Good morning, ladies and gentlemen, and welcome to today's Legrand's 2022 first half results conference call. All participants are in listen only mode. Later, there will be a question and answer session. For your 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. Please go ahead, sir. Thank you. Hello, everybody. Franck Lemery, Benoît Coquart, and myself are happy to welcome you to the Legrand 2022 H1 results conference call and webcast. As you know, this call is recorded. We have published today a press release, financial statements, and a slideshow to which we will refer. Those documents are available on the Legrand website. After a few opening remarks, we will comment the results into more details. I begin on page four with the key four takeaways for this H1 results. First, Legrand recorded strong growth in sales. Second, results were very solid despite an unstable and high inflationary environment. Thirdly, we announced today two new bolt-on acquisitions in data centers. Fourth and final item, we have raised our 2022 full year sales target. Moving now to page six to seven with an overview of sales for the first six months. Our sales grew by 18.5%, driven by a sustained organic rise of plus 10.9%. Organic trends in the first half reflected on many commercial successes, Legrand pricing power, and a still very active management of the supply chain, which remains under strong pressure over the second quarter, particularly for electronic components. On top of organic growth, the scope effect was plus 2.4%. Based on acquisitions completed and their likely date of consolidation, the impact should be around plus 3% for the full year in 2022. Now, last component regarding sales is the FX effect. It was also favorable at +4.4% on the first half and would be close to +4.5% on the full year 2022 based on average rates in the month of June 2022 alone. On page seven, focusing now on organic growth by area, each of the three regions achieved a high level of growth. In Europe, the pace was upbeat at +11.3% over six months, with both mature and new economies growing strongly. In North and Central America, sales were up +11.2%, with a high level in the U.S. at +11.3%, where business for non-residential applications recorded a marked growth. Finally, the rest of the world area grew +9.7%, driven by very sustained growth in India and double-digit increases in many African and Middle East countries. Focusing on Q2 trends alone, group organic growth was at a strong pace of +10.7%. I now pass over to Franck to provide insights on our results. Thank you, Benoît. Good morning to all of you. I will start on page nine with the adjusted operating margin. Before acquisitions, it stood at 20.8%. This is a limited retreat of 1.2 points from the first half of 2021. This solid profitability in the first half reflects the group efficient management of both expenses and sales price, while the environment was strongly inflationary. As an illustration, for example, the inflation of around +17% on raw material and components in the first half of 2022. Including acquisitions, the adjusted operating margin for the first half of 2022 was 20.5%. I'm now turning to page 10 regarding the net profit attributable to the group. With EUR 548 million, this represents a growth of +13.9%. This was primarily driven by the rise in the operating profit of EUR 73 million and group corporate tax, income tax stood at 27%. I'm now moving to page 11 with few comments on cash and balance sheet. As a percentage of sales, cash flow from operation was down 1 point at 19.2% of sales. The free cash flow stood at 7.8% of sales for the first half. This include a continued strengthened coverage of inventory in order to serve our customer in this context of sanction and shortages. Normalizing working capital requirements, so with the normalized free cash flow, it stood at 16.8% of sales in the first six months. On the balance sheet structure side, net debt to EBITDA ratio was 1.6 at the end of June. This concludes the key financial topics I wanted to share with you, and I'm now passing the mic back to Benoît. Thank you, Franck. Turning to page 13 now regarding M&A. Following the acquisition of EMOS early this year, we have announced today two new bolt-on acquisitions. First, USystems, that is a British data center specialist that offer cooling solutions and racks to help their customers reduce their energy consumption and therefore their carbon footprint in their data centers. The second is Voltalis, a French player that offers a comprehensive support and definition of tailored power supply systems for data centers gray rooms. Together, they represent sales of around EUR 24 million and both strengthen our positions in added value solutions for data centers, a field buoyed by the rise in data flows. On slide 15 now, as I said, starting this call, we have raised our 2022 full year sales target. Before going into the figures, as you know, the economic perspective are getting increasingly uncertain. In this context, our group is laying the groundwork to first, seize any growth opportunity, particularly by leveraging the quality of our positioning in segments structurally driven by digitalization and energy savings, but also by continuing to invest in innovation while pursuing bolt-on M&A. Second, we are working actively to limit the impact of an economic slowdown, thanks to an ongoing optimization of our cost base, our intact pricing power, and teams that are quick to respond and fully in tune with our markets. Now, our 2022 targets. In 2022, Legrand is pursuing its strategy of profitable and responsible development laid out in its strategic roadmap. Taking into account notable achievements in the first half of 2022 and the current macroeconomic outlook, Legrand has revised the full year targets it set for 2022 and is now aiming for sales growth at constant exchange rates revised and now anticipated between +9% and +12% compared to between +5% and +11% previously, with organic growth of between +6% and +9% compared to between +3% and +7% previously, and a scope of consolidation effect of around +3% compared to between +2% and +4% previously. This was for sales, and as far as margins are concerned, we are shooting for an adjusted operating margin of about 20% of sales with a margin of between 19.9% and 20.7% before acquisitions, i.e., at 2021 scope of consolidation and dilution from acquisitions of between -20 and -40 basis points. The group also aims to reach around 100% of CSR achievement for the first year of its 2020 to 2024 roadmap, testifying to its bold and exemplary approach to ESG. This concludes today's announcement on first half 2022 results, and we are now ready to open to questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. Our first question comes from Andrew Wilson from JP Morgan. You're now unmuted. Please go ahead. Hi. Good morning. Thanks for the time and for taking my questions. If I could start with a question around the pricing dynamics that you've seen in the first half. I don't know if you're prepared to tell us the kind of split between volume and price, but I'm also interested in terms of how your pricing expectations have changed for 2022 and how that plays into the raised guidance this morning, please. Well, I can thank you for your question. I can start by the numbers. The pricing in H1 was up 9.1%. You have slightly more pricing in Q2 compared to Q1. Q1 pricing was +7.8%, and Q2 pricing was +10.4%. In total, it leads to this +9.1%. Obviously, you can conclude that volume-wise, the volume growth in H1 was slightly below 2%. When it comes to the full year, well, of course, many things can happen, and you know that, pricing is extremely dynamic at Legrand, and we have the ability to move pricing up and down on a regular basis, depending on the price of the input as well as our competitive position. Many things can happen. Now, if we are taking the sole, let's say, carryover impact, i.e., if we take the price level that we have now, and if we push it to H2 without any changes one way or the other, the total pricing effect for 2022 would be +8% approximately. But again, this is a pure mechanical impact. Now, the reason behind the raise in our top-line guidance is that H1 is somehow better than expected in value, not necessarily solely inflation. Even though we remain cautious for the remaining six months of the year, we don't believe that the past guidance was credible anymore, so it was our duty to raise our targets. Does this answer your question or do you need more information? No, no, that's very clear indeed. If I can just squeeze in a follow-up just on your last comment around the staying caution in terms of the second half and obviously just your comments as well around being ready to take actions if needed. I just wanted to see if you'd seen any change in any of your markets relative to the very strong development you'd seen in the first half, I guess, particularly thinking on the resi side where we've seen, obviously, I guess, some slightly more negative data points. Thank you. Well, it's difficult for us to identify early signs. You know that we don't have a lot of visibility on what the market will do next. Couple of comments I can make, though. Number one, well volume wise, you will have noticed that Q2 is a little bit less supportive than Q1. Overall, we are growing volume in the three zones on H1. If you zoom on Q2 alone, our volumes are slightly down in Europe. Most of the heat actually coming from Russia. If you exclude Russia, volume are flat in Europe in Q2. They are flat plus in North America in Q2, and they are still growing mid-single digit in the rest of the world. Now, if you take the whole of Legrand, it is a fact that the volumes are about flat in Q2 and they were growing in Q1. This is for the sort of dynamics within the semester. What does it mean for the second half? Nothing special unfortunately, because as I said, it's difficult for us to anticipate any trends. Now, if you look at our guidance, the 6%-9% growth, it implies an H2 between, let's say, +1% to +7% approximately, like for like. +1% for the low end of the guidance, +7% for the high end of the guidance. Well, we cannot provide the precise guidance on pricing or in volume because it depends on many things. This guidance more or less implies in the upper end of the guidance, flattish volumes. Could be flat plus, it could be flat minus, depending on the pricing. In the low end of the guidance, a sort of mid-single digit drop in volumes. This is the sort of dynamics that we see for 2022. Growth in volume in Q1, flat volume in Q2, and for H2, let's say between mid-single digit down to flat plus. Now again, take those sort of guidance with cautiousness. As you know, we are not the best company to tell you what the economy or the market will do. Now, how do we deal with that? Well, as usual at Legrand, we are preparing different scenarios internally, and we have just reviewed the performance and the forecast from our main countries. They are prepared to react whatever the scenario. At the same time, investing whenever needed in order to capture growth. There are pockets of growth, and we anticipate that even if the environment gets a bit more difficult, there will be a number of pockets of growth to save, and at the same time preparing themselves, should the market decelerate and the economy be less supportive. We want to keep this flexibility at the country level to adjust and to adapt to an evolving environment. Thank you very much for the time. I appreciate it. Our next question comes from Daniela Costa at Goldman Sachs. You're now unmuted. Please go ahead. Morning. Hi, this is Eva, and I'll ask on behalf of Daniela. I actually have a follow-up question on that, 2H. Are you considering, like, the stocking inventories into 2H as one of the measures to adapt to the investment downturn you mentioned? That's the first question. The second one's more on M&A side, where you're seeing the multiples becoming more favorable to you given that the public markets are derating recently. Thank you. Well, as far as restocking, destocking is concerned, so I guess your question was about what our channel is doing. We haven't seen anything, a sort of global trend, neither towards restocking nor towards destocking. It really depends on the country. I can take two examples. In Italy, it is likely that our distributors have built a bit of inventory back and have somehow a little bit restocked. At the same time, in France, which is a big country for us, we have seen the other phenomenon and probably a bit of destocking from our distributors. On a global basis, I cannot tell you that the inventory management from our distributors or from our customers has neither helped nor gone against our performance in H1. I believe it has had quite a neutral effect. As far as M&A is concerned, well, I have to tell you that even two or three years back, when the market multiples were a bit inflated, we were used to pay reasonable multiples, and it was coming from the fact that most of the discussions were held with companies we knew for a long time, with individual sellers, who have usually a pretty so even two or three years back, we were not paying crazy multiples. So same for the deals that we have made in 2022. The two deals we announced this morning and EMOS that we announced in February. For those three deals, we paid what I would call very reasonable multiples. Below the current multiples, of course, and multiples that make us extremely confident in our ability to have value accretive transactions, whether within a couple of years. And of course, EPS accretive transactions. The multiples we've been paying on those transactions have been very reasonable. Now, if you look actually at the cash flow statement, you'll see that the companies we bought last year were paid on average 2x sales. The companies we paid that we bought in H1 were bought on average 1.5x sales. Of course, it doesn't give you a multiple of EBIT, but it shows that the multiples remain pretty reasonable. Our next question comes from Andre Kukhnin from Credit Suisse. You're now unmuted. Please go ahead. Good morning. Thank you very much for taking my questions. Can I first come back to the discussion earlier on second half implied, and I'm sorry in advance to labor it. I just wanted to ask if you've seen through the quarter a month-on-month kind of trend that pointed down in Europe and U.S. specifically. We can take Asia Pac aside, I guess, with the China lockdowns. Specifically in Europe and U.S., how was that kind of monthly cadence in the second quarter? Is that what points down to that sort of if I look on a ex-comm basis, a something like a sort of 6-7 points down slowdown that you imply in the second half in your guidance versus the second quarter? If your question relates to any trend that you would have seen within the Q2, you know, monthly trends are not relevant in our business. They might be relevant at the distributor level, but at the manufacturer level, at least for Legrand, they are not relevant at all because one given month can be impacted by many phenomena, specific supply chain issues, one or more more days, inventory move at a distributor level. No, we haven't seen any trend within the Q2 that would be relevant to tell you whether we will be in the upper end of the guidance, central midpoint of the guidance or so. We will have to wait for Q3 to be a bit more specific. Right. Just to confirm, no kind of tailing off in demand in, say, June versus May, April in Europe or U.S.? No, no. Again, you know, I know that it doesn't really answer your question, but I cannot really comment on a monthly trend, which again, for a company like Legrand, that doesn't mean anything. We'll wait for Q3. Understood. I appreciate that. Thank you. I have a much broader question. I don't know if that's kind of possible to answer, but I'd love to hear your thoughts on this kind of premium growth thanks to the electrification and energy efficiency drive that we're seeing, I think now emerging for players like yourselves versus more kind of broader construction end markets and wider construction applications. Is that something you've looked into? Is that something you could possibly quantify of how much of that kind of premium of growth you're commanding because of that push for electrification, energy efficiency? Then secondly, maybe more specifically to that, in Europe, given the evolution of events since February, do you see evidence of that kind of push for and customer demand for energy efficient products? Again, is there a way to tell how much of a kind of extra demand that is driving for you at the moment? It's indeed a very important point. We have very precise examples of the potential boost. For example, specific green incentive plan can have on our top line. Take, for example, Italy. Italy, there was this so-called Superbonus scheme, which is providing a tax incentive to households willing to do works to have a greener or more energy efficient houses or flats. It is clearly supporting our top line growth in Italy, which is very sustained. Actually, not only it helps our sales in green products, take for example, thermostat or or load shedding, but it also helps the rest of our product offering because when you are doing a complete renovation work, you also change the more traditional products such as circuit breakers, panel boards and wiring devices. So yes, it can have a very significant impact on our sales. Now, it's difficult to quantify because it depends on the nature and the specifics of the scheme. Take another example, which is France with MaPrimeRénov', which has been in the air for two years. Well, MaPrimeRénov' has had quite a limited impact on our top line because MaPrimeRénov' was more geared at passive products or heat pumps more than an active product. Depending on the nature of the scheme, the nature of the incentive, it can have either a neutral or a very positive impact on our top line. Now, this being said, midterm, we are very confident on the fact that it will provide the support for our top line growth, both in Europe, and actually green products in Europe grew very nicely in H1, above the European average growth rate. It could also be the case in the US and the news that the Biden plan could potentially go through is I think rather good news for our industry. I cannot give you a specific number because again, it depends on how those incentive plans are translated into the regulation and whether they are geared at passive, active temperature management, window, heat pump, and how much money is put into the system. It should have a positive impact on top line mid-term indeed. Got it. Thank you for your time. Our next question comes from Gael de Bray from Deutsche Bank. You're now unmuted, please go ahead. Oh, thanks very much. Good morning, everybody. I have three questions. Do you mind if I take them one at a time? Firstly, I can see that your finished goods inventories increased by 44% year-on-year, and now represent nearly two more points of revenue. What was the impact on margins this quarter? And could you talk about the rationale of holding such elevated levels of inventories, given your expectations for potential drop in volumes in the second half? Indeed our inventory increased significantly. And as you rightly pointed out, they represented in H1 19.1% of sales, which is pretty high level compared to 14.7% of sales at the end of June 2021. A significant increase of more than four points, where I don't wanna get into. I'm not getting into the specifics of the rationale behind this inventory increase because it's pretty much in line with what we said at the end of Q1, i.e., a part of it is coming from inflation, price increase basically, and part of it is coming from the necessary coverage and our willingness to provide a good service to our customers. Indeed, the level is high. As far as impact on profitability is concerned, it had a slight positive impact on Q1 and a slight negative impact on Q2. Overall, for the totality of H1, it had zero impact on our profitability. No impact on the profitability of our own inventory. Now, as far as the coming quarters are concerned, well, it is a big uncertainty because there are two main drivers actually as I said. Number one is the price of raw materials and components, and it's clearly plateauing today, and everybody expects the price of raw materials and components to go down. Now, we are not macroeconomists, and the valuation of inventory at the end of December will depend, of course, on the price of raw materials and components. The second uncertainty, which is probably even bigger than the first one, is the scarcity of components, raw materials, which is one of the reasons why we increased our coverage. Because especially when it comes to electronic components, for example, it has been difficult to source electronic components. The situation remains difficult, and we don't expect it to improve before a couple of quarters. Again, we deliberately have decided that servicing our customers was more important than maintaining a level of inventory consistent with best practices. I cannot give you a precise guidance. What we have said in Q1, and I can confirm the information, is that mid-term, we intend to progressively come back to historical level of inventory to sales, i.e., something like 13%-14% of sales. Short-term, we will do what it takes in order to continue to serve our customers in a context where you can gain or lose market share, not only depending on the quality of your product, but also depending on the availability of your product. We are really shooting to increase our market share even at the expense of our level of inventory. Sorry not to be more specific, but of course, it will depend very much on what will happen in H2. Okay, understood. Then on the pricing side, I mean, you've now raised prices like never before in the past. Do you think you still think you will be able to hold on to pricing even if cost inflation was to dissipate into the coming quarters? Well, no indeed, we have increased prices quite a lot. Well, if you compare to what the industry has claimed publicly, we are not among the companies who have increased the most their price. There are a number of companies who have done more price increases than us. So I don't believe that we have increased prices too much, which is a very important message for us. Now, if the prices of raw materials and components was to come down, we would of course seek to retain as much those price increases as possible. We have demonstrated in the past years our ability to retain. Once the raw materials and the component pricing was going down, so well, we'll see, of course. It will be our strategy, it will be our policy, and I think we have the methodologies tailored for that. Okay. All right. Last one from me. Would it be possible to quantify the negative impact of the China lockdowns on the Q2 deliveries, not only in China, but also in the Americas? Yes. So while in China, which represents between 4%-5% of our sales, it's not such a big market overall. Well, there's a clear drop in sales in H1. We are not particularly optimistic for H2. We'll see. We believe that the Chinese market will remain difficult. Actually, the sales in China are down YTD in H1. Well, again, we are small in China. We are very specific exposure targeted mainly in the building with a big part in residential building. Even though we have good leadership, because more than half of our sales are made within leadership position, we are a small player in a few niches. This was for China. The impact of the Chinese lockdown outside of China, the main flow from China to the rest of the world is between China and the US. The Shanghai factory we have, which represents approximately 10% of our Chinese production cost, so it's not big, is manufacturing almost solely for the US. Indeed, the shutdown of the lockdown in Shanghai and the fact that our factory couldn't manufacture anything for a month and a half or two months, had a negative impact on the supply of some products for our US operations and a negative impact on our US supply. It's difficult to quantify. It's probably not more than a few tenths of a million $, but it did negatively impact our top line in the U.S. Actually, maybe to sort of step up a little bit, we're focusing on the supply chain issues, we have two issues remaining. One is specific to the U.S., and it includes this shutdown, of course, the lockdown in Shanghai, but also the fact that the logistics to go to the U.S. and within the U.S. remain difficult. It's difficult to go to customs, it's difficult to ship products to U.S., difficult to carry products within the U.S. We have a specific supply chain issue in the U.S. on which we are working. The second issue, as far as supply chains are concerned, relates to electronic components. It's not specific to China for electronic components. As I said a little bit earlier in this call, it remains difficult to source electronic components. To answer your question specifically on China, so a drop in the Chinese sales, which is a small business for us, and negative impact on our U.S. operations. I wouldn't say. I'd say probably no material impact outside of those two topics. Okay. Tha nks very much. I'll get back in queue Thank you. The next question is from Alasdair Leslie from Société Générale. You're now unmuted. Please go ahead. Oh, yeah. Hi. Thank you. Good morning. Follow up on electronic components and just on your faster expanding segments. I kind of understand you've been a little frustrated with the growth due to the shortages in the previous quarters. Just wondering how those areas performed in Q2. Does that perhaps partly explain the slower volumes in Q2? What's the scope for an acceleration as component availability improves? I I understand you're still quite cautious there, but if you could just let us know your thinking there. Maybe as a second question, if you could also talk about the trends you're seeing in data centers in Europe. I understand there was a lot of momentum in Q1. How did that develop in Q2? Maybe you could just elaborate a little on how your two new acquisitions fit into your strategy there to gain share. Thank you. Well, on your first question, to be blunt, I remain frustrated. That frustration hasn't evaporated in Q2. We did not see an improvement in the availability of electronic components and semiconductors in Q2 compared to Q1. And talking to an industry specialist, I don't see any improvement very soon. But it could happen and it's not in our hands, but that's not what industry specialists are telling us. Most people expect that the situation wouldn't get better before, at best, the end of 2022 and most likely in the course of H1 2023. Yes, indeed, it had a negative impact on products incorporating electronic components. There are product families that where we couldn't sell for a month, for example, or where we cannot sell as much as required by the market demand. Here again, it has cost us a couple of tens of millions EUR. It is, I would say, a small frustration, not a big one. It's always frustrating to miss sales. We have missed sales in North America, in Europe, and in the rest of the world because of this shortage. At the same time, from what I can see from the market, everybody is facing the same difficulties, so it's not moving much market share. We are not all of a sudden, we don't have customers moving from Legrand to X, Y, or Z when it comes to assisted living, connected wiring devices or USystems because we wouldn't be able to supply. It is just that the lead times are increasing. Customers are a bit frustrated because they cannot get their product, and we are missing a bit of sales. As far as your second question is concerned. Data center in Europe. Data center in Europe. Well, data center is doing well everywhere. Taking into account the fact that we have a very big business for comparison, especially in Europe and in the US, where 2021 was, let's say extraordinary year in terms of data centers, but it's doing well. With also very, very good performance actually in the rest of the world. Mid-term, we remain very confident on the fact that data center will be a booster for top line. Bear in mind that it's significant. It's 13% of our sales. It was 13% of our sales last year, and it should soon be 14%-16%, given the growth we are experiencing there. This growth will not flatten, I believe. You know, when you are looking at the trends such as remote working, metaverse, stuff like that, all that will lead to additional data centers. As far as the two acquisitions are concerned, they have a perfect fit into the strategy we describe at our last CMD. When it comes to USystems, it's a sort of a double play. Number one, we are buying some rack capability in the UK, and we know that, especially for racks and cabinets, it's very important to have local capabilities because we can customize a product as per the customer's needs. On top of that, we are buying a nice cooling technology that we could now channel into our Legrand Data Center Solutions teams throughout the world. As far as Voltalis is concerned, it's a small but good addition. You know that we are big in the white room in data centers that we are strong in, and we want to develop into the gray room, where Voltalis will help us to provide a package of products and services to gray room customers. Both companies, well, they are small companies, of course, in total, EUR 24 million of sales, but they have a perfect fit within our data center strategy. Okay, thank you. Thanks for the detail. Our next question comes from Philip Buller from Berenberg. You're now unmuted. Please go ahead. Hi, good morning. Thanks for taking my question. Maybe I'm missing something or heard one of the numbers wrong, but I think you said that in H1 your input costs had gone up 17%, pricing was up 9%, and volume was 1%-ish. Yet your margins look stable, which is great. Mechanically, I'd assumed they'd have gone down a lot more, even if you are net price positive. What am I missing? Is it mix or are there some big temporary costs out that we should think about needing to come back? It sounded like your answer to Gael's question is that we shouldn't really attribute anything in the H1 margin performance to inventories. Yeah. I will first clarify the number, and then I will pass the mic to Franck on the margin. The number I gave was pricing H1 up 9.1%, with Q1 up 7.8% for pricing and Q2 up 10.4% for pricing. The average development, the total of those two numbers is 9.1%. Now maybe Franck, you want to take the lead on the margin front. Yeah, yes. Yes, thank you, Benoît. I understand that your question is the sequential evolution of margin, gross margin between H1, Q1 and Q2. At the same time that sales price increase, the yearly evolution of raw mats slightly decrease. It's 17% on H1, and it was 18% on Q1, so close to 15% in Q2. Sequentially, there is still a slight improvement on the inflationary balance, which is mitigated by lower leverage on production expenses. The inventory business impact that Benoît already mentioned was also negative sequentially. Last but not least, the freight costs have increased during Q2 versus Q1. That's the main driver for the stable margin, gross margin between Q1 and Q2. Yeah. I guess I was thinking more year-over-year, the margin performance. It would be the same explanation. It would be the same explanation. Yeah. Okay, great. No, that was the final question. Thanks very much. Our next question is from Eric Lémarie from CIC. You're now unmuted. Please go ahead. Yes, good morning. Thanks for taking my question. I got three actually. First one, you mentioned the procurement in the U.S. coming from China, so a big part. Do you intend to reduce it in the medium term, you know, in order to reduce your dependency on China? That's my first question. A second question, I don't know, but- Could you share with us the revenue generated by this faster expanding segment? You mentioned one of your last Capital Markets Day, you know, data center, energy efficiency, et cetera. Maybe the revenue generated by this segment in H1 and maybe the trend of the growth in H1. The last question, you already answered a bit to this one, but could you confirm you don't see any slowdown for any of your line of products in H1 or in Q2, but a slowdown not due to the war or to the supply chain, but due to maybe the macro environment? Thank you. Well, as far as the supply is concerned, yes, indeed. We have a pretty sizable Chinese sourcing for our U.S. operations. It's probably, let's say 20%-25% of our LNCA cost of goods sold, which is coming from China. It's an approximate number. The reason why, you know, we had this impact of the Trump tariff a couple of years back, and then this is now the reason why we are now suffering from this zero COVID policy. It's a significant dependency, if I may say. It's not a strategic risk. It's 20%-25% of our LNCA operations, which represent 40% of our sales. This being said, we are indeed looking at reducing a bit this dependency. It is an approach which we started a year and a half ago. For example, we have recently opened a factory in Vietnam and we are moving a bit of manufacturing from China to Vietnam. We have moved a bit of manufacturing back from China to Mexico. We are qualifying a number of alternative suppliers outside of China so that if some of our Chinese suppliers were no longer available, we could source our products or components from elsewhere. We are indeed in the process of reducing a bit this dependency, which again, I don't see as a strategic risk for U.S. operations. From time to time, it can indeed be impacted by factory shutdowns such as this one in Shanghai coming from the COVID policy. As far as share of our sales made in faster expanding segments, well, it was 32% of our sales last year. I don't have a number to give you for H1 because it's a number we are updating once a year, at the time of the February results. Qualitative comment, of course, all products incorporating electronics, whether fast expanding or more traditional products, did suffer in H1, as I said, because of the electronic component shortage. But again, this is not specific to Legrand. I think it is a phenomenon impacting the whole industry. As a result, some of the fast expanding segment products were indeed negatively impacted by this shortage. As far as a potential slowdown is concerned, I wouldn't say that we haven't seen any slowdown. I mean, volume-wise, this 2% of volume increase that we had in H1 is more or less made by +3%-4% in Q1 and +0.1% in Q2. We have seen flat plus volume in Q2, where volumes were up in Q1. Now, of course, part of this flat volume in Q2 is coming from Russia, which was in 2021 2% of our sales, so 5% of our European sales. It's not big, it's not significant, but indeed it has impact. Now, I wouldn't say that the market in Q2 was very supportive. I don't believe they were very supportive. Beyond Russia, you have China, which, as I said, is a pretty weak place to be for us. You have countries such as Brazil, which are not in super shape. The retail or slash DIY business is pretty mild, has been pretty mild starting end of last year. You know, Q2 wasn't a booming quarter when it comes to market trends or to top-line growth. Now again, it doesn't say much about what we have ahead of us. The only thing I can repeat once again is that from what we can see so far, we are shooting for something between mid-single digit drop in volume to flat plus in volume in H2. That's what we incorporated into our guidance. Thank you. That's very clear. Our next question is from Jonathan Mounsey from BNP Paribas. You're now unmuted. Please go ahead. Hi. Good morning. Thanks for letting me ask a question. Yeah, I'd like to return to the topic of price. From memory and some of the data we have in our model, I don't ever remember price for you being down on an annual basis really since probably about 1990. I think that's as far back as we can go. Yet, at the same time, it's only probably Q3 you were talking about you'd never raise prices by more than 4%. Here we are, we're having to raise them by 10%. I just wonder if RMI starts falling, say it was to fall 17% like it rose in the most recent half, what happens? Are we gonna see a year where on average across the group, pricing is gonna go negative if we start to see raw materials come off to the kind of magnitude that I'm describing? Do you think the business model is so powerful that actually you could retain much of that price? If that were to happen, what happens to margins? I would imagine they're going to the mid-20s% in that scenario, which I know is not something that you target. You'd much rather get volume growth. Which points to me that you are likely to cut price if raw material starts to fall. Then secondly, maybe part of the reason why that might not happen, what about things like wages? What level of wage inflation are we now starting to see, and how do you think that progresses as we move forward over the next four, five, six quarters? Thank you. I'm not sure that history can tell us much about what's gonna happen in the next quarter, because indeed, today's situation when it comes to inflation is probably a situation nobody has seen, or maybe the last time was in the early 1980s. In terms of the base, at least you are right, Legrand has never decreased its selling price since we started to record these KPIs so 20 or 30 years back. Indeed, Legrand has never raised the price by 7, 8 or 9% on a yearly basis for a couple of decades. Our strategy gonna be to retain as much of this price increase as possible. We've been able to do it in the past, but again, with price increases, which were not as high as 7, 8, 9 or 10%. This will be our strategy, and I believe that we have the tools, processes, people in order for this strategy to be successful. Now, of course, it will depend on the magnitude of the drop in price of raw materials and components and what happened in the market. I think that we have the processes, tools, and people tailored to retain as much price increase as possible. Now, as far as margins are concerned, we are not shooting, and we said mid-20s, we're not shooting to be in the mid-20s. We are shooting to be at the 20% EBIT midterm, and that's okay. We can confirm that it remains our mid-term objective. Because usually when the price of raw material components are going down, you have, unfortunately, the counterpart as far as volume growth is concerned. It also means that the economy is decelerating, so you don't have the same leverage, and you sometimes even have negative leverage on your P&L coming from volume drops, which you have to finance. The extra margin you can get can also be reinvested into additional SG&A in order to invest into pockets of growth. Don't forget that every year we have 20, 30, 40 BPS dilution coming from our acquisitions, which we also have to finance in order to come to the 20% EBIT. Even if we are able, which is our strategy, to retain as much of this price increase as possible, it will not translate into a 25% EBIT margin and our sort of North Star remains to be at 20%. As far as wages are concerned, it is, I believe, quite under control. If I have to shoot a number, I would say that the wage inflation in H1 was around +4% or +5%, which is probably lower than inflation in a number of countries. Well, of course, there will be an inflationary pressure on wages coming from the general inflation. Well, I'm not concerned, and I believe that we should have the ability at the same time to provide the right wage remuneration to our people to keep them happy and motivated and to compensate part of that through productivity management of headcount footprint whatever it is. It's part of those, you know, inflations. We have mentioned wages, we have mentioned raw material components. There's also transportation costs which are skyrocketing, energy prices which are going up. Well, you know, I believe that we have the ability to manage those inflations, and that's what we have demonstrated in H1, and we'll continue to do so. Thank you very much. Ladies and gentlemen, we currently have one final question. As a reminder, if you would like to ask a question at this point, please press star one on your telephone keypads. That's star one on your telephone keypads. Our next question comes from Jonathan Day at HSBC. You're now unmuted. Please go ahead. Thanks. Good morning, everyone, and thanks for taking my question. It's a couple actually. I was wondering, just to pick up on that last point, I was wondering if you could perhaps talk a little bit more about exposure to European energy prices and how you see the risks of gas supply and gas rationing over the winter months. I was also wondering if you could talk a little bit about what you're seeing in, perhaps in the U.S. residential market, which I know is quite small for you, but just wondered if you could touch on some of the trends there as well, please. Thank you. Well, yeah, starting with the exposition. First comment, we are not a big energy consumer. To give you order of magnitude, energy represented 0.5% of our 2021 sales, of which actually gas was less than. We're not very much exposed to energy. Well, we don't have a choice. We're not a big energy consumer, and we're not very much exposed to gas. This is sort of a broad statement for the whole group. When we are zooming on Europe represents, as you know, slightly more than 40% of our group sales. Out of the 40%, we have 10% of sales where we have no manufacturing. We have approximately 20% of sales where energy mix is not much exposed to gas. As part of the 20%, you have France, which as a country has a very small exposure to gas. You have 10% of sales with a more significant dependency on gas in countries such as Italy, Hungary, and Poland. This is sort of not a big exposure to gas as a whole. Zooming in on Europe, a bit more exposed in a few countries, but not exposed on three-quarters of our European sales. Now, of course, the big question mark and the uncertainty is the global impact a gas shortage would have on the European economy. We believe that this is the most important impact to look at, rather than a potential shortage or potential difficulty to manufacture because of a shortage in gas. It's what impact will it be on the European economy? Last comment, well, this energy crisis mid-term will also have a positive impact on our business. I can take an example. Currently, for example, in France, you know that there is a strategy from the French government to cut by 10% energy consumption in France within two years. There was no later than yesterday, a meeting between the ministry and specialists of housing looking at potential solutions. Among the solutions that were discussed, you have limiting HVAC to 26 degrees, limiting heating to 19 degrees, putting presence detectors to shut down the lights when people are not there, putting smart thermostat, blah, blah. You know, this could also have a positive impact on our top line and be part of those green plans that will have to be implemented in most European countries within a few years. Does it answer to your question? Yes. Just to follow up on U.S. residential and what you're seeing there given some of the- Yeah. U.S. U.S. residential. It's only It's only 20% of our U.S. sales, so it's a small business. The sales have not been very supportive in the U.S., especially the DIY piece. The reason for that being that we have a very strong base for comparison. Exiting the various lockdowns at the end of 2020 and in 2021, there were a lot of consumer spending dedicated to housing, consumer electronics and so on, which boosted our residential sales, especially in 2021. We don't have any more the support from this sort of post-lockdown trend, as well as incentive plans financing the consumer that were launched a year and a half ago. The demand is very soft. Well, we remain optimistic mid-term because we believe that there are plenty of interesting innovations that could be good for the U.S. customers when it comes to, you know, remote working, connecting products and so on. Soft sales in H1. Great. Thank you very much. Our next question comes from James Moore at Redburn. You're now unmuted. Please go ahead. Yes. Morning, everyone. Thanks for taking the questions. I wondered, and I'm sorry, I missed the first part of the presentation. If you have already said this, apologies. On pricing, you mentioned the 10.4% in the second quarter, and on the raw material inflation, I guess we've gone from 18% in the first quarter to 16% or so in the second quarter. I just wondered, as we roll forward into the third and the fourth quarter, what the carryover effect is at the moment and how you think. Yeah. Okay. The inflation of raw materials and components was close to +17% in H1. It was indeed slightly decelerating in Q2 compared to Q1, because Q1 was at more than +18%. Q2 alone was at more than +15%. Deceleration in Q2 compared to Q1. As far as the carryover impact, if you take the prices and if you extend them throughout 2022, for full year 2022, it would be, I think, something like +13%. But again, it's a purely mechanical carryover impact. The price of raw materials is going down because of whatever deceleration in the market. Of course, the numbers will be lower than that. Great. Thanks. If I could ask a second question on energy efficiency and the premium growth. You talked in the first quarter about seeing clear energy efficiency premium growth in EV charging, climate control. They just Mm-hmm. Are you still seeing those trends, and are you starting to see any of those in the US or are we still not seeing those trends in the US? No, we continue to see the trends, not only in Europe, but very, very small. It's more visible in Europe than in the US indeed. It's probably coming from the various incentive plans that were launched in a number of countries. So it's more visible in Europe than in the US. We also see them in the US. We haven't seen any specific deceleration between Q1 and Q2, and we see indeed EV charging, climate controls, smart thermostats, cold corridors, optimized airflow in data centers, all those products going up significantly. The only negative limitation or worry of the products remain the shortage of electronic components, which from time to time can impact some of those product families, well, let's say for example, product families which Okay. Use professional products. Today, not much on green product families, but when it comes, for example, to assisted living products that help old people to stay at home or to collective security, they have been getting impacted by shortage. We expect this growth to continue on green products. With this concern that in order for this growth to continue, we should continue to secure electronic components, and we know that we're gonna suffer for a couple of quarters. And just- Yeah, go ahead. Yeah. If I could just go back to the raw material and component. I couldn't hear because the line is a bit crackly. Did you say 18 in the first and 13 in the second? I understand that you haven't heard well what the purchase price increase was for H1 2022. It was 17%, and the sequential is Q1 around 18% and Q2 around 15%. The carryover leads to approximately 13% for full year 2022. Thank you very much. We let you compute H2 alone. That's great. Thanks. We currently have no further questions, so I'll now hand you back to your host for any closing remarks. Well, I just wanted to thank you all for connecting. I know that those times are very busy with everybody releasing their results. Thank you very much for taking the time to listen to Legrand. Should you have more questions, well, you can call Ronan Marc, you can call Sammy, you can call Paul, you can call myself. We have made ourselves available for the full day to answer any questions you may have. Thank you very much and have a nice summer break. Ladies and gentlemen, thank you for participating. You may now disconnect your lines.