Good day, and welcome to the Schneider Electric Q1 twenty eighteen Revenues Conference Call, presented by Emanuele Baboche's CEO and CFO, and Amish Bala, SVP, Head of Investor Relations. Today's conference is being recorded At this time, I would like to turn the conference over to Amish Bala. Please go ahead.
Well, thank you, operator. Good morning to everybody and welcome. Thank you for joining us today for our Q1 revenues results, the press release and the presentation is available on our website. As the operator mentioned, we have Emmanuel, our Deputy CEO and CFO to share the results with us. We will have a Q And A at the end of the presentation.
Just a quick reminder for page 2, which is the disclaimer and let you read that and having said that, I pass it on to Emmanuel.
Thank you, Amy. Good morning, everyone. I'm very pleased to be with you a warm welcome for this call, where we're going to discuss about our sales performance for the first quarter of 2018. I suggest that we go immediately on page 5, of the presentation and allow me a kind of preliminary comment. Of course, we're coming up with a strong result and no doubt that the positive environment has been helping our performance.
But I would say that beyond this good environment, the good results that we've been delivering in terms of sales growth for this first quarter is really for me, reflecting 2 things. The first one is the strength of the portfolio and our positioning, and I would mention among our strengths, our, capacity to innovate and that is leading to differentiation. I think we are evidencing over this Q1, the strength of the cross selling as well. And of course, the good positioning that we have in terms of global exposure to geographies and notably of course, strong exposure to new economy, that has been, having a very nice right during this first quarter. 2nd element, of course, the success of our strategy to lead the digital transformation of, our business, and we see traction coming from customer and potential materializing when it comes to this digital offering and what it brings to the customer in term of added value.
That has been translating into our 2 core activity, energy management and EBITDA Automation growing very nicely. You see that energy management is growing close to 6%, organically, a great performance on which of course I'm going to elaborate. And Industrial Automation is even growing faster at +9 percent. Moving to Page 6 and starting to dig a little bit, on the number. Clearly, this, first quarter of 2018 is further acceleration versus the last quarter of 2017 when we had been growing plus 4.6% organically.
And we are reaching for this first quarter of 2018, plus 6.2 percent organic growth And work in the adjusted, it's even higher. We, average plus 7.7 percent, organic growth. When you look at the energy management, growing, plus 5.2 percent organically, the plus 6 is including the dealership performance, which, as you know, is, is consolidated below the line. Energy management at +5.2 percent organic, that's really strong performance across end market. And we want to mention, of course, residential, that commercial and industrial building industry as an end market infrastructure or data center, they will have been growing very nicely during this first quarter.
Industrial Automation has been growing, as I said, plus 9.2 percent organically. It's a great performance in a discrete automation and all the discrete offering of Schneider has been performing very well. And a particular success on Machine automation on which I'll come back later on in this presentation. That of course is reflected in a growth across all region, I will provide more color on that, but the performance of Asia Pacific is, of course, particularly impressive with a strong double digit during this first quarter, but the performance in North America has been extremely good, rest of the world as well. And Western Europe has been slowed down by the medium voltage decrease, which was expected.
I will come back on that. But many areas have been growing very nicely and notably low voltage and the cell automation in this, in this first quarter. I was mentioning this competitive we think advantage that we have through our exposure to new economy, they've been growing globally double digit in this first quarter. Now what has been, making our success? I said it, we have a clear, strategic road map.
We have clear priorities. And we are delivering on that road map. You see that product has been growing organically +8 percent. Wiring devices, final distribution are a particular good performer, but I could have mentioned all the product in discrete automation, such as as drives, contractors, HMI, I mean, all these things have been performing extremely well. More software and services, very pleased, of course, to have closed the AVEVA transaction.
1st March, AVEVA is a 1 new company in which we own 60%. If I look at the legacy business of Schneider in software, it has been growing positively during this first quarter with a mid single digit organic growth. And Ateva has been commenting on a strong performance on their side and they are coming up with a double digit growth, without currency effect. More services as well plus 6%. So accelerating again on services, you know, the ambition that we have, our services are important to us.
It's, of course, sticky, sustainable, good margin business. It's a it's a new way, you know, to, build further the relationship with our customers. So we have a particular focus on services, and it has been contributing to the growth as well. Last but not least, of course, ecostructure, which I would say is, encompassing our old, digital push and ambition And we've been accelerating clearly on delivering EcoStruxure solution to our customer during this first quarter. And the EcoStruxure growth has been outpacing the average of the group, which, as you know, is the objective that we have.
Now if we move to page 7, I want to elaborate on some of these priorities and the first one is of course the cross selling We clearly see, this capacity to bundle different technology, put them together of course, within energy management to give the complete set of energy management, but also putting together energy management and in this automation as a real differentiation and strong added value proposal for our customer, we see a growing demand for this capacity to combine various technology and we think that this Q1 performance illustrates the success of this cross selling ambition. A few example here, I'm not sure I want to elaborate on on on all of that, but it just show that, you have, I would say, across, region, across sector, customers who are seeing strong benefit in putting together the full energy management, of course, Medium Voltage, Low Voltage and Secure Power. But also, and you have here the example of the oil and gas company in Argentina or the desalination plant in Northern Africa. Putting together in a very powerful manner, the automation of processes, factories, plant and the energy management deliver the last mile in term of efficiency and productivity.
2nd priority, of course, grow it structure, we want to lead this, digital technology, revolution. We want to enable our customer to take the full benefit of this energy transition and then discuss the future, which clearly a digital, is a catalyst of And during this Q1, we've seen this ambition rewarded, with a lot of growth in EcoStruxure globally. And with a lot of example here, again, I don't want to comment, you know, all of them, but a lot of infrastructure architecture that we've been selling to the customer, whether to optimize a building, whether to optimize a data center efficiency, a plant or a big infrastructure like it is the case, with the Chinese example on the right end part of this, of the chart. So really, traction, gaining momentum, and together with foreseating, we have 2 big drivers for growth there. Just very rapidly on page 9, just to say that a lot has been going on in the past months, in the company, and many of you have been joining us in 1 or several of the event that we've been organizing.
We had this, visit of the Wuhan plan. I saw many of you found full of learning. We have, of course, the innovation summit in Paris together with the marathon. But a few other big events that happened in the company and more to come. So just bear with us.
We certainly intend to keep very close contact relationship to explain everything which is going on. All the initiatives that we have on our priorities So a lot to come in the coming months as well in that regard. Moving to Page 10. That we put a lot of emphasis and we really grant a lot of priority to sustainability I'm sure you all have in mind the planet and society barometer that we've been using over the past few years. Well, we are starting for a new plant and society barometer for the period 2018, 2020.
And it is slightly amended. It is rebranded into a neider sustainability impact, but the concept remains the same. There will be 21 criteria that will be measurable and that will certainly be able to assess, the effort of the program that we make in key directions for sustainability. Here, you have 5 pillars, I would say that climate and secular economy are about what we bring to our customer for sustainability and what we do to be more sustainable in the way we operate. You have health and equity, which is how we progress on the health safe on, ensuring, equality, at Schneider.
That's really, you know, how we deal with our people. Of course, Essex is about, making sure that we are permanently with the highest standard of ethics and with a few objectives in that respect. And then development is about our impact on underprivileged people, less service community, I would say, in two dimension, access to energy, and also training people. And I would say boosting community, creating jobs and economic activity to, to, to to help them. So that that's that's really, start off a new journey for this parameter.
And, of course, we'll, will keep you informed on a quarterly basis of the progress that we are making. And in the meantime, our effort and the work we are doing continue to be rewarded. You have on the right hand part of that chart. A few example of the recognition that we received recently we've been, again, part of the for the 8th consecutive year of the assist here was most difficult company list. We are the 3rd company globally for, the carbon pin 200 list for clean energy.
We are ranked 45, in the Global Ireland Mult Sustainable Corporation list. And, we have been included, among the 104 company in the Bloomberg Gender Equality Index, you know, that we have a a very important, year ambition on, driving diversity and gender equality. If you move to page 11, the sustainable model is really in line. The right hand part is really in line with what I've just been saying, but we've been receiving other recognition. So on our people, I mean, isolation about gender equality and being part of the most difficult company.
On the center, it's attributed to the quality of our technology And we've been recognized, from, from Gartner on the quality of our supply chain. We are recognized by Fortune among the most in my companies in the world. Triconx has been awarded a premium as a best safety system. And, we've been designated by the Marine business as the most efficient ship solution with EcoStruxure. So all that showing recognition from a community stakeholder on what's happening.
Moving to Page 13, and of course, we've been playing a positive environment that helping. I believe that the great strength of Schneider is the capacity that we have given, our geographical exposure given the depths and the breadth of our portfolio to release all opportunities of growth in environment. And I think that's what has been materializing over this first quarter. If I look at the various, end market and trend that we have seen starting with the residential and nonresidential building. We've seen clearly positive demand on commercial and in the field building, I would say, across, geographies, which clearly, you know, the time of people chasing efficiency, clearly, arriving.
Good demand in residential market. Here again, I would say, across the region and for critical building as a quest for reliability, efficiency, sustainability is there. And certainly, has been a driver for our performance. Moving now to industry and infrastructure, we have seen overall a good demand and a good level of investment, no surprise to you. I'm sure We've seen a very strong OEM demand, during this first quarter.
We've seen overall good trends in a discrete and hybrid, industries and notably some very strong pocket of growth in Asia. When it comes to process industry, the recovery is still slow. And I would say today, we don't see much relaunch of big green project, but it's much more people focusing on productivity, efficiency, clearly with a software play because you have a great return on investment when you increase your efficiencies for a digital capacity, but that's very much what we've seen in this Q1 rather than new big project starting. And what I've been saying, I would say apply to oil and gas where we see, certainly some sign of recovery on investment. But again, it's more on how can I reduce my cost production rather than launching big new things?
Moving to data center and networks, a lot going on and strong investment in data center clearly carry on. We've seen that across region, U. S, of course, but not only, and I would say it's across the type of data center. So you will have the web giant the cloud and service providers, co location, micro data center, we see a lot of investment happening, of course, accompanying the Internet of things, growth. We also have seen good business in our IT channel for our small UPSS, the business is accelerating there and also favorable evolution of the non IT market.
Last, the utilities, the key being, of course, no news to you challenged by the decentralized grid. And they are investing on digital. The name of the game for them is clearly in Europe, to make sure that they have a better return on their asset and that goes through a better and more efficient grid with digital investment. I would say that where we see still significant investment in the grid is, is, and by the utility in the Asia Pacific region. Microgrid, this new energy landscape, clearly the activity is ramping up, in new economy and in North America, but we are probably just at the beginning of the potential of this microgrid.
Moving to Page 14. So I was talking about the environment, but you don't have this, 6.2% and 7.7% working the adjusted performance. Just on the environment. So beyond that, clearly, we believe that the strength of our model, as I said, the success of our strategy, our positioning is delivering. We've put two things on that slide.
On the left hand part, you have a few end market where we believe that in some geographies, clearly, we've been gaining market share. That's the case for worrying devices and final distribution. In several markets. I would say on Machine Solutions, that's probably the case, across the board, water and wastewater, very good progression and clear we have, a solution differentiated and we are gaining ground. Data center, one of the best, it's not the best performer for us again in Q1, very strong growth.
We have a unique capacity in that data center space, and commercial industrial building, in several, in several geographies. What is driving the outperformance, are, you know, what I described as the capacity to, to be innovating. And, you know, even in things which are putting some creativity as well, and we've taken this nice example here of the avatar on a line that we have launched for wiring devices, in China, which is really delivering an amazing growth. Of course, differentiation is key. I was mentioning the great that we have in water and water treatment, we believe it's coming from our differentiated offer.
In the OEM, we are globally very successful in China. It's It's definitely working extremely well. It's about being, scalable, flexible, and, you know, answering the needs of, the Chinese OEM in a very fix manner. Difficult deployment has been already commenting a lot on our EcoStruxure or our adviser, technology, and people, you know, are clearly today understanding more and more of the potential that is coming from, you know, starting from what are the data I want to have to operate my building, my data center, my plant. And then you build the full architecture starting from what do I want this building as an example to be able to deliver, to do to have an in term of of functionality, and and then you build the full, the full architecture ecostructures is absolutely, I would say, meaning food in that respect.
And last but not least, across selling, but I think of I've been, I've been talking a lot about it. I just want to mention that again, this very strong performance that we have in data center, we think is clearly, clearly helped by this capacity to put together, our expertise first data center and how you build an efficient data center. And then all the power management, the building, management system, in order to deliver a complete solution in a short period of time versus any of our competitors. Well, dig into a few numbers, on page 15. So sales, amounted at 5 1,000,000,000 for the first quarter.
It's down, versus the first quarter of 2017 minus 0.7%. So it's nearly flat. Of course, the big big impact here is the Forex, which is generating minus 8.4 percent of evolution. I would say it was totally expected. So it's in line with, what we thought a bit more than 2 months ago.
And we are confirming, based on the current rates the, guidance for the FX impact for the year. So for the top line, it, it is estimated to be between minus 1 and minus 1.1 1,000,000,000. For the margin, we confirm that the negative impact would be around minus 20 bps. On the adjusted EBITA. And the ForEx impact is going to be much more skewed towards the 1st part of the year.
And we expect close to 80% of this negative ForEx impact based on the current rate, of course, to materialize in H1. So hence, the very big impact more than 1,000,000 negative impact that you coming from Forex in Q1. Q2 is gonna be, again, you know, very big on Forex. And then H2 is gonna be much more benign in terms of of negative impact. Then you have the scope impact, with, of course, still the impact of a few disposal and mainly, the GTN.
And a few acquisitions that start to kick in and notably ASCO and AVEVA for 1 month. So I'm now going to comment, both FirstEnergy Management and then Industrial Automation. And I want to start with energy management, sales for energy management altogether, at the €4,225,000,000. It's down 2.2%, very important, of course, ForEx impact, minus 8.5%. The scope plus 1.1 is the as Co acquisition and the DTN disposal in front of that, mainly.
And then, of course, the organic of +5.2 percent. Let's start with, medium voltage. The, only business, decreasing over this 1st quarter, minus 2.7%. That was, totally, expected. We knew that during this Q1, we would be invoicing the low backlog that we had been taking in the previous months and even quarters and notably in Western Europe.
So we knew that this would impact Western Europe. And, and, we've seen also in India and Russia, a challenging performance during this Q1. But a lot of things have been going in the right direction and make us believe that we are feeling in the right direction. First, the order intake has been very good in Q1, and we are now 6 months in a row with a strong order intake. We believe, therefore, that we're gonna be back to growth for the top line, in Q2.
And, when it comes to strategic initiatives and priorities, because, of course, the recovery on Medium Voltage. It's not just about being back to growth, which is the first element that is not sufficient. It's also to be growing on our priority and the priority are more product, more services, more digital, and this priority have already been growing during this first quarter. So we are absolutely well embarked in this journey of improving and and further, increasing, the, the top line and the profit on, medium voltage. Of course, regarding the power system, we keep implementing the new organization.
Nothing new under the sun in that respect, I would say. We see that the the full organization will be implemented and operational at the end of H1. It's still the objective. And we are also, looking at the performance across geographies to see how this organization is performing by geographies. Moving to Page 17 and looking now at the Low Voltage business, this has been growing organically plus 9.1%.
Including the balance sheet performance, which has been absolutely stunning during this first quarter, the business is growing at plus 10.3%. So it's a double digit growth for, low voltage and it's really a strong performance, strong growth across all region and across, all of us. So, Asia Pac stands at, of course, you know, here, particularly remarkable performance. But North America has been doing extremely well, residential, commercial building, that Center segment. I mean, these are all area of strong growth in North America.
We have a double digit growth in rest of the world as well. And Western Europe, you know, Western Europe, which altogether is flat. I'll come back on that, but Western Europe has been growing, working the adjusted mid single digit for the voltaics. So clearly, We see a good growth in resi and non resi market for Western Europe. Well, the performance, no surprise is coming from this unrivaled position that we own, of course, in, in Low Voltage.
It's about the depths of the portfolio that we have. Our capacity to innovate the strength of the cross selling with the rest of the Schneider Technology EcoStruxure here again, is, is accelerating the growth and we are even more relevant when it comes to efficiency of a building. We keep working on connectivity of our ecosystem and we sign nice partnership with Donfoss and some fee during the quarter. And when we look at the performance by, I would say, technology. I mean, final distribution and wiring devices have been growing very, very fast.
But it's really across the family of products that we've been growing at double digit or close to double digit. We also closed one important deal for us on the 1st Feb, the IG Xero transaction has been completed. Now let's finish the energy management's review with the secure, power business, and, a nice acceleration in Q1, which is, which is a very good news. And and again, I would say the good news are coming from, all the, end market of technology. So good growth in data center.
I've been, you know, re referring to it. It's, of course, the low and medium hotel, but it's not only the low and, and medium voltage, we see also the 3 phase UPS racks cooling business accelerating. It's a good performance for our small UPSs in the IT channel, and it's also the Secure Power that we are selling to non IT application like a building or or the, industry businesses that has been growing. So a good start to the year and, and, and a good news to see the Secure Power business accelerating. Moving now on page 19 and commenting industrial automation with nice organic growth of plus 9.2 percent.
Sales growing by 4.1 percent at $1,475,000,000 despite the negative for impact of 8% of scope. Positive plus 2.9%. And of course, that's mainly the AVEVA transaction here. Where we are, treating in scope for 1 month, not only the Aviso business, but our legacy business as well for 1 month. So you have the accumulation of the 2.
Great performance. I mean, clearly, in discrete and hybrid. We've been very dynamic for all our family of product industry automation. If you look at PLC, drive, contactor, HMI, motion control, I mean, everything has growing with a lot of dynamism, a particular, certainly, mentioned for a very strong OEM demand. It's both as for all the explanation, giving favorable end market, but we think that we are gaining market share with a differentiated offer and with a great answer from our customer.
I made my comment on Process Automation, with, mixed results where clearly we have a region where we see some growth, and that has been the case in North America and Asia Pac, more difficult in Europe, where the oil and gas market remains difficult. Good news to start the software on the very good note for the Q1. And I think it totally support and justify our strategy to develop, grow, on software. And it's a company, of course, our digital ambition globally. I'm done now with the review of the businesses.
Looking at the region rapidly, I would say, starting with Asia Pac, growing 14%. You see that, of course, China has been delivering a strong performance. We talk about strong double digit growth in China during this Q1, but you see that India, Australia, Indonesia, Vietnam, I mean, all these countries have been growing very nicely, and contribute to the performance of this first quarter. Good news coming as well from North America, and very good performance in the US. Canada has been growing.
Mexico was was down, but we think that Mexico should recover for the rest of the year, but good to see clearly the U. S. Accelerating and confirming the good performance of the last quarter of 2017. Rest of the World, plus 5% it's really growth, I would say, across the region, you see that South America, Middle East, Africa all growing, good to see both South America and Middle East back to growth. One only negative Russia, which is probably an area where we can have some question on the coming months, given the impact of potential new sanctions.
And, and uncertainty on what it could mean there. I want to finish with Western Europe, it's flat. It's actually growing plus 2% working day adjustment. And as I said, in fact, Western Europe has been growing nicely outside the medium voltage. A low backlog, invoicing, and you have some country, you know, like Spain, Italy was in group globally growing very nicely.
France Germany have been growing nicely outside medium voltage. We just confirmed that certainly our biggest question mark or uncertainty for the year is the United Kingdom and the impact of the Brexit, the uncertainty that it triggers and therefore, the wait and see attitude that we see in some of the market in the United Kingdom. Alright. So let's move now to the the conclusion, and, the, outlook for 2018. So you see, we continue to, in a very consistent and successful manner, I would say, implement our strategy in a positive environment, product services, digital offering, the cross selling, all that is, is delivering I want to add to that, of course, our global presence, which is clearly a plus in this environment.
The strong performance in Q1 bodes well for the organic top line growth for the year. So in this context, we reaffirm the target to deliver a strong organic growth of adjusted EBITA in 2018, around, as we said, the high end of the plus 4% to plus 7% bracket which is the 4 to 7, the bracket that we communicated as the average value objective for 2017, 2019. And to deliver this strong performance, we, of course, as the ambition to maximize the organic top line growth in this good environment with you know, this nascent digital market where we want to build, clearly the ship. And of course, we will make the necessary investment to capture this growth in this fast growing market. Therefore, for 2018, we will target an organic top line growth to the higher of the plus 3% to plus 5% range.
So remember, initially, we are seeing plus 3% to plus 5%. Now we are just I would say it's a precision, we are based on this Q1 now, targeting the higher life, higher life for the plus 3 plus 2 plus 5% range. And we target an organic adjusted EBITDA margin extension towards the upper end of the plus 20 bps to plus 50 bps range targeted as a yearly average improvement for 2017, 2019. You have then a page that I, let you on additional notes and that, you know, help you factor a number of impact on scope tax or Forex. And with that, I'm done with my presentation and I'm ready to answer questions.
You.
You. We are taking our first question from Ben Uglow from Morgan Stanley. Please go ahead. Your line is open.
Good morning, everyone. Thank you for taking the questions. Two questions briefly. First of all, in May or last year, you gave us some fairly precise numbers about the industry, industrial automation business. In China.
And from memory, I think that we were close to 20% growth. You clearly had another, fabulous quarter there can you can you just calibrate the growth, double double digit can mean a lot of things, how, you know, how good are we relative to last year? And also, can you just talk about the progression, in the Industrial Automation business during the quarter? So were we seeing an acceleration into March or how do you see that one business in particular? That's the first question.
2nd question. I mean, the growth in low voltage is absolutely fabulous. Can you just talk about, and I know you don't like to talk about margins normally on the call. But pricing and whether you've had to be a little bit tactical around pricing to achieve that growth.
Thank you, Ben. I want to make sure that I'm understanding where your question, when you talk about progression, question of progression through quarter? Is it in China or globally?
Yeah. No. Sorry. China was re really just wondering the sense of how the Industrial Automation business developed in China over the 3 month period. And obviously, we've got the uncertainty of New Year, etcetera.
So just what you're seeing
Yes, yes. So, the progression as, I mean, you rightly say it has been very impressive in China during this first quarter. And we are once again close to 20% growth in industry in China for the first quarter. Frankly, I mean, it has been strong performance across the quarter. So and with the Chinese New Year, you're not able to say whether there was an acceleration or deceleration.
I would say strong performance across the, the quarter. But nothing specific to mention in that respect. Regarding your second question, and I don't want to be dragging commenting margin on this call because that's not the purpose. And I just want to reiterate the fact that, our objective is for the full year with with a price increase to compensate the raw material inflation. We are confirming that the raw material inflation for the year should be around 200,000,000.
So that's exactly the same kind of guidance that we gave a couple of months ago. And when we say that we all, when we talk about compensation between price increase and raw mats, it's outside, it's outside China, where we flag the fact that the situation was, was, was a bit different. But that remains our objective. It doesn't mean it doesn't mean that, you know, over a quarter or a very bit of 6 months. We managed to compensate.
And sometime, depending on how fast the raw mats impact can accelerate. We have had years where we did not manage to compensate over a calendar year, but over time, we always manage to more than compensate and that remains that were applicable.
Thank you, Ben. I see that we have actually several questions. So may I just request, keep it to one question per person and then we come back to you time permitting.
The next question comes from Andreas Willie from JP Morgan. Please go ahead.
Yes. Good morning, everybody. Thanks for the time. My question is on Europe, was it your 1% organic growth if you adjusted trading days, medium voltage, it doesn't look maybe as weak as the headline, but maybe you could comment a little bit what you have seen in Europe during the quarter given there's some concerns around the macro momentum in Europe with PMIs maybe having slowed more than expected in Q1 and some of the hard economic data has actually been quite weak in Q1. Are you seeing in terms of fleet indicators, orders, the trends in March?
Are you seeing a slowdown in Europe?
Good morning, Andreas. No, we don't. So again, I'm not saying that Western Europe is growing as fast as a as a rest of, of the geographies because that's not the case, obviously, but if you look at the both low voltage and industrial automation working there just because the one point 5% working the impact in, globally for the group. In fact, mean that in Europe, you have more than 2 percent because that the Easter impact, which is more for European countries. So we've been growing mid single digit both for low voltage and industrial automation.
And we've seen clearly dynamism, in the construction market, industrial automation in in most countries, I would say, with a few exceptions, certainly, Spain is a very strong performer, but Italy has been doing very well. France has been doing, quite okay, I would say on both, you know, low voltage and industrial automation. And, and Germany as well. So you don't understand where the performance on Europe, if you don't factor in the fact that we have been decreasing by a strong double digit in Medium Voltage. And that's why we don't have a better perceived performance.
So I think that on Western Europe, back to my earlier comments, our biggest question, concern, Worry, is on UK. What could happen in the coming quarters based on this wait and see attitude I was describing. But I would say that Europe should, I mean, on basis of what we see today, should keep dynamism, nothing that is going to grow as fast as some other region, of course.
Thank you very much.
The next question comes from Andre Hookin from Credit Suisse. Please go ahead.
Yes, good morning. Thanks so much for taking my question. It's really about guidance And on top line, you've moved to the kind of higher half of the 3% to 5% range, but you've just delivered, 6.2 despite the 1 half percent, points day effect. So the question is really whether there is, anything in that performance that, you don't deem to be entirely sustainable, or is there anything sort of later in the year that's, we should think about, and, and CAPP at 5, or is this just, kind of early days in the year and, which, which warrants some caution, some conservatism.
Yes. Good morning, Andre. Well, I don't know what, of course, the future will bring. I think that given the good start of the year, we can certainly have a more ambition and say that the IRAL of of the of the bracket is, is, is, is a treat. I don't think that we have today, the, the visibility the data to say that, you know, we have to revise above the 5%.
We that China started the year on a very strong note. I would say that China is going to stay strong through the year, but it doesn't mean that it's going to deliver strong double digit, through the full 2018. So this could, could see some slowdown in the coming quarters. We'll be facing some higher comps toward the end of the year. So given where we are, even if we are taking into account this good Q1 performance.
We think that this is a reasonable, I would say, adjustment or precision on the guidance at that stage.
Got it. Thank you.
From Deutsche Bank.
I'd like better understand how you feel now about the margin outlook for the full year compared to a few months ago. Because on the one hand, think you've been pretty clear, when you said that you wanted to maximize organic growth and that you would do the necessary investments But on the other hand, how do you see the mix playing now? Because with much faster growth in low voltage and automation that in the low margin medium voltage business, I guess this should be quite positive for margins, right? Just a bit of comment on that. That would be great.
Good morning, Ed. I don't want to spend much time commenting on the margin because again, that's not the purpose of that call. I mean, you said it, we, clearly, want to make sure that we sees, we grab the maximum potential of growth. We think that today, we have a lot of win in the sales and that we can outperform on many markets. So we want to make sure that we do that.
That's required, investment that of course we can afford with kind of top line growth, but investment are having an impact on the bottom line on the short term. That's clear. So that's what we are doing. We've been very consistent on saying that. We're going to deliver both top line growth organic and organic margin moment for the year.
That's clearly the ambition. And now we said that we are putting a particular focus on the top end growth. And we highlighted this need for investment. Now on your question on the mix, I'm not going to deny the obvious, yes, of course. Low voltage and industry automation growing is not bad for the mix.
That's quite clear.
Okay. Thanks very much. Can I have a quick second one? The, in Medium Voltage, I mean, what kind of challenge Sorry. What kind of challenges did did you see in India and and Russia exactly?
Is it pricing related or is it project project execution related?
Slow market, first, clearly for Russia, I mean, the market, which is clearly weak today, in terms of investment in oil and gas, notably, but, you know, in terms of big project, as a whole. And, and on India, I would say, it's probably the competitive pressure for non differentiated offer, I would say.
We are now moving to Alastair Leslie from Societe Generale. Please go ahead.
Hi, good morning. So you called out a strong order intake
in medium voltage over over 6 months.
So I was just wondering if it's possible to give some more color on the order trends for Secure Power. Maybe also the process side within Industrial Automation just to get a sense of how growth might ramp up through 2018. I think just particular 2 Secure Power, there was a tough comp there in Q1. Just trying to reconcile the positive comments that you made on investment levels and kind of activity around the industry and data centers and what that means specifically for growth expectations for Secure Power? Thank you.
Yes. So, as you know, we don't comment, order intake very often, they are not that differentiated versus the top line. I think that when it's very relevant and for medium voltage, you have you have a bit more, a lag between orders and sales. And we thought that, to give you visibility, it was important just to give a color on the fact that We're back to growth on order intake and that we materialize in the top line in the coming quarters. You know, I would say, the order intake evolution in all, you know, businesses are supporting, confirming the analysis I've been sharing with you.
So I have nothing else really to report The order intake is in line and support the comment I've been making on the trends and on the geographies evolution.
We are now moving to Simone Thonathan from Berenberg. Please go ahead.
Can I just ask sort of high level? I mean, from your perspective, where would you summarize, we are sort of currently in the industrial cycle. Mean, you clearly seem to be taking share in several areas as you mentioned for your device, etcetera. And if we take out comps, which are becoming a bit tougher in Low Voltage and IA in the next quarter. Are we still in sort of the acceleration phase, or do you expect this to stabilize sort of at this level now.
And I know you usually don't disclose orders and you've just set that on medium voltage, but I mean, In the voltage and industrial automation, you've seen a very strong acceleration in the first quarter and, also where market expectations were for your 1st quarter. Is it can you just give a bit of color at least maybe where sort of order intake towards the end of the quarter was And whether it matched kind of the growth that you've seen in the first quarter, particularly the short cycle business?
I can try. I think that, when you look at the early indicators and the PMI, probably the acceleration is now behind us. So we are in what I would qualify in a dynamic environment, but probably the acceleration that we've seen in H2 2017 is now behind us. So we are in this positive momentum that we are describing And, and I'm not sure, you know, I can, I can bring more colors than that? So, again, all those are just supporting the comment that we are making on the trend and on the ambition.
And I would not say that today they bring more information than what we've been sharing with you through our sales in Q1. That I would summarize things.
The next question comes from James Moore from Redburn. Please go ahead.
Yeah, morning, everyone. Hi, Emmanuel. Maybe I could ask my question on Eco structure. You've given us a loss in the last year, qualitatively, about it, but you kind of chose not to say too much quantitatively. I wondered if you could put a rough revenue size on as a percentage of sales and size how fast those sales are growing?
And could you say which of the 4 businesses are seeing the fastest ecostructure growth and penetration story?
Yes, what we said that, we, today, 45% of our offer that can be considered as part or possibly part of an EcoStruxure architecture. But of course, some of that sold, independently today. I'm not in an EcoStruxure, architecture, but is, you know, I would say, made in term of, capacity to communicate, the IoT ready, I would say, things. So that's the number we gave. Now when we're going to report about the EcoStruxure number, it's going to be about the edge control and the, and the digital software, digital services capacity.
And that's what we are because that's which is the most digital content of what we identified as this ecostructure portfolio. And that's on that part that we are seeing that we've been growing, faster than the average of the group during this first quarter.
Yeah. I I heard that. And, you know, the group's growing at, a nice number. I just wonder whether the spread is a 100 bps or a 1000 bps or more.
Okay. So sorry not to be able to bring more. I'm sure as we are it's a whip. So it's working in progress clearly. I'm sure that in the future, we're going to come with a more regular reporting and with numbers, but that is something that we are today, building and setting up.
So Bear with us and we will come in the coming months with probably the level of clarity or granularity that you are looking for.
Thanks, Amanda. I'm sorry. Just to clarify earlier on the whole of China organic, did you say it's just under 20 for the group or just industry? Could you say what the group was?
That's it for industry.
And for the group?
That's also close to 20%. Thank
you very much.
We are now taking Martin Wilkie from Citi. Please go ahead.
Yes, thank you. Good morning. It's Martin from City, just coming back to Russia, I think at one point Russia was about 7% of your sales. I'm assuming it's quite a bit lower than that now, but can you just remind us how big Russia is of your of your group sales? And then just in terms of you did mention, sanctions in your commentary.
I just want to understand, have you already seen some hesit some incremental hesitation on projects late in the quarter because of the possibility of sanctions, just to understand how we should think about Russia as the year progresses? Thanks.
Yes, Martin. Good morning. Russia is globally 3% to 4% of our sales. And my comment was given the sanction or outlook for more sanction. I think there is also a wait and see attitude on financing against this project, you know, be launched.
So that that's creating this kind of environment of uncertainty and and doubt. And and that's what is slowing down the market globally for medium voltage. So we are still growing in several, in several dimension in Russia. Don't get me wrong. And clearly, we are growing nicely in the voltage, for instance, but clearly medium voltage is a difficult part.
Thanks. And then just of that 3% to 4% is that largely inside medium voltage? I know you do have some other stuff in low vols in big center but the lion's share of that is medium voltage. Is that the way to look at it?
No, no, medium voltage is about the size of low voltage. So that these are the 2 big, big dimension. We also have a big Secure Power business in Russia. So it's not as if it was representing as the vast majority of the business in Russia as at all.
Thank you.
Next question comes from William Mackie from Kepler Cheuvreux. Please go ahead.
Yes. Hello. Good morning, everyone. Thanks for the time. My question is focused on selling versus sell out in the low voltage business.
I mean, in this environment where you're experiencing inflationary pressure, on the materials and on labor. And you are actively, looking at dynamically raising prices to offset that. I mean, often we have seen in previous cycles, the response being that the distributors will stock up, so to speak, ahead or anticipating your changes in list prices. I mean, can you comment, if you have seen any significant differences in what you believe to be the market growth trends across the key regions, the U. S, China and the main markets in Western Europe and the growth that you've experienced as the sellout of your factories to your distribution partners?
Hi, Will. Good morning. Well, I would say probably China and we are flagging it in the detail of of the analysts that we are providing this morning, we think that in China, probably we've seen some of, catch up on restocking, if you want. So where probably the selling was above the sellout But, you know, let's be clear, not in a very material fashion. So it doesn't change the fact that China is growing fast and doing very well.
And that's very often this kind of situation, it's just being magnified by people stocking a little bit maybe a price increase and maybe because it's a dynamic market and they would want to run into a shortfall, you know, of availability. And and, you know, it always plays the same way. So when things are clearly accelerating, you generally have the sell in, which is above the sellout and it goes the other way around when things are decelerating because the distributors don't want to be left with a too high level of inventory. So that's the kind of trend that we are seeing. I think we've been flagging China as a place where that can probably have been bringing a couple of extra percent of growth I don't think it has materially or dramatically changed the positive trend to this year.
All right. Let's move to the next question.
I think we're coming to the R, but there are probably another 2 or 3. So we try to accommodate them. Next question, please.
The next question comes from James Stettler from Barclays.
Thank you. Good morning all. In terms of the very significant opportunities from the energy transition, how
do you feel you're now set
up in medium voltage and you maybe discuss the strategic plans in that division?
Hi, James. Good morning. I think we clearly are saying this morning that we keep implementing this power system organization that will be up and running fully at the end of H1. We are, of course, monitoring the impact. I've been reporting the fact that we are happy to see good progress, on product on services and, and on, you know, all the digital grid dimension, which is as you, as you very well know, top priority for us.
We also, are clearly monitoring by geographies how this new power system business is doing. And, and will come at the end of H1 with some first element of vision and clear report on where we stand. As I said, we're working on it. We, of course, want to be back to a positive top line growth, which was not yet the case in Q1. But otherwise, between order intake, and the priority which are growing where that I was describing.
I would say a lot positive is going on on the energy technology today.
But you believe there's anything missing in the portfolio here?
On the portfolio missing, No, I would not say that we miss something on the on medium voltage. That's not the way we are approaching the matter today.
Thank you.
Thank you.
Next question please.
We are now taking Danilo Costa for performance Please go ahead.
Hey, thank you for taking my question. Just one final question last So can you talk a little bit about, sort of a outlook for, M and A, if you think sort of, I know the last question you asked about 1,000,000 voltage, but in the broader port is there are areas that you would be keen to still build out and sort of what's your capital allocation strategy priorities from here?
Good morning, Daniel. I'm not sure it fits very well in a call commenting the Q1 sales, but I'm happy to just repeat what we've been saying for a good moment now, which is we don't need to do M and A. We have a portfolio, which is strong and set for a nice organic growth, given what we own in terms of technology given our geographical exposure. Having said that, we, of course, look at opportunity to strengthen, the business in our core priorities. We've done that with ASCO.
We've done that with Aviva. No surprise to you. Certainly low voltage and software could be a big priority. But we have else, I would say, honestly, new to that capital allocation strategy, that's really the one we've been playing with now for almost 4 years.
Absolutely. Just you mentioned low voltage and software. You didn't mention Secure Power.
No, I'm not discussing that because, of course, you know, but I would certainly say that's not necessarily what would come first. But of course, if there was something strategically making sense at the right price, creating value, we could consider it.
Alright. Thank you very much. We're now taking Jonathan Mounsey from Exane. Please go ahead.
Thanks for fitting me in. Much appreciated. I guess since the last time, you were on conference call. You've now, consolidated Veeva. I just wanted maybe some first thoughts, particularly in regards to the potential synergies and whether we have any sort of updated views on that since now it's within the Schneider Group.
And then linked to that and slightly linked to the last question, although you're sort of happy with the portfolio, I've always given to understand that, the New Aziva separately estate asset would be a potential platform to require other software businesses. And I guess it'll take some time to integrate the Invensys businesses, but now that you own that combined asset. Have you any view on how long it's gonna take to bed those down and be ready, maybe fit to do some deals via the Aveda vehicle? Any sort of color on that would be great. Thanks.
Good morning, Jeanette. All very good questions, but you should add then to the EVA team. What I can tell you and confirm is that, AVEVA, as I started the way the year or finish where the year for them because they have their year end at the end of March in terms of sales. I've been reporting on the various trends, which are positive or super positive for the rest. And you had question on the synergies.
On outlook for external growth. I leave that for them to comment. And at that stage, I won't elaborate on that.
All right. I think we're over the hour. Maybe we will take one last short question.
And thank you for the interest by the way.
Operator, maybe one more question.
Thank you.
Yes, hi, good morning, everyone. Quick question on the Secure Power business. What you said is that data center was one of the fastest growing end markets for the water double digit growth. What I'm struggling with is if I interpret slide 28 in the appendix correctly, 2 thirds of the data center is Secure Power. So that would suggest, given the 2.7% growth in Secure Power that either lower medium voltage and data center was significantly above group average or secure power and non IT, was significantly below the 2.7%.
Can you just help us out Is it low voltage into data center that's really good or is it could power outside of it weak?
So Marcus, it's a mix of all, you have a decrease on the Luminess business, in, in India, which is in, which is a negative. Second, you have indeed the trajectory on the business in the IT channel, which is not necessarily, which is growing, but not necessarily at the same pace. As the data center and market. And last but not least, yes, we have had a very strong performance in low and medium voltage in data center. So that's a complete answer to your question.
And then, Markus, just
to add, I think if you're referring to the slide, in the appendix, that is actually an extract the full year results slide. So that's more indicative. It's not specific to Q1.
But I guess that these numbers don't change that dramatically quarter on quarter, right, those mixed numbers?
No, they don't. No, they don't. All right.
So I think, we probably stop there. Thank you, everyone, for your time. IR team would be now and in the coming days weeks. And please look forward to communication from us and we've got we've got some events we're participating in which is on our website and look forward to seeing you all. Thank you.
Thank you all. Thank you. Talk to you soon. Bye bye.
And we conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.