Schneider Electric sees surge in energy management, system revenue in Q4 2023 (2024)

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Dive Brief:

• Schneider Electric reported strong revenue growth in its North America operations during the fourth quarter of 2023, driven by a robust performance in energy management and continued strong demand in the data center and infrastructure markets.
• Overall North American revenue grew 8.8% in the fourth quarter to $3.4 billion (3.17 billion euros) and accounted for 34% of total 2023 revenue. Energy management segment revenue in the region climbed over 10% in the fourth quarter to roughly $2.9 billion and grew 19.5% to approximately $11.2 billion for the full 2023 fiscal year. Systems organic revenue rose 17% in the fourth quarter, Schneider said in a Feb. 15 earnings release, attributing the increase to strong sales growth driven by artificial intelligence developments in large data centers.
• Data center, grid infrastructure and process industry investment trends are creating strong demand for Schneider’s system offerings, Schneider Electric CEO Peter Herweck said on a Feb. 15 earnings call, pointing to a continuing shift in its software business toward subscription models.

Dive Insight:

Combining the technologies of its energy management and industrial automation businesses,Schneider Electric sells its portfolio into four end markets — buildings, data centers, infrastructure and industry — with a focus on electrification, automation and digitization. The company noted that demand in the non-residential technical buildings space remains strong both year-over-year and sequentially, with double-digit demand growth in hotels and retail as well as “good demand” in the healthcare sector.

Field services, which accounted for 10% of 2023 fiscal year revenue, grew 9% in Q4, with strong contributions from the energy management and industrial automation segments.

The company said organic revenue growth in its North America industrial automation business saw a 0.3% dip to approximately $472 million in the fourth quarter of 2023. Yearly industrial automation revenue, however, experienced 7.4% organic growth, reaching $1.89 billion at the end of 2023. The segment’s systems sales in the process and hybrid markets had solid growth, offset by weak demand from original equipment manufacturers for systems into discrete automation markets, the company said in its earnings release.

On the earnings call, Schneider Electric CFO Hilary Maxson attributed the decline in U.S. discrete automation to a normalization of lead times and inventories across the OEM value chain. Maxson added that the company’s effort to generate structural savings helped partially offset a higher inflationary year as it continues to invest in innovations that support its commercial footprint and AI investments.

Herweck said management anticipates a gradual rebound in demand for product offerings toward the second half of the year. This demand recovery, Herweck said, would be tied to an uptick in discrete automation, with the U.S. expected to play a key role in leading this growth trajectory.

In its earnings presentation, Schneider Electric cited a record backlog level of around $2.9 billion created in 2023 and pointed to 12.7% year-over-year organic sales growth at year-end. Backlog growth was “relatively faster” in its energy management segment, while strong demand for software drove year-over-year increases in its industrial automation backlog, the company said.

Herweck said the company is on track to meet its sustainability target in 2025. Schneider Electric also reported that its solutions and services have helped its customers avoid over 110 million tons of carbon dioxide emissions in 2023, with its sustainability impact division's Zero Carbon Project helping its top 100 suppliers cut 27% of operational carbon emissions.

The company’s overall 2023 revenue organically grew 12.7% year over year to roughly $38.7 billion and rose 9% in the fourth quarter to about $10.2 billion.

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