EuroBusiness Media (EBM): Rexel, the world's largest distributor of electrical equipment, just reported first-half earnings. Jean-Charles Pauze, welcome. You are the CEO of Rexel. What are your comments on your first-half results?
Jean-Charles Pauze (JCP): Our first-half results really match our objectives: clearly, we have been delivering, and we continue to deliver. This first-half is really a semester of strong acceleration on the top line, on the operating line, and on the net result. Going from the top line to the net result, we increased sales by 3.4% and improved the EBIT by 12.5%, leveraging down to the net [profit] with a 64% increase. So I think this kind of capability, combined with an acceleration and excellent leveraging, is really the key note of this particular half-year.
EBM: Clearly, the market is most interested in knowing about the sale of PPR stake in your company. Can you provide us with any new information or details? Is the sale moving ahead according to schedule?
JCP: PPR has confirmed the fact that they want to focus on B to C and the luxury business, and the time horizon for this is the end of the year. All alternatives are still open, clearly open. The [alternatives] include: the trade buyer, the financial institution, or the market. As a management team, we are gearing up to bring this about, i.e. business-wise by improving the results, streamlining the company to reach the best valuation, and technically organizing for all alternatives to be possible and to take place when necessary.
EBM: What are your comments about the impact of raw materials price increases? Is there a mismatch between the way Rexel is impacted by price increases and the way it passes them on to customers?
JCP: No mismatch. Clearly, we have had some price increases, beginning at the end of last year, particularly on copper and steel. There have been price increases which were rather significant, but we have been managing the situation so that all these price increases have been properly carried over to the final market. So there is really no mismatch.
EBM: As a global company, could you provide us with some insight about the business climate in the different regions of the world?
JCP: We are a global company, this is true. We are present in the three main areas of the world. We are the only electrical distributor present in North America, Asia-Pacific and Europe, and so we have a pretty good view of what is going on. But basically, we are also working in three main sectors of activity: first, industrial; second, residential; and third, nonresidential commercial. In industry, we can see in all our zones that there has been an upturn, and industrial investment is increasing. So we have been benefiting from that, and we expect to continue to benefit from that -- certainly this year, and probably somewhat longer term. Clearly, on the residential side -- except for Germany -- all regions have been at a high level, and are increasing. There is probably even potential for a greater increase, particularly in Europe. In North America, we expect resilience in this sector, and a particularly good resilience in view of the increasing interest rates. Concerning the non-residential commercial building sector, the situation is more heterogeneous; it was at an acceptable level, with no major growth -- or small growth -- in most regions, and very low in North America. But in the last month, we have seen a rebound on this particular indicator, and we do expect to see a gradual improvement in the commercial building sector in North America.
EBM: After your successful restructuring plan, there is a pervading sentiment in the market that Rexel may now be fairly valued. What could be the catalyst to trigger a re-valuation of Rexel by the market?
JCP: Well, I don't want to comment about the market and our share price. I would just point out that the consensus places us somewhat higher than the price of the shares today. I might add that what will trigger a better valuation of the company is clearly profitable growth. Clearly, profitable growth is: profit; a good command over improving our productivity; making sure that we get the operational leverage. And the growth is really coming from our organic growth, that we have started again rather strongly, with a high focus on sales, more distributive added value, a better product in terms of greater innovation, increased product functionality, and clearly more trading. We now have more people on the road. And even though in this first half-year we have decreased our overall workforce, our sales force has increased by 1%. As far as external growth is concerned, we have been undertaking external growth again, and we will focus on areas where there is higher natural growth: Europe -- Central Europe -- Aia-Pacific, some areas in the US, and particularly in key regions where we want to reach a 10% market share. Reaching 10% market share regionally is a goal because it means ensuring growth not only at the top line, but at the bottom line as well.
EBM: And finally, what is the outlook for business in the second-half, and beyond?
JCP: In the second half, in line with my comments on the general economic environment, we expect to see an increase in activity in the second-half as big -- if not greater -- than that of the first-half. In terms of our EBIT and operating result, we do expect to have the same kind of improvement between H2 '03 and H2 '04 as that between the first-halves of those two same years.
EBM: Jean-Charles Pauze, CEO of Rexel, thank you very much.
