By Natalie Huet and Gilles Guillaume

PARIS (Reuters) - France's Schneider Electric (PAR:SU) warned on its 2013 results on Friday, blaming unfavourable exchange rates, and said it would hike prices and shift production into emerging countries to offset a trend set to extend throughout next year.

The electrical gear maker posted slower quarterly organic growth and was the latest in a slew of multinational companies to complain of weak foreign currencies slashing the value of overseas sales.

For the full year, Schneider said it now expected "stable to limited" organic revenue growth. In July, it had forecast low single-digit percentage growth.

Schneider, which reports in euros, said the depreciation of foreign currencies including the U.S. dollar, the Australian dollar, the rupee, the yen and the Brazilian real, had reduced the value of its quarterly sales by 352 million euros.

Schneider said it expected unfavourable foreign exchange rates to cut full-year revenue by 800-900 million euros. It previously expected a hit of 600 million.

It added that at current rates, adverse currency moves would cut 0.3 to 0.5 percentage points off its full-year adjusted EBITA (earnings before interest, tax and amortisation) margin, which it had expected to be stable to slightly higher versus 14.7 percent in 2012.

Chief Financial Officer Emmanuel Babeau told Reuters he expected emerging market currencies to remain weak throughout 2014 and that the company would shift production into these countries to benefit from lower costs.

"It's what we call rebalancing - further putting into fast-growing emerging countries more and more of our costs, our teams, our structures," Babeau said, citing southeast Asia, South America and Russia.

Babeau also said the company would push through price hikes in these countries, but that this would mainly have an impact in 2014.

Schneider, whose products help utilities distribute electricity and which makes automation systems for the car and water treatment industries, said trading had remained difficult in Europe, where austerity-minded companies and governments have slashed capital spending.

Third-quarter sales, at 5.9 billion euros (5 billion pounds), were down 3.2 percent from a year earlier. Organic revenue rose 0.7 percent, a slowdown from 2.6 percent in the second quarter.

Quarterly organic revenue in the Asia-Pacific region rose 4 percent year-on-year and 3 percent in North America, offsetting a 6 percent drop in Western Europe, Schneider added.

(Editing by James Regan)