Ladies and gentlemen, welcome to the Schneider Electric Q3 2018 results presented by Mr. Emmanuel Babeau, Deputy CEO in charge of Finance, and Mr. Amit Bhalla, 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. Amit Bhalla. Please go ahead, sir.
Thank you very much. Good morning, everyone. Thanks a lot for being with us for the next one hour, where we're going to be sharing our third quarter revenue results with Emmanuel Babeau, Deputy CEO and CFO. Without further ado, just reminding you of the disclaimer, as always, on page two, I hand it over to Emmanuel.
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, give the 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. As always, of course, I have my presentation, but I would be more than happy to answer your question after that on what we are seeing on the various markets. We have clearly experienced, and on page five of the presentation, another strong quarter of growth. I believe that this is clearly coming from the success of our strategy and a successful 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 new customer and developing new things with our customer. I think that this quarter also illustrate well the advantage of having a balanced portfolio. When I say balanced portfolio, I mean balanced in term of geographies, of course. I'm sure you have seen already that we have two very powerful engine delivering during this quarter. Still Asia Pacific, of course, but North America as well. That's the good thing of having a diversified geographical exposure. Also diversified exposure in term 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. That's really what is behind, I guess, this strong performance of Q3. You can see first, on page five, when I'm in balance, look at Energy Management, +7.4% organic, Industrial Automation +6.6%. 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 six, where there is a bit more detail on the headline of the performance. First, on the left-hand part of this page, looking at the region, we have seen an organic growth across all regions.
I must say we've been growing across all technology, across all regions during this quarter. The four regions have 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 regions, you see double growth, of course, across Asia Pacific, and it's another quarter of double growth in China. I don't know whether I should comment China now because I'm sure you will have plenty of questions on China that I'll be more than happy to answer later. North America, great to see North America, which was already posting a good H1, further accelerating with high single-digit growth. Rest of the world still growing at mid-single-digit growth, with some pluses and minuses in the trends. Globally, we see new economies as a very important contributor to our growth with high single-digit.
System growing at +9%. I think we are still growing very dynamically on product, +5%. We are very happy to grow on service at +11%. We keep growing the weight of services in our total portfolio. Great success on software. I 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. The growth in system altogether is illustrating what I was mentioning in terms of the businesses which are more mid-long cycle accelerating. 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 customers.
One very important metric that we are looking at, which is a number of assets under management, which will trigger business in the future in terms 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 customers. It's up +12%. We remain focused on delivering shareholder value. 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. That will mean to be six months ahead of initial plan. All that gives for 2018, the possibility to revise upward our guidance.
We are now targeting an organic growth of the Adjusted EBITA between +8% and +9%, when previously the bracket was between +7% and +9%. Moving to Page 7, I think it is more for you when you will have maybe time to enter into some detail, and that can maybe trigger a question when we will have more contact with you and more interaction. We really have four big pillars 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. We keep innovating and launching new product, new technology, new digital capacity that create more added value with our customers.
You have a few example here in term of Power Advisor that keeps being improved and enriched with new apps and new analytical capacity. Easergy P3 connected product, which is about accelerating on the digitization of the grid automation. We are also investing on some startup super innovative technology, that is what we have been doing with Sense. Sense is a startup which provides a product that makes your electrical panel at home a 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 very fast in our digital journey. I talk about asset under management. You understand how critical it is to grow very fast on this matrix.
That is going to trigger, on the long term, a 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 is growing faster and significantly faster than the rest of the group. We are also working on the customer experience to make it digital and to really here 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. Third pillar, 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 example on the industry space. Each time, we deliver a very tailor-made, specific expertise on each segment that makes us relevant to our customer. Last but not least, of course, cross-selling, the fourth pillar. That is maybe what defines Schneider versus many of our competitors. That is a big strength, and that is 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 term of making the building efficient in term of power management, and all the features of the building management. I talk about data center. We could multiply all the example of the strengths of this cross-selling. Next page, I will not 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 customer, thing that we do for them, which are extremely different and that we've been delivering during this Q3. I think it points to the strength of the group that has today an unchallenged breadth and depth of portfolio and capacity. Again, I don't want to spend too much time because I want to leave time for Q&A later today in this talk. Moving to page 9, just 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. 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 dates where we've been spending time with thousand and thousand 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 Atlanta. 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. We spend a lot of time, we invest a lot of energy. It makes our business better altogether for 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, five dimension. Again, I don't want to spend too much time elaborating on all of them. Just taking one maybe, which I think is particularly striking. If you look at climate, we target to have in 2020, 80% of renewable electricity. We started Q2 2018 on the low key. We're at 6%. Look at the jump that we managed to achieve in Q3. We are already at 25%, so we're not yet at the 80%, but clearly, we are accelerating our journey. This is the kind of action that we've been taking to get there. In Americas, we've been purchasing renewable certificates. We've been signing a green tariff contract for 50 gigawatt hour in EMEA. In Asia Pacific, we actually have on-site 2,000 kilowatt of capacity in our factory in China.
We are using a lot of levers to get there, and we're going to get there, I can tell you. The last one on this section is just, of course, to highlight the fact that all this work that we are doing on sustainability, on compliance, on ethics, is acknowledged and rewarded by many recognition, great ranking. Again, don't want to enter into detail. It's here for your perusal. I think it's clearly recognized in a very clear fashion. All right. Now, maybe let's move to page 13, let's enter into some details on this Q3 performance. Our sales have amounted to EUR 6,377,000,000. It's up +8%. This is the third quarter of 2017. One impact, only negative here, which is the Forex. The negative impact is abating. It's now only -2.4%.
The main currency that are driving this negative impact, you have the Indian rupee, the Russian ruble, the Brazilian real. Turkey and Argentina currency have not been helping. These are the currency that have been negatively impacting us. Good news probably coming on the USD, where we see some strengthening of the USD, which is, of course, good news for us. Moving to the scope impact, +3.2%. This is the mainly AVEVA and ASCO impact, it is a nice contribution to the growth. You have this balanced growth between Energy Management and Industrial Automation, I am going to elaborate on each of them. Just one point on the global Forex impact. We are slightly revising it for the full year. For the top-line impact, we were around EUR 1 billion negative impact.
We now believe that because of the weakness in some emerging country currency, we would rather be around -EUR 1.1 billion. Nevertheless, we do not change the expected impact on the margin. We are still seeing an impact which would be around -20 basis points. Let's move to Energy Management analysis. I am on page 14. It is EUR 4,846,000,000. It is up +7.5%, with an organic +7.4%. What is extremely interesting and maybe remarkable during this quarter is how even is the high growth that we are seeing across the three technology. You have been used, of course, to see Low Voltage flying high. It is still flying high, look at Medium Voltage, up +8.3%, Secure Power up +6.4%. It is really across the three technologies of Energy Management, that is, of course, the success of our EcoStruxure offering. That is the power of cross-selling.
This is certainly the fact that we are approaching with a very bespoke approach by segment, that make us very successful. If I enter into some detail on the Energy Management component, having a look at Medium Voltage up +8.3% organic. That is 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, data center, to some extent, contribute to that. Clearly, Medium Voltage illustrate that in a nice fashion. I draw your attention on the fact that Q3 2017 was -4 for Energy Management, when Q4 was +2, therefore there was some here easy comps, if I may say. Clearly, we have been turning the corner on Medium Voltage, we are now growing nicely.
The good news is that this EUR 1.1 billion of revenue has been achieved delivering on the right priority, because it is not only about growing Medium Voltage. It is about growing the top line in a profitable manner and improving the margin. Indeed, during this quarter, we did manage to generate the right mix. We have been growing very nicely on product. We have been growing very nicely on services. Software component is delivering well. Therefore, we are growing this Medium Voltage business the way we want to grow it. That is certainly a good news. We have seen growth across regions. All regions have been growing on Medium Voltage. We are growing nicely in our priority end market and targeted end market, commercial and industrial building. This is here in package with Low Voltage, that is clearly helping the transactional, the product component, which is so important.
We've been growing 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 EcoStruxure Grid, and we are growing on software for the Grid, which is good news. Of course, the consequence of everything I've just been saying is that system has been growing, but at a slower pace than transactional for Medium Voltage. That's exactly something we want to target. Moving to the next page, the Low Voltage performance. Low Voltage has been flying high for quite a while now, and it continue to fly very high. We are once again growing in all region. 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 Low Voltage. Service is up high single digit. I talk about this nice performance on Energy and Sustainability Services 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, Secure Power. +6.4% organic growth in Q3. I think we had not seen this type of growth for Secure Power for quite a while, actually. 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 the distributed Secure Power. The small UPSs, 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, that mean that Secure Power, Low Voltage, and Medium Voltage, the three 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 and medium size server room or data center, I would call them, creating of edge computing capacity towards, I don't know, or close to an hospital, a manufacturing site, an oil and gas site. That is clearly helping the other non-IT market. Then services up mid-single digit. Here we talk about 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 years, 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% exactly. Now facing higher base of comparison in Q3 of 2017. I mentioned already that we are benefiting from this balanced portfolio between discrete, hybrid, and process industries.
That's clearly, I think, a big plus in this performance of Q3. We continue to grow well with the OEM. Of course, this is part of our discrete offer. We are growing nicely and gaining traction with EcoStruxure Machine. We see process automation accelerating. Clearly, the price of oil and gas is an element for that. It's not the only one, but as we progress through the cycle, we see this acceleration for process automation. Last but not least, of course, we have great success with AVEVA that has been delivering a nice double-digit organic growth in Q3. The performance of AVEVA is highlighting, or confirming, I would say, the strategic intent and the synergy that AVEVA and Schneider can generate together. All that gives a bit more than EUR 1.5 billion of sales. It's up almost 9%. The scope impact, of course, is the AVEVA contribution.
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, +11%. China is actually very much in line with this growth, China keeps growing fast. The growth was actually well spread between Energy Management and Industrial Automation over this quarter. India, with great performance on Low Voltage with a growth north of 20%. Australia, where we have seen a double growth, both in Energy Management and Industrial Automation. Indonesia, great growth, Low Voltage Industrial Automation. Only negative point or significant negative point in this zone is Japan, which has been down because of the 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, of course, weight of the U.S. make it the most important market, both across the businesses and across the technology for North America, which is reflecting both a 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 obvious. Western Europe, before moving to rest of the world, +3%, it's slightly better than the +2% that we had experienced in H1. Great performance in Spain, where we are growing double digit in Energy Management. Italy is delivering a nice mid-single digit growth, both in Energy Management and Industrial Automation. A particular positive note on United Kingdom.
I've been cautious on United Kingdom for quite a while now, they've been delivering a nice Q3 with good performance in Low Voltage, Medium Voltage, good performance as well in Industrial Automation. Two negative points in Western Europe, France and Germany. France, where we have both some destocking impact with some of our intermediaries and distributors, that do not reflect the underlying trend of the market and some of that should be corrected in the coming months. Also Medium Voltage business that is suffering from a low activity on the market. Germany, that's largely the counterperformance on Medium Voltage because you have other dimension positively oriented in Germany, starting with Industrial Automation. Finishing with rest of the world, +5% organic growth. This 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 these countries are being helped by price of energy, price of commodity at a better level than 12, 18 months ago. There is some renewed investment. Middle East is flat. It's a mixed bag because we have a number of countries in the region that are doing well thanks to the price of energy. We are leaving Iran, and that is having some negative impact. 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 having today, I would say, a subdued evolution. That's it for the region.
That leads me to my outlook and conclusion. Maybe before coming to the final vision for 2018, sharing with you what we expect for Q4 and the following months. First, in North America, we believe that we're going to see a continuation of a favorable environment. Here the visibility look pretty good and really the driver for the economy looks pretty strong. On China, where I know there are a lot of questions, I'm sure some of you will come with more questions. We are certainly now facing very high base of comparison. Remember that, at the beginning of the year, we are growing north of 20%. We always said that was not sustainable. We believe that there will be certainly some areas that are going to be impacted by the war on tariff between China and the U.S.
Every business that is very significantly exposed to export and export to these countries will be impacted. Fundamentally, for Q4 and the coming quarters, we see China as a growth market, and we see dynamism clearly continuing in many end markets and many parts of the Chinese economy. That does include many parts of the construction market, certainly investment in infrastructure. In industry, we see several segments on industry like oil and gas, mining, metals, electronics remaining well-oriented. We continue to see China for the coming quarter and for the coming months as a growth country. We expect good momentum seen in many Asia Pacific countries, India, Southeast Asia, to continue. In Western Europe, we are not expecting a sudden improvement, I think we're suddenly getting much, much better than they are. We continue to expect a moderate pace of growth.
When it comes to the rest of the world economy, 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 markets and countries in the coming months. That was the outlook I wanted to share with you. More precisely, 2018. You've seen it, we had a strong sales performance in Q3. We have an expectation of a continued growth in Q4, although we certainly acknowledge that we have a higher base of comparison. 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%, and previously we were between +7% to +9%.
When we look at the component or the driver for that, we target an organic sales growth for 2018, close to +6%. We are previously between +5% to +6%. For the margin, we target +30 to +50 basis point 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 number of questions or requests for questions. We want to try to get them all in within the designated time. As always, please keep it to one question per analyst, and then time permitting, we'll come back. With that, we open it up for the first question, please.
Thank you. As a reminder to ask a question, please press star one. Our first question comes from Andreas Willi, JPMorgan. Please go ahead.
Good morning, everybody. My question is about the investments you're doing. We've clearly seen the benefit to 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 terms 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 pessimism about next year. 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, for the time being, we see the environment overall still positive. I would certainly agree that the environment is not as positive as it used to be six months ago. Let's look at all the PMI growth outlook, it's still being positive.
Now, if I leave aside 2019, therefore what I'm going to say is not linked to 2019 at that stage, I certainly believe that we have the capacity to act to keep the priority in term of investment and make sure that we don't decrease this strategic investment that, as you rightly said, I think, are making a difference. 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. I think we've done that in the past, this capacity to generate efficiency. Therefore, in the event, and again, I'm not talking about 2019, it would be required. I think we have perfectly the levers to generate efficiency in several places in the company and keep focusing on this strategic core investment that we see as very important.
Thank you, Andreas. Next question, please.
Next question from Gaël De Bray in Deutsche Bank.
Thanks. Good morning, everybody. 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? Maybe could you give us some indication on the order trend here, so that we can see if the kind of growth you've seen so far on the revenue side is sustainable for the next few months? In light of the pretty strong growth you had in Q3, also given the commentary you made that the business was turning around the corner and growing with the right mix, I was wondering if you were now sort of on track to deliver the upper end of your targeted margin improvement for the Medium Voltage business. Thank you.
Thanks, Gaël. I don't want to be drawn into questions only on the margin because as you know, this is not the purpose of this call. Nevertheless, 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. We've seen order intake evolving positively for quite a while now on Medium Voltage. I would say, taking into account my comments on the basis of comparison last year, Q3, Q4, yes, of course, we have an order 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. There is no reason for us to change anything regarding our expectation guidance in that respect.
Thank you, Gaël.
Thank you.
Next question, please.
Next question from Alasdair Leslie in Société Générale.
Yeah, hi, good morning. 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 the next year, 2019? We've seen a sort of step change in the hyperscale CapEx this year. 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, digitalization, et cetera? Or should we really see 2018 as somewhat exceptional and investment pull back a bit? Thank you.
Thanks, Alasdair. No, I think you rightly said 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 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 project to carry on 2019. I don't see a kind of stop at the end of the year, and clearly this is a very powerful trend. When I was referring to solid trend in the U.S., I think this is one of them.
All right. Thank you.
Thanks, Alasdair. Next question.
Next question from Andre Kukhnin in Credit Suisse.
Yes, good morning. Thanks very 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. There is a lot of things on which we've been working. I would say tactically, 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. 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 ask 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 seeing some signs of change of utilities, investing again, and how sustainable you think that is. Thank you.
Hi, Daniela. Well, difficult for me to exactly give you a precise answer. Of course, the fact that Q3 was clearly weak last year is helping. I think I made a comment on beyond the three 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. I'm not saying that 8% is the underlying trend. Don't get me wrong, and I want to be very clear, I think we have a pretty nice underlying trend today on Medium Voltage growth fundamentally.
Thanks, Daniela. Next question.
From James Moore in Redburn.
Morning, everyone. Morning, Emmanuel. My question surrounds China. Can you help us dig into 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, nine, 12, what have you. Within that really is my question. My sense is that IA was growing faster than Low Voltage in China in the second quarter. Could you give us a sense as to how that's developed? 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 and August as some other companies have seen? Of course, if you have any flavor on October, that would be helpful as it's a big topic at the moment.
Thank you, James, for your question. Frankly, I would have been very disappointed if your question had not been on China. It's good to see that you're not disappointing us. You're asking for a lot of information. I think I've been providing already a lot of detail on China, and maybe let me repeat it and maybe elaborate further if I can. I'm not saying that China is not slowing down. As I say, +11% for the region. Asia is actually a bit above that. I think it just shows 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% reference for Q1 next year. 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. I would expect the business to slow down on the OEM order intake in the coming months. 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 how 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 change in attitude, and the recent attitude seems to be more lenient. I think they've been announcing a number of things on easing access to credit.
Let's see what happens on residential, but there is still a lot of demand momentum if access to credit is not an issue. We see a lot of dynamism in construction for public building. That is developing very well. That's what we can say for construction. 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 is being very successful. That's one element to illustrate what we see in infrastructure. We see in digital economy, in data center, a lot of investment as well. That's another driver for the economy. I mention industry because I talk about OEM, maybe being the most impacted by the war on tariffs.
There are many other parts of industry. I mentioned oil and gas, mining, electronics. I could have been talking about pharmaceutical and many other, where we see continued dynamism. 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 of China was more high single-digit. We'll see what is the final impact of the tariff. I certainly want to 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, Emmanuel.
Thank you, James. Next question, please.
Next question from Ben Uglow 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, you partly sort of explained it, but there does seem to be big differences between different sub-sectors in China and different industries. We see automotive doing one thing, semiconductor doing another. There's clear growth in areas like pharma, food and beverage, et cetera. Just in terms of your conversations with customers at the moment, i.e., in the last few weeks, do you believe that OEMs in general are going to 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. What I wanted to know is how broad-based do you think this 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. Let me give a global color, because I'm not sure I have the granularity to enter into specific that will be relevant for you. I said, I think that OEM is the place where we expect slowdown. It has started already, in Q3, and I think we've been now flagging that for a while. Yes, we expect slowdown in OEM generally. That means that even if you have positive OEM end market exposure, the global impact will be for the OEM business for us, to slow down.
Thank you.
Thank you. Next question from Simon Toennessen in Berenberg.
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 Secure Power, which I think you flagged as a growth level that you haven't seen for quite some time here. I remember a 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? Obviously lots of questions on visibility, arguably, given the kind of noise out there in the market. Secure 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?
Thank you.
Thanks, Simon. May I take one second of my answer to you to complement what I've been sharing with Ben? Amit Bhalla 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. 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. Taking your question on Secure Power. I think we've been already saying for many months that we see the wave growing on Secure Power, and we see, and we were elaborating on the reason why we see investment accelerating. Of course, still an exponential growth of the data that needs to be stored.
Certainly less efficiency in reducing the efficiency precisely on the data center space and how you store more data in a more reduced space. The regulation which is playing powerfully. Everybody now starts to dig data center on their own soil and ground, and that is big driver. I was talking about the development of edge computing, which is also helping. A number of positive things happening at the same time that make us believe that the trend is deep and powerful. We have very strong order intake year to date globally on Secure Power. I'm not saying that we're going to keep growing at 6%, but we have certainly a lot of underlying element that shows that we are probably gaining market share, but in a market that is growing well. That's what we are seeing.
You're right, there are, on top of that, some big projects that are magnifying the growth, and we see some of that in the U.S. Not only in the U.S., there are many places where we see a big project for large data center. We see as well prefabricated data center growing very fast. It's in line with my edge computing comment. These are all the aspects playing and delivering the nice performance on Secure Power. What is the visibility? Frankly, once I've said that, we have, of course, a backlog that has been growing. We have a number of projects. 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. I hope it answers your question, Simon.
Thank you, Simon.
Yes. Thank you.
Next question, please.
Next question from Jonathan Mounsey in BNP Paribas Exane.
Hi. Yeah, 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. If it is it related to EcoStruxure? I'm thinking particularly, Secure Power is growing well now. You talk a lot about how one business feeds the other. If 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?
Yeah, Jonathan, I think that the success of Energy Management. Of course, we have an unparalleled, unrivaled breadth and depth in Low Voltage. 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. Back to the pillars I presented during my slideshow. The fact that we're able to put together Low Voltage and Medium Voltage in the commercial and industrial building, the fact that we are able to bundle that with building management system, the fact that for data center, we can put together Secure Power with Low and Medium Voltage, all that, of course, encapsulated or offered through EcoStruxure 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. Yes, when I look at our performance, frankly, we've been growing faster than the competition for many quarters now, and I'm happy to make the exercise with any of you on that. I see all the reason for that to continue.
Thank you, John.
Thank you.
Next question, please.
This one is from Markus Mittermaier in UBS.
Hi. Good morning, everyone. Can I just dig into a little bit more detail, please, on Secure Power? It seems like data center, it's nothing really new that this is growing strongly. I think given that you have a 60/40 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 clearly James on China, and I'm super happy to see you on data center. I'm going to try to give you a clear answer. I think that the very good trend on data center that we've been experiencing for many quarters now, started clearly with some architecture, notably with the web giant, with a lot of Low and Medium Voltage, and as you know, a bit less UPSs. I think we see two things. We see some of this architecture changing, and therefore people being back to maybe a more traditional architecture with UPSs. That's beginning of an answer. Then we see also investment that are happening in many other places apart from the web giants. It can be colocation, it can be 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 UPSs and cooling. These are the reason why we see a global acceleration of Secure Power in data center. Now, I would say the three component growing double digit.
Thank you, Markus. Next question, please.
Comes from Denise Molina in Morningstar.
Hi. Thanks for taking my question. I just actually wanted to ask about the AVEVA integration in terms of if you think that there are any places where you still need to 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. Finally, I would say just in terms of new launches on software that you might be using, maybe are there verticals where you're using digital twin or other kinds of software rollouts?
Yeah. Thank you for this question on AVEVA. Certainly, we're at the beginning of the journey on AVEVA, 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. It's the beginning of the journey, and there is much more to do. It's for AVEVA to get to a unified homogeneous software suite. 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. It takes some time to build the relay and the right organization. Very encouraging signals already, but we are at the beginning of the journey. We would expect much more to come in the future. Now you were talking about launch of new software.
I think they are permanently going to innovate and develop new things on, first of all, making the software suite synergetic and homogeneous, and of course, they keep working on the analytical capacity on what the software provide. I would then suggest that you spend more time with the AVEVA 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.
Thank you, Denise.
Can I just, Sorry.
Sorry.
Can I follow up on that?
Yeah. Go ahead.
Yeah. No, I was just wondering specifically on the software sales in terms of incentives for the sales force.
Sorry.
For cross-selling.
Well, I think the incentive is coming from the fact that, of course, all salespeople are incentivized on the business they do, and I think that the two teams discover that when they work together, they do a great business, and they do great thing for the customer. I think it's a great incentive because it's just moving up their sales number and they have the benefit of it, of course.
I think, yeah. I think we are approaching the close of the hour. I'm also mindful that some of you might be getting onto another call at the turn of the hour. As I said earlier, I think there are probably a couple more repeat questions, so we're happy to sort of take them quickly. The next question, please.
It comes from Andreas Willi, JPMorgan.
Yeah. 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 6 billion industry division.
I was checking whether we share this information. I'm happy to say that globally, between discrete and hybrid process, and I put software in hybrid software, it's 50/50. The OEM business altogether is part of discrete. It's several hundred millions, but you have a big part of that which is going of the discrete technology, which is going in the general market. I don't think we give exactly an OEM number. That's as far as I can go in detailing our exposure.
All right. Thank you.
Thanks. We take one more, last one in the interest of time.
Thank you. It's a follow-up from Gaël De Bray, Deutsche Bank.
Thank you very much for the 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, Gaël, 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. Probably the new start are slowing a little bit, but it mean that we're going to be impacted much later. I would expect overall growth in construction and that we can reflect that on the kind of underlying trend. I hope we're going to be able to 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, 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.
All right. I think we'll have to stop it there, and I must just thank everyone for the time this morning and wish you all a happy rest of the earnings season. Thank you.
Thank you. Talk to you soon. Thanks, Gaël. Bye.
That would conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.