* Cuts 2013 sales and margin forecasts after forex hit
* To shift production to emerging markets
* Q3 sales down 3.2 pct at 5.9 bln euros
* Shares drop 3.7 pct, worst performers on Euro Stoxx 50
By Natalie Huet and Gilles Guillaume
PARIS, Oct 25 France's Schneider Electric
cut its revenue forecast for this year on Friday,
blaming unfavourable exchange rates, and said it would raise
prices and shift production to emerging markets to preserve
The electrical gear maker posted slower quarterly sales
growth, citing weakness in Western Europe, and was the latest
European-based multinational to complain of weak currencies
slashing the value of overseas sales and hurting profitability.
It forecast "stable to limited" organic sales growth for the
year and said the depreciation of foreign currencies - including
the U.S. dollar, the Indian rupee, the yen and the Brazilian
real - would slash revenue by 800-900 million euros.
The group had previously expected low single-digit
percentage growth in revenue for the year ending in December and
a currency hit of 600 million euros ($828 million).
Adverse currency moves would also cut 0.3 to 0.5 percentage
points off its 2013 adjusted EBITA (earnings before interest,
tax and amortisation) margin, which it had expected to be stable
to slightly higher than 14.7 percent in 2012.
Shares in Schneider fell 3.7 percent after the dual warning,
the worst performer on the Euro Stoxx 50 index of European
The French company, which earns 75 percent of its revenue in
foreign currencies, joins a chorus of multinational companies in
complaining that their earnings are being crimped by a weak
dollar and a sharp depreciation in emerging market currencies.
They include French-based car maker Renault,
building materials supplier Saint-Gobain and insurer
On Friday, Swedish home appliances company Electrolux
also cited weak emerging currencies and tough
conditions in Europe as it announced a fall in quarterly
earnings and 2,000 job cuts, and said it would shift more
production to emerging markets.
SOLID CHINA GROWTH
Schneider's Chief Financial Officer Emmanuel Babeau told
Reuters he expected emerging market currencies to remain weak
throughout 2014 and that the company would move production to
emerging markets to benefit from lower costs.
"It's what we call rebalancing - further putting into
fast-growing emerging countries more and more of our costs, our
teams, our structures," Babeau said, citing southeast Asia,
South America and Russia.
Around 40 percent of Schneider's more than 140,000 worldwide
workforce as of last year is already based in emerging markets
while a third are in Western Europe, which accounts for around
30 percent of the company's revenue.
Schneider also said trading conditions in Europe were still
tough: its sales dipped in France and Germany in the third
quarter and posted double-digit declines in Spain and Italy.
Third-quarter group sales, at 5.9 billion euros, were down
3.2 percent from a year earlier. Organic revenue rose 0.7
percent, slowing from 2.6 percent growth in the second quarter.
Sales fell 6 percent in Western Europe, contrasting with
solid growth in China and North America, where organic revenue
rose 4 percent and 3 percent, respectively, driven by investment
in construction. North America accounts for 25 percent of
company revenue and the Asia-Pacific contributes 27 percent.
Schneider's products help utilities distribute electricity,
and it makes automation systems for the car and water treatment
industries. Like rival engineering firms Siemens and
ABB, it has seen sales hit by Europe's austerity
policies, which led companies and governments to slash capital
Chief Executive Jean-Pascal Tricoire, in a conference call,
said the company was not focusing on further acquisitions but on
the integration of British engineer Invensys, which it
recently bought for $5.2 billion to strengthen its portfolio
against larger players such as ABB and Siemens.
The deal was approved by Invensys shareholders last month
but is still subject to regulatory approval. Schneider said it
was uncertain whether Invensys would be consolidated into its
results this year or only in 2014.