Rexel Lowers Outlook Amid Macroeconomic Uncertainty

The Tip Desk · June 30, 2014 · 2 min read

The electrical equipment distributor revised its sales and margin targets following a decline in first-half revenue.

Rexel, the electrical equipment distributor, now expects sales to remain nearly stable compared to last year in comparable data and at a constant number of days. This revised guidance follows a first-half consolidated revenue of 6,287.6 million euros, a 2.8% decrease from the 6,468.8 million euros reported in the first half of 2013.

The company said the revenue decline was driven by a 3.4% unfavorable exchange rate effect, which amounted to 221.3 million euros. This was partially offset by 25.4 million euros from acquisitions in Thailand and Singapore. In comparable data and at a constant number of days, sales rose 0.5%.

Profitability also trended lower. The company reported an EBITA of 90.7 million euros for the first half of 2014, compared to 113.0 million euros in the first half of 2013, a decrease of 19.7% in published data. In comparable adjusted data, the EBITA rate fell by 70 basis points to 4.4% of revenue.

Regional performance diverged during the second quarter of 2014. In comparable data and at a constant number of days, revenue grew 3.0% in North America. This was offset by declines of 3.2% in Asia-Pacific and 6.4% in Latin America, while Europe remained stable. The company noted that excluding a 0.8 percentage point drop caused by lower copper cable prices, second-quarter revenue would have risen 1.3% in comparable data and at a constant number of days.

Financial stability remained within required limits. The company reported a net financial debt of 2,406.4 million euros as of June 30, 2014. Its debt ratio stood at 3.00x, satisfying a senior credit agreement requirement to keep the ratio below 3.50. Liquidity was 1,670.8 million euros at the end of the period.

Cash flow from operations represented a use of 121.6 million euros in the first half of 2014, compared to a use of 6.9 million euros in the first half of 2013. This was influenced by a decrease in EBITDA from 356.0 million euros to 337.7 million euros.

Looking forward, Rexel now expects an adjusted EBITA margin of at least 5% of sales. The company attributed this outlook to unfavorable mix effects on gross margin, higher costs for strategic projects, and investments in targeted growth initiatives. The company confirmed its goal to pay a dividend of at least 40% of recurring net income.