Legrand Group’s North American activities include lighting brands Finelite, Focal Point, Indigo-Clean, Kennall, OCL, and Pinnacle, Wattstopper, Indigo-Clean, as well as lighting controls & systems brands Adorne, Radiant, Vantage and Wattstopper.
On February 10th, Legrand reported overall global results and provides some regionally-based proportion of revenue and growth information. For 2021 Legrand reports Year over Year (YoY): total growth in sales of +14.7%, adjusted operating margin of 20.5% of sales, rise in net profit of +32.8% and cash flow of 15.4% of sales. Keep in mind that the 2021 sales growth comparison is against a challenging year in 2020 when sales growth was -5.4%.
Legrand does not break out results by business category, so US sales includes other businesses in A/V, data communications, critical power & infrastructure, networking, shading systems, wire & cable management and wiring devices.
North America & Central America make up 38.6% of the Legrand Group’s global sales, with the United States being 35.4% of Group revenue. The US business was up 7.4% for the full fiscal year 2021, and up 12.1% for Q4. The US Group sales results noted a strong increase in datacenters, residential spaces; for other non-residential spaces, there was growth in 2021 YoY but not a return to 2019 levels. Canada and Mexico were referenced only as having “substantial rise” in revenue for the 2021 full fiscal year.
A lot of detail is provided on Legrand’s progress on a number of extra-financial initiatives in the Environmental, Social and Governance (ESG) realm. With the close of 2021, Legrand completed their 4th roadmap on Corporate Social Responsibility (CSR) and the 5th CSR roadmap (2022-2024) will be presented on March 29, 2022. Some highlights noted in the company’s year-end results release related to their CSR achievements over the 2018-2021 roadmap period:
- Reduction of direct carbon emissions by 28%
- Reduction in Volatile Organic Compounds (VOC) by 22%
- Increase of 18% in the rate of manager positions held by women, now standing at 26.7% at end of 2021
- Reduced accidents frequency rate by 46% (with and without lost time)
- Over 21,000 employees trained in business ethics
Ongoing long-term extra-financial commitments include:
- targeting full carbon neutrality by 2050
- taking part in circular economy and energy transition
- long-term support to communities to get access to electricity or restore it
- promoting inclusion in the workplace:three employee networks within the company – gender, sexual orientation and ethnic minorities
During the earning’s webcast, CEO Benoit Coquart responded to a question on the 2021 non-residential business in North America, commenting that the non-residential business is growing but was not to back 2019 levels. He noted that sales in the US were up over one year, but slightly down over two years, with data centers up double digits (value, not volume) in 2021 versus 2019, residential also grew double digits in 2021 versus 2019. He said that non-residential (excluding data centers) is about half of the sales revenue in NA, and that in the first fiscal half of 2021, non-residential was down double digits versus 2019, while the second half fiscal half of 2021 was down single digits. Coquart expects a number of factors to help in the US recovery, including the return to office, especially the big financial and tech companies in the larger cities in the U.S.
CEO Coquart indicated that the business has been able to achieve their 2021 results and maintain strong competitive positions despite higher pressure on supply chains. He highlighted the challenges of input costs going up (labor costs – especially in the US with its low unemployment rate, raw material and components, cost of energy, cost of transportation) and indicated that Legrand has managed these challenges through a good level of demand, and through actions on pricing, productivity and restructuring. The inventory to sales ratio increased by 4 points (from 14% in 2020 to 18% in 2021). This investment of working capital has been in all types of inventory (parts, work-in-process and finished goods) and has helped manage supply chain challenges. On the subject of restructuring action, Coquart noted that the annual budget for restructuring actions is in the $30 million euro range, and that with 120 industrial sites in about 30 countries, Legrand has doubled the number of sites closed per year (from 5 sites per year to 10 sites per year) as they continue to target footprint optimization.
Looking ahead to 2022 targets, Legrand aims for growth in sales between +5% and +11%, with organic growth accounting for +3% to +7% of that increase. The targeted adjusted operating margin is about 20% of sales. CEO Coquart noted that the key driver for profitability is market share, with margins >20% typical on products that have high market share, and margins <20% for products with lower market share. He indicated that Legrand has about 200 products in leadership positions in their market. R&D investment will continue at Legrand’s typical annual ratio of 5% of sales, with a focus on digital, connected R&D resources. M&A activities will continue (4 acquisitions were made in 2021 – all European-based).
Legrand continues to leverage multiple brands for built environments, part of the strong trend as our lighting industry becomes further integrated through smart, connected systems.
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Legrand Group: https://www.legrandgroup.com/en/investors-and-shareholders