Analysis of Legrand First Nine Months of 2022: Results Show Sustained Sales Growth, Rise in Net Profit Over Prior Year and Another Two New Bolt-On Acquisitions

Legrand (LGRDY) reported results for the first nine months of fiscal 2022 last week, with an increase in global net sales of 19.1% for revenues of EUR 6.154B ($6.17B) and adjusted operating profit up 12.1% at EUR 811.7M ($813.4M). 

Sales increased in all geographical regions over the first 9 months of Fiscal 2022, with the overall 19.1% growth attributed 10.1% to organic, 2.4% to acquisitions and 5.6% to favorable foreign exchange (FX) effect.  CEO Benoit Coquart commented that the sales growth “reflects strong group business momentum including many successful commercial initiatives and pricing power…and very active management of supply chains, which were still under pressure.”

The 2 newly announced Q3 “bolt-on” acquisitions will strengthen Legrand’s global positions in segments buoyed by strong, structural trends around energy infrastructure and solutions for changing ways of working:

  • A&H Meyer, a German-based player in commercial power-in-furniture connectivity solutions business with annual sales around EUR 20M ($20M)
  • Power Control, a British-based UPS specialist in equipment, services, installation & maintenance, with annual sales around EUR 15M ($15M)

Legrand does not break out lighting brands and lighting controls separately.  These businesses are reported within the geographical summary along with Legrand’s other North & Central American businesses in A/V, data communications, critical power & infrastructure, networking, shading systems, wire & cable management and wiring devices.  The North & Central American sales volume includes lighting brands Finelite, Focal Point, Indigo-Clean, Kennall, OCL, and Pinnacle, as well as lighting controls & systems brands Adorne, Radiant, Vantage and Wattstopper

9 Months 2022

Organic Growth by Destination

Europe North & Central America Rest of the World
Total Net Sales EUR 2.44B ($2.45B) EUR 2.5B ($2.51B) EUR 1.2B ($1.21B)
Percent of Legrand Group Consolidated 39.7% 40.7% 19.6%
Organic Sales Growth first 9 mos ‘22 vs first 9 mos ‘21  

+10.5%

 

+10.7%

 

+8.0%

Notes from Earnings Release Presentation Continuing negative impact of conflict between Russia & Ukraine US – marked growth in non-residential

Mexico – sales up sharply

Canada – sales down

India – very sustained growth

China – decline

S. America – Brazil down

During the earnings call Q&A, CEO Coquart commented that the common theme for all geographies is that growth remains constrained by supply chain challenges, particularly in sourcing electronic components.  When asked about distributors destocking, CEO Coquart noted they have seen slight destocking in Western Europe, although the level of inventory was already not very high.

Asked about the inflation impact on Legrand of energy costs, CEO Coquart stated that energy costs are a small part of their costs, representing only 0.5% of sales in 2021.  He did note that energy cost increases are impacting other areas such as the cost of raw materials like aluminum.  Legrand does have some short-term hedging contracts for energy and are trying to find the best deals in the market, but are also cutting their own energy consumption.  A new initiative supported by some additional CapEx has been put in place to reduce energy consumption by another 15% by 2023 (over the past 10 years, Legrand has reduced their energy consumption by 35%, while growing sales by 65%).  CEO Coquart also commented that there are other bigger areas of impact, giving the example of the net effect of transportation costs at 2.5% of Legrand’s sales, having increased 30% or 40% year-over-year, and could go down.

With one quarter remaining in their fiscal 2022, Legrand confirmed the forward guidance given at the end of last quarter:  growth in sales targeted for the full year between +9% and +12%,   targets for adjusted operating margin at about 20% of sales. Legrand still expects to reach around 100% of its CSR (corporate social responsibility) achievement for the first year of the 2022-2024 roadmap.

Go Deeper

Legrand First Nine Months of 2022 Press Release: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2022/9m/Legrand_Press_Release_Results_9M2022_1667397186.pdf

Legrand First Nine Months of 2022 Earnings Slide Presentation: https://www.legrandgroup.com/sites/default/files/Documents_PDF_Legrand/Finance/2022/9m/Legrand_Slideshow_9M2022_EN_1667397188.pdf

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