Schneider Electric confident it can overcome coronavirus hit, shares climb

By Camille Raynaud

(Reuters) - France's Schneider Electric <SCHN.PA> shares rose to an all-time high on Thursday, after its results beat expectations and the firm said it was confident it could offset the impact of the outbreak of a new coronavirus in China.

The group, which sees coronavirus costing it around 300 million euros (£251 million) in the first quarter, said the affect would be felt mostly in China, representing about 15% of its revenues, due to factory closures in January and February.

"We have 80% capacity reopened for our factories in China," Schneider Chief Financial Officer Emmanuel Babeau told Reuters.

Schneider, which markets products ranging from electrical car chargers and lighting control to transformers and production software, expects the impact of the virus to be almost entirely offset throughout 2020, mostly in the second half of the year.

"Chinese economy has shown its ability to mobilise and rebound very quickly in the past," Babeau said, citing the aftermath of severe acute respiratory syndrome (SARS) epidemic in 2002 and 2003 as an example.

Schneider shares rose 5.9% to 103.15 euros by 0846 GMT, after peaking at an all-time high of 103.20 euros.

The virus, which originated in the city of Wuhan in western China, has spread to more than two dozen countries, causing widespread economic and travel disruptions.

"Management confidence on coronavirus impact recovery is reassuring, especially given Schneider's substantial presence in Wuhan and Wenzhou," analysts at Credit Suisse wrote.

Full-year sales in the Asia-Pacific region, which accounts for 29% of revenue, grew 4.4% organically, with China growing a high-single digit, delivering a strong performance in commercial and industrial buildings.

"China continues to remain a growth market with dynamism in many end markets and segments," the company said in a statement, adding that it expected original equipment makers (OEM) demand to strengthen in the second half of the year.

Schneider Electric posted a free cash flow rise of 65.4% at 3.48 billion euros, beating analysts estimates of 2.65 billion euros.

"We had some favourable elements of recovery compared to last year on the level of stocks, (today we are) a company which can generate a free cash flow of around 3 billion euros in a normative way," Babeau said.

Full-year results also slightly exceeded expectations, with revenues of 27.16 billion euros and adjusted earnings before interest, tax and amortisation (EBITA) margin of 15.6%.

"Schneider delivered on all levels with its 2019 results while the 2020 guidance implies modest upside on margins and cash," JP Morgan analysts said.

The company, which has a history of raising its guidance several times a year, expects 2020 revenue to grow 1% to 3% organically and EBITA margin to come in between 16.0% and 16.3%.

"This includes the impact of the coronavirus, a difference to most companies providing guidance so far," JP Morgan analysts added.

Schneider Electric proposed a dividend of 2.55 euros per share.

(Reporting by Camille Raynaud in Gdansk; Editing by Christopher Cushing and Edmund Blair)