Please standby. We are about to begin. Good morning, ladies and gentlemen, and welcome to today's WebRonde 2019 9 months results conference call. Call. Thank you.
At this time, I would like to hand the call over to CEO, Mr. Ben O'Coca and CFO, Mr. Frank Nouri. Please go ahead.
Thank you. Hello, everybody. Frank Lemry, Francois Parson, and myself are happy to welcome you to the Legrand 2019 1st 9 months Results Conference Call. Let me first remind you that we have really published today our press release our financial statements and the slide show to which we will refer. Those documents are available on development website.
Please note that this conference call is recorded and webcasted on our website. Let me start first with few opening remarks. Following which Frank and I will comment into more details of 2019 9 months results. I begin on Page 4 of the deck with the 4 main takeaways from today's release. 1st, LeBlanc reports a strong top line growth with sales up 10% in total.
This is a very positive achievement as we clearly continue to develop group's positions, both organically and through acquisitions. 2nd takeaway, this strong sales growth translates into robust value creation. As you can see on the slide, all main financial KPIs are on the rise by more or less plus 10% compared with 9 months 2018. Adjusted operating profit increased plus 10%. Net profit attributable to group was up +9 percent and normalized free cash flow grew plus 12%.
3rd, momentum is very good for both innovation and acquisition driven growth. As far as innovation is concerned, we have delivered over the 1st 9 months of the year, the dynamic flow of new products, including, of course, connected offerings. On the M and A side, we are pleased to announce today the acquisition of 2 leading companies, Konnect Truck in the U. S. And Jobo Smartech in China.
Taking into account the purchase of Universal Electric Corporation early Q2, Legrand has first announced 3 acquisitions since being as a year, totaling annual sales of more than EUR 180,000,000. And lastly, based on our 2019 1st 9 months achievements, lebron confirmed today its target for 20 I will come back to this point later in this call. After this briefing production, let's start with another view of sales on Page 6. So in total, sales rose plus 10.2% in the 1st 9 months of 2019. This strong growth resulted first on a plus 2.3 percent organic growth compared with the 1st 9 months of 2018, including 2.6% in Metro Countries and 1.5% in new economies, all three geographical zones being under rise More specifically, in the third quarter 2019 alone, organic growth itself to that plus 2.6 percent.
This reflects, on the one hand, a solid performance in Metro economies, plus 3.3%, driven notably by good showings in Italy, the U. S. As well as in France where, as you may remember, the basis of comparison of the third quarter of 2018 was favorable due to destocking by distributors at that time. On the other hand, the rise in sales in new economies in Q3 was limited plus 0.8%, driven by high single digit growth in sales in China and India, but affected by ongoing retreat in business in the Middle East, declining sales in Turkey due as announced to a particularly demanding basis of comparison and recruiting sales in Brazil. This was for organic growth.
Acquisition driven growth, which is a group's 2nd growth driver, contributed plus 5 point 2% in 9 months 2018 and should contribute based on acquisitions completed in 20182019 and the likely date of consolidation, down plus 5% in fiscal year 2019. Lastly, Forex impact was favorable at +2 point 4 percent in the 1st 9 months of the year, If we apply to Q4, the average forest rates observed in October 2019, the annual Forex effect on sales for 2019 for the whole of 2019 would be around +2 percent This is, of course, and as usual, a theoretical computation. Let me now go into more details regarding the like for like evolution of sales by geographic zone, which are all positive. And for that, I'm referring to Page 7 to 9 of the slideshow. So starting with Europe, organic growth in sales was plus 2.7% in the 1st 9 months of 2019, In Europe's Metro countries, sales grew plus 2.8% in 9 months, driven by cost showings in Italy, Benelux, 1000 Europe as well as in the UK.
In France, sales were slightly up on a like for like basis, One should keep in mind that in France, Q4 2018 represents a challenging basis for comparison as it benefited from some restocking by distributors after the destocking experienced in Q3 2018. In Europe and new economies, organic growth in sales stood at +2 point 3 percent in 9 months 2019 fueled by very good showings in Eastern Europe. Sales in Turkey were down stemming from, as announced, particularly demanding basis of comparison. Let me now move to North And Central America, where sales were up +2.6 percent on a like for like basis in the 1st 9 months of 2019. This increase was fueled by the U.
S, where sales grew plus 3.1% in 9 months 2019, with good showings in cable management, user interfaces, and revenue growth in lighting management. Although the 1st 9 months of the year, sales were almost stable like for like in Canada and down in Mexico. Moving now to the last zone, rest of the world where sales rose plus 1.1% on the like for like at least. In Asia Pacific, sales were up plus 2.3%, driven by good showings in India and China, This was partly compensated by declining sales in Australia. Organic growth in sales in Latin America was plus 0.3%, due notably to a slight rise in revenues in Brazil and a decrease in sales in Colombia.
In Africa, Middle East, sales were down -2 percent like for like in 9 months of 2019 in the Middle East where business is facing weaker business environment, the decline in sales was marked. This was partly compensated by rising sales in many African countries. Let me now pass the mic to Frank for a presentation of how our strong growth in sales converts into published value creation.
Thank you, Benoit. Good morning to all of you. Let's start with profitability on Page 11. As said earlier by Benoit, adjusted operating profit rose +10 percent to reach close to EUR 1,000,000,000, in the 1st 9 months of the year. Moving to Page 12, 9 months 2019 adjusted operating margin before acquisition I.
E. At 2018 scope of consolidation came to 20.8% of sales. Adjusted operating margin before acquisition was up 0.3 points compared with the adjusted operating margin recorded in the 9 1st 9 months of 2018. Wind markets uncertain on award and differentiated from 1 country to another. And with rising U.
S. Custom duty, we believe this is a good performance driven by efficient pricing as well as effective control of SG And A and other operating expenses. One should also keep in mind that the group benefited from a favorable basis for comparison in the third quarter and will face a demanding basis for comparison in Q4, including the 0.4. Dilution from acquisition, adjusted operating margin came to 20.4%. Once I comment on here on the impact of acquisition on adjusted operating margin, taking acquisition completed in 2018 2019 into account, the dilution from acquisition and adjusted operating margin should be as announced, early fab, about minus 0.4 points for the full year of 2019.
Aving now outlook at net profit attributable to the group on Page 13. It was up close to 9% from the 1st 9 months of 2018. The solid growth resulted mainly from the increase in operating profit. Partially offset by higher hefix and financial results and higher corporate tax in value. This deserves 2 additional comments.
1st, on financial charges, there has mechanically increased by about EUR 7,000,000 in 9 months 2019 due mainly to the implementation of IFRS 16 from January 1. Excluding IFRS 16, financial charges would have been almost flat year on year. 2nd comment on corporate tax The increase in value is due to higher profit before tax when corporate tax rate benefited from a favorable one off impact of about one point. Moving to the last picture of the financial performance with cash generation on Page 14. As you know, the relevant reading of free cash flow generation on the quarter is on a normalized basis.
You can see on the right hand side of the slide that normalized free cash flow was up plus 12.3% in the 1st 9 months of 2019. In more detail, on the left hand side, you can see: 1st, that cash flow from operation was very robust at +18 percent of sales sorry, 18 percent of sales. 2nd, working capital requirement as a percentage of sales was under control, increasing 0.5 points as it was a bit affected by the impact of recent acquisition. 3rd, that free cash flow stood at a solid 13.7% of sales. One should also keep in mind that Q4 2018 free cash flow generation was particularly strong and represents accordingly, a demanding basis for comparison for Q4 2019.
These were the key topics on a low ground 2019 first 9 months is performance and value creation that I wanted to share with you. I now give the mic back to Benoit.
Thank you, Frank. Let's move now to the 4th part of the presentation on Page 16, with low cost, strong momentum in innovation and acquisition driven growth. As you can see, on Page 17 to 19, we kept on actively innovating with several new product launches covering many of our product categories and, of course, including connected offerings from our Elliott program. This includes, for example, Valina Next, a connected user interface range, conceit with Netatmo for Belgium and Spain, Mosaic in France, Clasia in Europe, the increase in India and many others. We were also active in architectural lighting, energy distribution, connected emergency lighting in France, new connected door entry system with a plus 100x range, successfully launched in Italy, audio video solutions, assistive leading alarms, and digital infrastructures.
Moving now to Page 2021, remember that in April, we completed the acquisition of Universal Electric Corporation, the undisputed number 1 in the U. S. For persuade dedicated mainly to data centers. We are pleased to announce today 2 smaller new acquisitions. 1st, Konnect Track, an innovative U.
S. Company specializing in overflow, power and data distribution, connected products are designed to be very easy to install in both new and existing commercial buildings. By adding this business to our catalogs, we strengthen our position in cable management in the U. S. The second deal is Juposmartek, the Chinese leader in connected hotel room management solutions.
Jubo SmartTech's offering will hand out blue comp product ranges in China's hotel segment a very dynamic market. So 3 deals closed this year, and we're still, of course, very active on the M and A front. Coming now on Page 23 to the last topic of this earnings release, I. E, our target for the full year. Taking into account achievements in the 1st 9 months of 2019 and base of comparison of the fourth quarter of 2018, to which I would add, as you know, the usual seasonality in Q4 performance, you are all aware of.
Legrand confirms its 2019 target of for organic growth in sales of between 0% +4 percent and its 2019 target for adjusted operating margin before acquisitions, IV at 2018 scope of consolidation of between 19.9% 20.7% of sales. Le Gouin will also pursue its strategy of value creating acquisitions. This is regarding our 2019 targets. One very last comment, before we open the Q And A session, I am pleased to announce that, as of July 1, 2020, Francois Poisson, who you all know, will take over new responsibilities within Legrand and Ronan Mark will become of IP, VP, financing and high air. A few words on Ronan, Ronan joined LeBlanc about 20 years ago and has handled many financial and corporate duties within the group, including country CFO in India and in Russia, M And A Officer and Head of Internal Audit.
I'm convinced that is a strong knowledge of the group business and strategy, which will highly contribute to further foster the strong and trusted relationship Laurent has been entertaining with the financial community for decades. Of course, until December 31 this year, Francois remained fully in charge of financing and eye care. Frank Francois and myself are now ready to open to questions. Thank you.
Thank you, We have one first question from Mrs. Lucie Kahya from Morgan Stanley. Madam, please go ahead.
Hi, good morning gentlemen. Thanks for taking my question. I a couple. I'll go one at a time. The first one I was hoping you could give us, you could maybe break down for us kind of the organic growth trend we've seen in the quarter based on price volume and working days, please.
And I for the group and you can give us some indication by geographies as well, please?
Hello, Lucy. What do you want by geography? I didn't get the end of your question.
I'm just trying to understand the dynamic between price, volume and working days as part of the organic growth.
Okay. Versus the 1st 9 months of the year, the levent price was up plus 2 +2 percent. So the plus 2.3 percent organic growth was basically +2 percent of price and the rest being volume and mix. This is for the for the 9 months. As far as the Q3 alone is concerned, pricing was up 1.4%.
And in both cases, Q3 and 9 months, of course, includes part of this pricing, we're dedicated to compensate for the rise in the U. S. Tariffs. And we may say a word, if you want, on the U. S.
Tariffs. And this was for Pricingvolume. As far as the number of days is concerned, well, it's always, a very, you know, difficult questions to answer for us because you have the sort of theoretical computation and you have the practical So if you take the theoretical computation, there was one day more in Q3, in a number of regions 2019 compared to Q3 2018, but this is sort of ex RPA computation, ex post. We don't believe that these number of days really played one way or the other in Q3, nor that it played one way or the other in 9 months. So for us, it has No, I understand that it's a bit more important for distributors and for manufacturers for us.
We don't believe that it has a significant impact.
Okay. Thank you. Thank you very much. My second question was more to understand some of the trend in the North American margin. And also at the level of the group, but specifically in North America, would you say that, you now have kind of more than offsets some of the headwinds, thanks to the price increase that you've had for the past 12 months and how we look kind of further How should we think about this dynamic between the pricing, the raw materials and the tariffs, please?
Yes. So specifically on the U. S. Tariff, let me maybe give you the numbers in the 1st 9 months of 2019, we had a rise in the U. S.
Custom duties of about EUR 38,000,000. So that's what we have as an additional cost for our COGS, in our accounts over 9 months. And indeed, this was fully offset in LNC account by pricing mostly, but also by a number of adaptation initiatives, and it was offset both in value and in margin. So this is a very good performance. As these, wasn't such an easy game to play, to compensate for these type increase.
If you look now at the whole of, 2019, well, this is a fast evolving story. And from one day to another, it can change. You are much aware of the current talks between the U. S. And the Chinese administration.
We believe that the value tariff implementation could have a maximum impact maximum impact of $55,000,000 in the full of 2019, including the various, lease, the lease 3, which holds to 25% on June 15th, at least 4 at 15% implemented since the second or first, an maximum impact of $55,000,000. And our commitment vis a vis the financial community hasn't changed. Our commitment is that we aim at compensate at this in value, this increase in tariff, by pricing and adaptation. Now again, it can change very quickly. By the way, from what we understand, the current discussion are on the list 4.
So the current discussion, which may potentially lead to, lift some of the tariffs are mostly on at least 4. And this 4 for LeGrande, it's a total annual cost of maximum 3 to $4,000,000. So this wouldn't have, unfortunately, a very big impact on the LeGrande accounts. So was for the tariff alone. Now your question was a bit broader.
You see it was also an impact on the raw material and group level. Well, over 9 months, the inflation of raw materials and components was about plus 2.6%. Including 2.6 points of U. S. Size.
So all of the increase we have in the raw material and component cost over 9 months came from the US tariff. Excluding the US tariff, it would have been flat compared to the 1st 9 months of 2018.
Thank you very much. And just maybe my last question, if I may, is around the trend in the North American business because I appreciate the price, kind of momentum there must be quite large considering the tariff situation. It seems that we are continuing to somewhat decelerate in terms of volumes or volume growth. And so I was just hoping whether you could comment on what you are seeing in the North American business in terms of a market dynamic. As we head into 2020, are you expecting significant changes or requirements in terms of the energy code in some of the large states in the U.
S. Because I remember that in the past, it had benefited you.
Well, I'll first and say what we saw in Q3 And it was experienced by many U. S. Players was a softer U. S. Market in Q3.
If you look at the release of many U. S. Players, clearly, they are showing flat plus growth in sales in Q3 compared to last year. And they have a lot of them revised down themselves. So clearly, there was a softer U.
S. Market in Q3. In this context, our 3.3 percent like for like growth in Q3 is a good performance. And a good relative performance compared to our peers and compared to on a softer U. S.
Market. As far as 2020 is concerned, well, we'll not give any clue or indication at this stage, we will be a lot more precise in February, you see when we release our full year 2019 numbers.
Apologies to press, but just on the energy code, I mean, sometimes those are kind of released a bit ahead of time. So I appreciate you cannot maybe comment on the market, but have you seen some regulatory requirements on a state by state basis? Around this energy code that could be It's
an energy code story. I mean, it's a story which has been lasting for 20 or 30 years, especially type of 20 in the U. S. So year after year, you have new states entering the replying energy codes. So it is something which has been lasting for 4 years.
So it had no specific boosting impact on 2019. And I don't really see why it will have a specific reporting impact in 2020. So this is not a new story. It's a developing story. And again, is a step by step, a step by step, sorry, version by version that it is implemented in the U.
S.
All right. Thank you.
Thank you, madam. Next question is from Mr. Gail DuBree from Deutsche Bank. Sir, please go ahead.
Good morning, everybody. I have two questions, please. The first one is on the pricing dynamics because if we try to adjust for the price rises, required to offset the custom duties in the U. S, it seems the underlying price rises in Q3 were pretty negligible in the quarter, perhaps 0.3% or 0.4% only. So that shows a clear deceleration compared to the Q2 price rises So I guess the question is whether there's been any change to the to the pricing approach between, between Q2 and Q3.
The second question is regarding the margin in Europe, because I was surprised to see a small decline year on year for the fully adjusted margin in Europe this quarter. Despite the much easier comps in France. So if you could comment on this, that'd be great. Thanks very much.
Okay, gal. Let me maybe give you the full picture for Q3. So I said that the lecon pricing was up 1.4%. But I did not give inflation of raw materials and components, which was up 0.6%, including about 2.7 points of U. S.
Tariffs. So excluding the U. S. Tariffs, the whole price of raw materials and components was down. So as a result, this is not surprising that we do a softer pricing that in H1, where the price of raw materials and components was I mean, increased a lot more.
As you know, we have a very dynamic pricing strategy So our objective is not to apply a 2% or 3% pricing fees, whatever happens. If the price of raw material and complaints is going down, We have a softer pricing approach, of course, of course, competitive. Now all in, in Q3, I can confirm that on one with this pricing on one side and the inflation of home and compliance on the other side, the impact on the gross margin was what put it either. So no specific issue on pricing. We just adapt quarter by quarter, most by months to what is happening and our cost structure taking into account, of course, also our competitive environment.
As far as the second question is concerned, so the European Margin Wealth, it's always difficult to to give a precise analysis because, as you know, Europe is a mixed bag of 40 countries with a profit in visibility, which can be very different from one country to another. Now if we look at the numbers, the European adjusted operating margin indeed went down from 80 bps by SEBPs from 9 months 2018 to 9 months 2019. So it moved down from 23.4% in the 9 months of 2019, down to 22.6% in the 9 months of 2019. But don't forget, guys, that It is including acquisitions. If we look excluding acquisitions, the margin was almost at the same level, It was down by 10 bps, actually.
So almost at the same level as last year. So the acquisitions had a dilutive impact on, on the European margin. So it was almost stable. And this stability is a minus on gross margin, let's say, and a plus in other costs. This is the way we should do it.
So almost stable margin, excluding acquisitions.
Okay. Very clear. Thanks very much.
Thank you, sir. Next question is from Mr. Andreas Willey from JPMorgan. Sir, please go
Yes. Good morning. Thanks for your time. My first question is on the performance in France versus Italy. Could, shed some more light on that.
You keep doing very well in Italy relative to GDP growth or maybe expectations, but in in France, it grows as relatively weak also relative to what other people say. So what's the difference there in terms of kind of your own commercial momentum product introductions and so on that Italy seems to continue to respond to that much better than France?
Well, let's take markets 1 by 1. So starting with frost, In force, the market is clearly not very supportive and hasn't been very supportive, for a couple of semesters now. Again, looking at LUKOR Markets, for example, we are not active in HVAC market, as you know, and the HVAC market in France has been growing double digit. We are not active in the cable market and the cable market has been growing also on the insulation market. So looking at LUKOR Market, and this is very much backed up by you know, the professional wholesaler data, the market French market is up slightly positive in 9 months, slightly positive.
That's what we are doing as far as a sellout is concerned. That's also what we are doing in terms of selling. So our performance in France is very much in line with the performance of the market, so slightly up. As far as Italy is concerned, the GDP numbers in Italy are indeed worse than in France. And take, for example, the IMF, I think today, the IMF is expecting 0 GDP growth in 2019.
This being said, the market is a bit more supportive in Italy, probably because it went down more than the French market in the previous years. The market is a little bit more supportive, going a little bit faster than the French market. And it is true indeed that on this market, we are gaining market shares in energy distribution, in smart thermostat, in inventory, in user interfaces, and so on. So when comparing France and Italy, you should bear in mind that the Italian market is slightly more supportive than the French Well, this being said, this is maybe for me also the opportunity to highlight that, in France, we have a base of comparison, which was easier in Q3 because of last year's strong destocking, and which will become a lot more demanding in Q4. Because there was a slight restocking from our distributors in Q4 last year.
So that's basically for comparison is somehow demanding. Same comments for Italy. We made a very strong finish in, in Q4 twenty nineteen in Italy, as you know, And as a result, for both countries, the Q4 is going to be a demanding comp.
And my second question on the tariffs price raw material, if we now see some of these tariffs lifted over the next periods, should China and the U. S. Degree? What do you expect to happen on the pricing side? I mean historically when your business had basically falling raw materials, you tended to keep some of that benefit after you've increased prices like we have seen in Q3 this year where you make a positive margin between price and raw material.
Would you expect the same kind of market behavior to happen on tariffs where at least temporarily, you will get basically a boost to margins as tariffs fall and pricing is more sticky? Or is tariffs going to be different because your customers and distribution partners all transparently see that and want won't that price increase immediately back?
Well, this is a fair question. So first, coming back on what I was seeing when commenting the tariff. The current talks from what I understand are at least 4, not least 1, 2, 3, and it's 4 it's maximum $4,000,000 to $4,000,000 relief on the for Le Mans. So unfortunately, This is mostly consumer units. It has not much to see with the wrong products.
This being said, nobody knows what will happen next year. And indeed, some further talks could occur between the U. S. And China and potentially, some of the list, the 1, 2, 3 tariffs could either be lifted or could could go down. By the way, they could also go up.
So they could move to ways. Well, I can tell you that our customers are packing very closely this tariff issue. And clearly, if, some of those tariffs were to be relieved, we would have to give the benefit back to the market. We were able to increase prices and compensate for the the tariff increase, but clearly our customers would will require us to give back the tariff decrease to the market. So don't expect any kind of significant benefit coming from a potential tariff relief.
Thank you, sir. Next question is from Leslie Alainder from SG Corporate.
My questions. Really the ones around pricing U. S. Tariffs have been asked, but maybe a couple of outstanding questions. Just firstly on Brazil, I think that's the first time in recent quarters that you've specifically called out weakness there.
Not a surprise, I guess, but I think you were talking about an increase through H1. So just wondering if you could give us a bit more insight into what you see there sort of the scope of your activities. I think from memory, it was your 3rd largest emerging market after India and China. So maybe just a bit of a comment on the outlook as well. And then the second question was really regards to the Jobo Smartech acquisition.
It sort of seems like quite an interesting deal, but only 1,000,000 of sales and what I imagine is a pretty huge market. So maybe again, you can just elaborate a little bit more on what this brings you expand a bit on your current offering, which you kind of alluded to on the slide deck and the strategy and kind of market opportunity there? Thanks.
Yes. So So Brazil, it's about 2% of our sales only. It used to be a lot bigger, but you know, we've gone through 4 or 5 years of difficult economic times in Brazil plus the currency hasn't helped. So now it's only about 2% of our sales. And indeed, So we thought in H1 that the situation was improving.
So Brazil was down double digit 2 years back. It was down 1 I mean, single digit last year, and it was up in H1. And everybody expected that the policy situation will get better. Now when we commented sense in Brazil in H1. We clearly told you, be careful because We have very limited visibility in Brazil, and things can happen very quickly.
And what happened in Q3 was that sales were down double digit in Q3 in a like for like basis compared to last year. I mean, will the situation be better in Q4? How will it be going into 2020? But it is clearly one of those countries where you have always a huge uncertain see on what's the what to predict and what to forecast. So yes, it was a bit of a disappointment.
We expected the budget to be in a better shape and indeed Q3 was by strongly negative in Brazil. But again, it's only 2% of our sales. Segment, as far as Jobo is smart tech is concerned, well, as far as the products are concerned, it's really, control units for hotels. So those, such packs either of the world or in the world that you have in a hotel room, in which allows you to comment, the lighting, shutters, temperature, and so on. And this is highly complementary from our offering.
And we actually already had a start of the portfolio product offering mostly made for European markets of such kind of products. But we were lacking of a market position and of a specific Chinese technology product. So we decided to acquired this company, which is bringing us 2 things. Number 1, specific Chinese technology for hotel rooms, number 2, brand name and presence amongst, amongst Chinese hotel chain. It is small indeed in terms of sales, But in his specific niche, it is a leader.
And this has clearly been our strategy in China. It's not to go after all potential markets and chasing, small market shares across 100 productivities of strategy in China has been to pick up either organically or to acquisitions businesses where we could be number 1 or number 2. And that's what we've been able to achieve in the wiring devices. That's what we achieved last year with the acquisition of clever, Shenzhen in a smart PDUs, and that's what we are to achieve, with the acquisition of Jumbo. So yes, indeed, we are still small in China.
I'm quite confident on the fact that it will soon be our 5th largest market. And it's a profitable market for us, and we are growing nicely both organically and through acquisition. So it's a good small, but good addition to our Chinese footprint.
Great. Thank you.
Thank you, sir. Next question is from Martin Wilkie from Citi. Sir, please go ahead.
Hi, sorry, this is Gee on behalf of Martin. I just have one question on your ebbs M and A strategy. Just looking at the couple of acquisitions you made this quarter, the last quarter. So I mean, just wondering if you had specific portfolio or geographical target on your acquisition strategy going forward that you were specifically focusing on Thank you. Well, actually, we are indeed more focusing on the quality of the target itself than on a given geography.
So what we are looking for are targets, which are number 1 or number 2 positions in complementary niches where we could grow our our position, somehow regardless of the country. So whether in the new economies, Europe, or loss in South America, if we find a very interesting target being another one of the number to complementary to LeBlanc that we could do at reasonable price, then we would, we would, look at it. So it is true that we have made many deals in the U. S, but This was mainly coming from the fact that we were underrepresented in the U. S, but we are very happy of the deals we have made.
In, in Dubai, in Germany, in China. And we will continue to look at targets across the board in terms of geographies, in terms of profitability. Thank you. Thank
We have another question from Mr. Andre Koning from Credit Suisse.
1, it's time. Firstly, can I just get your indication for raw materials versus price for Q4? Should we expect that to be any different versus Q3? And maybe just to extend that raw materials question, I know tariffs, a bit is very uncertain, but just if raw material price were to kind of prevail at the current rates, what would 2020 look like for you?
Well, as far as Q4 expectations for pricing and raw materials, something's picking, I had no clue It depends on 70 six, not only on the price of raw materials themselves. It depends on what's going to happen in Chile, for example, for copper. It depends on on the exchange rate also, many meters are listed in U. S. Dollar.
So the price in euro would also depend on the U. S. Dollar currency. So it's really a big, big question mark as far as, raw material price is concerned. So is, the it is also a situation for dive, of course, which can, move one way or the other very quickly.
And Since of dynamic pricing, somehow the reserves of our input costs, the same answer for pricing, our pricing in Q4 will also depend on what's going to happen in the raw materials and components and types. So fortunately, I cannot be more precise than that because this is a reality of our trade. I. E. That we have to adapt to what's happening rather than planning for a price increase in that month or this month.
So the only thing I can tell you about Q4, which we already said during this call, is a fact that it's for the whole of the group, a demeaning basis comparison, especially as far as the margin is concerned. And maybe let me remind you, the numbers as far as the top line is concerned, we had a Q4 at +5.2 percent, which was above the average of the year. And with, as I already said, very strong growth in France and in Italy, as far as Adjusted operating margin is concerned. Q4 twenty nine-'eighteen was up 60 bps, whereas the full year 2018 was up only 20 bps. So a little bit in terms of top line and more material in terms of margin to Q44 2018 is a demeaning value for the present.
Now what will it be as far as tariff raw material components and pricing is concerned, it's to your question mark.
Got it. Thank you. And thanks for the additional color on the comp as well. My second question was on your data center related content. Could you give an indication of how much grew in Q3 and maybe year to date?
We are not giving this kind of granularity because it especially in a quarterly basis because it depends on it depends on many things. If you look at the given quarter, it it also depends on the comp and so on. The fact that the Unilever Salalexic Corporation is doing very well, for example, since the beginning of the year, But for example, the trend is a bit softer in PDUs, because of the benefit for comparison that we had last year, a big data center projects, in the data center project and very easily be at 2,000,000 dollars, 3,000,000 dollars, $4,000,000, $4,000,000, $4,000,000, $5,000,000. So, we don't have a consolidated number for the whole of our data center, play, to give you, we'll maybe give you a bit more color in, in full year 2019. This being said, whatever happens on a quarterly basis, it, of course, remained very attractive segment, for Legrand.
I remind you that it's about 10% of our sales. It's a very segment. And we now have the relevant offer, especially for the white home, we're putting together cabinet, connectivity, busways, PDUs, we have, I believe, a high quality offer, which very attractive for customers.
Got it. Thank you very much. And my next question was just on France. We had quite a few kind of stocking variations there as you already flagged kind of into the end of last year and then earlier this year. Do we need I know you mentioned Q4 comp, but do you think that 2019 is a year overall?
Are we kind of ending up with a net kind of positive or negative effect on stocking in France? Just trying to think about these effects for 2020. I mean, do we need to think about them as we draw 2020 numbers?
Well, if you find a way to predict talking or destocking, let me know, I would be highly interested to factor that into my by budget process. No, I mean, 2018, I remind you that trend, very strong destocking in B and a slight restocking in Q4. As far as 2019 is concerned, we can see a slight destocking over the 9 months, but we which is very, very small. And I believe at the end, it didn't have such a material impact. So the the destocking or destocking impact was more the one coming from 2018 than anything material that we would have experienced in 2019.
Going into 2020, for us, it's completely impossible to predict. It's even impossible to predict what can it be the behavior of our customers in Q4 2019. So unfortunately, this is sort of uncertainty we have to live with And again, it can negatively impact or positively impact month or quarter, but we believe that's a long term basis. This is something we have to live with and it doesn't affect long term or performance. Neither is a quality, of course, a relationship with business.
Got it. Thank you. And the office appreciate you can't, it's impossible to predict. I was just, yes, the base effect is what I was, wondering about and you've given the answer And the final one, if I may, just really taking a big step back and looking your kind of M and A appetite. In the past, you gave very clear slides where you talked about your expectations of M and A kind of stepping up in the markets where organic growth had stepped up.
And I just wanted to check if you're M and A appetite is changing at all, especially given that in North America, you have seen the underlying volume growth rates now moderating and trending towards stable and arguably some lead indicators pointing to a more stable 2020 as well. Are you as active in M And A there? And is the upside changing anywhere else in the world?
Well, the fact that in the past, in so called difficult times, you had less deals was a bit coming less appetites on our side, but it was a lot coming from the fact that sellers were less interested to sell in difficult times than in good times. Because as far as our appetite is concerned, we are thinking long term. So of course, we embed into the valuation into our valuation whatever is happening on the macro front. So if we are in a market which is less supportive, well, we factor that into our business plan and as a consequence into evaluation. But if there is a quality company which is for sale, even in difficult time, which is highly complementary to the goal, which is a good leader and which we support the group long term strategy, we will look at it even in difficult time.
So to make a long story short, it's not much a matter of changing appetite for the goal. It's not a matter that they may be at some point less, less, people are willing to sell if they feel that they can get a better price in 5 or 7 years. This being said, we still have a pipeline, with a lot of opportunities, We still have a lot of discussions going on. It's highly likely that in the coming quarters, you will see more deals coming from the goal. But again, I mean, the usual uncertainty that people might not always willing to sell some of those deal might not go through because of valuation, discussion and so on.
But we still have a very healthy pipeline and a lot of discussions going on.
Great. Thank you very much for your time.
Thank you, sir. Next question is from Mr. Rizvi Vazee from RBC Capital. Sir, please go ahead.
Hi, good morning. Thanks for taking my question. Just a follow-up just to get some granularity on North America, actually, reasonably solid numbers, you said, given some of the peers are reporting a pretty flattish rate. But just within your business, I'd be interested if you could give us some flavor as to what the different bits are doing. And you talked bit about digital infrastructure, but also maybe what the lighting business is doing versus maybe your core low voltage.
And then on in terms of prospects, I think you mentioned at your Investor Day that busways and PDUs and things give you a bit of insight into where the data center market projects are going. So it does give you some level of visibility. Could you tell us what you're seeing in that part of your business and what that makes you think the data, the data center part of
your business will do over
the next kind of 1 or 2 quarters?
Well, the second question, my answer is going to be very, very short because we yes, we are usually selling best ways before we are selling PDUs, but there are, sort of depending on the 2 polishes that center, you have that percentage, which are using plus we handle PDUs or the other way. So you can hardly take those away as a leading indicator for data center business going forward. So unfortunately, we don't have a lot more visibility in data centers compared to our other businesses. As far as the first question is concerned, lighting management is doing well. So it's growing, low single digit, if I may say, but it's growing.
User interface is also doing well. AV is quite flat. So AV, again, it's sort of merger between the Maestro and Middle Atlantic, but it's not a surprise and it was a factor into a budget because last year, it had a mid single digit growth, above the sort of long term market growth of 2% to 3%. So if you take the 2 years, it is a completely in line with the long term market growth trend, but this year, indeed, it is quite, quite flattish. As far as I said, I answered, I didn't say anything doing very well and PDUs on the softer side, but we don't see that as a competitive problem.
It's more that some of the big data centers which materialize where PDUs are consumed which materialized last year did not materialize this year. So this is as usual, given the last portfolio of products we have, a mixed bag of a lot of different situations.
Thank you, sir. Next question is from Mr. William Mackie from Kepler Cheuvreux. Please go ahead.
Yes, good morning, gentlemen. A couple of questions around development of the business segment and product portfolio. Firstly, on digital infrastructure, in the past, you've aggregated that number at the group level and demonstrated the ambitions for growth. Can you give us or provide some insight into the rate of growth of the digital infrastructure business across the group? Rather than just within the geographic segments against that baseline of revenues, which you described at around 1,000,000,000 last year, And the second question really relates to your product launch strategy.
I seem to have and impression you have a wave of product introductions, particularly in Europe, that come through in Q3 and Q4 this year, particularly around the IoT product capability or the portfolio with the IoT product capabilities. Can you give us a sense of how your IoT product enabled portfolio is developing against that 10% mid term growth target? And perhaps specifically, I know you don't want to break many things out, how the NatAPmo business is developing against the initial business plans? Thank you.
You have to have in mind that our, sort of, reporting approach is a geographical one. So So that's why we are also reporting geographically to the market. We are not organized by sort of be used, having their own P and L by product families and by so it's not the way we organize. We organize by country and by so. So typically, when we mentioned, for example, the business we are doing in data centers or the business we are doing in the Asian products and so on, this is the agglomeration of the addition a number of different productivities, that we are not, always doing on a quarterly basis and, and, obviously, not commenting, on a quarterly basis, So we can give you a flavor, but we do not comment just because it's not the way we organize, it's not the way we report to the market, on precise trend by product family.
Otherwise, we would have to take the 100 product families we have and get into the details of each product family and each each each country. So unfortunately, I cannot answer your question on digital infrastructure. Except by reminding the numbers, we gave the last Investor Day, which is that we did the EUR 1,200,000,000 in 2018 compared to EUR 2,200,000,000 in 2018. So about 20% of our sales compared to 5% Internet, but David. Again, we are not commenting on quarterly trend by primarily because we are not organized to do so.
Organization is by a bank country. Asphalt product launches are concerned, well, this is an active year as far as product launches is concerned, not more active than last year, if you look at the number of launches, we already had the significant launches last year. It is true indeed that on a given quarter, a launch can positively, or negatively, if you have basis for comparison impact to given geography, now is intact. It's not huge on a yearly basis, except, of course, the gaming market share helps you to achieve. Take, for example, France, we clearly said that the Q2 performance in France was somehow being boosted by the launch of new products, namely 2, the new connected emergency lighting unit and the new Mosaic, but on a full year basis, these sort of one off positive impacts is not so material.
So again, we are not seeing a number of new products. Same comment for ADOS as the one I was making for, for digital infrastructure. ID, we are not publishing and commenting on the 9 months figures by product family. As far as the net debt pool is concerned, Well, not much to say except that we are completely in line with our talking plan. I remind you that the target midterm target we have for net add more is a threefold, number one to sustain a strong growth in top line.
Number 2, to progressively lift the margin, EBIT margin from 0 to high single digit. Number 3, to leverage net add more to accelerate our growth in Elliott. Well, even though we are only 9 months into the docking of net debt move, I can confirm that we are completely in line as far as the 3 targets are concerned.
Thank you very much. Have a good day.
Thank you, We have another question from Mr. Andreas Willey from JPMorgan. Sir, please go ahead.
Yes, thanks for the follow-up. On the guidance, which you often tighten at the Q3 results and haven't this year, or is it implying a unusually wide range for Q4. I just wanted to check whether this is just because you didn't need to feel you didn't need you didn't feel that you need to change the guidance because we are somewhere on track? Or is there anything specific you signal about Q4 beyond the tough comps that you already mentioned? By not tightening the guidance a bit and removing the lower end, particularly on organic growth?
Yes, I wouldn't say that it it's a sort of normal practice for the law to tighten our change of guidance in Q3. It really depends on the what we have delivered as far as results are concerned and the sort of state of the market. So don't read the fact that we're not taking the guidance as a change in practice. Well, you know, the 2 components of our performance for the full year and for FQ and for Q4. Number 1, when I look at 9 months 2019 performance, it is well, it fits very well with our targets.
We are doing a plus 2.3 organic growth compared to 0 to 4. So we are almost right in the middle of the guidance as far as adjusted operating margin before acquisitions, it's up 30 bps. So it's close to the average of the guidance, which is minus 30 plus 50, having in mind that, the benefit for comparison, Q3 helped his performance. So as far as our performance is concerned, it's very consistent with the guidance. As far as what we see for Q4 is concerned, Number 1, you have the demanding basis for comparison, which we already described a little bit in top line and a bit more in bottom line.
And second, there is even more uncertainties than before. One way or the other, not only you have the discussions between China and the U. S, you have the Brexit, which can happen at any time. You have Turkey, which is a difficult situation. Now you have countries like Lebanon or Chile that are in a difficult conditions.
You have the war in the Turkey Turkish border. You have many, many things that can happen. And given uncertainty, we think that it's it's extremely adapting and given the performance we have done so far, it's very, it's really good not to change the guidance.
Thank you very much.
Thank you, sir. We have another question from Mrs. Sikaria from Morgan Stanley. Madam, please go ahead.
Thank you. Thanks for taking my follow-up. I was just hoping if you could comment on the trends in France, notably around the renovation market, because I know for you, it's quite a large market. And we've heard from some players in the construction market. That it was now that the new start where kind of had been tailing down, there were maybe of some more workforce available for renovation.
So what do you see there precisely?
Well, we are not seeing much, much change. What it is indeed that both for you and for innovation, you have a number of sub segments that are growing nicely. Again, I was mentioning insulation because the French player, it very clearly stated that insulation subsegment was going fast fast. But as far as the renovation is concerned, we still see a very flat plus, flat plus France. So we haven't seen any sort of acceleration, neither, neither deceleration.
The other books of our contractors are still still significant. So, no, we haven't seen any change in trend.
Thank you, madam. Next question is from Jonathan Monte from Exane BNP Paribas. Sir, please go ahead.
Hi, good morning. Thanks for taking my question. Regarding the tariffs, I guess, obviously, there's 2 ways to deal with with these one race prices as you've been doing, but another maybe slower longer term would be to adjust where your buying your components and subassemblies from. And given that the tariffs have now been ongoing for well over a year, Are we seeing progress there? Are you still on a wait and see approach hoping the tariffs go away?
Are you actively looking to change how you source your product? And if so, is there a tailwind going into 2020 potentially as you find other ways to mitigate the tariffs than simply putting prices up?
Well, there are 2 kind of adaptation measure that you can take. Number 1, a very short term change in your supply chain where, for example, instead of sourcing some products from a Chinese supplier, you would source from somebody else in Vietnam or elsewhere. Those short term moves were done very rapidly after the implementation of the tariff. But to make things clear, if you present a small part of our headwinds to the tariff issue, a large part of the headwinds was pricing because it was It has always been the locomotive, and it was, of course, easier to implement. And you cannot always switch from a Chinese supplier to somewhere else.
The second piece of the reaction is potentially moving some manufacturing from China to elsewhere. Well, this kind of decision cannot be taken only because of a tariff issue. Because tariffs are things that can move very quickly. And industrial footprint decisions are decisions that are taken for 5 to 10 years, not decisions that they can put for 2 years. So we are actively looking at our footprint, actively analyzing alternative manufacturing places, especially in Southeast Asia, but any move that we would do there would be based on, a long term, footprint strategy, more than a short term tariff issues.
And that's what we've been doing forever. We closed last year's site in China, for example, in Shenzhen. We closed the site in India, closed the site in Turkey. So we are very actively doing this print optimization, but again, not specifically, as an answer to the tariff issue, but more as a footprint optimization. Thank you.
We have no We have no other questions, sir. Back to you for the conclusion.
Well, thank you very much. For your time in attending this call. Should you have, further questions when digging into the numbers, Please do not hesitate as usual to call Francois and Sammy, and have a good day. Thank you very much.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.