Third quarter results released today by Schneider Electric suggest that the market for plant operations technology, especially in Europe, is going through a continued period of stagnation. Although the company is confident of a gradual recovery, a lack of investment on the production side has resulted in declining sales and a need to find more amenable markets.
Growth has remained strong in Spain, and Schneider claims that a more favourable trend in the third quarter can be identified in Italy. But this has not been repeated elsewhere on the continent. Weak industrial investment, both for production equipment and buildings, has meant that in countries such as France, no signs of recovery are as yet visible.
The company also says that medium voltage projects in particular have been subject to strong competitive pressure. Overall in Europe, third-quarter 2003 sales declined by 2.4 per cent from the year-earlier period, reflecting no noticeable change in trend.
Schneider can take heart however from a continually robust Eastern European market. The company has enjoyed sustained sales growth in the region, and the sector now constitutes nearly 10 per cent of Schneider's total European sales. The group said that it has benefited from fast-growing capital spending in the East.
And in the rest of the world, third-quarter 2003 sales showed sustained growth, increasing by 7.9 per cent year-on-year. China continued to record strong growth supported by a high level of capital spending and sales in Japan also showed substantial gains thanks to the recovery in the industrial market, amplified by the positive integration of Digital Electronics. Southeast Asia and the Pacific region as a whole enjoyed significant growth.
In North America however, which along with Europe is Schneider's key market, third-quarter 2003 sales declined slightly by 0.6 per cent from the year-earlier period but were up noticeably compared to the second quarter 2003. The company says that business is beginning to benefit from an improved economic environment, although market conditions still remain difficult overall.
At September 30, 2003, Schneider Electric cumulated total sales of €6,447 million. On a constant structural and currency basis, sales declined by 0.1 per cent from same period last year. At current structure and currencies, third-quarter 2003 sales were down 2.5 per cent compared to the samequarter last year.
Unsurprisingly, the company has chosen to highlight the more positive aspects of the third quarter results, and believes that green shoots of recovery are visible. ''Schneider Electric's markets show signs of improvement in a still very mixed environment, with notangible recovery at this stage," said Henri Lachmann, chairman and CEO of Schneider Electric.
"Economic conditions are still sluggish in Western Europe while our performance is encouraging in North America and remains remarkable in Asia and Eastern Europe. In this context, the group expects full-year 2003 sales to improve slightly on a constant basis."
Schneider Electric is a global IT systems provider and operates extensively in the food production sector. The company generated sales of €9.1 billion in 2002 with global brands such as Merlin Gerin, Square D and Telemecanique installed in over 130 countries.