Good morning, and thank you for participating in this Rexel H1 call, especially as I know it is a busy day for all of you. I'm here today with Laurent Delabarre, our CFO. As you have seen in our press release, our results in H1 were a historical high in all dimensions, and I think it has to do with three factors. First of all, a good market which continues to be supportive and in which the electrification trends are visible. Secondly, our transformation over the last few years, which clearly bear fruits. As I said during our capital market day in June, Rexel has become, over the last few years, more digital, more agile, more robust, and more resilient.
Thirdly, the Power Up 2025 plan that we have just announced in June and that we are starting to implement actively and that is providing an additional boost. We have, for example, actively pushed our portfolio optimization in the Q2 with two acquisitions and two divestments after the very successful Mayer acquisition from last year. Very happy with both our set of figures and with the way they were obtained. Let us go into more details. As I said, Rexel posted an outstanding performance in the H1 , building on the momentum of previous quarters to deliver record numbers. I will contextualize this performance on the next slide, but let me begin on slide 3 by 4 KPIs that sum up in a nutshell the robustness of our activity in the H1.
First, our same-day sales grew by 13.9% in the half, with strong 12% growth in the Q2. Second, we achieved a record level of adjusted EBITDA margin for our H1 at 7.7%, circa 230 basis points above the H1 2021 level. Third, our free cash flow was also a record for the period at EUR 232 million, which is exactly double the amount we posted in the same period last year. Last but not least, our H1 indebtedness ratio was also at a historically low level of 1.26x EBITDA after leases, down from 1.79x one year ago. Slide 4 details the context and drivers of these excellent H1 numbers.
First of all, we continued to see robust activity in Q2 with double-digit growth both in Europe and in North America. What is particularly noteworthy is the acceleration of volume in North America as well as the increase across the board of the selling price for non-cable products. On this particular topic of price, I would underline that in Q2 we fully passed through price increases from suppliers on non-cable products, and we anticipate further price increases in H2. At the same time, we continue to have to show great agility to help our customers deal with the product and labor shortages in the H1 , notably on products that embed electronic components. We continue to juggle on a day-to-day basis to make the best use of our inventory and our supplier relationships to deliver the best possible service to our customers. These factors are really critical to me.
If we do a good job managing supply chain constraints and passing through price, then the value added of a professional distributor becomes very clear. I mentioned our record high EBITDA margin on the previous slide. It benefited from approximately 86 basis points of positive one-offs linked to inventory price inflation on non-cable products. It also reflects the continuing positive effects from our transformation over the past few years that makes us both more efficient and more resilient throughout the cycle. Looking forward, I'd like to mention a couple of key points. First of all, on the back of our strong H1 performance and supported by record high backlog, an easier base effect in Europe in the H2 , and a return to growth in China, we are confident in reaching the upgraded 2022 full-year guidance that we provided to you on June 16th.
Second, in line with our stated strategy of an active M&A agenda and continued portfolio management, we are announcing today two acquisitions, one in Belgium and one in the U.S., and two disposals of our activities in Spain and Portugal. I will detail this a little bit more later on, but I would like to stress that these moves will make a positive contribution to our sales and profitability as soon as they are closed. With that, let me hand over to Laurent to detail our financials.
Thank you, Guillaume, and good morning to all of you. On Slide 6, we take a look at our overall Q2 2022 sales performance. Our sales of EUR 4.7 billion were up 26.3% on a reported basis and 12% on a same day basis. The calendar effect is close to zero in Q2 2022 after +3.1% in Q1 at group level, mainly due to North America and Europe to a lesser extent. This effect will reverse in H2 2022. These reported sales were boosted by a favorable scope effect of 7.9%, driven by the acquisition of Mayer in the U.S., and also by a positive impact from foreign exchange of 4.7%, mainly from the appreciation of the U.S. and Canadian dollars.
We now anticipate the full year 2022 scope impact to be close to 7%, and the full year currency impact to be close to 5%, assuming spot rates remain unchanged. On Slide 7, we see that Q2 2022 is the sixth consecutive quarter of sales growth for Rexel post-COVID, confirming our capability to fully capture the rebound. The same-day sales growth of 12% in the quarter can be split between a volume effect of +0.6%, equivalent to a +1.7% excluding the exceptional COVID situation in China that is now completely over. A non-cable price effect of +9.2%, a cable price effect of +2.2%.
Moving to Slide 8, that focus specifically on volumes, which contribute +0.6% to the growth in Q2 2022, with differing performance by geography. Indeed, North America further recovered with volumes up 5.1%, accelerating from 4.5% in Q1 2022. The strong performance offset the slightly negative volumes in Europe, down 0.5% due to a stronger base effect in Q2 last year, and negative volume in APAC, largely from the lockdown in China. As already said, the temporary COVID situation in China, overall volumes stood at +1.7% in the quarter.
Now looking at the bottom of the slide, which shows the evolution of volumes at group level and by geography since 2018 on an indexed basis, we clearly see that H1 2021 is the highest point reached last year, as it corresponds to the reopening of the economy post-COVID, with a very strong catch up at that time, before seeing normalization of the trend in H2 2021. Therefore, we anticipate the base effect to be easier in H2 2022. On the graph, we also see that at group level, volumes are above the 2018 level, largely thanks to Europe, 7% above 2018, with a strong post-pandemic rebound, while North America remains below 2018 levels.
Moving to pricing on Slide 9, its contribution to same-day sales growth was 11.4%, of which 9.2% from non-cable products and 2.2% from cable products. Specifically on non-cable products, the 9.2% effect is similar to Q1 2022. It is interesting to note that the expected lower carryover effect has been fully offset by additional price increases that occurred during Q2. For H2, while the carryover effect is expected to decrease to zero in Q4, we anticipate additional price increases. Specifically on cable products, the 2.2% contribution in the quarter is lower than the 4.1% in Q1 2022 as copper prices increased in Q2 last year.
For H2, assuming copper price remain at the current spot rates, we anticipate the contribution to turn negative as copper price dropped to $7,500 U.S. dollar per tons versus circa $9,500 U.S. dollar per tons in H2 2021. Slide 10 focus on the contribution of our three geographies to the group +12% same-day sales growth. You have all the detail in the press release on a country-by-country basis, so I will just highlight the key evolutions of the quarter. In Europe, our Q2 2022 is up 10.4% versus Q2 2021, as a result of the combination of further price increases on non-cable products and a slightly negative volume impact of -0.5.
Growth was driven by strong momentum in Germany and Benelux, where we gained shares coupled with faster growth in Europe from green-related products such as PV, in a context of growing uncertainties regarding energy availability. This more than offset the tapering of growth in some countries like France, where in France we continue to outperform the market. In North America, we posted same-day sales growth of 17.2% in the quarter with sales growth in both the U.S. and Canada. More specifically for the U.S., the three end markets grew at similar pace by region. The country benefited from strong overall momentum in Mountain Plains and Gulf Central, notably driven by oil and gas, as well as robust growth in commercial. In Canada, the good performance was driven by industrial end markets, more specifically oil and gas and mining activities. Finally, backlogs have improved significantly in both countries.
In Asia Pacific, sales were down 2.6% in Q2 2022, largely from the lockdown in China in April and May, driving a -10.9% same-day sales evolution in the country. The Pacific, on the other side, is positive, growing at mid-single digit pace, largely driven by commercial activities. On Slide 11, you see that we continue to have a record level of backlog, which bodes well for the coming quarters. Similarly to previous quarters, this is due to several factors, such as strong underlying demand, as well as delays in projects because of labor and product scarcity that disrupted the activities. Let me illustrate this by our backlogs in the U.S., Canada, France, and China that you see on the graph.
As you know, while backlogs represent a material part of the North American and Chinese businesses, representing around three-five months of activities. They are much smaller in France, let's say around half amounts of business. This illustrates the positive trend in those countries and give us some visibility for part of our business in the coming quarters. On Slide 12, we show you the building blocks that led to a record adjusted EBITDA margin of 7.7%, up 228 basis points. The progression can be explained by a positive operating leverage impact of +190 basis points, largely, from our capacity to pass through price increase.
A net positive non-recurring effect of circa 86 basis points as a result of, on one hand, a positive one-off gross margin gain on non-cable inventory price inflation for 109 basis points. On the other hand, a negative 23 basis point one-off effect from higher performance linked to bonus, notably for our sales force, in a context of better than anticipated activity versus our initial budget. An OpEx inflation impact of -60 basis points, notably due to wage inflation and transportation costs corresponding to an OpEx increase of +3.5%, of which +2.4% in salary and benefits, and +7% in transportation, building and utilities, and occupancy costs. On Slide 13, you see how each geography contributed to our record profitability.
Our gross margin in all regions benefited from our ability to pass through price increases to our customers. Moving to adjusted EBITDA margin, profitability improved in all geographies, even restated from the positive one-off effects. Europe adjusted EBITDA margins stood at 8.4%, up 149 basis points, including circa 90 basis points of non-recurring items. A robust performance in a context of lower volume growth, as we have seen, and stronger selling price increases that helped offset OpEx inflation, notably on salary and transportation costs. North America adjusted EBITDA margins stood at +8.5% at 297 basis points, including circa 95 basis points of non-recurring items, largely driven by the same factors as in Europe. This strong performance was also delivered thanks to robust activity and synergies from Mayer.
Asia-Pac's adjusted EBITDA margins stood at +1.4%, up 57 basis points, largely thanks to the positive progression in the Pacific and the favorable country mix as China sales were down while other countries were growing. On Slide 14, we look at the bottom line part of our P&L. Let's start with our adjusted EBITDA of EUR 704 million, up 63% on a comparable base. Reported EBITDA stood at EUR 709 million, including a positive non-recurring impact of EUR 5 million from copper price compared to EUR 44 million in H1 2021 as copper price started to rise in Q2 2021.
Other income and expense amount to EUR 19 million, including restructuring for EUR 2.4 million, as well as termination costs for our Russian activities, where we no longer have presence yet, and the impairment of IT development costs. Moving to financial expenses, they stood at EUR 52 million versus EUR 60 million. Restated from the one-offs related to the refinancing and interest on lease liability. Our financial costs decreased from EUR 33.7 million to EUR 30.1 million, reflecting the good work done on the balance sheet over the past years and the sustainable bonds refinancing completed in 2021, which offset the increased interest rate on the receivable financing.
Going forward, we anticipate financial expense, excluding one-off and interest lease liabilities of circa EUR 65 million in 2022 and EUR 80 million in 2023 in the context of rising interest rates, assuming current interest rate conditions remain unchanged. Our income tax rates stood at 27.2% versus 27.9% in H1 2021, down 70 basis points, notably thanks to lower tax rates in France. For 2022 onwards, we confirm our tax rate estimated of below 30%. As a result, net income was EUR 460 million versus EUR 271 million, and our recurring net income stood at EUR 471 million, up 95% and reaching all-time high level for half year. We generated record cash flow before interest and tax, reaching EUR 232 million.
This reflects the robust operating results, which more than offset the cash outflow from working capital in the context of disrupted supply chain and the cash outflow of the 2021 bonuses. Free cash flow after interest and tax reached EUR 46 million after paying EUR 24 million in interest and EUR 161 million in income tax. Notably from higher performance in H1 2022. Let me just remind you that the income tax benefited in H1 2021 from cash savings due to the last utilization of the remaining French tax losses carry forward. CapEx stood at EUR 55 million, representing 0.6% of sales, including 50% for IT and digital. A low point, mainly due to the phasing of projects, and we confirm our ambition to be around 0.9% of sales over the cycle.
In H1 2022, we also paid EUR 230 million in dividends related to 2021 results or EUR 0.75 per share. Let me add that to the appreciation of the USD and CAD. Our net debt increased by EUR 84 million in the H1 . All this leads to a net debt level post-merger acquisition and dividend payment, slightly higher than last year at EUR 1.8 billion. Our indebtedness ratios stood at 1.26x and reached an all-time low. If the portfolio management transaction announced today had been finalized in H1 2022, the indebtedness ratio would have been 1.31x. Let me turn to Slide 16 to our balance sheet and liquidity picture, which shows that we have no significant short-term repayments scheduled.
Let me start by saying that after the Moody's upgrade to positive outlook issued in May, Standard & Poor's upgraded in July the rating of our 2028 sustainable linked bonds by two notches and the issuer rating to BB+, considering the group's deep transformation, the recent results, and the mid-term ambition shared during our CMD in June. As of June 30, we have EUR 1.1 billion of liquidity, including EUR 850 million in undrawn facilities on our senior credit agreements. Overall, our active financial management over the recent years, and more specifically, the two refinancing completed in 2021, is reflected in the very low average effective interest rate on gross debt, down 46 basis points year-on-year to 2.01% in a context of rising interest rates. Let me now hand back to Guillaume.
Thank you very much, Laurent. As you know, we had the pleasure of presenting to you last month in Zurich our new strategic plan, Power Up 2025, and this plan will be instrumental in taking Rexel to the next level. We have not wasted time and have started implementation with a few very tangible results, and I would like to update you on that. On Slide 18, I wanted to remind you what the Power Up 2025 plan is about, but also why it is important in today's environment. Power Up 2025 is based on two main pillars. The first pillar is about further optimization of Rexel's core model, and the second pillar is about the development of a leadership position on topics shaping the future of the industry.
Those two pillars complement each other and both contribute to our main objectives, midterm growth, of course, but also short-term profitability and resilience. It means that whatever the time horizon and whatever the economic environment, working on those topics makes perfect sense. The first pillar is mainly driven by operational excellence on our fundamentals. For example, digital, supply chain excellence or productivity. As you see on the slide, working on those fundamentals may be a moderate driver of growth, but on the other hand, it contributes strongly to improved profitability and resilience. This pillar is our first and immediate priority in all countries. In the second pillar, we develop leadership positions on topics such as energy transition and electrification solutions, advanced services, or the use of data.
This pillar is more growth driven, but it will also boost profitability and further enhance our resilience as the macro electrification trends tend to be less dependent on the short-term variations of the economy. One very good example of that is what we are seeing right now in Western Europe, which is detailed on Slide 19. As you know, unfortunately, the war in Ukraine is dragging on with a terrible human toll that we all deplore. While we all hope for a speedy resolution, the war has also had an important silver lining in that it is accelerating investment in energy savings projects and alternative energy sources as a result of European and national initiatives, especially in those countries which are more dependent on Russian gas.
These efforts have included, for example, an acceleration in the deployment of solar energy panels, and Rexel is playing an active role in this. PV cells have grown by 109% year to date in Europe this year versus last year, and we have launched a number of strategic initiatives to support this growth, such as a dedicated distribution center in Germany, offering training to customers, the creation of expertise centers or support to activate further public incentives. Other categories could also benefit from these efforts, such as, for example, energy monitoring and piloting for buildings, heat pumps and EV charging stations and ecosystems. This is really not what we would have liked to see, but it also illustrates what I was saying at the CMD in June.
Electrification trends will become increasingly real and short-term because they are at the convergence of many topics, two very important ones being global warming and geopolitics. Another key aspect of our strategy is the continued digitalization of our business, which is a trigger for more productivity and more profitability. Slide 20 shows you that we reach EUR 1.2 billion in sales in Q2, up more than 24% versus the same quarter last year. Digital thus represents one quarter of our sales in Q2, up 244 basis points. Europe continues to lead the way, with digital sales representing nearly 35% of total sales, growing by 109 basis points. France continues its progression, with digital up 184 basis points to 28.7% of sales.
As you see, North America, which was something of a late adopter, is catching up. Digital sales grew by 467 basis points in Q2 and rose to 16.7% of total sales. This is a result of the continuing digital journey of our U.S. operations and processes, notably at Mayer. In Asia-Pacific, the amount of digital sales remains low at 4.8% of sales. As you know, this largely reflects our business mix in the region, which is heavily skewed towards industrial automation. We continue to roll out digital tools and are accelerating on the webshop search engine and email-to-EDI initiatives while also scaling up our AI solutions, for instance, on assortment optimization in the U.S. and AI pricing in Switzerland.
M&A is also a key part of our strategy, and on Slide 21, we announce four transactions which are very representative of what we want to achieve through active portfolio management, which is to concentrate our energy on our strength. This means acquisitions like Mayer last year, which by the way, is doing very well, or the two that we are announcing today, but also divestments when it makes sense. We closed on July 4th, the acquisition of Trilec, a Belgian family-owned electrical distributor operating mostly in Flanders with 15 branches, 172 employees, and a semi-automated distribution center. Trilec is the number three player in Belgium with sales of EUR 80 million in 2021, and its strong complementarity with our business there allows us to project high levels of targeted synergies.
On July 7th, Rexel USA signed a definitive agreement to acquire Horizon Solutions, headquartered in Rochester, New York, with 10 branches and 219 employees. The company is an industrial automation player that generated 2021 sales of $170 million. It further strengthens Rexel's industrial automation business in the Northeast. The transaction is projected to be accretive to Rexel's earnings per share in year one and value-creating in year two, fully in line with the group's commitment, notably thanks to the synergies. This transaction is expected to close in Q3 2022. At the same time, we are disposing of our activities in two countries that we consider non-core, Spain and Portugal.
We have signed yesterday the divestment to Sonepar of these businesses, which had combined 2021 sales of EUR 170 million and were dilutive to profitability. We see better opportunities for capital allocation elsewhere. This transaction is subject to approval by the Spanish competition authority and is expected to close by October. All in, the combined M&A operations will contribute positively to our sales, earnings, and return on capital employed in year one. They will add combined circa EUR 75 million in annual sales on a net basis and be accretive to adjusted EBITDA margin. Overall, outstanding strategic and financial moves. Looking a little bit more long-term, ESG is a key focus of ours. As I said at the CMD, we can do more, and we will do more.
I'm happy to report on Slide 22 a first important step in this direction as SBTi has recently validated our target to be a net-zero company by 2050. That makes us the only electrical distributor to have its net-zero standard target validated by SBTi. This recognizes the upgraded 2030 target that we presented at our Capital Market Day and which constitutes a key milestone in our journey. We intend to reduce CO2 emission by 60% in absolute terms on Scopes one and two by 2030 by optimizing transportation and building efficiency and switching to clean energy in our own operation. We will reduce CO2 emission by 45% in value on Scope three by 2030 by forming partnership with suppliers and influencing and helping customers to move to energy-efficient solutions.
We believe that we are uniquely placed in the value chain to have a real impact on the use of products we sell, which represent the biggest part of our CO2 footprint. Finally, to finish on this Power Up 2025 implementation, Slide 23 is a good demonstration of how this plan, building blocks all come together in the case of a particular country, in this case, France. During the month of June, we were very pleased to host our traditional Rexel Expo event in Paris for the first time since the outbreak of the pandemic.
This fair brought together 200 suppliers and 22,000 visitors over five days and was a real window into the future of electrical distribution, an opportunity for us to present a number of innovations and aspects of our offer that are clearly aligned with our strategy, be it in energy efficiency, electric mobility, smart buildings, or connected solutions. I could cite dozens of examples, and a few of them are listed on this slide that we can talk about in the Q&A if you wish to. Beyond individual examples, what is important is what all those topics have in common.
They demonstrate how the role of electrical material distributors will expand in many directions in the future, securing a more and more central spot in the value chain and creating differentiation to the advantage of advanced players like us. During this week in France, it was really obvious for external observers, for our suppliers, and also for our customers, who were quite enthusiastic about it. Let me now conclude with our outlook and confirmation of our full year guidance. How do we see things in the coming months? Obviously, there are a few uncertainties, but our current business trends, as well as our backlog in many countries, give us some visibility for the rest of the year, which should be good. In North America, we continue to see solid activity ahead, supported, as Laurent mentioned, by a record high backlog.
In Europe, we cannot rule out a gradual slowdown of growth, but this will be partly offset by the continued positive trends linked to the energy transition and further market share gains. In Asia, a lot depends on the evolution of the COVID situation, but we are banking on a rebound. In terms of cost and price, we think that we will continue to operate in an environment marked by high inflation for non-copper related products with price increases for H2 already announced by suppliers.
Now, even though we are clearly confident about H2, it doesn't hurt to prepare for possible more difficult times, and this is what we have done since the end of Q1, focusing in all countries on headcount, inventory and receivables, which are what you need to zoom on quite early if you want to be able to react with agility should there be a change in trends. We are not currently in a situation that calls for a plan B, but plan B is ready. More importantly, minds are ready within the company. Now, let me conclude on slide 26 by talking about guidance. We recently upgraded it in June at our Capital Market Day.
One month later, with an excellent H1 in the pocket, as well as solid backlog in important countries like the U.S., as well as the perspective of an easier comp basis in Europe and the China rebound versus H1, I can say that I am confident in our ability to deliver this guidance. We don't underestimate the growing macroeconomic concerns, and as I said, we are prepared, but the current trends are robust, and 2022 will be a very good year for Rexel. As a reminder, we target for 2022 at comparable scope of consolidation and exchange rates, the same day sales growth of between 7% and 9%, an adjusted EBITDA margin of circa 6.7%, including 50 basis points of non-recurring items, and a free cash flow conversion above 60%.
Thank you very much for your attention, and Laurent and I are now happy to take your questions.
Thank you. This is the conference operator. We'll now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Martin Wilkie with Citi. Please go ahead.
Yes, thanks. Good morning. It's Martin from Citi. Just a couple of questions on the outlook. I mean, obviously you've had a very good Q2 . You'd obviously raised the guidance a few weeks ago, but it does imply a slowing in the H2. Just to understand, is there some caution in that? Or how are you seeing things like tendering and project inquiries and things like that as to how you see the volume development into the H2 ? Thank you.
Okay. First of all, yeah, since the guidance update in June, we had fairly good news. As you said, we had a very good set of H1 results. That's the reason why we said in our press release that we are confident about the guidance for 2022. You could translate that into being a little bit conservative on the conservative side, because the trends that we are seeing right now are solid trends, as I mentioned, with a very robust level of backlog in many countries, including the U.S., Canada, France, China, which is boding well for the rest of the year. So the trends very clearly are confirmed.
We are confident about the end of the year. I don't know, Laurent, if you want to elaborate a little bit more on that.
Yeah. Just to say that, the lower end, well, you can calculate what H2 means with the H1 we have provided to you today. Basically, it's a top line between 0.2%-4%. That in the lower part of the guidance, we want it to be quite resilient. We have assumed a lower level of copper and we have taken some prudence on volume in Europe to be on the safe side on the lower part of the guidance.
No, look, I think, Martin, the key word is confidence in this guidance. We have felt that in the current a little bit uncertain context, and despite the fact that the trend that we are seeing are good one month after our recent upgrade, it was not a time to change our guidance for the year. The key word is really confidence.
Thanks. Can I have a follow-on on pricing? I mean, obviously you've had sequentially better pricing in the Q2 . Obviously, some raw materials look to have peaked. Just to understand how you see your suppliers thinking about pricing and how you're thinking about pricing. Some companies have talked about surcharges, which suggest those could reverse. Just generally how you see the pricing development given that raw materials in some cases have peaked and come a little bit lower.
Look, I mean, there are, I would have two buckets. One is about copper and one is about the rest, basically. On copper, I wouldn't bet too much on the copper market. As I said already consistently, the evolution of, I mean, you have analysis on the copper market. We think that midterm, the gap between supply and demand will be on the direction of a general shortage for copper. What the timing is going to be, how it plays out with the Chinese demand, et cetera, I mean, there are many people in the market who are more knowledgeable than us on that.
On the non-copper part of the business, what I can tell you is that we have several price increases in all categories already announced or pre-announced by suppliers for the second part of the year. Clearly, definitely, we see continued inflation there. You have to understand that, you know, there is not only the raw materials part for our suppliers, there is also the labor part, which is starting to weigh on the cost side, and also the transportation side, and obviously the energy cost, which are weighing on the cost side, which means that they have an important incentive to increase price.
From what we see, from our discussions with them, we are going to continue to have an inflation environment in the H2 of the year sequentially.
Great. Thank you very much.
Thank you.
The next question is from Andre Kukhnin with Credit Suisse. Please go ahead.
Good morning. Thank you very much for taking my questions. I'll just go one at a time. Wanted to first follow up on the demand question, where you said that you're seeing robust demand across the board, across the regions. I think there are some wider indicators that point to a bit of a slowdown in residential, at least in North America. I just wanted to double check on that, as well as on any recent developments in Europe, whether that kind of electrification energy efficiency drive is overriding what's an underlying slowdown for you, or are you seeing that sort of softness as well?
Look, I mean, I can only comment on the trends that we are seeing in our current figures. You know, about the future, first of all, I mean, I will start by commenting about the future. You know, I read the newspapers just like you, and I see the macroeconomic environment. That's the reason why I mentioned in my last part that within the company, we are preparing in terms of controlling cost, in terms of controlling headcount, in terms of making sure that our inventory is in the right shape and that our customer mix in the right shape. We are preparing to any situation, and we are monitoring very closely the markets.
When we look at the trends, you know, it's a little bit difficult to read because there is a comparison basis of last year, first of all, and there is also the backlog effect, which is creating a tailwind, in fact, to ourselves. Overall, what we are seeing is an acceleration of volumes in North America in Q2 compared to Q1. It's very clear. We are on good trends in North America, especially driven by a rebound of some industrial sectors in the US. The rebound of the oil and gas, for example, in the U.S. is clearly helping the southern regions of the U.S.
In Europe, we see a sequential slowdown of activity between Q1 and Q2, but in front of a very high comparison basis last year in H1. Overall, you see. That's the reason why we call those trends quite solid. As far as the future is concerned, it's difficult for me to comment more than that and more than the fact that we are making the company completely ready to any possibility and any trends. That being said, right now, at present, the business is good.
Thank you. That's very clear. Yeah, completely appreciate the difficulty on commenting forward and acknowledging your comments on readiness. My main question I wanted to ask was on inventory levels. I just wanted to really hear your opinion and overview on the how do you view the current inventory levels across yourselves and your peers and maybe kind of elsewhere across the supply chain as well? Have you seen any maybe excess stock buildups at customer levels or suppliers in your opinion? Thank you.
I don't know exactly what your question is. I mean, our inventory level is slightly higher in terms of number of days than it was last year at the same time of the year. It's a mix of several effects, one of them being stranded inventory. You know, the backlog that we are talking about very often corresponds to real projects and which are waiting for one particular part to be shipped to the customer. This is what we call stranded inventory. I mean, you see that also in other parts of the economy with the GM cars and all those kind of things.
We have the same effect in our inventory, which creates a bump in the inventory. The second part, when you look at the inventory in number of days, is that because of the supply shortages, service and ability to deliver to the customers becomes a very differentiating feature. Selectively, on some high-turn items, we have decided to increase slightly our level of inventory to be able to provide better service to our customers. We are comfortable with that. We think that there is a limit also to that, and so we will make sure that we keep that under control for the rest of the year.
As far as the second part of your question, which is there more inventory at our suppliers or more inventory at our customers? You know, I think our customers right now, and you see that in the level of backlog, they are asking for products. They really are waiting for products to be able to complete their jobs. I don't think from this point of view that they are speculating in any way on electrical materials. I've not seen any evidence of that. I've not physically seen any location where I could see a big pile of cable or a big pile of electrical materials. I don't think this is the case.
I mean, right now, the whole supply chain is focused on one thing, which is delivering the best service to the end user at the end of the road who is waiting for the projects to be completed. As far as suppliers, I cannot comment. I mean, many of them are listed, so they would comment on that. I think from what I understand, they also struggle to make sure that their supply chain is delivering the best service to us and to their other customers. I don't know if it answers your question.
Yes, it does. That's exactly what I was looking for. Thank you very much.
Yeah. Thank you, Andre Kukhnin.
The next question is from Phil Buller with Berenberg. Please go ahead.
Oh, thanks. Good morning. Thanks for taking my questions. Can we talk about cable, please? There's still a pretty tight correlation in the share price versus copper pricing, which is a bit of a shame as it feels like a lot of the good stuff you're doing in terms of the underlying gets overlooked by copper prices. You do break out the cable growth rates. Can you remind us how much of the business is cable, both in terms of sales, but also as a percentage of operating profit? That's ignoring any non-recurring items, which I think would be pretty helpful so we can assess the business ex cable. Okay, that's the first question.
Yeah. Obviously it depends on the level of copper, but cable is around 17% of our sales. The sensitivity we have already given that for around $500 USD per ton of price increase in copper price. The impact on the top line is around 0.8%. Usually the margin is lower than the average of the group. You have variable costs linked to the commission and the bonuses. At the end, it has an impact of a bit less than 10 basis points on the profitability.
Great. Thank you. Martin asked a question on the top line in terms of the guide. I'd like to ask one about the margin expectation. The full year guide of 6.2% underlying, if we strip out the 50 basis point one-off, looks like you're actually baking in a pretty ugly H2 margin given you just did, I guess, 6.8% underlying in H1, if we strip out the 86 basis points. How should we think about what you're baking into the H2 margin guide, please?
You know, Phil, you know, there is no secret message in the fact that we kept our guidance from June. You know, as I said, the keyword is confidence. As I said also, we upgraded our guidance in June before we knew the full year, the full H1 results. The H1 results were better than expected. That being said, we decided not to change our guidance because, you know, we cannot change it each time we go out and because also there are economic uncertainties, and so we prefer to wait a little bit later in the year to change, if needed, the guidance. Clearly, you're right.
The guidance, if you do the reverse calculation based on our H1 figures, is conservative, and that's the reason why we added the word confidence.
Thanks. Just finally, Guillaume, can you just expand a bit on what you're doing from this plan B scenario you're talking about? I'm asking the question because given what you presented at the Capital Markets Day with regards to a need to invest in digital, does that mean that you'd likely choose or perhaps need to keep costs high?
No, you know, I think it's very clear. I mean, when you look at our, there are things obviously on the margin side, which is about selecting the right customers, the more resilient customers. There are things which are linked to the sales part of it. On the other hand, if you look at the OpEx part of it, which is a short-term thing on which we would work in case of a more difficult environment, you know, our OpEx is mostly headcount. There is a little bit of digital, but it's mostly headcount.
In terms of digital, I truly believe that, you know, long-term, but also mid-term and short-term, those actions in terms of digital, first of all, require consistency, and they are providing results. I mean, you know, at the Capital Market Day, we talked about the positive effect on margin of AI initiatives, for example. Digital is also a tool which is able to bring productivity, additional productivity. We will continue our course on digital. Yes, it requires continuous investment. That being said, we think it's the right thing to do for the company, even from a short-term basis. When I'm speaking about plan B, it means basically working on productivity, on headcount, on expenses.
You know, when changing the headcount level and the productivity level, it takes time, and there is a lag effect. I mean, you hire people, you don't replace people. All of that takes a little bit of time to have effect within the company without disturbing too much the commercial part of the business. That's what we are doing right now. You know, working specifically on productivity, working specifically also on our inventory level to make sure that we have the right stuff in the right SKUs and not having too much inventory on SKUs which are not turning enough. Those are the things that we are working on at this stage and which we call plan B.
I can tell you that the mindset of the country CEOs right now is extremely cautious on those two aspects.
Thanks. I guess just to be clear, I was asking the question about headcount as well, really, because your predecessor took out a lot of heads.
During the pandemic. From your side, there's still a pretty big dial there for you to use should you need to.
You know, if I look at the pre-pandemic, I mean, we took lots of people during the pandemic. We re-increased a little bit, but we are still below the level of pre-pandemic substantially. We still think that there is ongoing productivity potential in our business. Because we think that, you know, the rise of digital, for example, is freeing time from our sales teams doing what we call unproductive tasks to focus more on selling and to be able to increase the sales, for example. That is something which is, you know, bringing a potential for productivity.
Also, as I said, during the Capital Markets Day, some countries are very optimized from a productivity point of view, but some others are at the beginning of the path of operational improvement. There is potential for more, absolutely.
Thanks. Thanks.
The next question is from Akash Gupta with JP Morgan. Please go ahead.
Yes. Hi, good morning, everybody, and thanks for your time. My first question is on volume growth in Europe, which was -0.5%. If you can provide a split of that volume growth between green and non-green products. You already said that your solar PV was up like 109% in the H1 . I'm just wondering if you can say how much total green portfolio was up versus non-green portfolio. Maybe was there any supply chain impact that might be prohibiting your level of volume growth that is worth highlighting here?
Yeah. I think yes, we talked about specifically the PV growth. The PV growth is at this stage a relatively small part of our business. It's single digit in terms of the proportion of our sales. This is not a big and substantial effect. We hope that it will continue, by the way, because we see continued demand for that. We don't see that as a short-term burst in terms of growth.
In terms of the overall volume in Europe in Q2, what I can say also is that when I look at the comparison basis, compared to before the pandemic to 2020, 2019, we had a relatively high comparison basis, which is becoming more easier the H2 of the year. That's really the main reasons. I don't know, Laurent, if you want to expand a little bit more.
Yeah. I mean, volumes are slightly down, but when we compare to before the pandemic, we are still above in terms of volume. It is also important to note that Q2 of last year was our highest quarter. It was just the highest post-COVID, and the base effect will help us in Q3. With regards to the PV question, there are countries where it is significantly helping them, but we have governmental measures that are there, such as Germany, such as the Netherlands. Overall at group level, it's not a significant impact, but in some countries it has. Overall still volumes that are at a high level, even if they are slightly decreasing.
Thank you.
Thank you.
My second question is on price increases and this non-recurring margin impact. Maybe if you can elaborate on what level of price increases we are expecting in Q3 or H2 of the year versus what you had in the H1 , especially in the non-cable portfolio. When it comes to this margin impact, I mean, you are guiding 50 basis points for the full year. We got 86 in the H1 , which would imply roughly 15-20 basis points one-off in the H2 . Could there be upside to that 15-20 basis points number on the back of these price increases that you have in the pipeline?
I will let Laurent do the calculation for the second part of the question. I can tell you, I mean, there is no precise answer to your first question. I mean, the way the price increases work today is that the suppliers don't give a lot of advance warning on that. I can tell you directionally that we are seeing important price increases coming our way in non-copper products for the second part of the year. But having a visibility on the total H2 is difficult for me.
I clearly see no sign of a slowdown sequentially of the price increases in the non-copper part, as I was mentioning in response to a previous question. Laurent, I don't know if you want to speak on the 50 basis points.
Yeah. No, but on the one-offs, you can do the math. Obviously, it means that in H2, we have a far less one-off than in H1. Again, that is backed in a guidance on which we are confident, and probably we may have a positive evolution going forward. We don't want to bet on inflation to drive additional action on the business. That's why we had this quite conservative approach.
Thank you. My final one is on M&A pipeline. Maybe if you can talk about, if are there more opportunities given the macro environment that many of the companies may prefer to put themselves on sale rather than. Anything you're seeing on M&A pipeline that is different than before?
No. I mean, we continue. I mean, first of all, you know that since one year, we have started to replenish our pipeline of opportunities. Rather than opportunistic before, we are quite systematic in the way we look at opportunities. So we are confident, I mean, as we said during the Capital Markets Day, that we will continue, you know, in between now and 2025 to have a strong contribution of M&A. The current environment, it's a mixed bag, because at the same time, there are many people who are sellers. Their price expectations are relatively high, and we are quite cautious about what we are doing.
Because, I mean, when I say that the price expectations are relatively high, the multiples in the market are going down a little bit. People still have in reference the recent results. We want, when we do acquisitions, to make conservative assumptions of what the future may look like. This is the only equation that we need to solve. There are opportunities of the same kind and the same size as what we have done in H1. We'll see where it goes. You know, we are very happy with what we did in H1. One of them was a very synergistic acquisition in Belgium.
Belgium is one of our strong countries in terms of profitability, and we are excited with the opportunity to add more scale and also to add synergies. The second one is a Rockwell distributor in the northeast of the U.S. You know that we are the largest distributor of Rockwell in the U.S. It reinforces this position. We have experienced very good success in our previous acquisitions of Rockwell distributors. On top of that, the northeast, and especially this part of the northeast, which is Upstate New York, is an area where we can have synergies with our existing business. Quite exciting that we are able to do those acquisitions.
As I said, I think what is really interesting in the two acquisitions and two divestments that we are doing, that we have announced in H1 is that it's representative of what we want to do. Focus really our business on our strengths, reinforce our strengths, and in the places where we think our strengths are not big enough, don't hesitate to divest. That's what we are doing.
Thank you.
Thank you, Akash.
The next question is from Alexander Virgo with Bank of America. Please go ahead.
Yeah, thanks. Good morning, everybody. Just a quick follow-up, I guess, just thinking about the comments that you made and some of your suppliers have been making with respect to the customer dynamics around spending patterns. I think much of the concern in the market at the moment is around the impact of the macro headwinds on spending decisions now, despite the obvious benefits of making investments regarding energy efficiency and inflation or what have you. I just wondered if you could give us any color around the changing dynamics of customer engagement, given what's going on with, you know, real, I guess, real-time in terms of energy costs, and whether you've seen that reflected in any acceleration or deferral.
I guess the right example is to look at what we disclose on our PV sales. Our PV sales are exactly that. They are representing the fact that customers. It's really easy to identify because it's linked to a specific category. They are linked to the fact that customers are concerned both about the energy price and also about the security of supply, which is another concern. I mean, it's one thing to act on energy prices. It's another one to have the risk of having to shut down something or to cut the global supply somewhere. This is really one good translation of what you are saying.
We are also seeing a lot of activity with large customers in terms of CapEx dedicated to energy efficiency very clearly. You know, we are doing the same. We are revisiting our buildings and looking at where it makes sense to invest marginally to make the buildings more efficient. Usually the payback of monitoring the consumption, monitoring the energy and delivering control solutions is relatively quick. If I take an example, in France, we have a service that we are just starting, which is exactly about that. About allowing commercial buildings to, for a relatively moderate cost, to monitor their consumption first of all, and then to control the way they are operating.
You know, when we see lots of initiatives in many countries about lowering the temperature of buildings, about controlling the air conditioning, et cetera, all of that includes controls, includes electronics, includes connected products that we sell and that on which we are able not only to sell the products but also solutions and services. Yes, we are seeing activity in this area, and I think we will continue to see activity. The balance between being afraid of spending and being afraid of CapEx and, on the other side, wanting to invest on the specific topic on energy efficiency, I think on this topic, the balance is clearly in our favor.
Great. Thanks very much.
Thank you.
The next question is from Eric Lemarié from CIC. Please go ahead.
Yes, thanks for taking my question. I got three actually. The first one.
A bit of a follow-up on the last one. Regarding your exposure to energy transition solution that you mentioned at your last capital market day. You know, EV charging station, PV, data center, and IA. Today it represents 15% of your sales, but does it include any sales generated by cable? Because I suppose that cables for electrification, for instance, contribute to energy transition as well. Maybe overall your exposure to this transition solution are higher than 50%. That's my first question. I got a second question on this plan B you mentioned during the call. What could be the financial impact of the implementation of such a plan B? Maybe if not in euro, maybe in terms of percentage of revenues concerned about this plan.
The last question, very general. I was wondering today, do you feel immune to the macro cycle currently thanks to your exposure to the respective plan you mentioned?
Okay. Thank you very much, Eric Lemarié, for those three questions. On the first one, when we say 15%, I think we have quite a conservative vision of the products which are involved in energy transition. Because, you know, you're right. In general, there are many products that we sell and which, you know, one way or the other go into energy transition project and we don't know so much about. So we really try to be quite strict in the way we measure. So we measure projects which are really linked to heat pumps, to EV projects that are identified or to PV projects that are identified.
If, for example, a plant is electrifying the old process because, you know, they switch from, I don't know, a dryer which was a gas dryer to an electric dryer and to controls, which are more advanced, we're not going to see that. I suspect that there is more in our mix of products than the 15% I have mentioned. We prefer to give you figures which are backed by internal analysis and which are trackable. That's for the first question.
The second question about the financial impact, what I would say is that, you know, you have to, I have to re-insist on the fact that, plan B is being prepared, but it's not implemented. Because the thing is, the demand for the moment, I mean, right now, if you go to our customers, if you go to our branches, the customers are not concerned about volume. They're concerned about supply of products right now, and they're concerned about service. So it's not right now the time, to scale down and to reduce the service level at a time when the customer concern is really about that. Plan B is about, okay, if something happens, what are we going to do?
It's difficult for me to measure the impact because the impact is both in the effects of the plan B in the something which is going to happen, you know? It's an offset in a way. I cannot give you a precise answer on that. No, really, I mean, what you could look at, if you wanted to have examples of how agile and how reactive we can be, is look at what we did during the COVID crisis. Not at all to say that we are facing a crisis of this magnitude, but just to tell you that we are agile and resilient.
You know, we are preparing to be the same, whatever the environment in the future. But for the moment, we are not in a position to activate it, and we are just in a position to being cautious and being ready. The last topic is about are we immune to the macro? I wouldn't say that. I mean, just like any company, we are not immune from the macroeconomic environment very clearly. I mean, we have talked during this call about our sensitivity to inflation, about our sensitivity to volume, et cetera. Yes, there are very nice positive trends which are happening and very nice electrification trends. So it will really depend on the offset of that.
I would say, in case of a big financial shock, yes, we are going to be impacted, but believe us, we are going to be active, agile, and resilient. If I compare the Rexel of today to the Rexel I didn't know, but which is the Rexel of five years ago, I would say that we are much more resilient than what we were five years ago.
Yeah. Thank you.
Mr. Texier, that was the last question, so I turn the conference back to you for the closing remarks.
No, thank you very much for being here today. I mean, I will repeat what I have said in my introduction. Very good set of results, and guidance reiterated with confidence and a company which is both benefiting from medium-term trends and also ready for any scenario in the future. Thank you very much. Have a good day.