Ladies and gentlemen, good morning and welcome to today's Legrand 2021 Nine-Month Results Conference Call. All participants are in listen- only mode. Later there will be a question and answer session. For information, this conference is being recorded. At this time, I would like to hand the call over to CEO, Mr. Benoît Coquart and CFO, Mr. Franck Lemery. Sir, please go ahead. Thank you. Good morning, everybody. Franck, Renaud, and myself are happy to welcome you to the Legrand 2021 Nine-M onths Results Conference Call and Webcast. We have published today, as usual, our press release, financial statements and a slideshow to which we will refer. Those documents are available on the Legrand website. Please note that this conference call is recorded and webcasted. After a few opening remarks, Franck and I will comment into more details the 2021 nine- months' results. I begin on page four of the deck with two key takeaways. First, amid tensions and supply chains that have intensified, Legrand recorded a strong rise in financial results in the first nine months of the year. Sales grew +15% year-on-year and +5.7% over two years, driven by a strong organic rise of +16% over one year or +4.4% over two years. Adjusted operating margin came to 21.4% of sales, and net profit rose +42% from the first nine months of 2020 or +12% from the same period of 2019. These very good results testify once again to the soundness and relevance of our unique model for value creation and confirm our continued capacity to improve competitive positions on our markets despite strong headwinds. Second takeaway, given the solid showings recorded in the first nine months of the year, but also significant pressure on supply chains with a volatile pandemic environment, we are specifying the full- year 2021 targets. Getting now into details, we are moving to page six. Diving first into sales trends. Over nine months, sales rose strongly in all regions. Organic growth reached a significant +16%, at double digit levels in both major countries with +13.2% and new economies with +24.7%. Over two years, organic sales grew +4.4%. This strong performance confirms Legrand continued capacity to improve its competitive positions on its markets as pressures built on supply chains, especially in the third quarter. At end of September, this performance is notably driven by good demand in residential as well as sales in faster expanding segments, namely data centers, connected solutions and our energy efficiency programs. This is for organic growth. Acquisitions contributed to an increase in sales of +2.7%, and exchange rates had a negative impact of -3.4% over the first nine- month period. Applying September average Forex rates to the rest of the year, this exchange rate effect should theoretically be about -2.5% in 2021 at the whole. Let's now move to page seven to go into more details regarding the like-for-like evolution of sales by geographical zone. In Europe, organic sales grew +21.8% in the first nine months of 2021. In Europe's major countries, growth was +22.3%, including +4.3% in the third quarter alone. Over nine months, the steep rise recorded included strong showings in France and Italy, with many commercial successes, notably in faster expanding segments. Sales in Europe's new economies were up +19.2%, including +11.9% in the third quarter alone, with very good showings in Turkey and Eastern Europe over nine months. Moving now to North and Central America, organic sales increased +7.9% in the first nine months. In the U.S. alone, the organic rise in sales was +6% with a slight decline of -0.9% over the third quarter alone. Over nine months, these trends reflect a marked sales increase in solutions for data centers and residential spaces, while demand for other non-residential spaces grew slightly. Let me now move to the last zone with rest of the world where organic sales rose +22.4% over nine months. In Asia Pacific, sales increased +18.9%, including +5.4% in the third quarter alone. Over the nine-month period, China and India both grew double digits. In Africa and the Middle East, sales rose +16.6% with +5.7% in the third quarter alone. The region's nine-month performance was both supported by strong gains in Africa. In South America, sales increased +43.1% with +22.8% in the third quarter alone. Reflecting continued significant growth in many countries. These were the key elements on sales. I am now passing the mic to Franck for an overview of our financial governance. Thank you, Benoît, and good morning to all of you. I hope you're doing well. Going to page eight now. Adjusted operating margin before acquisitions in the first nine months stood at 21.6%, meaning an increase of +2.9 points from the end of September 2020. Inflation in raw materials and components reached nearly +10% over the nine-month period and nearly +15% in the third quarter alone. Despite a significant inflation, our profitability increased, reflecting, in particular, strong leverage on expenses together with group pricing initiatives. After acquisitions, the adjusted operating margin for the first nine months of 2021 was 21.4%, setting the adjusted operating profit just over EUR 1.1 billion or up +31.5% from the first nine months of 2020. Going now to page nine regarding the net profit attributable to the group. At EUR 699 million, it grew +41.7% compared with the first nine months of 2020. The main driver is the strong growth recorded in the operating profit. The trend in the financial results is also favorable, and these positive items were partially offset by an increase in value of corporate income tax, while the corporate tax rate was slightly down from the first nine months of 2020 at 28.5%. Moving now to page ten with a few comments on cash and balance sheet. As a percentage of sales, cash flow from operations was up +2.3 points at 19.7% of sales above EUR 1 billion. It's driven first by the rise in cash flow from operation, and second, as expected, an increase in working capital requirement. The free cash flow stood at a solid 50% of sales in the first nine months of 2021. Now, when normalizing working capital recurrent variations on the right-hand side of the slide, the normalized free cash flow stands at EUR 859 million or 16.6% of sales in the first nine months. One last point I wanted to share on this slide. End of September, Legrand successfully issued its first sustainability-linked bond indexed on our carbon neutrality trajectory, and this trajectory is validated by the SBTi. This concludes the key topics on our first nine months' strong financial performance, and I'm now passing the mic back to Benoît. Thank you, Franck. Moving now to the second part of the presentation regarding the 2021 full- year targets that we are specifying today. We are on page 12 of the deck. Given solid showings in the first nine months of the year, but also significant pressure on supply chains with a volatile pandemic environment, Legrand is now aiming for the following full-year targets. Organic growth in sales of between +11% and +13% compared to at least +10% previously. The scope of consolidation effect of nearly +3%. An adjusted operating margin of between 20.0% and 20.5% of sales, including acquisitions consolidated in 2021 compared to about 20% previously. The group also aims to achieve at least 100% of its CSR roadmap for 2021, testifying to its ongoing deployment of a bold, exemplary approach to ESG, with a particular focus on the fight against global warming and the promotion of diversity. Let's now move to the last part of the presentation. We are on page 14 to comment briefly on our last CMD, where we reaffirmed our ambition to accelerate value creation. As you can see on the left-hand side, Legrand's strategic roadmap is supported by the strong pillars of a unique business model and by our solid integrated performance. Building on these strong assets, we accelerated growth initiatives, in particular in what we name faster expanding segments. We target to raise the share of group sales made in these promising fields from 31% in 2020 to 50% in the mid-term. Going to page 15, a few additional words on two important aspects of our strategic roadmap. First, we will continue to build on our performance-driven and close-to-market organization, leveraging on operational excellence, talent promotion, and strong employee engagement, which stood at 80% this year, rising strongly from 2017 results. Secondly, we intend to keep on deploying a bold and exemplary approach to ESG, which, as you know, is driven by demanding CSR roadmaps with a fifth one starting in 2022. I am now moving to slide 16. We have confirmed our midterm targets regarding growth margin, cash flow, and ESG. In terms of capital allocation, Legrand will continue its balanced policy, dedicating more than half of free cash flow to bolt-on acquisitions on average, while maintaining an average dividend payout ratio of about 50%. As you know, the full event presentation and the replay webcast can be found on our website. Franck, Renaud, and I are now ready to open to questions. Thank you. Thank you. Ladies and gentlemen, if you have a question, please press zero one on your telephone keypad. We have a few questions from Daniela Costa from Goldman Sachs. Please go ahead. Hi, good morning. Thanks for taking my question. I have three questions. They're relatively quick, I hope. First, I wanted to ask you regarding if you could comment a little bit in terms of your distributors, if you see them restocking, how sell-in versus sell out. I know in the past you've commented on that. Second, on your inventory build up in Q3, can you talk about how much of that is just finished goods waiting to get out of the door because of supply chain issues? The final point, just checking regarding restructuring. Q3 in terms of restructuring expenses was relatively low. When you look out into Q4, do you see any need to raise that given, like, the situation that you mentioned in terms of supply chain? Shall we assume it remains relatively low going forward? Thank you. Hello, Daniela. On the first question, I'm sure that our distributors would like to build some inventory, but given the constraints on the supply chain, I think they can hardly do so. No, we haven't seen significant change in their inventory in 2021, and they are not able, unfortunately, to build back some inventory. Now, 2021 compares to a situation where the level of inventory in 2020 was very low. Even with the current level of inventory and even without building back some inventory, there is some positive impact on the top line coming from inventory. Again, I don't believe that their level of inventory is particularly high. They would be happy and pleased to build back some inventory, and unfortunately, they cannot. As far as our own inventory, well, it's coming back to normal. We had a level of inventory which was very low in H1, given the very strong surge in demand and in sales, which was somehow unexpected, and our effort to serve the demand. It's now coming back to normal, so it has a mechanical, let's say, negative impact on our net working capital, which we expected to happen. We clearly guided the market when we released our H1 number saying, "Be aware that as far as net working capital is concerned, the free cash flow is concerned, the situation will somehow deteriorate a little bit in H2 compared to H1." It was completely expected, but it's more coming back to normal than building a lot of inventory. Now, let's make things clear. If we have the ability to build further inventory in order to cope with the difficulty to get components and raw materials, we will. In other words, our strategy for Q3 and Q4, and probably going into 2020, is to do whatever it takes to serve our customers, even at the expense of extra inventory. Unfortunately, it's a bit difficult given the current scarcity of resource, but we will not hesitate in building a bit more inventory if needed to better serve our customers. As far as restructuring is concerned, I think that as of the end of September, our level of restructuring is about EUR 18 million, which compared to EUR 55 million at the end of last year. The key message is that we are coming back in 2021 to a sort of normal level of restructuring. i.e. a level of restructuring between, let's say, EUR 20 -30 million or EUR 20 - 25 million, which is a sort of historical level of restructuring. You shouldn't expect anything exceptional in Q4. It should be more or less in line with what we have done so far since the beginning of the year. Last year level of restructuring was sort of exceptional given of course the crisis. I have to specify that the numbers I'm giving you are excluding the sales of asset. You remember that last year in Q1 we sold the big asset I think for EUR 50 million in South America. EUR 17 million as of the end of September. EUR 20- 25 million or EUR 30 million for the full year. Q4 we should be consistent with the rest of the year. That's it. Thank you very much. Thank you. Thank you. Next question from Gaël de Bray from Deutsche Bank. Please go ahead. Yes. Good morning, everybody. Thanks for the questions or the opportunity you're giving me to ask questions. If I look at the performance in Q3, the organic sales on the two-year basis were up 4%. But then if I look at the midpoint of your guidance, it implies that in the fourth quarter, the organic sales would actually be down by about 3% on the same two-year basis. I mean, why do you guide for such a sequential deterioration? In particular, did you see some disruption from supply chain challenges going into the fourth quarter? More disruption actually than there was already in Q3. Well, it is true that the +11% to +13% organic growth for the full year imply a Q4, which would be over one year between -2.7% and +4.7%. Over two years between a strong decrease to almost a stability. So this is the range we are shooting for for the +11% to +13%. As you are rightly mentioning, the big uncertainty is coming from the supply chain. The situation has clearly deteriorated in Q3 on many fronts. It has become increasingly difficult to get the electronic components, for example. It has become increasingly difficult to get containers and transportation capabilities or capability to get the goods out of the customs quickly in a number of places. And it has also, you know, been the case for more traditional raw materials. The situation has deteriorated. We'll see how it is in Q4, but this is the big uncertainty, let's say, between +11% and +13%. Now, I believe that the +11%, to make things clear, is somehow a bit conservative. And it's really the low end of the guidance, and it assumes a very strong deterioration in the supply chain in Q4, which may not happen. This is a clear, let's say variable or input that can change a bit the profile of the Q4 compared to Q3. Last word beyond the supply chain constraints, don't forget that Q4 2019 was a very strong quarter. When you compare over the two-year period, yes, Q4 2020 was not very strong as such, but Q4 2019 was very strong, both in terms of absolute growth and in terms of, you know, comparison with our peers, especially in North America. It may also negatively impact the Q4 2021 performance. Okay, thanks for this. Maybe a longer term question. At the CMD, you highlighted that you were seeing some new growth opportunities emerging in the post-COVID world with, for example, the upgrade of meeting rooms for hybrid meetings, including, you know, both virtual and in-person capabilities. That was something you were seeing, increasing the value of the low-growth products per meeting room by a factor of nearly 10x. Could you elaborate a little bit on this upsell potential in the office market? Is this a marginal trend, or do you really see today already a lot of inquiries on this? What's your guess on, you know, the proportion of meeting rooms that could potentially be upgraded in the next five to 10 years? I know it's a difficult question to answer to, but any help on this would be appreciated. Well, it's indeed quite a difficult question to answer. Like, well, it was a midterm comment, not a comment for the next couple of quarters. I think that the first priority is for people to get back to the office, which again is not the case everywhere. If you look at the big metros in the U.S., for example, the work from home is still prevalent in many places. I could hardly tell you that we have done an analysis in the pending quotes saying that there is a structural change in the value of office space. It was more a midterm comment than a short-term comment. Now, we are very confident it will happen, because it is supported by a number of requests and trends from people. For example, the fact that office spaces will need to be greener. There is a COP26 currently happening with the U.S. coming back to the table. It is sure that this will help. The fact that more and more spaces will need to be connected to support AV conferencing or remote conferencing is a fact. The fact that you need more and more connectivity, whether wired or wireless, to accommodate for more needs, it's a fact. The fact that the number of people we require not only to have a desk to work, but also a number of you know social spaces a lot more than before. We will also happen. Those trends will somehow materialize. Frankly speaking, I have no you know precise number to tell you X or Y% of office space will need to be remodeled for an additional value of Y. We'll see. If I may say, it's not yet happening because this is a long-term trend, but we are very confident that it will materialize. Okay. Thanks very much. Thank you. Next question from Andre Kukhnin from Credit Suisse. Please go ahead. Good morning. Thank you very much for taking my questions. Can I please start with extending the math that Gael ran on your organic growth rates and what's implied for Q4 to the implied profitability for the fourth quarter? Because if my math is right, then even at the top end of your organic growth and margin guide, you're implying around 17.5% margin for Q4, down 200 basis points year-on-year. I just wanted to check if that math is right, and would love to hear your reasoning behind it as well. Yes, of course. Well, the math are almost right. Our guidance imply a Q4 in terms of adjusted operating EBIT, all-in, including acquisitions between 15.3% in the low end of the guidance, up to 17.9% in the upper end of the guidance. Right. Well, three comments. Number one, 17.9% is not never seen. Q4 margins are always lower than the rest of the year. It's a seasonality topic. If you look at the past five years, margins around 18%, let's say 18%-18.5%, were not never seen. In 2015, Q4 margin was 18.4%. In 2016, it was 18.1%. So you know, structurally, let's say our Q4 margins are lower than our nine months margin, and 18% EBIT margin is not a never seen. Number two, there is a strong squeeze happening since the beginning of the year, which is not a surprise to you, between selling price and purchase price, which worsened in Q3. Maybe I can give you the precise number. In- Okay. The first nine months of the year, purchase price increased by close to 10%, and selling price were up plus 2.7%. Those numbers were plus 7% for the purchase price in H1 and plus 1.9% for the selling price. It implies a Q3, which is at nearly plus 15% as far as purchase price is concerned, and plus 4.3% as far as selling price. You remember I told you in July that in H2 we would have the purchase price, which would be a double digit, and a selling price, which would be between 2% and 4%. Well, it's more than double digit if I may say. Well, it's double digit, but it's probably more than expected. It's +15% for purchase price. As a result, we did some pricing at the upper end of the sort of guidance I gave you, +4.3%. What to expect in Q4? Well, purchase price will probably be at the level of Q3 or even worse. You could very much put in your estimate that the purchase price could be comprised between +15% and +20%, even though we have no crystal ball. This is the order of magnitude we could expect. The selling price should be approximately at the same level as the one we recorded in Q3. It will be something around the +4%, let's say. If you take those two numbers, and I remind you that the raw material and components represent about one third of our sales. You can see the sort of squeeze we are currently experiencing. This is the reason why, you know, having a 17.9% EBIT margin all-in in Q4 or less than that is not something which is out of the question. It's very much consistent with the squeeze we have in front of us, even though, of course, we are doing many things. We have some cost control. We have some restructuring charges, which, as pointed out by Daniela, will be lower than last year. We have many things that will partially compensate for that, but the squeeze is significant. Third comment, the difference between the low end of the margin guidance and the high end of the margin guidance is clearly coming from the top line. Whether you have, let's say -3% in Q4, +5% in Q4, of course, does not have the same impact on the margin. The top line evolution in Q4 will be the driving force behind the 20%-20.5% EBIT margin that we are shooting for. Thank you very much for such a comprehensive answer. I really appreciate all the details you've given. Just one more question because of time. Could I ask, in the rest of the world, you've seen a really healthy acceleration on kind of two-year stack basis in Q3 versus Q2 or H1. Could you talk about maybe what regions or maybe product lines, what drove that and how sustainable it is, please? It's Rest of the World over two years. Rest of the World. Yeah. Over two years, it is true that the quarter is plus 8.7%, and the nine months is plus 6.4%. Yes, indeed, you have a bit of acceleration. I could hardly say that it's a big acceleration, and it's mostly coming from India, which is positive single digit over two years in Q3, and which is still negative single digit over nine months over two years. You remember that in India, the COVID crisis is more 2021 H1 topic than 2020 topic, as opposed to most of the rest of the world. India has progressively recovered from the COVID crisis, as many countries did last year. Again, it represents most of the change in trends, let's say, between H1 and Q3. If you look at the other places, Africa is doing also very well, both in Q3 and in nine months. China is doing very well, both in Q3 and in nine months. All my comments are over two years, of course, and South America also. The place which is a bit more difficult is the Middle East, which is down over nine months and over Q3 or over two years. To make a long story short, it's good all across the zone, except in Middle East, and the change in trend between H1 and Q3 is mostly coming from India. Very helpful. Thank you very much. Thank you. Next question from Andreas Willi from JP Morgan. Please go ahead. Good morning, Benoît and Franck. Thanks for the time. I wanted to follow up on the guidance discussions we've had, because we are in early November already, and you assume in your range a pretty material further deterioration in the supply chain. Maybe you could comment what you have seen in October so far and how much visibility you normally have in terms of component stock at hand and so on. Would this imply a dramatic deterioration basically into the year end to get to the middle or the lower end of the range? Or have you already seen a further deterioration in October? That's my first question. Well, you know, the rules of the game, Andreas, so no, I will not comment on October. Again, you know, looking at Q3, I can confirm that the situation is tough. To give you sort of a feeling of what we are facing ahead of us, we had, for example, to reallocate a couple of our R&D, I mean, some of our R&D team to do a sort of a redesign to start redesigning a number of products to incorporate components that were more available than the ones that the products currently have. We have a task force of supply chain people meeting weekly on the topics. We have daily discussions with our suppliers. No, it was in Q3 particularly difficult. We have probably lost a couple of tens of millions euros of sales. Difficult to be more precise in terms of quantification because, you know, at the same time, you probably had a couple of distributors who ordered a bit more than they needed. When you want to make sure to get 10 products, you tend to order 15 or 20. As a result, you think you are more sure, if I may say, to get the 10 you really need. You have many factors at play, so it's difficult to give you a precise number, but we have probably lost a couple of tens of million euros of sales over nine months. Again, yes, plus or minus, assume that there would be a strong deterioration in the situation. As I said a little bit earlier, this is somehow a bit conservative, probably. No, I cannot be more specific on October. You know, the rules of the game. We are not commenting months. We are commenting quarters. Thank you. My second question is on North America. Maybe you could give a little bit more granularity on the trends there in terms of volume growth, where volumes are now versus two years ago. I assume the U.S. has also seen, or North America has also seen pretty high price increases this year. Where are volumes versus 2019, and what you're seeing or have seen in Q3 sequentially in terms of the growth trends, momentum in the market in REST versus non-REST? Thank you. Well, recommending a price on a region by region basis, but I can tell you that there's absolutely no reason why we would do more pricing in North America than elsewhere. I saw a couple of releases where people were stating price increases of 5% or 7% or 9%. This is not the sort of price increase we are seeing in North America. We're not increasing prices in North America more than elsewhere. As far as the trends are concerned, not much new things to tell you compared to what we told you in H1. Over nine months, data centers and residential are doing very well over the first nine months of the year, with a strong double-digit increase over two years. As far as other non-residential spaces, which represent 60% of our sales, I remind you, they are still strongly negative over two years. However, the two-year trend is improving in Q3 compared to H1. The drop in sales over two years is not as strong in Q3 as it was in H1. The result of that is that there is a slight growth over nine months sales compared to 2020. Still a strong drop in sales over two years, slight growth over one year. If you compare H1 to Q3 is better than H1 over two years. Well, so that's what I can tell you. There's again nothing specific as far as the pricing is concerned in North America, neither between the various pieces of our business, residential, non-residential data center, nor when comparing North America with the rest of the group. Thank you very much. Thank you. Next question from Lucie Carrier from Morgan Stanley. Please go ahead. Yeah. Good morning, gentlemen. Thanks for taking my question. I have a couple of follow-up, actually. The first one is a follow-up on the question from Andreas just right now on North America. When you speak about slight growth in the third quarter in non-res in the U.S., is it in volume terms or is it in value terms? Just so we kind of know what we're talking about. Well, it's in value terms. Okay. Slight growth in value terms in the third quarter. Yeah, slight growth in value terms, indeed. Are you able to give us an indication of how it might look like in volume terms? No, we are not giving pricing per region. Now, again, you can assume that the pricing we are doing in North America is not much different from what we're doing elsewhere. You can come to the conclusion by yourself. No, we are not giving precise pricing per region. Okay. Thank you very much. My second question was around the logistics or transportation cost that you are facing. Are you able to tell us kind of how much they represent, generally speaking, as a percentage of sales? And also, when you think about your procurement and whether this is procurement of components or procurement of finished products, how much of that is really dependent on what I would call sea freight, rather than just kind of more traditional transportation and specifically coming from Asia into Europe or into the U.S.? Transportation cost is slightly above 3% of group sales in fiscal year 2020. Of course, it includes domestic transportation, where inflation is pretty reasonable, low single-digit, with transportation by sea, the inflation could be as high as 4, 5 or 6x for cost of container, for example. The only significant, let's say, flow we have, the big one, is between Asia and the U.S. We already discussed that two years back when we discussed the Trump tariff, a year ago when we discussed COVID. This is the biggest, let's say, flow of products or components from one continent to another. Now, I'm turning to my colleagues. Are we able to give more precise breakdown of those 3%? I'm not sure we can. Franck? No, Lucie. Unfortunately, we cannot. I don't have that material. But you see, 3% of sales is not a lot. As Benoît said, looking at our footprint, it's more domestic transportation than what you call the sea flows or intercontinental flows. Third, our products and moreover, the ones traveling from China to the U.S. are very small products, where the freight in percentage of the cost or in% of sales are minimum. This is why the question is how much the transportation is harming our PNL. It's not material today. Last maybe comment. As far as increase in price of transportation, it's pretty consistent with what I told you about raw materials and components. It's a little bit higher than what I told you for raw materials and components. It's a little bit lower for energy, for example, but it's pretty consistent. Thank you very much. Very helpful. Maybe my last question is, I guess this is maybe a more theoretical question, but do you see across the value chain in construction, you know, whether this is you as a supplier into this market, you know, labor cost and so on, do you see potentially that the price increase or the inflation acceptance is becoming more difficult? Do you think this is a risk for this industry in terms of demand as, you know, every single bit of cost across the value chain seems to be increasing? Well, today I don't see that as a short-term risk because there is such a shortage in components and materials that the people are you know eager to continue the renovation or construction work, and not really stopped by inflation, which probably actually has somehow a negative impact on our top line, which again is difficult to size and to evaluate. When you have no wood for wood in construction, when you have no concrete, for example, you have no wall, and when you have no wall, you have no switch to install. This impact is extremely difficult to evaluate, but it's probably happening here and there. Now of course, if the construction cost was to increase by, I don't know, 30-40%, it could potentially, you're right, it could potentially over the midterm, have a negative impact on the market itself. That's not what we are seeing so far, and I believe that part of this negative impact would be more than offset by all the positive trends which I already mentioned. You know, whatever the cost of the goods, if there is a strong political and social willingness to make the buildings greener, a lot of renovation work will happen. Whatever the cost of raw material and components, if you need to install Datacom system, I hope to remotely work, you will. I believe that those trends will more than offset any potential, let's say, negative coming from the cost of construction. But this being said, you know, our price is increasing by 2.10%. It's not increasing by 10% or 15%, huh? Of course, also price of other inputs is also increasing. Today, I don't believe that price for the total renovation, for example, price for big construction, is increasing by 30%, 40%, 50%. It's not something we have never seen to do a price increase of +2.7%. Sorry, 2.7%, not 2.10%. I wouldn't be so theoretically could happen, frankly speaking. Number one, given the level of pricing we see today in the market, which is not +10, 15 or 20%, but closer to what we are doing, +2.7%. Number two, all the mega trends which will materialize, I don't believe it will really happen. Thank you. Thank you. Next question from Supriya Subramanian from UBS. Please go ahead. Yes. Thank you. Good morning, everyone, and thank you for giving me the opportunity to ask a question. Sort of continuing on the pricing point, just wanted to get your thoughts on, you know, you said that you will potentially continue to take pricing action into fourth quarter as well. How much do you see that supporting sales maybe in early in 2022? And also just wanted to get your thoughts on the supply chain issues and supply shortages. What is your outlook or thoughts on this situation? How do you see that developing? Or let's say, how long do you expect these constraints to last in the markets? And maybe last question, a little bit more medium or long-term is related to the European renovation market. How do you see that developing in the context of the Green Deal as well as the recovery fund? Are you starting to see sort of demand and funds flowing into the market now? Thank you. Clearly there will be a carryover. As I said, Q4 pricing should be around plus 4%, compared to Q4 2020. Pretty much what we did in Q3. Of course, this will have a carryover impact into 2022. So will the cost of raw materials and components. You have of course a negative impact also of input prices. It's far too early to discuss 2022 guidance. We will do that in February when we release our 2021 numbers. Of course, you know our midterm guidance, which is 5%-10% top line growth on average per year, excluding foreign exchange, and about 20% EBIT, which we repeated and reiterated at the end of September. As far as the supply chain constraint, well, I have no crystal ball and I have to you know, listen to specialists and read up the studies. What most people say is that you have to you know, a very sort of conjuncture thing to the issues which for example is about containers and a number of traditional raw materials such as polypropylene. Most people say that this should ease in the coming months or quarters. Most of the specialists also expect the semiconductor issue and the electronic component issue to last until the beginning of 2023, because it will take time for a semiconductor specialist to build the capacities, extra capacities, additional capacities to answer to the demand. That's what most people say. Transportation and traditional raw materials and components should be a matter of months, and for electronic components, it should last a bit longer than that. As far as the third question is concerned, well, it's too early to see the European Renovation Wave. We see a number of, you know, initiatives locally taken by local governments, such as, for example, MaPrimeRénov' in France. We see similar initiatives in a number of countries, including Italy. The bulk of the so-called renovation wave is yet to come, and it's more a topic for the years to come than the 2021 topic. As you know, it always take a bit of time between the time the initiative is announced, is structured, then it is voted by the European Parliament, then it is voted by the local parliament, then the flow of money is getting into the market. The renovation markets were pretty positively oriented in 2021, but it's not coming from any stimulus plan. It's coming from the fact that following the lockdowns, a lot of people decided to renovate their home because they felt that it would become not only a place where they would like to live, but also that's a place where they would need to be remotely connected to their doctors, to their office and so on, so forth. Renovation is pretty well oriented in 2020, but it's not coming from the renovation wave or the Fit for 55 or any other programs. It's coming mostly from the need of individuals and to a certain and lower extent from local incentive plans that were launched one or two years back. Okay, great. Thank you. Thank you very much. Thank you. Thank you. Next question from James Moore from Redburn. Please go ahead. Yeah, good morning, everyone. Benoît, Franck, thanks for taking my questions. I have two if I can. Maybe do them one at a time. Lots of my questions have been asked about price and raw materials, so maybe I could shift to mix. You've often had the strategy of getting positive mix impact on sales from trading up over time. I wondered if you could comment on how mix impact on sales looked in the first nine months, and whether that was in line with historic trends. Well, you know that for us, it's always difficult to identify mix. We have on one hand pricing, which we can, you know, quantify and measure very accurately, and then we have volume and mix, and it's a bit difficult to do the split between volume and mix. We are doing the analysis over nine months. It's difficult for me to answer. What I can tell you is that when we look at the various product families, the sectors which we identified as or labeled as faster expanding segments, Eliot products, data centers, and the green programs grew faster than the rest of our product offering. Now, I have no more precise number to tell you. We haven't seen the big change whereby, for example, given the increasing price of products, customers would shift from added value products to simpler or access products. No. There's not such a move, and we don't expect this move to happen. I have no more comment to give you. We're not doing this kind of in-depth analysis on a nine-month basis. Keep in mind that we have 300,000 SKUs, so every time we want to dig into a bit more precisely into the numbers by product family, it's a big machine we have to put in place. I understand. My second question you may have already touched on, but it's just on the fast-growing segment and the strategy there. Could you comment on the differing speeds between the three buckets of data center connectivity and energy efficiency this year? I'm not trying to be precise, but do you see a pecking order in terms of fastest to slowest? No, it really depends on the main driver, if I may say. It would rather be the geographical driver. Take, for example, U.S. non-resi, excluding data center. As I said, it's still strongly down double digits over two years. Even if connected products or green products are doing better, well, they're not growing 20%. All product families in non-resi in the U.S. somehow suffer from the fact that people have not yet gone back fully to the office and that the renovation work has not yet really happened there. Take on the other side, Western Europe and residential market, which is booming. It's booming on those three segments, as well as on traditional products. No, I cannot make a difference between, let's say, data center, connected products and green. It really depends on the region, and it really depends also on the basis for comparison. What I can tell you is that taken as a whole, putting together, they're growing faster than the plus 16%, that we are showing for the total of the group. Any way you can quantify that positive spread? We are usually doing it on a yearly basis, not over nine months or so. Let's say, park your question and ask it again in February. All right. I will. Thank you very much. Thank you. Next question from Alasdair Leslie, Société Générale. Please go ahead. Oh, yeah. Hi, good morning. Thanks. Just a question on pricing. Q3 pricing came in at the top end of the 2%-4% guidance range. I think you were talking about for H2. Which I think to a certain extent was gonna be dependent on tactical pricing initiatives. Does that mean that it's kinda been harder for you to execute on those on that kinda pricing strategy to boost growth maybe due to the supply chain environment and whether there's maybe implications there for your growth expectations in the short term, does it delay that at all, or should we kind of not really read too much into that? Thank you. No. I mean, to be sure that you get the numbers right. In July, we said 2%-4% in pricing for H2, and now we are saying it's gonna be more 4% than 2% because it was 4.3% in Q3, and we are shooting for 4% in Q4. We are sort of precising the pricing guidance. The 2%-4% is becoming now a 4%, which is, well, it's never granted because you could always give some price out to your customer. But given the pricing initiatives we have launched until then, we are very confident our ability to reach this +4% in Q4. If your question is, why aren't we doing more? The answer is, we could. Especially in the current context, we could do a 5, 6 or 7% price increase instead of 4% in Q4. I don't believe it would be a wise decision for Legrand because even though everybody's increasing its price, I think that it would put us somehow at a competitive risk. Pricing, it's always, you know, small balance you have to find between protecting your profitability and protecting your competitiveness. We believe with our country managers who are really, you know, driving these price increases, we jointly believe that the plus 4% plus, if I may say, in H2 and Q4, is the best balance we can have today. Okay. Yeah. Sorry. Thank you. It's not because we can't do more, it's because we don't want to do more. No, exactly. That's kinda what I wanted to check on that effectively. Even at four, there was a sort of an element of tactical pricing within that allows you to gain share and boost growth. Thanks for that. Maybe just a quick follow-up on U.S. non-resi. I was just wondering whether you're sort of seeing any signs at all or projects getting pushed to the right, maybe due to labor or component shortages. Well, it's always difficult to say. I think they are not pushed to the right, they are pushed ahead of us. That's why I'm not negative for the U.S. for 2022, 2023, 2024. Now we'll see. It is true that the labor shortage is a fact. It impacts actually not only people, you know, in contractors, for example, but it is also something we have to manage in our factories. Well, so far, I think it's not the topic. The topic is more the fact that the recovery is, as expected, a bit slow. It will take a bit of time before the people get back fully to work and all the renovation work are performed. Again, Q3 is already showing some sort of improvement compared to H1, both in value and in volume. Hopefully, this will materialize in the months to come. Great. Thank you very much. Thank you. Next question from Martin Wilkie from Citi Research. Please go ahead. Yeah. Thank you. Good morning. It's Martin Wilkie from Citi. Just a question on customer behavior relative to the pricing. I appreciate your price is only up 4%, but presumably for a certain product line, it's up a lot more than that. Are you seeing any indications of customers reacting to that either? You know, obviously, Legrand typically has premium products. Are customers choosing to sort of move to cheaper products as a result of pricing? And also, if you can remind us what percentage of your products are specified by specialists such that the electrical contractor has no ability to choose somebody else if they can find a product that's cheaper than Legrand, just to understand if pricing could have effect on competitive dynamics as well. Thank you. No, we are not seeing such a move whereby, given the price increase, the end user and the contractors would go to cheaper solutions. If we look at our, for example, premium ranges of wiring devices, Céliane in France, Living Now in Italy, connected products, high-end panel boards, all those stuff, they are doing a very good performance, going nicely and sometimes faster than the rest of our product offering. We are not seeing such a move toward simpler products. Again, the answer being that the reason being that when you are doing some renovation work, when you ask a contractor to come, the cost of product would be 10% of the total cost of his work. Out of this 10%, probably, I don't know, 2 or 3, 4% would be the core products. Then you have cables, lighting fixtures and many other topics. If on those 2 or 3%, you are increasing your price by 4, 5, 6%, it's not such a big deal for the end user. It's not a reason not to do the work. Well, it could be a reason for the contractor to switch to a competitor. That's why we are doing +4% pricing increase and not +10%. It might not be a reason for the end user to tell the contractor, "Let's stop the work. It's costing too much for me. I'm going to invest my money in something else." Also more as, don't forget that during the year 2020, in many countries, people saved a lot of money. I think the total savings for France alone, I don't remember the exact number, but it's EUR 120 billion or EUR 150 billion of money which was saved. No, to make a long story short, I don't see this kind of behavior whereby there would be a migration, let's say, toward a cheaper product. Also more as all of the factors are in play. The fact that your product needs to be available. You know, today, clearly, there is a rush toward products which are available. It is also the opportunity for us if we can be smart to gain a bit of market share. We are not seeing this move. As far as the percentage of product that would be specified, it's the large minority of our products. A lot of our products, a majority of our products, difficult to shoot a precise number, but the majority of our products would be chosen either by the contractor or by the end user, the end user being either an individual or a professional company, more than by an engineering office, typically, or by a design bureau, by an architect. When it is a contractor choosing or the end user choosing, are they usually choosing a lower value product? The answer is no. You can still sell very added value products to those guys. If I may add maybe one factor, the current cost increase or price increase of energy, which, by the way, is not a big topic for Legrand because I think that I'm turning to my colleagues, they can confirm the number, but I think the energy cost is 0.5% of our sales. You see it's a couple of tens of millions of euros. It's not big. It's not a big, let's say, a cost problem for us. It can even provide additional opportunities and push people either engineering offices, contractors, end users, toward buying a lot more energy efficiency-related solutions. You know, when your heating cost is increasing by 20%-30%, and statistics show that in France it represent EUR 1,200 a year, well, maybe this is a good opportunity for you to buy a thermostat, which you're gonna pay EUR 250 or EUR 300 at best, and which will help you to save 15, 20, 25% of your bill. You know, not only we are not seeing any negative mix effect coming from the current, let's say, supply chain crisis, but on top of that, it could even provide a number of opportunities, either in terms of market share, if you can be better than your competitors, or in terms of selling more products to help people to reduce their energy bill. Okay. Thank you very much. Thank you. Next question from Eric Lemarié from Bryan Garnier. Please go ahead. Yes, good morning. Thanks for taking my question. I got two, if I may. The first one regarding the product you mentioned, the faster expanding product or your most successful product like connected product solution for data center, et cetera. Do you think you've got more pricing power with this type of product than for the other product of Legrand? My first question. I got a second one regarding 2022 next year. In a scenario with further inflation next year, do you think you would have further room, further leeway to offset that inflation in terms of pricing, cost cutting, restructuring, or would it be too much for Legrand? As far as the first question is concerned, we have neither more nor less pricing capability in those faster expanding segments than elsewhere. I don't think there is a specific different pattern except that they are growing faster. No, I wouldn't tell you that we have more pricing power. As far as the 2022 year is concerned, again, I'll not repeat the fact that we are very confident in our ability to deliver our midterm guidance, which imply midterm an average of 20% EBIT. On top of that. Given the fact that we are pretty reasonable in terms of pricing, that's the feeling I have, not doing too much of pricing, there's probably a bit more margin for maneuver for 2022 if we need it. And as far as cost management is concerned, we have reinvested into cost expenses wherever needed in 2021. Again, if needed, we will always have the ability to put cost under a little bit more constraints. I'm not giving any warning for 2022. We will give a guidance in February 2022. And you can expect that the midterm guidance will be as expected. Maybe one indication on our cost base, which I didn't give and which can be useful. I mean, you know that our like-for-like sales over nine months increased by 16%. Our like-for-like expenses, i.e., production expenses and SG&A increased by 8% in nine months of 2021. At the same time you have one of the reasons why we can compensate the increase in raw materials and components, not only through pricing but also through leverage. On top of that, you can see that we are punctually reinvesting into, especially SG&A, wherever needed. We are not cutting further our cost. We are putting some cost back into the machine. Well, part of that cost of course is variable, but part of it is also fixed cost. No, I wouldn't, you know, give you today a specific warning or concern for 2032. Of course, our budget process is going on, and we'll tell you more in February 2022 when we release our full year numbers. Thanks. Thanks for everything. Thank you. Next question from Jonathan Mounsey, from Exane. Please go ahead. Yes, thanks for fitting me in. Yeah, on the first question, maybe back to the same topic you were talking about there. I think about Q4 and the guidance you've given on what it implies for margins. The conversations we were just listening to around pricing and how far to push it and how pushing it much further, which you could do, would probably ultimately hurt your market share, which seems to be something you don't want to do. If that's the case, then you're kind of a bit boxed in terms of pricing from here, at least for a while. Margins are obviously under pressure in Q4. As we go into Q1 and Q2 of next year, is this just something we have to weather? I listen to your comment around confident that you can recover the margin to 20% on the midterm. Is that really how we should read things, that the exit rate next year can be 20%? Honestly, you know, as we move into the early part of next year, we're gonna have to accept margins sub 20% for a while because you can't pull the lever of price without hurting market share. Or is there an alternative such as a more aggressive restructuring campaign that we could see announced shortly as a different lever you could pull to offset the headwinds you now seem to be experiencing? Well, I told you that I didn't want to comment in detail 2022. I'll not go one step beyond commenting Q1 and Q2 2022. Again, the performance over one quarter, and it applies, you know, my comment is more for Q4 2021, is not of great interest to me. You know, you know, delivering 17% or 18%, or even 16%, EBIT margin over a quarter is not a big concern, provided, number one, I'm fully in line with my yearly guidance, and the 20% EBIT margin. Number two, I'm doing what it takes to serve my customers, accelerate my top line growth, and reinforce the group positioning. Well, I know that it will not precisely answer your question, but again, we'll discuss the 2022 guidance in February. Okay. I guess it's fair to say. You should trust a bit Legrand when we are telling you that we will do whatever it takes to deliver on our mid-term guidance. Yes. Which is something we intend to achieve every year, of course. Yeah, I have confidence on you recovering a 20% margin. I just note that the exit rate is gonna be something closer to 17.9%, I think you've said, as we leave 2021. On maybe a different topic, acquisitions. Obviously, originally you were guiding to 3. I mean, we can never be sure about the scope effect and the timing that deals land or indeed when you choose to start consolidating deals that you do. How is the pipeline looking right now? Can we expect the usual sort of 4% contribution to the top line next year? Or is it becoming more difficult to get deals across the line in this sort of inflationary environment? Well, we are indeed saying that the scope of consolidation should be nearly 3%. Well, actually, it does not depend on further deals to be made. It depends on how fast we'll consolidate those who are already announced, namely two, Ensto and Ecotap. Either we can consolidate them before the end of the year, and the scope of consolidation will be slightly above 2%, or we can't, and the scope of consolidation will be slightly below 2%. Frankly speaking, it's not a big deal, and we are not rushing to consolidate. You know, for me, it's not an absolute must to be exactly at 3.1%, and I can very much live with a 2.8%, for example, because we wouldn't push too much in consolidating. That's why the wording is merely it depends on the ability to consolidate fast, which does not only depend on us, but also on the state of the financials and the readiness of the companies to be consolidated. As far as our sort of midterm scope effect, what we said during our Investor Day was that historically it was +4%, including a big deal milestone, and excluding milestone, it was 3%. We are not changing our guidance at all. We are shooting for, let's say, between a plus 3% or plus 4%, depending on whether or not we are doing a bigger deal. If we could do more, in a given year five or six, we would of course be delighted to do so, provided we are buying the right companies. Third comment, as far as our pipeline is concerned. Well, we still have a number of discussions going on, so I'm not afraid about our ability to further this in the quarters to come. We have quality discussions. Of course, sometimes prices are a bit high because of plenty of cash on the market. Now, it has always been Legrand core asset to be able to buy quality companies at reasonable prices. That's what we did this year with Ensto and Ecotap, and that's what we intend to do in the quarters to come. No, there's still a number of discussions going on. I cannot be precise on, you know, when they will materialize because until you have signed the acquisition contract and even sometimes closed the deal, you're never sure to make it. I cannot be more specific except to tell you that the pipeline is not empty. Thank you. Thank you. Next question from Simon Toennessen for Jefferies. Please go ahead. Yes. Good morning, everybody. Thanks for taking the question. My first one is just maybe a bit more clarification on the organic growth guide, please, and here specifically about the comps you're seeing in the U.S. in the fourth quarter. I think last year you were down 11% in the U.S. versus the -1.5% decline in Q3. You're facing significantly easier comps. You're saying non-resi is improving sequentially. I would think the U.S. should grow very nicely for you in Q4. How should we read this into your quite conservative implied Q4 guide? Secondly, on China, you're saying in the presentation it was up double digits in the first nine months. H1, you said it was up double digits, but maybe you can talk a bit more about how Q3 was, maybe even throughout Q3. I know it's small for you, but just interested in that. Lastly, can you comment a bit on your customer churn in any way over the last, say, 12 to 18 months? Has this changed in any way given pricing strategies? Thanks. Thanks a lot. Well, as far as the Q4 is concerned for the U.S., you know, the fact is that it was Q4 2019, which was very strong, especially compared to our competitors. If you look at Q4 2019 compared to 2018, all of our listed peers, namely the Eaton, ABB, the Hubbell, the nVent, all those guys went down pretty significantly, and our performance was a lot better. I think our performance was something like +2% in Q4 2019 compared to Q4 2018, and all of our peers were down sometimes 3%, 4%, 5%, 6%. I think the performance in Q4 2021 will have to be compared with Q4 2019, which is a two-year comparison, which must be done for all our areas in 2021, given the very specific, let's say, pattern of the year 2020. That's why we don't expect, you know, fantastic growth in the U.S. because the basis for comparison over two years is pretty difficult. As far as China is concerned, when I told you that both the nine months period and the Q4 was positive, if you look over two years, both Q3 and nine months were up double-digit, where it is true that Q3 is couple of points less than nine months, but nothing to be worried about. The pattern is still very positive. Well, what to expect going ahead, it will depend very much on, of course, the Chinese economy and the Chinese GDP. If I may, we are so small in China. I remind you that it represents 4% of our sales, that we should be able to pursue our growth strategy, even if the market is not super positive. It's not saying that we will grow in China whatever happens, but it means that, for example, we will continue to look at potential acquisitions in China. We've done two in the past four years, and we remain interested to do more, and we'll keep investing into new products. I'm pretty confident in our ability midterm to keep growing nicely in China. To make a long story short, nothing specific between H1 and Q3. No precise guidance for the rest of the year, nor for 2022 because it's too early. Number three, we intend to pursue an offensive growth strategy in China because we believe that we should grow this 4% of our sales to something bigger. As far as customer churn is concerned, we haven't seen significant customers going down. I mean, you know, going out of business clearly in 2020 because of financial constraints. It's not the reason why customers are changing. We continue to work with all the big guys in the trade being either big distributors or DIY, pure internet pure player, professional distributors as well as big contractors and smaller contractors. I don't see anything specific coming from customer churn that would be worth mentioning. We have a pretty solid and stable customer base, and I haven't seen a big shift from one customer to another coming from the crisis. Again, you are mentioning pricing. You know, I don't wanna repeat things, but seeing pricing such as the one we are seeing as a +2.7% in our nine months or so +4.3% in Q3 has never been seen. In Legrand history, we have had several years with pricing at +3% or +4%. I wouldn't want you to think that this pricing is so exceptional that it is completely changing the mind of the market or changing the players that are active in the market. It's something we saw from time to time in the past three years. Thanks, Benoît. Thank you. Next question from William Mackie from Kepler Cheuvreux. Please go ahead. Good morning. Thank you for the time. I wanted to ask another question on the USA, please. Just if you can help us understand. If I think about the year and how it's developed, I think in Q1, you know, you had 4% growth and non-resi declined. In Q2, you had 15% growth, and again, your non-resi was nearly unchanged. In Q3, in value terms, you're reporting a 1% decline, but you're saying that non-resi in the nine months has slightly grown. Can you be a bit more specific about why there was such a drop? It seems to be if we assume pricing was +4% in Q3, then there's a volume drop of about five percentage points. Non-resi was growing, according to your commentary. Why is there such an apparent drop in Q4 around data centers and residential? Or perhaps I'm reading it the wrong way. How would you describe the trend in the segments in Q3 across the business lines? Well, I was more commenting over two years than over one year, because when it comes to top line, the year 2020 is so, let's say, strange, if I may say, than one-year comparison doesn't make a lot of sense. For example, in Q3, the resi in the U.S. was super strong in your Q3 2020 because there was, the, you know, these sort of consequences from the end of the various lockdowns happening here and there. The base for comparison in Q3 in residential is strong. And as a result, the Q3 performance in 2021 for residential is a bit smooth, but again, it's not coming from any negative trend. It's coming from the base for comparison. That's why I'm as much as possible analyzing the numbers over two years. Over two years, that's what I can tell you, residential, strongly up, I mean up double-digit in nine months, up double-digit in Q3 with about the same number. Over two years, no change in trend for resi. Data centers, very strong growth over two years in nine months, strong growth over two years in Q3. Not slightly lower in Q3 than over nine months, but it's not significant, and as a whole, it is growing fast. Now, other non-resi is down double-digit in H1, is down single-digit in Q3. As a result, it's still down double-digit in nine months, but less than in H1. From those numbers, I'm deriving the comments I'm making on trends, saying trends in resi are still good. Even though looking at Q3 alone over one year, it's smooth, but it's a base for comparison topic. The market itself is still supportive. The market is still very supportive for data center. For other non-resi, there is some sort of improvement because you know the decrease in sales is more or less cut by half between H1 and Q3. We see that as a sort of sign for improvement, even though it remains negative over two years. Is that clear? Perfectly clear. Thank you very much. Thank you. Um[inaudible]. Thank you. That was the last question. Back to you for the conclusion. Well, thank you very much for your patience and for the time you dedicated to Legrand. Have a good day. Thank you very much. Of course, Ronan, Marc, Samy Bensaïd, Franck Lemery a nd myself will be available till the end of the week to answer any additional questions you may have. Thank you.