Welcome to the Quarter One Financial Release, Schneider Electric conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Amit Bhalla, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and welcome. Early start than usual this time. Thanks for making it. We're here for the Q1 revenue release. It was released an hour ago on our website. The presentation and release is available. To take us through today, we have Deputy CEO and CFO, Emmanuel Babeau. We'll have about maybe 30 minutes of presentation, followed by Q&A. With the usual disclaimer that you will see on slide number two, I want to hand it over to Emmanuel.
Thank you, Amit. Good morning, everyone. Really pleased to be with you. I just have to repeat what Amit has been saying. Thank you. I know it's an early start for many of you. Thank you for being with us. I suggest that we start immediately on page five of the presentation. As a starter, I would like to remind that Schneider is a simple and focused company. We have two businesses. Each of them is driving a major transformation of the world economy. Of course, on one side you have energy management driving energy transition. On the other side you have industrial automation driving Industry 4.0. Each of them, of course, is accelerated by the digital disruption. We are here making a difference with leading expertise in that field. All that is driving significant opportunity for our customer.
When we talk about our customers, I talk about our four domain of expertise, four end market, building, data center, infrastructure, and industry. Here you have a display of some of the benefit for the customer in term of energy efficiency, productivity, of course, reliability and safety, and last but not least, when it comes to delivering sustainability to the growth and to the development. I'm now moving on page six. All that simple company focus with leadership, with this clear value proposition for the customer that is translating into continued dynamism in our growth. As you have seen, we are off to a good start in 2019. I would say. I'm going to elaborate on that. All the ingredients that made our success in 2018 continue to deliver in Q1. Globally, EUR 6.3 billion of sales, growing organically plus 5.9%.
You see that the two businesses have been growing nicely. Energy management on one side growing 7% organically, industrial automation growing 4%. That is making a retreatment and taking as a scope effect here the end of a panel activity with low margin in the U.S. Of course, based on that good start, we are reaffirming our 2019 target. Moving to page seven. One of the reasons for our success, I think, has been, of course, the successful strategy that we've been now implementing in a very consistent, I would say, persistent manner over the last few years now. Quarter after quarter, showing its strengths and the result it does deliver. It starts, of course, with the fact that we have a well-balanced portfolio by geographies. You see here that Asia Pacific is number two this quarter behind North America.
It's certainly interesting to see that Asia Pacific is growing fast. Nevertheless, the best performer is North America this quarter. This capacity to seize the growth wherever it is a big plus for our company today. The other dimension, which maybe had not been well totally perceived, is the fact that the company has been evolving and is now well-balanced in terms of exposure to the various parts of the economic cycle, and we have a good balance between early cycle and mid, late cycle exposure. Clearly in Q1, we have seen the benefit of that. We'll talk about that when it comes, of course, to industrial automation. I would say it's also the case when it comes to energy management. Moving to page eight.
The strategic priorities have been also very clear for a long period of time now. We keep working on them and delivering. You know that the first thing is that we want to drive more product. We want to maximize the growth on product. They are still growing, I would say nicely by 3%, despite the fact that, of course, we are progressing through the economic cycle. It means that we are able to globally, with the innovation, with the quality of the portfolio, with the geographical exposure, to keep delivering growth on product, even if the evolution of the cycle is less favorable for them.
We want more services, because they're coming with great margin, great return on capital employed, and Q1 has been absolutely excellent in that respect at plus 11%. We want more software. I don't think I need to argue why we think that we absolutely need to develop software, both for what they bring to the customer and of course, because they represent a fantastic value creation. Once again, we are coming here with a quarter with double digit, and we are extremely pleased with the AVEVA performance. We want EcoStruxure, which is really a powerful drive of our digital and integrated offer. We want EcoStruxure to grow faster than the average of the group. We keep delivering on that. We also want better systems. Systems are not the priority, but we certainly want to grow them in a profitable and efficient manner.
You see that they are growing by 10%. It does reflect the evolution, of course, of the economic cycle, we go for more infrastructure, more data center, more process automation project, and that means more system. It's good to see the capacity that we have to balance the growth through the cycle, and to limit the volatility, thanks to this exposure to late and mid-cycle activity. That's what the system growth is reflecting that. Of course, all this priority, all the objective being then translated into the overall growth for sales. Moving to page nine. It's also our strategy about being focused and getting even more focused. That start, of course, with the portfolio optimization that we have announced, the EUR 1.5 billion-EUR 2 billion revenue that are today under strategic review. First disposal occurred in Q1 with Pelco.
You know the term of the transaction, you know the impact on the company. We've been disclosing that. We are here at the beginning of a process. Of course, I'm not able here to share a timeline and what's coming next, but you should expect us to come with more pruning of the portfolio in the coming months, in the coming quarters. By pruning the portfolio, we are making the business stronger, simpler. Of course, there is a very strong merit on the focus on the quality of the execution and the strength of the execution.
We are also making sure that we are strengthening our core by gathering more strength or, I would say, building new teams, the Carlyle partnership that we have announced for critical infrastructure to make sure that together we build super efficient, sustainable digital infrastructure with two nice projects, the JFK airport and the Lone Star Ports, Harbor Island. That's two project that, of course, are just the beginning of what we think we could be together, but it shows that there is today a need for efficient critical infrastructure that we are extremely well-placed, I would say, really with a strong differentiation hence, I guess why Carlyle has decided to partner with us in that respect. We see very nice potential of development in that direction and through this partnership. Moving to page 10.
We wanted to remind here the pillar of the growth, what the strategy is building upon. You know then the four pillars starting, of course, with innovation. We came up again with plenty of innovation, whether on contactors, on new PLCs. You have here a new digital protection relay. You have new UPSs. That is a big objective for us to continue, to accelerate on innovation, to make sure that this innovation is reaching our customer fast and that the share of new product or innovation among the global shares keep increasing month after month. That's how we get differentiated and that's how, of course, we manage to bring value and price for it. Second pillar, the digital. We have been nicely growing our asset under management by 39% year-on-year. We've been developing more advisor apps on EcoStruxure.
For those who were in Hannover, you've seen the launch of our Exchange platform, which we think is going to be a nice collaborative platform, a great ecosystem for improvement, for sharing, and at the end of the day, for creating value ultimately for the customer and for all our partners and people willing to work with us for the benefit of the customer. Third pillar. We are segment-focused. We know that at the end of the day, expertise differentiation is coming with knowledge of given application. I would say intimate, granular knowledge of the need of the various end market, and to talk the language of the customer. We have a very nice progression of orders in few of them, which are of course critical like oil and gas and MMM.
We are even growing double digit, showing that we really managed to make a strong impact when we have this focus. Fourth pillar. Extremely important. You know it, the cross-selling. We see day after day that our customer are asking for this capacity to bundle technology together within energy management. I can tell you, we really no longer speak about family of product or type of technology, but we talk about how do you make my energy management efficientSustainable. Above that, of course, you have the cross-selling between energy management and industrial automation, which is allowing us here again to make big impact among consumer goods, oil and gas, mining, or wastewater. I think we really see in our performance the strength of the cross-selling, and Q1 is another illustration of that.
Good to talk in general term, but also important to speak about some detail and precise case of success, of putting together and cross-selling. I have to start with the building one and the Tottenham Stadium. Yesterday evening, they were not playing in Tottenham, but not only with the new stadium, which is full of Schneider technology, are they more efficient in term of energy saving, safer, and globally improving dramatically the customer experience and the fan experience, but apparently it's giving chance at home, because I think they haven't lost since they are starting their new stadium, and maybe away as well, but maybe I'm getting a little bit too far there. Data center. A nice project in China, where we are putting together the old power management, and that has been attached to secured power as well.
Infrastructure. Great project with the Marines where we are putting together both going for renewable, getting greener, and the, I would say, reliability and efficiency. We are covering the efficiency, the reliability, but also becoming greener, and the two are not antagonist, of course, and they get on together extremely well. Fourth thing. It's just the full monty. It's an ethanol plant in Brazil, where we've been delivering a combo of all power management, medium voltage, low voltage, secured power. We've been selling plenty of technology for industrial automation and plenty of software from AVEVA. It really shows that we're not dreaming about this kind of project. They are actually happening, and we see more and more of this project month after month.
We know that, I'm not going here to take you by surprise, driving sustainability for our customer in the way we operate, for the community we interact with, therefore globally for the planet, is part of our DNA. We are reporting quarter after quarter our progress on the Schneider Sustainability Impact. You have here the performance at the end of Q1 versus where we were at the end of Q4. You have the final objective. I have to highlight here that given the fact that we were progressing fast and really having a fast journey, we decided to raise the bar for some of the indicators. We are making our target more demanding, more difficult to reach, we are super happy to do that. It's just showing that we are on this various parameter, making good progress.
Of course, we have one branch, one division, which is epitomizing this sustainability mission that we carry, which is ESS, Energy and Sustainability Service. Here we just wanted to put a nice project with the city of Saint Joseph, where we've been working with them on, again, how to make their energy management greener, more efficient, and certainly with a very high degree of reliability, and you have the testimony of our partner there. It's one story among many other. Moving to page 13, I'm going to skip. It's nice to see that this particular feature of Schneider, the mission that we have, is recognized. You have the list of the prize or the recognition that we have received in Q1. It's just good to see that this is making an impact and this is seen by the outside world. All right.
Now let's go to the numbers, the numbers are coming from what I've just been explaining. Let's start by the page 15 and global view on sales evolution. Sales amounted globally at EUR 6.307 billion. It's up +8.7% versus the first quarter of 2018. Good to see that the Forex is moving positive at +2%. Biggest driver here is the US dollar. Second then is the Chinese yuan. Then we have a number of currency that have been negative for us, whether in Middle East, in South America. The Russian ruble has still been negative for us in Q1. In total, it's positive. We see now for the full year based on the current parity, a positive impact on top line, which has improved. Now it's between EUR 300 million and EUR 400 million.
On the FX, we were expecting something around stability. It could be slightly negative. It's really moving marginally, it could be around -10 basis point because of some of the new economy currency that has been depreciating. On the scope, +0.8%, this is mainly AVEVA, to be very clear. That leaves us with an organic growth of +5.9%. Moving to the detail of that. I've already alluded to the three components of the growth, starting with the product, so +3%. Clearly, in the building end market, we have seen a continuation of a very good growth. Discrete industry has been moderating in term of growth, globally still growing. In line with our expectation, that's what we were planning for.
Really to deliver 3%, it shows the strength of the portfolio and, I would say, the impact that we managed to have on the various geographies. I commented about the system growth, the +10%. It's good to have this exposure to process industries, to data center, to infrastructure, because they are a nice contributor to the growth. As you know, we are working on the quality of the system and on the profitability of the system as well. It allows really to smooth the volatility and decrease massively the volatility through the cycle. Service and software, 12% growth in Q1. Really growing extremely fast, both of them. On services, I have to highlight the very nice growth on data center and among our industrial customer. I talk about ESS, that is doing extremely well.
You have seen, of course, the performance of AVEVA for the Q1. They've been closing their first year as the new AVEVA, and we are very pleased. Of course, they will communicate their full year results in the course of May, but the top line growth has been extremely good, and it's a great satisfaction for a first year to see already such a dynamism. Let's dig a little bit into energy management and industrial automation. I'm on page 17. I start with energy management, of course. EUR 4 billion 738 million. It's up +9.6%. We really have continued to grow nicely on the residential and on small building. We are playing here on innovation. We are working on the channel. The cross-selling is very important here.
We have a good progression on the commercial industrial building, and that's really the strength, the capacity to be able to cover both residential, small tertiary, but also the CIB. That's a big strength of the company, and that has been playing across geographies. Good cross-selling as well with industrial automation. That has been showing notably in oil and gas. [3M EcoStruxure] is hitting the market with great success. Continuation of a really great journey on data center with double digit. I must say, the sequence that you have here on the right bottom part of the slide is impressive. The growth over the last nine quarters, it has been now several years in a row of good growth for energy management. That is continuing in Q1. Moving by geographies. I'm sure you've been impressed by the growth in North America, +12%.
It is a combination of strength on building, both resi and non-resi. Data center doing very well. I talk about services growing well and ESS notably. That was accounting for the 12% growth in North America. Asia Pacific, +8. Very solid performance in China. We have been certainly further enhanced, I would say, by some distributor restocking. That certainly has been, I would say, helping the number. Fundamentally, what is happening in China is what we said would be happening, as is that China is a growth market. Despite the fact that we are seeing some very high comps in Q1, going to continue in Q2. We see the Chinese market as a growth market. We see construction going well. We are here flagging the fact that we believe that after a fantastic period of growth, the growth could moderate in the coming quarter.
I would say to a large extent in line with our anticipation already several months ago. We see also all the energy management things that we sell to infrastructure, to industry, doing well. India has continued to deliver good growth. We've seen Southeast Asia and Australia also performing well, notably on data center and smart grid customer. Rest of the world growing 4%. Good to see South America back to growth. Africa, that keeps growing as well. For the more negative, Middle East has been down with a number of market like Saudi Arabia, the Gulf being more difficult. CIS globally has been down. A good trajectory, I would say, for things linked to residential, commercial building. Much more difficult when it comes to investment in oil and gas and therefore all the energy management that we sell to that end market. Western Europe, plus 3%.
Good growth seen in Italy and Spain. Good growth seen in the U.K., clearly uncertainty is increasing, linked to the Brexit, and that is having some impact. We see wait-and-see attitude and the level of project on which we are working with the customer, the pipe, all that is certainly impacted by the level of uncertainty. Germany has been a bit down, France has been down, notably because of a weak utility market. Going to industrial automation, up plus 2.3%, we believe that you really have to, organically, we really have to treat the end of the panel builder, which was a low-margin business in the U.S., and that's the reason why we decided to stop it. We have been delivering a 4% organic growth, without that impact.
There was a lot of question, I know, around what's going to happen to the discrete and the OEM business. We've been extremely clear on the fact that the OEM has been slowing down, and sometimes significantly. That has been the case in China. Nevertheless, we are still slightly up, despite a slowdown in some of these geographies. Comps were high in Q1. They're going to be even higher in Q2 because all this discrete business was on fire in Q2 last year. Nevertheless, good to see that discrete is holding up decently well. We have strong growth in process and hybrid that is continuing, and that boosted by late cycle demand that was expected, that we would have the relay of this business through the cycle. Actually, process automation has been growing in all region, which is good news.
I think the sign that the Invensys acquisition, which has suffered of the environment at the beginning, is clearly delivering today. We see that across the geographies. I have to, of course, finish that with the AVEVA detail. Double its growth, as you have seen again on the top line. Here you have the combination of the strength of the new portfolio independently and autonomously, I would say the fact that putting the two portfolio together is having a nice impact and create lot of dynamism for AVEVA. Second, and it's very important as well, the fact that Schneider and AVEVA together are a unique, differentiated value proposal for the customer, and we see very nice traction behind that. The sequence of growth was impressive for energy management. It's even more impressive for industrial automation.
You've seen that we've been from mid-single-digit to double its growth for the last nine quarters. A very strong business here with industrial automation. Just by geography, rapidly, starting with Western Europe. Western Europe is the only region where actually industrial automation has been growing faster than energy management. Good growth in France, in Germany, in Spain, and in the U.K. Actually here, good performance on OEM and machine solution, really doing well. Of course, process and hybrid has been also a good performer. Interesting to see that discrete has been holding up pretty well for us in Western Europe. Asia Pacific, up +3%. China still up, again, despite this OEM slowdown. Process industry doing well in Southeast Asia. India growing across technology, I would say. Japan, more difficult. Here, discrete automation has been clearly under pressure and declining.
Rest of the world, growing +3% as well. Good growth in South America, in CIS, in Africa, in Central Europe, and therefore, really places of difficulties have been Middle East and Gulf and Turkey in particular. Last, North America, growing +2%, excluding panel. Even if you just look at the U.S., U.S. has been growing +5%. Clearly good performance on process industries. Oil and gas, food and beverage have been doing well. If you just look at discrete and OEM, it has been stable. Again, still growing in North America, despite this slowdown on discrete. All right. That leads me to the conclusion for the rest of 2019. I'm on page 22. What should we expect for the rest of the year after this Q1? We are, if you want, confirming and sometime refining the vision for the various markets.
On China, I think we keep repeating that China is a growth market. We are facing, as we said, high basis of comparison and a softening OEM market. We flag the fact that construction, infrastructure, and many parts of the industry should continue to do well, and that's what we are expecting. We are here highlighting the fact that construction could soften, could moderate in term of growth in the coming quarters. North America has been very good in Q1, and we expect North America to continue to be good for the rest of the year. We see a large country in Asia Pacific, such as India and all the big geography in East Asia, to continue to enjoy good momentum. In Western Europe, we expect to see continued moderate growth. Of course, the Brexit is a big question on what could be the impact.
On the rest of the world, we expect to see a continuation of a contrasted picture, that's exactly what we've been experiencing in the first quarter. We are, of course, reaffirming the target for the year. We do expect a good growth in aggregate in 2019, and Q1 is, of course, just confirming this ambition and the target. We are globally targeting for 2019 an organic adjusted EBITA growth between +4% and +7%. As you know, we're going to use the two levers to deliver that. The first one is the top line organic growth. We are targeting to be between +3% and +5%. The other one is the organic improvement of the adjusted EBITA margin, and we target an organic improvement between +20 and +50 basis points. That ends my presentation, and we are now moving to the Q&A.
I will be very happy to answer your questions.
Thank you, sir.
Thanks-
If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask the question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.
Yeah. Just to reiterate, I think we do see several questions in queue. Let's keep it to one question per person, and then time permitting, we'll come back so that everyone gets a chance. With that, let's move to the first question, please.
Thank you. Our first question comes from Andreas Willi of JPMorgan. Please go ahead.
Good morning, Emmanuel and Amit. My question is about data centers, which, based on your commentary, seems to have had strong growth in Q1 across many regions. Maybe you could tell us what the overall vertical is growing currently and what you see on the order intake, whether this can continue in the coming quarters.
Yes, Andreas. Thank you. Indeed, data center has been growing nicely. I would say it's a continuation of the trend that we have seen. It's not as if suddenly there was a big acceleration. That has been there. We've been flagging the fact that we were having a nice success on that market. It has been growing across geographies. You are absolutely right. North America was good. Clearly, many new economy have been good. Many country in Europe have been good as well. That's a good momentum that we are enjoying. We know that the cycle is also explaining that. That's a business where you have acceleration on the growth, and then the growth can be softening. We are still seeing a good momentum and good dynamism. I'm not able to say how it's going to evolve in the coming months.
We are certainly taking the view that for the year, data center growth should be a nice contributor to the growth. No doubt about that.
Thank you. Thank you, Andreas. Next question, please.
Thank you. Our next question comes from Andre Kukhnin of Credit Suisse. Please go ahead.
Yes, good morning. Thanks very much for taking my questions. I will ask about China. If you could maybe quantify the amount of restock help in Q1 in AM, what your expectations are for this geography for the year, maybe for EM and for industrial automation, where I guess growth was surprisingly robust still in Q1, you have got tougher comps that you flagged. Thank you very much.
Yes, Andre. I can try. Always extremely difficult, of course, to give a growth outlook for the year on China. We started around 7%, again, with a number of element that has been helping. I am back to my comment on the fact that the Chinese market is a growth market and should be a nice contributor to the growth. I am not sure that it is going to reach Q1 for the overall year. Probably today, I would say the underlying trend is probably around mid-single digit growth, as a kind of underlying impact without the working day and all that. Knowing that Q2 is a mountain to climb again in China, because Q2 was, again, enormous, notably for industrial automation. That is a kind of underlying and could be a vision to be confirmed for the full year.
Got it. Thank you.
Thank you. Next question.
Thank you. Our next question comes from Alasdair Leslie of Societe Generale. Please go ahead.
Oh yeah. Hi. Good morning. Thanks. I am just wondering on the systems growth and your comment about kind of working to ensure profitable growth there and the, I suppose, the implied mix impact on margins. I just wondering to what extent the strong growth in data centers is influencing that growth and really whether that has any impact on the traditional margin profile that we kind of think about for the systems business. Thank you.
Sure. No, absolutely. I mean, the system growth is partly only because you have also process automation, you have everything on infrastructure, where we sell a lot of energy management technology, EcoStruxure. These are contributed to the system growth. Data center is a contributor. I would not say that the profile of margin is sufficiently different because they're not the only growth contributors. You have also other elements. That is sufficiently different to change the profile of the margin. We have globally, I would say, an objective to improve the margin on system. We've been doing that for the last three years. We want to continue, and it's a big objective to make sure that we keep improving the margin and the return on capital employed on system.
At the end of the day, it is clear that systems growth is going to bring some negative mix impact. In front of that, of course, we are coming with price increase. We are coming with productivity. We have services growing fast. We have software growing fast. We are working on our SFC, even if I'm going to surprise you, but we are investing to keep our leadership on innovation and digital. We take all these dimensions, and I can tell you that, of course, include the impact of system, when it comes to working on our margin improvement.
Thank you.
All right. Next question please.
Thank you. Our next question comes from Jonathan Mounsey of Exane BNP Paribas. Please go ahead.
Hi. Yes, good morning. Thank you for taking my question. On the runoff of the panel builder business in IA, in the U.S., just thinking about the balance of the year. What is the impact on the top line as we run this through the year? Obviously, it's quite significant in North America in Q1. Is that a kind of a drag that we should be modeling as it annualizes over the next three quarters?
We'll be happy to provide you, Jonathan, with of course the impact. That is, you have the drag on Q1. You had already an impact on Q4 last year, and I think we flagged the fact that for the full year, that was about one full point of growth for Industrial Automation at the group level. All right? Therefore, if you start with a bit more than EUR 6 billion, it's around EUR 60 million impact for the year. We'll be happy to provide you with an expected phasing of that.
Thank you.
All right, Jonathan, we'll come back to you on that. Next question please.
Thank you. Our next question comes from James Moore of Redburn. Please go ahead.
Yeah. Good morning, everyone. Morning, Emmanuel. Please, can I return to China? You mentioned helpfully the 7%. I wondered if you could do the same for IA and EM, I was thinking 2% and 9%. You mentioned China construction could moderate in the coming quarters. Can I ask what prompts you to say that? Is it based on comparatives or something more specific like land sales or tender activity or something else?
Yeah. I understand there are questions on China. Clearly, I'm happy to provide some detail between Energy management and Industrial Automation, if it was your question. Energy management was growing high single digit when Industrial Automation was rather growing mid-single digit. Okay? That's the mix of that, which is giving the around 7% growth. On the moderation, that's what we can try to with the very high conviction that we were having and some exceptional growth last year. Also, when we look at the new starts, when we look at the environment, that's the feeling that we have, that the growth could moderate. We have to be very cautious because, of course, decision could change that very rapidly, on access to credit, for instance, or giving more new permit or whatever.
That's based on that we have the feeling that this could soften, growth could soften in the coming quarters.
Just to be clear on that, you're talking more about comparatives than any great visibility of order deterioration or tender deterioration?
Yes.
Okay. Thanks.
Absolutely.
All right. Thanks, James. Next question please.
Thank you. Our next question comes from Gael De Bray of Deutsche Bank. Please go ahead.
Yeah, thanks very much. Good morning, everybody. I had a question about Industrial Automation and within Industrial Automation about Western Europe in particular, which outgrew other geographies this quarter. And some of your competitors had previously flagged some delayed investment decisions in Europe, particularly in Germany, talking about machine builders becoming more cautious on the outlook. I guess you've not been really impacted by this quarter. The question or the questions I have would be what's driving the superior growth in Industrial Automation in Europe now? Why do you think you're getting share in Europe, and how easily could you actually replicate this European success elsewhere in other geographies?
Thank you, Gael. Difficult for me to say that we are gaining share because, of course, not many competitors so far have been reporting. Not yet fully clear what has been happening. Well, I think we certainly have been quite efficient in growing, still with OEM, making sure that we've diversified industry through our distribution channel. We were having success. Certainly process automation here as well is accelerating, and we see a number of investments. You have to bear in mind that we have very little exposure, I would say, unfortunately, to automotive, and that maybe some of the slowdown that has been seen in Europe is starting maybe with automotive. That could explain why we don't have that negative, that drag on the performer. I'm not sure I can comment more than that.
I think it's really, again, innovation, the fact that we are spreading our exposure to the various technology. Again, maybe automotive could make a difference there versus others.
Thank you, Gael. Next question, please.
Thank you. Our next question comes from Wasi Rizvi of RBC Capital Markets. Please go ahead.
Hi, good morning. Most of mine have been answered. I guess one thing that didn't come up during the call, which I think you spoke about Q4, was a working days impact, and it seems like it's been negligible in the first quarter, but I think you just specified it as being an issue for the whole of the first half. I guess if you could talk about what you're expecting for Q2 and what you saw in Q1 as well.
Yeah, sure. That's important. Actually, we had a negative working day impact on Q1, which was close to 1% negative. Actually, Q2 is even worse, and that is going to be significantly more than 1%. Q2, it was the highest comps last year. We have big working days, so that's going to be a very demanding quarter in term of comps and one-off impact. Then we're going to recover in H2 in term of working days. For the full year, that should be about neutral. H1 is very negative, and H2 is going to be much more positive.
All right. Next question, please.
Thank you. Our next question comes from Peter Reilly of Jefferies. Please go ahead.
Well, good morning. Could you please give us a bit more color on what's happening in data centers? You talked about growth in all regions. Are you seeing a trend to smaller, more local data centers for reducing latency and complying with local regs? If so, do you think that trend has a long way to run?
Yes, Peter, absolutely. Really on data center, that's the kind of positive chemistry that we've been experiencing for several quarters now. You have the combination of, on one side, regulation, of course, fundamentally starting with the growth in capacity, that is absolutely needed because you keep having an exponential growth of the data that needs to be stored in data center. Regulation is, of course, helping because more and more, you need to have data center in specific geographies, and you need to store your data in specific geographies, and it's not going to ease. That is combining with edge computing, which is for us great news because that means that many people are going to go still for a small, medium-sized data center where they will keep their, I would say, sensitive, critical data, and they reduce the latency time.
They, of course, manage to exclude any kind of cyber risk by having a private cloud. That is triggering a lot of investment as well. Therefore, the two cover the full ground of our technology, which are the small UPSs, the single-phase UPSs, but also, of course, the large data center three-phase, which are involving, as we know, also a lot of power management dimension. That's really the combination of the two that is explaining the dynamism at the level of data center. If I look at the family of products that you are reporting, I think your power has been growing very strongly in Q1.
Thank you.
All right. Next question, please.
Thank you. Our next question comes from Daniela Costa of Goldman Sachs. Please go ahead.
Good morning. Thank you very much for taking my question. I just have one follow-up. Wanted to ask you about the guidance for the margin improvement. Last quarter, you had a comment about the margin improvement being more pronounced in the second half, and I think you've removed that from the release now. Can you help us understand, given what you mentioned on mix and given the various comps and other things throughout the year, how do you expect margin progression to pan out in the year? Thank you.
Yes. I can try, Daniela. It's true, we haven't been repeating that. That's a comment that we made at the beginning of the year. That was a possibility. That is still a possibility. I've been flagging the fact that Q2 was a big comps and with one-off impact coming from the working days. That's a possibility that we are seeing a couple of months ago. Now the year has started, we are of course, off to a strong start. That's good news. It could mean that what was a possibility won't materialize, but it's too early to say. We said it's a possibility. We'll see where we are at the end of H1. It is clear that we are starting the year on a good note, and that's globally good news. There is nothing else I can add to that.
All right. Next question.
Thank you. Our next question comes from Denise Molina of Morningstar. Please go ahead.
Just a quick question on the portfolio pruning. If you look at the announcements so far, I think it's somewhere around the upper end, 8% of the revenue. It sounded like you were saying that there could be more that goes under review, which makes sense given that you're seeing growth in software and maybe you've got some other legacy businesses. I'm wondering if you're done with the review or if we can expect more to come.
No, my comment was really to say versus what we've been announcing with SpecCo, you should expect more to come. I'm absolutely within this EUR 1.5 billion-EUR 2 billion. I'm not able to tell you where we're going to end up. It is clear that we have this absolute willingness to become even more focused. You have some huge positive knock-on effect, when you get simpler, more focused, the way you operate in the remaining business is even more efficient. You focus your investment on what is really making a difference. You globally work in an easier, more agile environment. We're going to be uncompromising with that. I'm not coming with more than the EUR 1.5 billion-EUR 2 billion. That's absolutely the envelope on which we are working.
Great. Thank you.
All right. Thank you, Denise. I think we've covered most all the institutions. We have about five minutes left. We can probably take another couple of repeat questions and within the time left. Let's go for the next one.
Thank you. Our next question is a follow-up from Jonathan Mounsey of Exane BNP Paribas. Please go ahead.
Hi. Thank you for taking the second question. It was just to ask what's the Q1 impact from price rises. I know that we're kind of annualizing price rises from last year that we're catching up for raw material headwinds. I would assume, therefore, the price is materially positive in Q1. Can you give us the magnitude of that effect, please?
Jonathan, I won't comment on the number. What I can tell you for sure is that we said that we wanted to be more ambitious on price. We said that it was no longer about just matching the raw material inflation, which we expect probably to be negative for the full year, but not to the same magnitude as last year and far from it. I think that last year in H2, we showed the capacity to accelerate on price increase and to deliver more impact on the top line and therefore, of course, on the margin. That is certainly the way we've been addressing Q1.
Thank you.
All right. Let's take one more.
Thank you. Our next follow-up is from Andreas Willi of JPMorgan. Please go ahead.
Yeah. Thanks for the time. I had a question on process automation. If you look at the Foxboro DCS business, now that we see some investments coming back in the market, are you participating in this mainly in your historic installed base or also with new customers?
Thank you, Andreas. I think, after a difficult cycle, phase of the cycle, you are right, they are both green and brown field. What we have today with AVEVA, the capacity through EcoStruxure to have, of course, the analytical level with AVEVA and our advisor is very well complemented by our DCS and by our safety system, by Triconex. It is our ambition to certainly try to go for greenfield, including with new customer that maybe sometime AVEVA could introduce to us. We believe that that was already five years ago, the acquisition of Invensys. We have been progressing. We are becoming more relevant. So we have globally been gaining shares over the last five years on the DCS, but in a market which was relatively subdued, so that was certainly more difficult. Our ambition today is to accelerate.
We have a number of signs that show that we are clearly developing among new customers, in oil and gas, in mining, for hybrid, in some of the hybrid end market. I think the next 12-24 months are going to be important to watch, to see the impact that we manage to do. My feeling is that in Q1, we have both, in terms of sales but also in terms of order intake, good sign. We'll have to wait what the others have been doing in the same period of time.
Thank you very much.
All right. Thank you. Thanks. I think we're coming to the hour. I just want to remind everyone of two dates. This year, we're doing the EPG. Most welcome to meet with us over there for the investors, and a specific sell- side day there as well. Secondly, there's the 26th of June, which is our Capital Markets Day in our headquarters in Paris. It's probably, for those of you who haven't, please mark the date. With that, thank you from my side. Emmanuel, any closing comments before we close the call?
No. Thank you all. Glad to have a good start to the year. Again, very much in line with our expectation. We had various scenario when we build the full year. Certainly, they were not all that favorable for Q1. It's good to start on a good note, and that was a possibility to continue. I think what is important for us is, again, coherence, consistency, and persistence. The ingredients of the growth at the beginning of 2019 are the one that we have been experiencing and that have been working in 2018. Thank you. Talk to you soon, I'm sure.
All right. Bye-bye.
Bye.
Ladies and gentlemen, this concludes today's call. Thank you all for your participation. You may now disconnect.