Ladies and gentlemen, welcome to the Schneider Electric Q3 2018 Results presented by Ms. Emmanuel Babol, Deputy CEO in charge of Finance and Mr. Amit Bala, Head of Investor Relations. For your information, this conference is being recorded. At this time, I would like to hand over the call to Mr.
Ahmed Pala. Please go ahead, sir.
Thank you very much. Good morning, everyone. Thanks a lot for being with us for the next 1 hour where we're going to be sharing our 3rd quarter revenue results, with Emmanuel Babour Deputy CEO and CFO. So without further ado, just reminding you of the disclaimer as always on page 2, I hand it over to Ananiyah.
Thank you, Amit. Good morning, everyone. Very pleased to be with you this morning. Well, I believe it's a great moment to catch up, certainly to review with you where we are at the end of Q3 gives you outlook for Q4 and the coming months. It's certainly a very timely moment to talk about what we see in the market.
I'm sure you're coming with a lot of questions. So As always, of course, I have my presentation, but I will be more than happy to answer your question after that on what we are seeing on the various markets. So we, have clearly experienced, and I'm on page 5 of the presentation. Another strong quarter of, of of growth. I believe that, this is clearly coming, from the success of our strategy and the success full implementation.
Notably, of course, thanks to putting digital at the forefront of the strategy. We clearly see that leading the race is a big differentiating element in gaining customer and developing new things with our customer. I think that this quarter also illustrate well the advantage of having a balanced portfolio. And when I say balanced portfolio, I mean, a balance in term of geographies, of course. I'm sure you have seen already that we have 2 very powerful engine delivering during this quarter, still Asia Pacific, of course, but North America as well.
And that's the good thing of having a diversified geographical exposure, but also diversified exposure in terms of end market and technology which means that we are exposed to the various phase of the cycle. Of course, we have seen now for the last 18 months our short cycle business, doing well and delivering good growth. What I believe we have started to see in Q3 is first, of course, on short cycles, still good news and delivering good growth, but an acceleration on the mid long cycle part of the business. So that's really what is behind, I guess, this strong performance of Q3. You can see first, you know, on page 5, when I when I mean balance, look at energy management plus 7.4 organic Industrial Automation plus point 6.
I mean, the two businesses are growing at a very similar pace at the end of the day, and very much in line with the average of the group. If you turn, the page, page 6 where there is a bit more detail, on on the headline of of the performance, First, on the left hand part of this, of this page, looking at the region, we have seen an organic growth across all region. And I would say, we've been growing across all technology across all regions during this quarter. So the 4 region I've been growing in all technology. I think we had not seen that for quite a while.
It's interesting to note. When you enter into the region, you see double digit growth of course, across Asia Pacific and it's another quarter of double digit growth in China. I don't know whether I should come in China now because I'm sure you plenty of questions on China that we'll be more than happy to answer later. North America, great to see North America, which was already costing a good H1 further. I accelerating with high single digit growth.
Rest of the world, still growing at mid single digit growth, some pluses and minuses in the trends. And globally, we see new economies as a very important contributor to our growth within high single digit. System growing at +9 percent I think we're still growing very dynamically on product, plus 5%. We are very happy to grow on services plus 11%. We keep growing, the weight of services, in our total portfolio.
Great success on software. I'm I'm guess you may have seen the AVEVA communication this morning, but we are growing double digit at the group level and AVEVA in particular during this Q3. But the growth in system altogether is illustrating what I was mentioning in term of the businesses, which are more need long cycle accelerating, I think that's an interesting element to note. Of course, as I said, digital is top of the agenda for us. And EcoStruxure is leading the charge when it comes to digitizing the business of our customer.
One very important metric that we are looking at, which is a number of asset under management, which will, trigger business in the future, in term of digital services notably selling analytical capacity, that is growing more than 25%. So a good performance. We are also growing very nicely in our, sustainability, services, what we call energy and sustainability services, which is this mix of digital services and efficiency that we deliver to our customer. It's up plus 12%. We remain focused on delivering shareholder value.
And, given the situation on the financial market, we are contemplating the possibility to accelerate the completion of our buyback program and to finish it before the end of 2018 and that we need to be 6 months ahead of initial plan. All that gives, for, 2018, the possibility to revise upward our guidance We are not targeting an organic growth of the adjusted EBITA, between plus 8% and plus 9% when previously the bracket was between plus 7% and plus 9%. Moving now to Page 7, I think it's more for you when you will have maybe time to enter into some detail and that can be a trigger question when we'll have more contact, with you and more interaction. We really have 4 big pillars, that is that are supporting our progress and our success. The first one, of course, is innovation, in today's world.
You cannot be relevant. You cannot make a difference, without being a leader in innovation. And we keep innovating and launching new product, new technology, new digital capacity, that create more added value with our customers. So you have a few example here in terms of power advisor that keeps being improved and enriched with new apps and new analytical capacity. Is there GP3 connected product, which is about accelerating on the digitization of the grid automation And we are also investing on some startup super innovative technology that what we've been doing with Sense.
Sense is a startup what's provide a product that make your, a panel, electrical panel at home, smart panel instantaneously with the capacity to assess, measure the way you are actually consuming energy with your various devices. Digital, of course, is at the heart of innovation. As I said, it is top of the agenda for the group. We are progressing progressing very fast in our digital journey. I talk about asset under management.
You understand how critical it is to, grow very fast, on these metrics, that's going to trigger on the long term, sticky, strong added value for the customer business. We are, of course, growing fast on EcoStruxure and EcoStruxure is a contributor to the, growth of the group. It's growing faster and significantly faster than the rest of the group. And we are also working on, the customer experience to make it digital and to really hear make a real difference versus competitors on this digital customer experience, which is going to be so critical in growing our business in the future. Circular, the segment focus, in today's world, if you want to be relevant, you have to build expertise by segment we can do that very powerfully by bundling our technology.
Of course, quite easy for me to take data center as a very clear example where we can bundle various technology. I could also take an example on the industry space. And each time, we deliver a very tele made specific expertise on each segment that make us relevant to our customer. Last but not least, of course, cross selling, the 4th pillar, that's maybe what defines Schneider versus many of our competitors. That's a big strength And that's certainly something that is helping the performance in our Q3, once again, and we talk here, of course, about bringing the full energy management and industrial automation to our partner, in both industry and infrastructure space.
We talk about approaching the building with all the answer in terms of putting the building efficient in terms of power management. And all the features of the building management. I talked about data center. I mean, we could multiply all the example of the of this cross selling. Next page, I want to elaborate just again, pointing to my comment on the diversity of technology of exposure look by geographies, the diversity of end market, technology type of customers, things that we do for them, which are extremely different and that we've been delivering during this Q3.
And I think it points to the strength of the group, that, as to the unchallenged Brits and depths of portfolio and and capacity. Again, I don't want to spend too much time because I want to leave time for q and a, later today. In this, in in in this talk. Moving to page 9, and just, you know, pointing to the fact that innovation is, of course, our role, our mission, that is a journey that we are clearly making with our customers and partner. And therefore, we have this kind of should I say climax or key moment in the relationship with our customer, across the globe, as you can see, many, many dates where we've been spending time with 1000 and 1000 of customers.
Many of you have been joining us during some of these events. Just doing 2 minutes of advertising. The next one is actually in the U. S. In a couple of weeks in Atlanta.
We expect many customers. I hope that some of our shareholders will able to join us, to talk about innovation in 2 weeks in at nighttime. And before moving to more detail on the number, I really want to insist again on the fact that sustainability is certainly core to our mission and it's deeply rooted in our DNA. And we we spend a lot of time. We invest a lot of energy.
It makes our business better altogether the planet, but also for our customer, we are sharing, of course, with them this sustainability, championship or capacity. We have this new Schneider sustainability impact, 5 dimension. Again, I don't want to spend too much time elaborating on all of them. Just taking one maybe which think it's particularly striking. If you look at climate, we target to have in 2020, 80 percent of renewable electricity We start up Q2 twenty eighteen on the low key.
We're at 6%. Look at the jump that we managed to achieve in Q3. We are already 25%. So we're not yet at the 80%. But clearly, we are accelerating our journey.
And this is the kind of action that we've been taking to get there. In Americas. We've been purchasing a renewable certificates. We've been signing a green tariff contract for 50 gigawatt hour, in EMEA. And in Asia Pacific, we actually have on-site, 2000 kilowatt of, of capacity, in our factory in China.
So we are using a lot of levers to get there, and we're gonna get there. I can, I can tell you? The last one on this section is just, of course, to highlight the fact that all this work that are doing on sustainability, on compliance, on ethics is acknowledged and rewarded by many recognition a great ranking, again, don't want to enter into detail. It's here for your per user, but I think it's clearly recognized in a very clear fashion. All right.
Now maybe let's move to Page 13 and let's enter into some details on this Q3 performance. Our sales have amounted to €6,377,000,000. It's up plus 8% versus the third quarter of 2017. One impact on the negative year, which is the Forex, the negative impact is abating. It's it's not only minus 2.4%.
When I look at the main currency that are driving this negative impact, you have the Indian rupee, the Russian ruble, the Brazilian reais. And then, of course, you know, Turkey and Argentina currency have not been helping. But these are the currency that have been negatively impacting us. Good news probably coming on the dollar where we see some strengthening of the dollar, which is, of course, good news for us. Moving to the scope impact, plus 3.2%.
This is the mainly AVEVA and ASCO impact, but it's a nice contribution to the growth. And then you have this balanced growth between Energy Management And Industry Automation, and I'm going to elaborate on each of them. Just one point on the global Forex impact. We are slightly revising it for the full year, just for the top line impact. We were around 1,000,000,000 negative impact, we now believe that because of the weakness in some, emerging country currency, We'd rather be around minus 1,100,000,000.
Nevertheless, we don't change the expected impact on the margin. We are still seeing an impact which would be around minus 20 basis points. So let's move to energy, management analysis. I'm on page 14. It's 4,000,000,000, 846,000,000.
It's up to 7.5% with an organic plus 7.4%. I think that is extremely, interesting and maybe remarkable during this quarter is how even, is the high growth that we are seeing across the street technology. You've been used, of course, to see low voltage, you know, flying high still flying high, but you look at mediumvoltage, plus 8.3%, Secure Power, plus 6.4%. So it's really across the 3 technologies of energy management. And that's, of course, the success of our EcoStruxure offering that is the power of cross selling.
And this is certainly the fact that, we are approaching with a very bespoke approach by segment, and that make us very successful. If I enter into some detail on the energy management components. As you look at Medium Voltage, up +8.3 percent organic, That's a very nice acceleration. When I was pointing to mid long cycle businesses accelerating, this is one of them, not the only one, of course, process automation. That doesn't, to some extent, contribute to that, but clearly, medium voltage, illustrate that in a nice fashion, Now I draw your attention on the fact that, Q3 2017 was minus 4% for energy management.
When Q4 was plus 2. And therefore, there was some ear easy comps, if I may say, but clearly, We've been turning the corner on Medium Voltage and we are now growing nicely. And the good news is that it's EUR 1,100,000,000 of of revenue, has been achieved, delivering on the right priority because it's not only about growing medium voltages. It's about growing the top line in a profitable manner and improving the margin. And indeed during this quarter, we did manage to generate the right mix.
We've been growing very nicely on product. We've been growing very nicely on services. Software component is delivering well. And and therefore, you know, we are growing this medium voltage business the way we want to grow it. And that's certainly a a a good news.
We've seen growth across regions. So all regions have been growing on, medium voltage. We are growing nicely in our priority end market and targeted end market, commercial industrial building. This is here in in package with low voltage and that is clearly helping the transactional, the product component, which is so important and we've been going also very well on data centers. Services are up double digit.
It's another priority. And it's delivering, very well with a great performance notably in North America. We are also growing nicely such a grid and we are growing on software for, the grid, which is good news. And of course, the consequence of everything I've just been seeing is that system, has been, growing, but at a slower pace and transactional 4,000,000 voltage. And that's exactly something we want to target.
Moving to the next page, and the Low Voltage performance, I mean, Low Voltage has been flying high for quite a while now and it continued to fly very high. We are once again, growing in all regions. We continue to have a great success in residential and small building. Across region, China and India, once again, were particularly good, in that space, but not the only one. We see great success in commercial and industrial building, and the LV offer is really making a difference.
I talk about data center for Medium Voltage. That's also the case for for Loews. Service is up high single digit. And I talk about this nice performance on the energy and sustainability offers that epitomize both what we can do in term of, the management of energy and making sustainability, a great success and element of performance for our customers. Next page, take your power, plus 6.4 percent organic growth in Q3.
And, I think we we we are not seeing this type of growth for, for Secure Power for quite a while, actually. And it's great to see really secure power becoming, as well a great contributor to the growth. It has been across the various part of this business, starting with a distributed secure power, so the small UPSOs, what is going through the IT channel, Although we are still being impacted by some shortages, that was clearly a positive quarter for this business. Very strong growth in data center. We are now growing double digit for the Secure Power Technology in data center.
And that means that Secure power, low voltage, and medium voltage. The 3 of them are growing at double digit now, for, data center. Good growth as well in non IT, market. This is the edge computing, I would say implication that I shared with many of you we see a lot of small, medium size, you know, server room or data center, I would call them, creating of edge coaching capacity towards, I don't know, or close to a hospital, a manufacturing site, an oil and gas, site, and that is clearly helping the, as an IT market. And then services up mid single digit.
This is here, we talked about critical, critical services, critical application. We are not growing as fast as for the rest of the group. But that has been a very sustained growth over the past year and that continue, which is a very good news. I am now turning to Industrial Automation, which keeps growing fast at close to 7% +6.6 percent. Exactly.
Now facing higher, base of comparison in Q3 of of 2017. I mentioned already that we are benefiting from this balanced portfolio, between discrete hybrid and and process industries. That's clearly, I think, a big plus in this performance of Q3. We continue to grow well with the OEM. And of course, this is part of our discrete offer We are growing nicely and gaining traction with EcoStruxure Machine.
We see process automation accelerating And clearly, I mean, the price of oil and gas is, an element for that. It's not the only one that as we progress through the cycle, we see this acceleration for post automation. And last but not least, of course, we have great success with AVEVA that has been delivering a nice double digit organic growth in Q3. And the performance of Aziva is highlighting, or confirming, I would say, the strategic intent and the synergies that Azivange Nydall can generate together. All that gives a bit more than 1,000,000,000 of sales.
It's up almost 9%. The scope impact, of course, is the AVEVA contribution. And that's an overall excellent performance again for industrial automation over this quarter. A few words about the geographies. All positive again, starting with Asia Pacific plus 11%.
China is actually very much in line with its growth. And China keeps growing fast. And the growth was actually well spread between energy management and industrial automation over this, this quarter. India, with a great performance on, low voltage with a growth north of 20%. Australia, where we have seen double digit growth both in energy management and industrial automation.
Indonesia, great growth, low voltage and industrial automation, only negative point or significant negative point in this zone. Is Japan, which has been down because of a slowdown in industrial automation for us. North America, which is growing almost as fast now as Asia Pacific, great news. I would say very homogeneous, growth across the three country, but, of course, wake of the U. S.
Making the most important market, both across the businesses and across the technology. For North America, which is reflecting both the market in good shape. And I guess the fact that we are also gaining market share in North America, when we look at the growth of some of the competitor that looks pretty, pretty obvious. Western Europe before moving to rest of the world, plus 3%. It's slightly better than the plus 2% that we had expensed in H1.
A great performance in Spain where we are growing, double digit in energy management. Italy is delivering a nice meat single digit growth both in energy management and industrial automation. A particular positive note on United Kingdom, you know, I've been cautious on United Kingdom for quite a while now, but they've been delivering a nice Q3 with good performance in Low Voltage, medium voltage, good performance as well in industrial automation. To negative point in Western Europe, France and Germany, France, where we have both some destocking impact with some of our intermediaries and distributors, but they do not reflect the underlying trend of the market and some of that should be corrected in the coming months. And also medium voltage business that is suffering from a lower activity in the market.
Germany, that's largely the encounter performance on Medium Voltage because you have other dimension positively warranted in Germany, starting with industry automation. Finishing with rest of the world, plus 5% organic growth was a trend that we had seen at the end of H1. A lot of positive in South America, for instance, when we see Colombia growing Brazil back to growth. Africa is growing. Many of this country are being held by price of energy, price of commodity at a better level than 12, 18 months ago.
Therefore, this some renewed investment. Middle East is flat. Actually, it's a mixed bag because we have a number of country in the region that are doing well, thanks to the price of energy, but we are leaving Iran and that is having some negative impact. And of course, there are also some difficulties on the Turkish economy for the time being. Clearly negative element, we flagged that already in the region Russia, which is negative because of the sanctions and an economy that is happening today, I would say, subdued evolution.
That's it for the region. That leads me to my, outlook and and and conclusion. Maybe before coming to the final vision for 2018, sharing with you what we expect for Q4 and the following months. 1st, in North America, we believe that we're going to see continuation of the February environment and here, the visibility looked pretty good and really, you know, the driver for the economy looks pretty strong. On China, where I know there are a lot of questions, and I'm sure some of you will come with more question.
We are certainly now facing very high base of comparison. Remember that you know, at the beginning of the year, we are growing north of 20%. We always say that was not sustainable. And we believe that there will be certainly some areas that are going to be impacted by the war on tariffs between China and the US. And every business, that is very significantly exposed to export and export to to to this country will be impacted.
But fundamentally, for Q4 and the coming quarters, we see China as a gross market, and we see dynamism clearly continuing in many end markets and many parts of the Chinese economy. And that does include many parts of the construction market, certainly investment in infrastructure. And in industry, we see, several segment on industry, like oil and gas, mining, metals, electronics, remaining well oriented. So we continue to see China for the coming quarter and for the coming months as a growth country. We expect a good momentum seen in many Asian Pacific country, India, Southeast Asia to continue.
In Western Europe, we are not expecting a sudden another improvement. And I think we are suddenly getting much, much better than they are. We continue to expect moderate, pace of growth. And when it comes to the rest of the world, economy, so which is roughly new economy outside Asia. We believe that energy pricing and some of the commodity pricing should help this economy and many of the market and country in the coming months.
So that's what the outlook I wanted to share with you. Now moving to more precisely, 2018. You've seen it. We had a strong sales performance in Q3, We have an expectation of continued growth in Q4, although we certainly acknowledge that we have a higher base of comparison. And all this allows us to revise upward our objective for 2018.
We are now targeting an organic growth of the adjusted EBITA between +8 to +9 percent. And previously, we were between +7 to +9 percent. When we look at, the component of the driver for that, we target an organic sales growth for 2018 close to +6 percent We are previously between +5percentto+6percent. And for the margin, we target to +30to+50 basis points organic improvement of the adjusted EBITA margin. This is it for what I wanted to share with you, and I'm now extremely happy to answer your questions.
All right. Thank you very much for that Emmanuel. I see that we already have a long sort of number of questions or requests for questions. So we wanna try to get them all in within the designated time. So as always, Please keep it to one question per analyst and then time permitting, which will come back.
So with that, we open it up for the first question, please.
Our first question comes from Andreas Willing JPMorgan. Please go ahead.
Yeah, good morning, everybody. My question is about the investments you're doing and we've clearly seen the benefits organic growth with some market share gains year to date. How do you look at this kind of investment strategy in light of potentially more uncertain and weaker economic growth in of how you calibrate going into next year as well, investments to drive market share relative to protecting profitability and protecting from kind of the uncertainty that's out there.
Thanks, Andreas, for your question. Well, first of all, because I know where your question could lead me, I don't want to share pretty reasonable about next year. And therefore, you expect me to start talking about what we're going to do if things turn negative. I think what I've just been saying is that you know, for the time being, we see the environment, overall too positive. I would certainly agree that the environment is not as positive as it used to be 6 months ago.
But let's look at all the PMI, you know, growth outlook, it's still being positive. Now if I leave aside 2019 and then I'm going to say is not linked to 2019 at this stage. I certainly believe that we have the capacity, to act to keep the priority in terms of investments and make sure that we don't decrease this strategic investment that, as you rightly said, I think are making a difference and that will require certainly, if it was needed, that would require prioritization, that would require a lot of discipline on other costs that we see less important, less efficient. And, I think we've done that in the past. It's capacity to generate efficiency.
And therefore, in the event, and again, I'm not talking about it in 2019, it would be required. I think we have perfectly delivers to generate efficiency in several places in the company and keep focusing on this strategic core investment that we see as very important.
Next question from Gail De Bray in Deutsche Bank.
Can you talk a bit more about the medium voltage business, which clearly stood out this quarter and was for once the fastest growing business? So maybe could you give us some indication on the order trend here, just to, so that we can see if the kind of cros you've seen so far on the revenue side is sustainable for the next few months. And in light of the pretty strong growth you had in Q3 and also given the commentary, you made that the business was turning around corner and growing with the right mix. I was wondering if you are now sort of on track to deliver the upper end of your targeted margin improvement for the 1,000,000 voltage business?
Thanks, Gail. I don't want to be drawn into, you know, questions only on the margin because, as you know, it's not the purpose of this call. Nevertheless, I was trying to give some element of answer, on the order evolution. Of course, as you would imagine, we're not talking about a short cycle business here. So we've seen order intake, evolving positively for quite a while now on medium voltage.
And I would say, taking into account my comments on the basis of comparison last year, Q3, Q4. Yes, of course, we have another intake evolution that is supporting the positive evolution of the medium voltage business. On the margin, I think that we are delivering the scenario we were expecting to deliver. So there is no reason for us to change anything regarding our expectation guidance in that respect.
Next question from Alastair Leslie in Societe Generale.
Hi, good morning. So for North America, you highlight you're continuing to deliver on several large projects in data centers and IT. Can you comment a little bit on the outlook for larger projects heading into next year, so 2019? We've seen sort of step change in the hyperscale CapEx this year? I guess just trying to work out how sustainable that is.
Do we push higher again due to kind of ongoing needs to support cloud computing to realization, etcetera? Or should we really see 2018 as a somewhat exceptional and an investment pull back a bit?
Thanks, I understand. No, I think you rightly said that there is clearly, some CapEx investment going on in the U. S. I've been sharing with many of you the fact that we see digitization of the economy, you know, clearly getting traction in the type of investment that we see a lot of investment, on data center as, of course, epitomizing that. I don't think that 2018 is a one off, and I would expect certainly, a lot of projects, to, carry on, on, on the, on, on 2019.
So I don't see a kind of, stop, you know, at the end of the year. And, until this is a very powerful trend, you know, when I was referring to solid trend in the U. S. I think this is one of them.
Thanks, Alastair. Next question.
Next question from Andre Kuhin in Credit Suisse.
Yes, good morning. Thanks so much for taking my question. I wanted to ask about pricing, how that has developed in Q3, whether you have continued to look to increase prices and how that's worked out across the key divisions, please? We continue to work on pricing. I would say I very much stick to my earlier comment, which was there will be a few impact in 2018, but, clearly, our goal is to make an impact in 2019.
So there is a lot of things on which we've been working. I would say, technically, more strategic and deep, I would not expect that to have a lot of impact in 2018 in the second half. I would really expect that to have a nice carryover impact in 2019 as many things will be put in place but it's toward rather the end of the year that they will start to deliver full effect. So yes, we are working. I can tell you it's a big priority.
We are clearly today seeing inflation ramping up in many, many places. I don't expect a lot of acceleration versus our H1 performance in H2. I would certainly expect that 2019 is going to show the result of what we've been doing. Got it. Thank you, Emmanuel.
Thanks, Andre. Next question.
Next question from Daniela Costa in Goldman Sachs. Hi, good morning. I just wanted to you about the medium voltage growth and whether you could, sort of, give some color on how much of that is just the easy comp versus actually being some signs of change of utilities, investing again and how sustainable do you think that is? Thank you.
Hi, Daniela. Well, difficult for me to exactly give you precise answer. Of course, the fact that it was Q3 was clearly weak, last year is helping. But I think I made a comment on beyond the 3 months impact in the quarter on the fact that the order intake was pretty solid. That we were clearly seeing the cycle playing, if I may say, and CapEx, increasing infrastructure spending, increasing, So that is giving, I'm not saying that 8% is the underlying trend.
Don't get me wrong. And I want to be very clear, but I think we have a pretty nice underlying trend today on medium voltage goals fundamentally.
Thanks, Daniella. Next question.
From James Moore in Redburn.
Good morning everyone. Good morning Emmanuel. My question surrounds China. Can you help us begin to the growth a bit more, granularly? You mentioned it was similar to APAC.
I wondered if you could go further and say where we are, 9, 12, what have you? But within that really is my question. My sense is that AA was growing faster than low voltage in China in the second quarter. Could you give us a sense as to how that's developed? And perhaps more importantly, can you talk about how the sequential growth trends within the quarter in China have developed basically has September stepped down versus the running rates in July August as some other companies have seen.
And of course, Do you have any flavor on October? That will be helpful as it's a big topic at the moment.
Thank you, James, for your question. Frankly, I would have been very disappointed question and not been on China. So it's good to see that, that you're not disappointing us. So you're asking for a lot of information. I think I've been providing already a lot of of detail on on on China and and maybe let me repeat it and and and maybe elaborate further if I can.
I'm not saying that China is not slowing down, as I said, you know, plus 11% for the region, Asia is actually a bit above that. But I think it just show that China has been very dynamic We've been flagging again for many, many quarters now that China is, not growing at 20% underlying. Now we have, of course, this 20% referenced for Q1 next year. But China is a market where we see underlying growth we flagged the fact that, OEM would be impacted, probably as the first, impacted by the war on tariff. So I would expect the business to slow down on OEM order intake, in the coming months.
But as I said, there are many other places in the economy where we see a lot of dynamism. If I look at, construction first, I think here is a question of our tight is access to credit, because plenty of projects are there. I think that the question is can the real estate developer and even the individual find the capacity to finance the project here, maybe the government has had some, you know, change in attitude and the the the recent attitude to be more lenient. I think they've been announcing a number of things on easing access to credit. So let's see what happened on on residential, but there is still a lot of demand momentum, if, access to credit is not is not an issue.
We see a lot of dynamism in, construction for public building that is developing very well. So that's what we can say for construction. Now apart from that, we see a lot of investment, a lot of momentum on infrastructure a lot of project going on. There is notably among other things, in Metro, a lot of investment, and we have a bespoke offer that has been very successful that one element to illustrate what we see, in infrastructure We see in the digital economy in data center, a lot of investment as well. And that's another driver for the economy.
And I mentioned industry because I talk about, you know, OEM, maybe being being the most impacted by, the for forest for, by the war on tariffs. But there are many, many other parts of industry, I mentioned oil and gas, mining, electronics, you know, I could have been talking about pharmaceutical and many other where we see continued dynamism. So again, I'm not disputing the fact that China is slowing down. We are no longer at 20. It's 11%.
I've been flagging the fact that maybe the underlying growth rate China, was more high single digit. We'll see what is the final impact of the tariff, but I certainly want highlight that you have many powerful growth engine in the Chinese economy, which we see as very favorable for us in the coming months and quarters.
Thanks, Amanda.
Thank you. Thank you, James. Next question please.
Next question from Ben Uplow in Morgan Stanley.
Morning Emmanuel and morning, Amit. I really sort of wanted to follow-up, of course, on China, following on from James. Emmanuel, just, I mean, you you partly sort of explained it, but there there does seem to be big differences between different subsectors in China and different industries. So we see automotive doing one thing, semiconductor doing another And there are clear growth, there's clear growth in areas like farmer, food, and beverage, etcetera. Just in terms of your conversations with customers at the moment, ie, in the last few weeks, do you do you believe that OEMs in general are gonna be postponing investments and things are going to slow down?
Or do you think it's localized to some specific industries? The fact that automotive is going down shouldn't be a surprise to anyone. But what what I what I wanted to know is how broad based do you think this o e OEM slowdown is?
Certainly, not all of them will be impacted and the more they work for the local market, the less they will be impacted. But let me give a global color, because I, you know, I'm not sure I have the granularity to enter into specific that will be relevant for you. As I said, I think that OEM is the place where we expect slowdown. It has started already, in Q3. And I think we'll be now fading that for a while.
So yes, we expect slowdown in OEM generally. So that means that even if you have positive, OEM and market exposure, the global impact will be for the OEM business for us to slow down.
Thank you. Next question from Simon Thomasan in Berenberg.
Yes, good morning, Emmanuel and Amit. We talked quite a bit about the good growth in medium voltage, but we haven't talked as much about your power, which I think you flagged as a growth level that you haven't seen for quite some time here. And I remember, couple of years ago when the business was obviously struggling in terms of seeing growth.
Can you just talk
a bit more about the underlying market and what has changed over the course of the past sort of four to eight quarters in this business? And obviously lots of questions on visibility arguably given the kind of noise out there in the market. And your power is obviously another business where you can have some larger type projects. What's the sort of visibility you have here that finally as sort of the growth seems to be accelerating that this should continue?
Thanks, Evan. May may I take one second of, my answer to you to complement what I've been sharing has been and it was rightly pointing to the fact that I did not clarify, and I should have clarified that our exposure to automotive in China is super small. So if there was any question about what automotive means for us in China. It's globally at the group level, our automotive exposure is very small, but it's true as well in China. Sorry, Simon.
So taking your question on Secure Power, I think we've been already seen for many, many months that we see the wave growing on Secure Power. And we see and we were elaborating on the reason why we see investments accelerating of course, you know, still an exponential growth of the data that needs to be stored. Certainly, less, efficiency in reducing the, the efficiency precisely on the data center space. I know you storm, you know, more data in the more radio space. The regulation, which is playing powerfully, everybody now starts to the data center on their own soil and ground, and that that is the driver.
And then I was talking, about the development of, of edge computing, which is also, helping. So a number of positive things happening at the same time that make us believe that the trend, is, is deep and powerful. We have, very strong order intake year to date globally on Secure Power. And I'm not saying that we're going to keep growing at 6%, but we have certainly a lot of underlying elements that show that, we are probably gaining market share, but in a market that is is growing well. So that's what we are seeing.
You're right there. In top of that, some big project that is that are magnifying the growth. And we see some of that in the U. S, not only in the U. S.
There are many, many places where we see a big big project for for large data center. But we see, as well, prefabricated data center growing very fast. It's in line with my edge computing comment. So these are all the aspects playing and delivering the nice performance on Secure Power. What is the visibility, frankly, you know, once I've said that, we have, of course, a backlog that has been growing.
We have a number of projects. Now, you know, beyond the deep analysis that is pointing to a good growth and describing what we've been seeing, I'm not sure that I can add much at that stage. So I hope it answers your question, Simon. Thank you, Simon.
Next question, please.
Next question from Jonathan Moshe in Exane BNP Paribas.
Hi, yes, thanks for taking my question. Good morning. On low voltage, is it that you're taking market share here? This is a very impressive growth number. And if it is, is it related to EcoStrux and I'm thinking particularly Secure Power is growing well now.
You talk a lot about how one business feeds the other. It's Secure Power in the way that you've just described is set to continue to grow. Does that mean low voltage is also set to continue to surprise positively versus peers as well?
Yes, Judge, I think that the success of of energy management, you know, and it's a capacity of course, you know, we have an unparalleled unrivaled breadth and depth in the voltage. So clearly, nobody is able to challenge us in the technology we can offer, the channel that we have to deliver this technology to our customer. But, you know, back to the pillars, I I I presented, during my, my slideshow. I mean, the fact that we're able to put together low voltage and medium voltage, in, the commercial industrial building the fact that we are able to bundle that with, with building management system, the fact that for data center, we can put together, Secure Power with low and medium voltage. And all of that, of course, encapsulated or offered through ecostructure architecture.
The fact that in Industrial Automation, we bring best technology for discrete process and power management, of course, starting with low voltage, I think that's a major strength for us. And I think that's clearly making a difference. So yes, when I look at our performance, Frankly, we've been growing faster than the competition for many, many, many quarters now. And I'm happy to make the exercise with any of you on that. And I see all the reason for that to continue.
Comes from Marcus Mitra Mayer in UBS.
Hi, good morning, everyone. I'm kind of dig into a little bit more detail please on Secure Power. So it seems like, data center, it's nothing really new that this is, growing strongly, but I think Given that you have a sixty-forty split roughly between low voltage and, say, traditional UPS type equipment, it seems to me that now there's growth back also on the UPS side. Is that because of new product launches? Is that, because something fundamentally changed?
Or is that sort of the comp element that we already discussed.
Thank you, Mark. I was super happy to see, Katie James on China. I'm super happy to see you on data center. But I'm I'm and I'm gonna try to, to, to, to give you, a clear answer. What we are seeing, I think that the very good trend on data center that we've been experiencing for many, many quarters now, started clearly with some architecture, notably with the Web Giants, with a lot of flow and medium voltage.
And as you know, a bit more, a bit less, sorry, UPSs. I think we see 2 things. We see some of this architecture changing. And therefore, you know, people lean back to maybe more traditional architecture with UPS. So that's beginning of an answer.
And then we see also investments that are happening in many, many other places apart from the Web Giants. It can be colocation. It can be a proprietary data center. I talk about edge computing where you're going to have some small, medium sized data center, but, that are not going to be, of course, on architecture without UPSUs and cooling. So these are the reason why we see a global acceleration of Secure Power in data center.
And now I would say the 3 component growing double digit.
Thank you, Marcus. Next question please.
Comes from Denise Molina in Morningstar.
Hi, thanks for taking my question. I just actually wanted to ask about the Aviva integration in terms of, if you think that there are any places where you still need sort of get the teams to work together in terms of cross selling and what sort of incentives you're providing to the sales force to do the cross selling And then and finally, I would say just in terms of new launches on software, that you might be using, maybe, other verticals for you using digital twin or other kinds of software rollouts?
Yes, thank you for this question on AVEVA. 20, we're at the beginning of the journey on AVEVA. So great to see the company growing double digit. Again, confirming the strategic intent, showing that the first thing that we are doing together are working. But it's the beginning of the journey.
And there is much, much, much more to do. It's for ANVIVA to get to unify homogeneous softness feed. They're working fast on that, but they have not far from that finished the work and certainly, by type of
customer in countries
to work even closer together. And, you know, it takes some time to build the relay and the right organization. Very encouraging signals already, but we are at the beginning of of the journey. And we would expect much more to come in the future. Now you were talking about launch of new software.
I think the are permanently going to innovate and develop new things, on, on, 1st of all, making the software suite synergetic and homogeneous. And of course, they keep working on the capacity, on the analytical capacity on what the software provide. But I would then suggest that you spend more time with the Aviso people. I think it's for them to elaborate on what they are doing, but I'm sure they will be more than happy to do it.
Thanks. Thank you.
Sorry. Can I just follow-up on that? Yes. No, I was just wondering specifically on the software sales in terms of incentives for the sales force? Well,
Well, I think the the incentive is coming from the fact that, of course, all sales people are incentivized on the business they do. And I think that the 2 teams discover that when they work together, to do a great business and they do a great thing for the customer. So I think it's a great incentive because it's just moving up their sales number. And then, and they have the benefit of it, of course.
I think, yes, so I think we are approaching that close of the hour. I'm also mindful that, some some of you might be getting on to another call, at the turn of the hour. But as I said earlier, I think there are probably a couple more repeat questions. So we're happy to, to sort of take them quickly. So the next question, please.
It comes from Andreas Willy, JPMorgan.
Yes, just had a follow-up question on your earlier comments on automation, maybe you could indicate what the size of your OEM business is within the roughly EUR 6,000,000,000 industrial within the $6,000,000,000 industry division.
I was checking whether we we share this, this this information, but, I I'm I'm I'm happy to, to say that globally, between Discrete and hybrid process, and I put software in hybrid software, it's fifty-fifty. And the OEM business altogether is part of Discrete, but it's several 100,000,000, but you have a big, big part of that, which is growing of the discrete technology, which is within the general market. But I don't think we give exactly an OEM number. But that's as far as I can go in detailing, our exposure.
Thank you.
Thanks. And we take one more last one in the interest of time.
Thank you. It's a follow-up from Gail De Brayinto.
Follow-up. Can you just talk a bit more about the trends in France in particular on the construction side of the portfolio? Thank you.
Well, yes, Gail, as I was, alluding to, we don't think that the performance in France in Q3 reflect the underlying trend. And therefore, notably for construction, I think that there was some stocking element destocking versus last year. I think the construction remains well oriented altogether. You know, probably the new start are slowing a little bit, but it mean that we're going to be impacted much, much later. So I would expect, overall, a growth in construction and that we can reflect that on the kind of underlying trend.
So I hope we're going to be able show that in Q4, we are back to growth with the construction business and with low voltage in France.
Sorry, did you say how much it was down in France in Q3?
No, I don't think we said we are down low single digit in France in Q3. Globally, but we don't split by business.
I think we'll, we'll have to stop it there. I must just thank everyone for the time this morning and, wish you all a happy, happy rest of the earning season.
Thank you. So too soon. Thanks, Guy.
And that will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.