EuroBusinessMedia (EBM): Rexel, a leading worldwide distributor of electrical supplies has just announced H1 results for 2008 and with me today is the Chairman of the Management Board and CEO. Jean-Charles Pauze, welcome. What is the global picture behind these half-year results?
Jean-Charles Pauze (JCP): Well, actually, this first half year has been really a solid half year, and it has been a solid half year both in terms of top line and in terms of EBIT. In terms of top line, in all our regions we have been posting, for this half year, positive growth, and in total + 2.3% on a comparable basis. And in terms of the EBIT we have been posting a growth of the EBITDA which is about twice - slightly over twice - the growth of the top line, which actually represents a 5.9% increase to a level of 335 million, driving us to 5.6% of our turnover, so really this is the main highlight of this half year.
EBM: How about net income?
JCP: Well, in terms of the net income we have been improving our net income, actually more than 70% - 72% - and with a specific the capital gain alongside the transaction that we have had with the Hagemeyer deal.
EBM: Are you happy with your cash-flow operation?
JCP: Well, in terms of the cash-flow, our model has always been very much cash-flow productive; but particularly during this quarter. We have been producing a high level of cash-flow, which has been helping clearly deleveraging and our debt - after the disposal of the entities to Sonepar and also the swaps and the sale of Ireland - has been now reduced to an amount of 3.1 billion, whilst it was 1.6 billion more before.
EBM: The environment continued to be challenging in this first half year. What drove your performance?
JCP: Really that’s two things. The first thing is that we are shifting, as quickly as possible, our marketing and sales strengths on a market that is still lively, there are clearly applications which are still driving high, particularly on the industrial side, on some part of the commercial construction as well. Take the example of raw materials, of oil and gas, reshifting our efforts, refocusing our efforts on those applications is definitely one driver. As an example, the development of our key account business has been 4% during this semester, this first half. That’s clearly the first driver. The second driver is really the implementation of our levers, our performance levers. And here, this is really the efforts that we have made on the growth margin, the growth margin where we were more and more specifying the different product categories, different customer segments and bringing the right service but pricing also at the adequate level. And second, on the cost side, adjusting our cost, logistic costs particularly, whether it’s on the North American side or on the European side.
EBM: Are you seeing strong growth in Asia?
JCP: We are seeing strong growth in Asia and we are not seeing any sign of weakening. This covers at the same time the Pacific and China and South East Asia as far as we are concerned and the growth is very much driven by the industrial sector as well as by an active commercial construction area.
EBM: Hagemeyer entities have been consolidated since April 1st. Now, how has this contributed to the results?
JCP: Well basically, the Hagemeyer entities have been consolidated from the second quarter only, as you realise. We have been reselling to Sonepar, according to the deal that we had with them, an enterprise value of close to 1.7 billion euro, which has definitely helped us to bring down our leverage to what I mentioned to you. Naturally, the interest of the Hagemeyer deal is increasing our market share and our presence in Europe, as you realise the retained entities of Hagemeyer for Rexel are in Europe which increases our local market share, which gives us the possibility to serve better key accounts, which also gives us the possibility to increase our share in renovation, since we have more renovation in construction in Europe than what we have in North America. So clearly, the Hagemeyer deal is a possibility for us to reinforce our sustainability of business through time and give us new opportunities in some new countries and in developing key accounts, and particularly industrial key accounts.
EBM: Are all the management teams in place?
JCP: Well at this point in time we have everywhere the management team in place, but not only that, I think that we have the road maps - clear road maps - for all the different countries and entities, which means that basically we can reiterate our expectation of synergies. I remember we have been announcing 50 million synergies on a yearly running basis from 2011 on. We really have clear road maps on that and we have been starting, already in Q2, to grasp some of those synergies on the purchasing and administration side.
EBM: You are confident about your 2008 guidance. So can you give us some insights on your outlook?
JCP: As you have been seeing, we are reiterating our guidance. The environment is going down, we know that, and we have been anticipating that in our guidance. But by the same token I’m saying also that we adjust permanently our actions and our costs, particularly, according to the situation that we see in the different countries. So we know it will be more difficult, we anticipate that, and we have been proving, particularly through the H1 result, our capability to be quite proactive and react to the situation.
EBM: How will you develop organic growth in this environment?
JCP: Well, in this environment, as I mentioned, we are refocusing our commercial and sales efforts towards the different applications where there are still investments. Here, I want to name some where we are quite efficient; this is actually the whole oil and gas area, I can quote the Alberta in Canada which is really driving hard, many of the oil and gas applications in different US parts or in the North Sea or also in the mining industry overall. So that’s really one area, one sector where we are pushing our efforts. Also in the whole energy saving sector, not only renewable energy which is one aspect of that, but really the energy saving in our daily life, like pushing all types of applications in lighting, for instance, in using low consumption sources, there are quite a few opportunities, it’s a question of redirecting our effort.
EBM: Do you have any concluding remarks?
JCP: There are two points that I want to highlight, first that our business model has been showing a great capability to adjust to a more difficult environment, which is still weakening. And secondly, clearly that we have opportunities - it’s a matter or redirecting effort to those areas of opportunities that we have been mentioning.
EBM:, Jean-Charles Pauze, Chairman of the Management Board and CEO of Rexel, thank you very much.
JCP: Thank you.
