Good morning, ladies and gentlemen, and welcome to today's Legrand's 2022 nine-month results conference call. All participants are in a listen only mode. Later, there'll be a question and answer session. For your information, this conference is being recorded. At this time, I would like to turn the conference over to CEO, Mr. Benoît Coquart, and CFO, Mr. Franck Lemery. Please go ahead. Thank you. Good morning, everybody. Franck Lemery, Renaud Marc and myself are happy to welcome you to the Legrand 2022 first nine months' results conference call and webcast. Please note as usual that this call is recorded. We have published today our 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 four key takeaways for the first nine months of the year. First, Legrand recorded sustained rise in sales. Second, results were robust despite many adverse external factors. Thirdly, we announced today two new bolt-on acquisitions. Fourth, we have confirmed our 2022 full year targets. Moving now to page six-seven with an overview of sales on the first nine months. Our sales grew by +19.1%, driven by a sustained organic rise of +10.1% that reflects strong group business momentum, including many successful commercial initiatives and pricing power, as well as Legrand ongoing and very active management of supply chains, which were still under pressure. On top of organic growth, the scope effect was +2.4%. Based on acquisitions completed and the likely date of deconsolidation, this impact should be around +3% for the full year in 2022. Now, last component regarding sales is the FX effect. It was also favorable at +5.6% and will be close to +6% on the full year 2022 based on average rates in the month of October 2022 alone. On page seven, focusing now on organic growth by area, each of the three regions achieved a high level of growth. Europe grew +10.5% over nine months, with both mature and new economies growing strongly. In North and Central America, sales were up +10.7%, with a high level in the US at +11.1%, where business for non-residential applications recorded a marked growth. Finally, the rest of the world area grew +8.0%, driven by a very sustained growth in India as well as in Africa and Middle East. Focusing on Q3 trends alone, group organic growth was +8.4%. This works for the sales. I am now passing the mic to Franck to provide insights on our results. Thank you, Benoît, and good morning to all of you. I will start on page nine with the adjusted operating margin. Before acquisitions, it stood at 20.4% of sales. This is a limited retreat of -1 point from the first nine months of 2021. This solid profitability against the backdrop of persistently strong inflation reflects the group's fair management of both expenses and sales pricing. As an illustration of inflation, the increase of purchase prices of raw materials and components is around +15% over nine months. Including acquisitions, the adjusted operating margin was 20.2%. I'm now turning to page 10 regarding the net profit attributable to the group. With EUR 812 million, this represents a growth of +16.1%. This was primarily driven by the rise in operating profit of +EUR 123 million. Please note that group's operating margin stood at 27%. I'm now moving to page eleven with few comments on cash and balance sheet. As a percentage of sales, cash flow from operation was down -0.9 points at 18.8% of sales. The free cash flow stood at 10% of sales for the first nine months. This include temporary strengthened coverage of inventory. In the context of supply chain tension, it reflects our priority given to customer service. Normalizing working capital requirement, the normalized free cash flow stood at 16.3% of sales in the first nine months. On the balance sheet structure side, net debt to EBITDA ratio was 1.5 at the end of September. This concludes the key financial topic I wanted to share with you. Now I'm passing the mic back to Benoît. Thank you, Franck. Turning to page 13 now regarding M&A. Following the acquisition of Emos, USystems, and Voltalis earlier this year, we have announced today two new bolt-on acquisitions. A&H Meyer, a German leading player in power and furniture connectivity solutions for commercial buildings with annual sales of over EUR 20 million. And Power Control Ltd, a British specialist in UPS systems with annual sales of around EUR 15 million. These two acquisitions strengthen Legrand global positions in segments supported by strong structural trends, energy efficiency infrastructures, as well as solutions for changing ways of working. 2022 is an active year with total annual sales of company acquired of nearly EUR 145 million. On slide 15 now. Sorry. We have confirmed our 2022 full year targets, which were raised on sales last July. First, I would like to insist on the fact that in an uncertain economic outlook, we are deploying all initiatives to both seize all growth opportunities, particularly in data centers and energy efficiency solutions, and to optimize our cost structures. Now, taking into account our solid achievements in the first nine months of 2022, Legrand has confirmed the full year targets it set for 2022, with growth in sales at constant exchange rates of between +9% and +12%, an adjusted operating margin of about 20% of sales, and around 100% achievement on its CSR roadmap. This concludes today's announcement on the first nine months results. Before we open to questions, I would like to emphasize that Legrand is playing an active role and is a key actor in promoting frugal energy choices. First, we announced early October that we are doubling our energy consumption reduction targets set between 2021 and year-end 2023, and we are now aiming for a global -15% cut. Second, Legrand is offering a wide range of solutions for automating the so-called eco-friendly actions in all buildings and making them easier to implement, which is absolutely key in the current energy crisis context. Now we are ready to open to questions. Thank you very much. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. We will take the first question from Yifan Zhang from Goldman Sachs. Morning, gentlemen. My question's around. I'd have two questions. First one's on, what do you think drove the Europe growth? You have a 10% organic growth. What products are driving the growth there, given we see the weakness in Europe growth markets? Have you seen some de-stocking from distributors, in the areas? My second question around, can you quantify your pricing action in 2022, and how much do you expect the carryover effect in 2023? Thank you. Hello. I will start with the second question of the pricing. Pricing over the first nine months of the year was +9.9%, coming from both carryover effect and new increases. Let me maybe remind you the sequence. Q1 2022 was close to 8%. Q2 was slightly above 10%, and Q3 is slightly above 11%. The total of all that leads to this +9.9%. The theoretical carryover for the full of 2022 would be slightly below +10%. Again, it's a theoretical carryover. It's, you know, purely mechanical and the actual number could be different depending on the decisions we're gonna take on pricing, either up or down in Q4. As far as the first question is concerned, it's the total growth. Before zooming specifically to Europe, the third quarter was impacted by several things. As you could notice, our volumes are slightly down in Q3 compared to Q3 of last year. This is coming from a number of factors, where number one, a couple of geographies did suffer in Q3. We can of course mention Russia, where volumes are very significantly down and which is negatively impacting our European and our worldwide performance. We could also mention China, which is down, actually in sales and in volume as well as Latin America. We have a number of geographies which are going down. If we are zooming on the two main and big geographies, which are the U.S. and Europe, well in the U.S., we have the same phenomenon in Q3 as in the first six months of the year. The residential piece of the market is under pressure, coming notably from a tough basis for comparison, as well as from the fact that consumer spending is under pressure in the U.S. The data center market is doing well, despite we have a very tough comp, and the non-residential market, except data center, is significantly up, and it's pretty consistent with what we said at the beginning of the year where we expected the non-residential market to grow in the U.S. As far as Europe is concerned, the consumer-related products, so mainly DIY, small retail, are again under pressure, and it is consistent again with what we see elsewhere in terms of consumer spend, so it's driving down our sales. As far as areas boosting our sales, we can mention for example, energy efficiency related products, which are growing in Europe faster than the rest of our product offering. If we take a two-year approach, putting together 2021 and 2022, energy efficiency related products in Europe grew 10 points faster than the average of our countries in Europe. It's pulling the demand. Now, this was in a number of countries, geographies. Now, there's also a theme which is common to all geographies, which is the fact that our growth remained significantly limited by supply chain tension, especially when it comes to electronic components. It has remained difficult to source components and you know that electronic components are an important part of our faster expanding segments, so connected products, energy efficiency related products and data centers. The tensions have clearly limited our sales growth over the first nine months of the year. Now we expect the situation to get better in the quarters to come, but it has been clearly weighing on our sales. Does it answer your question? Thank you. Can you comment also on the distributor? Do you see any de-stock in there? Yeah. No, it was also part of your question. Well, we have seen a slight destocking in Q3, especially in Western Europe, but it has been a slight one. We haven't seen a huge destocking so far. Yeah. The next question comes from Lars Brorson from Barclays. Oh, yes. Hi, good morning, Benoît, Franck, Renaud. Maybe I can follow up on the guidance and the implied growth range, I guess, for the fourth quarter. Assuming pricing can stay in the, should we say high single digit, perhaps even low double for the fourth quarter, it would suggest that volumes are down quite meaningfully, perhaps even low double digit at the low end of your guidance in the fourth quarter. I take it U.S. is holding up outside residential. I'm trying to understand how we should think about European volumes in the fourth quarter at the low end of the guidance. Should we think about that, you know, could be down in the teens perhaps? Maybe you can elaborate a little bit on the earlier question with regards to European de-stocking. Do you see that as largely behind us, or is that very much embedded within your fourth quarter guidance as well, please? Okay. Well, to make sure that everybody has the right number, the year to goal, the fourth quarter top line implied by our guidance would mean approximately -5% in the low end of the guidance and +6% for the high end of the guidance. Between -5% to +6% for Q4. Well, the low end of the guidance, given the price effect we have in our books and our forecast, the low end of the guidance would imply indeed close to double-digit decrease in volume, which is not the most likely to make things clear, whereas the higher end of the guidance would imply low single-digit decrease in volume. We are clearly shooting for the higher half of the guidance, not the lower one. We don't believe that the scenario whereby the volume would be down double digits is a credible scenario, given what we see for the remaining weeks or months of the year. Now, when it comes to your second question, we have absolutely no clue about what our distributors will do in terms of de-stocking. Again, you should ask them the question. It depends on their own forecast about what the sales of the next quarter is gonna be. The only information we can give you is that as per our information, the level of inventory at our distributors is not very high. They have managed carefully their inventory throughout the crisis starting back in 2020, and I don't believe they are carrying a lot of extra inventory. Now again, what they will do going forward is a business decision on their side, which is not in our control. Can I secondly just ask briefly about supply chain headwinds? Yeah. I'm a little bit surprised that we are still seeing those headwinds. I thought we were coming out on the other side. We see some of your peers having had some success around redesigns of products and starting to get on the other side of these headwinds. Can you help us understand how much- Yeah. that impacted you in the third quarter, particularly in your U.S. business, and how to think about that in the fourth and into 2023, please? Yeah. Well, the situation has been improving since the beginning of the year, when it comes to number of plastics or metals, but still there are two dark spots which remain, and which are the same, as in Q2. Number one, the situation of electronic components, which remain globally very difficult, and has limited the growth of our ranges embedding those electronic components. I don't believe this is an issue specific to Legrand. I think, my competitors are facing exactly the same situation as me. The second dark spot, if I may say, is North America, which suffered from a double impact. Number one, this impact of shortage of electronic components. Number two, the specific Chinese situation. You know that we have a significant flow of products sourced or manufactured in China and going to the U.S. Between the Q2 lockdowns, which have created a number of bottlenecks in Q3 in terms of supply chains. A number of regions which are still under lockdown from time to time. The specific inland situation in the U.S. where we are facing a number of transportation issues and so on and so forth, North America has clearly suffered from some supply chain tension. Otherwise, when it comes to most of the plastic materials and metal materials, indeed the situation has been improving throughout the year. When will it be solved? I have no idea. The feeling we have and the feedback we are getting from our suppliers, especially on the electronic component front, is that the situation will progressively improve, and we should be able to see that in the coming months. How much has it costed us in terms of sales? It's a difficult question to answer, because since we have some orders which are difficult to fulfill, sometimes our distributors are ordering twice the materials they really need. To do the net of all that is a bit difficult. Yeah, tens of millions euros for sure. Yes. Thank you. The next question comes from Andrew Wilson from JP Morgan. Hi. Good morning. Thanks for taking my question. I just wanted to try and clarify a couple of the comments on pricing that you made earlier. Just to try and understand, I think you were implying that, given what you've seen so far and given what you're expecting in the Q4, you would expect a 10% benefit in 2022. Did I understand that correctly? Then did you quantify sort of what the run rate from the actions you've taken already would be for 2023? Yeah. Actually, the 10% I was mentioning is really close to 10%. Let's say the pure carryover impact, if we are taking the price level as of the end of September and taking this price level to Q4, it would lead to close to +10%. It would actually imply a Q4 alone at also close to +10%. It's a pure mechanical impact. It could be less, it could be more, depending on the decisions we're gonna take in terms of pricing. As far as 2023 carryover impact is concerned, it would be a bit too theoretical to communicate a figure or range for 2023 or any sort of carryover impact. The only thing I can mention is that pricing, as you know, has never been negative in Legrand history. And of course, this is a nice track record we are pretty proud of, and we don't intend to have any negative pricing in 2023. As far as the carryover is concerned, it would be too theoretical because many things can happen, many decisions can be taken that will impact this theoretical carryover. That's very helpful. Maybe just as a quick and I guess more specific follow-up, just on North America, and clearly the U.S. has overall developed very well, particularly on the non-res side. Just specifically in terms of, I think it was that you mentioned Canada had been weaker. If there was anything specific there in terms of what we're seeing in Canada which was different to anywhere else, or is it a common issue? It was just interesting to observe, it looks like the combination of Canada and Mexico is down when you look at North America overall. Well, I don't believe there's anything specific happening in Canada. We have a pretty small position in Canada, which is not really material compared to the one we have in the U.S. I'm not aware of any specific issue we are facing in terms of competition or whatsoever. No, not much specific information to give you on Canada. Okay. Thank you very much. Is there another question? Hello? Operator? Sorry, it seems like we have an audio issue. Please stay connected. We are trying to solve the issue. Thank you. The next question comes from the line of Andre Kukhnin from Credit Suisse. Please go ahead. Good morning. Thank you very much for taking my questions. I'll just go one at a time. Firstly, to follow up on price, I wanted to check, are you increasing prices further in Q4, or should we think about the run rate of Q3 as the sort of ongoing and then think about next year later? Well, I cannot answer this question. We're not guiding on pricing for the next quarter. We'll do what it takes to maintain the balance between competitiveness and value creation. I cannot be more precise than that because it depends on a number of factors. Again, we are not guiding on the next quarter pricing. We retain some ability to do a bit more pricing if needed. You know that last year we told you that we were extremely cautious in increasing prices. I don't believe we have done more pricing than our competitors in 2022, so we retain some ability to do a bit more if needed to fulfill our commitment. That's clear. Thank you. No, I wasn't asking for guidance. I was just thinking whether kind of conceptually is edging up further in Q4 or not. That's clear. In terms of energy costs, could you give us an idea of how much kind of inflation impact you saw in Q3? Also, how close are we to be mark-to-market on this? i.e. kind of what are your contract lengths and just trying to gauge what the sort of full size of impact can be if it's not already there in Q3. Yeah. Yeah. Well, in 2021, energy cost represented 0.5% of our sales. So it was not indeed so material, except of course that you find some energy costs elsewhere than in your pure, let's say, energy cost line. The energy cost is also impacting the cost of raw materials. Take aluminum for example. You know that two-thirds of our purchase of components and raw materials are indeed components, and the components are manufactured by third party and include in energy cost. You can also find some energy cost in the remuneration increase. So the impact of energy cost goes beyond this 0.5%. But if you just take the energy we are consuming, it's 0.5% of our sales. The price has increased by about 70%. We do have some short-term hedging contract. Now, given the fact that this 0.5% is not that material, you shouldn't expect energy cost to have a huge impact on our PNL, which we wouldn't be able to compensate. We're ahead of that. Of course, we are trying to find the best deals on the market, but we are also, and I believe it's as important as buying the energy at the right price. We are also cutting our energy consumption. As I said, during my introduction, we have decided to launch a plan to cut by 15% of energy consumption within two years, from 2021 to 2023. We have associated a couple of additional CapEx to do that. It comes after a very significant reduction in the past 10 years. You may not know that, but the past 10 years, we have reduced by 35% our energy consumption, and at the same time, the sales grew by 65%. It take us half of the energy it took us back 10 years ago to do one year of sales. Those are the main answers. 0.5% growing 70%. Yes, indeed, we are trying to hedge when we can, but it's not so material at group level. And we are taking a number of derivative actions to cut our energy bill. Got it. We shouldn't worry about the carryover, kind of catch-up effect for energy cost inflation in 2023, given the current spot prices, assuming that they stay. Well, it's likely that in 2023, the cost of energy will indeed energy will cost more than in 2022 and in 2021. At the same time, you should probably have also a couple of factors going down. The net effect of transportation costs, which is, for example, 2.5% of our sales, and which has increased by 30% or 40% this year compared to last year, could possibly go down too. The net result of all that is, of course, difficult to factor into any model. You're not only having inflation. You also have some costs which could possibly go down. Thank you. If I may just lastly, on light commercial exposure, could you help us quantifying that within your non-resi, how much is kind of light commercial? You mentioned it sounds like it's already coming slightly under pressure in Europe. Is there anywhere else globally that you see that trend that is kind of spreading from resi into light commercial? Well, I'm not able to quantify light commercial against the larger commercial because most of the products which are sold in light and in non-light or larger commercial are the same products. My comment on smoothing market was more on the pure resi side and especially on the part of the resi side, which is tied to customer spending. i.e., DIY and small retail. Again, when you look at the DIY numbers, for example, when you look at a number of consumer goods, the demand has softened, especially in Europe and especially compared to what happened between let's say mid-2020 and the end of 2021, where those markets were booming. It's more. Those were more comments made on the residential side than on commercial, either light or large. Great. Thank you very much for your time. The next question comes from the line of Alasdair Leslie from Société Générale. Please go ahead. Oh, yeah, hi. Good morning. I was just wondering on the weak underlying margin in Europe this quarter. I appreciate you kind of encourage us not to focus on regional margins, but that's the lowest in Q3 for a number of years. Just wondering if you could kind of elaborate on what drove that, was it sort of sudden slowdown in volumes, more pronounced impact from Russia, you know, higher burden of perhaps more centralized costs, maybe something else, just some more color there. In a kind of recessionary scenario, can you just confirm that your target would be to essentially keep margins at the group level at 20%, including any potential restructuring charges? Just kind of sort of tagged on to that, you mentioned deploying initiatives to optimize, you know, your cost structures in the press release. Just wondering if you could again, maybe elaborate on some of those. I guess most of those are gonna be at the discretion of the local country managers. Are there any larger group-wide opportunities that you're kind of focusing on as well? Thank you. Yeah. I will answer question two and three, and I will let Franck comment on question one. Well, as far as the second question is concerned, we have a midterm guidance, which is an EBIT of approximately 20% across the cycle. Clearly, it remains, of course, our objective in good and in bad times. Actually, when we look at what we've been able to deliver in 2020, in 2012 and in periods of harder economic times, we had margins which were at or very close to 20%. It remains our midterm objective regardless where we stand in the cycle. As far as cost initiatives are concerned, well, there are many things which are done which relates to digitalization of a number of topics, analysis of a number of cost base where we could dig in. If you look at Q3, you would see, for example, that we have a pretty significant level of restructuring expenses. Actually, if we look at our nine months' restructuring, it stood at EUR 26 million, and it was EUR 15 million last year. We have clearly increased in Q3 and in 2022 overall our restructuring charges because we have a number of plans which we believe will be activated in order to cut our control expenses. Needless to say, our EBIT guidance, which as mentioned, is after restructuring charges. Again, you know that our EBIT is all-in. It includes any positive or negative one-off. It includes restructuring, it includes impairment of of assets and so on and so forth. This way to compute our EBIT won't change, of course. To make long story short, we stick to our 20% guidance across the cycle. We have no reason to change, and we believe that the Legrand business model has been conceived and geared in order to deliver those 20% EBIT all in, including restructuring charges. Number two, we have increased the level of restructuring because we have a number of plans we're gonna activate. Franck, did you use the mic for the first question? Your first question was about the softer margin of Q3 and especially in Europe. As Benoît said, what we would call the softer margin of Q3 is mainly due to higher restructuring, which we have launched to prepare the future. Restructuring was 30 basis points of H1 sales, and it was 60 in Q3. Sequentially, it has softened a little bit the profitability, but it's to protect the future. Talking now specifically in Europe, and talking specifically. In Europe, in Q3, you see that the EBIT margin, the adjusted EBIT margin is going down by 250 basis points versus last year. First item being acquisition. Acquisitions are dilutive, it's normal in the Legrand model. Our acquisitions are mainly in Europe in the recent months. Excluding acquisitions, the retreat is minus 180 basis points, which is a little bit more than the group. Why? First, because it is a place where inflation is the most important in Europe on account of energy and also because of some FX with the U.S.D. Second, this is a place also where we had restructuring. In saying that, as we usually said, a given quarter on a given geography is not very meaningful. Talking about the nine months' results in Europe, we are happy with 21.3% of profitability here. Okay, great. Thanks. Thanks very much. Could I sneak in a quick follow-up just on M&A? Yeah. There's obviously kind of more hype now around kind of electrification, energy efficiency themes. I was just wondering if you're sort of seeing competitions for assets intensify and maybe also higher expectations now from some of your targets. Looks like you're gonna add 3% to your top line from M&A this year. I think that leaves the three-year average around about that same 3% level. You know, I think in the preceding three years, you did sort of 7%. I was just wondering, do we think M&A can perhaps sort of re-accelerate again over the next few years? Are there some larger deals in the pipeline as well that could perhaps move the needle again? Well, as you rightly noted, we have acquired already five companies, totaling sales of close to EUR 145 million, and we expect a 3% perimeter impact this year. We have a number of discussions going on, and we hope to be able to close more deals in the weeks and quarters to come. Well, in terms of price paid, you can look at the financial statements of Legrand and you will see that over the first nine months of the year, we have paid on average a multiple of 1.6x sales. And historically, we have paid on average a 2x. We've been able to pay pretty reasonable multiples, the five small deals we have closed so far. Are we likely to see a strong acceleration in M&A? The answer is no. That's not what we have guided the market to. We believe we should be able to do every year or two, three, potentially 4% scope effect. From time to time, we'll have a bigger acquisition. This bigger acquisition is by definition highly uncertain. I think it's more reasonable to include into your model the fact that we would have 2%, 3%, 4%. Actually, this is a 3% perimeter impact we record this year. It's pretty consistent with our historical numbers. As for the prices of acquisition going forward, we see no reason why we shouldn't be able to pay approximately the same multiples we've been historically paying, i.e., between 1.6x- 2x the sales. We see no reason why the multiples would all of a sudden neither deflate nor inflate. Even through the three or four last years, we've been able to pay reasonable multiples, and we will stick to this policy. Okay. Very clear. Thank you very much. The next question comes from the line of James Moore from Redburn. Please go ahead. Yes, thank you, and good morning, everyone. I have three, if I could, one on price, backlog, and European volumes. Maybe I'll go one at a time if it helps. Just given that raw material prices are rolling over, but electronics still difficult, and we have accelerating wage inflation. I wonder, without numbers, how you're feeling about your incremental price policy and whether you're trying to capture wages more than usual. If you were able to say what wage inflation is this year and what you expect next year, that would be helpful too. That's the first one. The reasoning we have is not saying let's specifically look at the energy cost, the wage cost, the raw mat and see how much pricing we need to compensate each of those components. It's more how much pricing do we need in order to deliver our financial contract. So far in 2022, the wage increase has been pretty much under control. The wage inflation in 2022 was something between +4% to +5%. It's not at the same level as raw mats and components. I remind you, I don't know if I gave you the number, but the price of raw mats and components over the first nine months of the year went up 15%. Raw materials and components up 15%, wages up 4%-5%. It's not exactly the same order of magnitude. Now, going forward, this comment applies both for Q4 and for 2023, our pricing policy will be what we need to do, again, in order to maintain a good balance between competitiveness and profitability and remuneration. If we believe we need to do a bit more pricing because of skyrocketing energy cost or increasing wages, we do a bit more pricing. Yeah. This is something which is not out of reach. Again, when you look at our pricing compared to what has been communicated by our peers, I don't believe we have done too much pricing. I think that we have retained the ability to do a bit more pricing. Thanks. The second one, if I could, is order backlog is normally, I think, quite short for you, maybe a month or so. I imagine with the supply chain crisis, it's stretched. I wondered if you could say what the normal backlog in months of sales was and what it is today to give us a feeling for what you have baked in for 2020. Yeah. Well, the normal backlog, if we're doing our job well, is zero. Because we are almost zero, a few million euros. We should. The vast majority of our orders, if not almost all of the orders we get should be delivered out of our existing stocks. They are not orders planned for next month or in six months. We should be able to deliver the orders we get out from our existing stock. Now, indeed, we have a number of orders which we couldn't fulfill on time because of lack of products, sometimes of lack of components. I can hardly quantify it because, you know, the backlog is never given forever. If you have an order which you can only fulfill in six weeks because it takes time for you to get the airplane components and to manufacture the product, well, this backlog can always be canceled by the customer. The backlog is not granted forever. I don't believe it can give you one way or the other any feeling about what we have ahead of us in terms of top line. This is unfortunately the nature of our business, which of course does not apply with companies that do have structurally larger books. This is not the case for everyone. Thanks. If I could finish with your European monthly volume momentum, that would be what I'm really trying to get to. I'd be interested in whatever you can say. As we've gone through the third quarter into October, just trying to scale really when the peak month was excluding price and how much it's dropped. I'm particularly thinking about new build resi versus non-resi and whether renovation in resi is kind of holding up or not. Well, I cannot comment on October, and monthly numbers are not really relevant in our trade. What I can tell you is that we have not seen within Q3, neither in Europe nor elsewhere, a trend which would be worth mentioning to the financial community. If we had seen a trend, we would make it public, but it's not the case. Now again, the monthly number at Legrand doesn't mean much. Don't forget that we are in a very complex economic chain where we are selling to distributors, selling them to contractors, installing them the product and so on and so forth. No specific comments on October and no specific trend within the quarter, within Q3. That's helpful. Thank you. The next question comes from the line of Gael de-Bray from Deutsche Bank. Please go ahead. Oh, thanks. Good morning, everybody. I have two questions, please. Firstly, volumes have been flat or even slightly negative for two consecutive quarters, and you're guiding for further decline in Q4. So why do you continue to increase inventories? That's question number one. Question number two is on the growth side of the story. I mean, your growth this quarter has been lagging that of your peers pretty considerably, I think. Could you perhaps comment on competitive dynamics? Since you know, your mix is of course often a bit different from that of your peers, could you also provide a bit more granularity on the organic growth that you achieved in Q3 in non-resi versus resi? Thanks very much. In terms of volume, well, no, Q1 was up, Q2 was slightly up, and Q3 is down. No, you don't have two consecutive quarters of declining volume. You have one, which is indeed Q3, which is indeed slightly down. I think that I gave a number of indications on what happened in Q3. We don't believe that Q3 should be read as a clear sign of a slowing end demand. It's more, soft volume in Q3 are more linked to a temporary or structural factors. There's a conflict between Russia and Ukraine, Chinese and South American market dynamics, availability of components, and a slight stocking from distributors. As far as the competitive dynamics are concerned, let's look region by region. If you look at Europe, and if you put Russia back into the European territory of some of our peers, which are publishing Europe excluding Russia, well, everybody is more or less at +10%. Legrand is at slightly above +10%. I said excluding copper is at +10-point-something%. ABB is at +10%. Schneider, if you put Russia back, is at +10%. Signify is at +8%. Somfy is at +1%. In Europe, we have no material difference compared to our peers over one year, and we are doing better than everybody over two years, significantly better over two years. In America, indeed, we are below a number of listed peers. With +7% we are below companies such as ABB, Hubbell, Eaton, and that's probably where the gap is coming from, the global, let's say, the level from North America. Now, don't forget that we have different exposure compared to those guys. We are not exposed at all to the utility business or to the industrial automation business, and it has been the business booming in the U.S. It has also been the business which has experienced the highest price increases. We are not in this business. We are active on, as you know, 50% is non-resi, but it's mostly office building, schools, hospitals, and so on. It's about 25% is data center, and 20% is resi. We have absolutely no exposure to utility infrastructure, industrial automation and so on. Indeed, zooming on North America, we have a gap which is higher over one year than over two years. Third, the last zone where we can compare with listed peers because they are issuing numbers is Asia. In Asia, we are doing better than everybody. All those who release the numbers. With +10%, we are above ABB, Schneider, Vertiv, and a few others. This is true over one year, and this is also true over two years. To make a long story short, we are at par in Europe with our competitors above over two years. We are lagging behind our listed peers in North America, which is indeed a fact. We are ahead of the few listed peers which release numbers in Asia. These are for the pure mathematical analysis. Now, again, as usual, I don't like this comparison because, you know, I don't believe that Schneider, Eaton, Hubbell, ABB are the really competing apples to apples against Legrand. Our competitors are mostly, as you know, small to mid-size companies. We are doing the in-depth analysis of our competitive position once a year because it's difficult to analyze competitive position every single quarter. We'll see what our market positions are doing. I don't believe we are losing market share. We are not, for example, in North America, the fastest-growing segment is a fact. As far as inventories are concerned, well, our increase in inventory for the past 12 months has been linked to the fact that, not only, of course, the price of raw material components was increasing. That has a mechanical impact on our inventory level. On top of that, you may have some FX factor and perimeter impact. Indeed, we have increased our inventory turn by about 20%, I think, which is coming from the fact that since last year, we really wanted to favor quality of service to our customers, even at the expense of our level of inventory. That's what we've been consistently doing. We've said that very openly to the financial community that we were looking to do the best service possible, even at the expense of inventory. Does it mean that we are servicing very well our customers? The answer is no, not enough, because we are lacking a number of components. If we hadn't increased the level of inventory, the situation would be even worse for distributors. I don't believe that it would have been a smart decision on the Legrand side. Now, our level of inventory to sales stood at more than 19%. I think it was 19.4% at the end of September 2022. I tell you what I told you last quarter, we don't believe that it is a sustainable level. We don't intend to be at 19% or 20% forever. Fortunately, with the progressive easing of the supply chain situation in plastics, in metals, and hopefully soon in electronic components, we have less of a need to have this kind of level of inventory, and we will progressively come back closer to historical level. It may take a couple of quarters, but we'll do it. Does it answer your question, Gael, or do you want me to be more precise? Yes. Thanks very much. Just very quickly. I understand that the comparison with ABB, Schneider and a few others is not perfect. That's the reason I would be interested if you could quantify the difference in the organic growth rate between non-resi and resi this quarter. Well, we don't have this kind of number. Again, because even between resi and non-resi, some of the products are the same. We can give you a flavor of what we've been trying to do. Well, take, for example, the U.S. resi is in value up low single-digit%, which means that it is down significantly in volume. Again, it's not specific to all. Look at what is happening in the consumer goods, you'll see the same phenomenon. Data center is up despite it has a significant base for comparison. Non-residential, excluding data center, it's up between 10% and 20%. Mid-teens%, if I may say. Well, this is the kind of pattern you see in the U.S. When it comes to Europe, it's even more difficult to evaluate. The DIY related sales in Europe are down significantly down in volume, which again is not a big surprise given the trend experienced when we exited the lockdown. Energy efficiency product, as I said, it's significantly going faster than the average for the group. The other non-resi product, it's about at the same pace or so, or slightly above the European average. This is kind of a directional indication I can give you. I cannot be more specific than that because those are not numbers we are tracking with the same accuracy because in our business model it's very complicated to do so than for example sales by country or sales by region. No, no. Thanks very much. That's very helpful. Thank you. The next question comes from the line of Alexander Virgo from Bank of America. Please go ahead. Thanks very much. Good morning, gentlemen. I wondered if I could clarify something on price, and then ask a question on margins. If I just clarify on price, if you did 11%, slightly over 11% in Q3, your Q4 last year was about 5%-6%. 6%, I think Q1 was 8%. Mechanically, I would've thought carryover is 5% and 3%. I'm just wondering where you get the 10%, or can you help us get to the 10%? Second question on margins. If I look at the last three quarters or so on your raw material inflation, I think you've gone 18%, 16%, 11%, and pricing has come up to 11%. I'm just wondering why we haven't seen better margins, notwithstanding your comments about restructuring costs, in Q3. Thank you. All right. Well, okay. Alexander, I will start with the second one about the margin. Why not the better margin in Q2, in Q3, sorry. Well, as we said, the main driver is additional restructuring, roughly 30-40 basis points, which is quite meaningful, but which is also quite smart considering the very uncertain environment and the challenging environment in some specific geographies. What are the dynamics in the margin of Q3? It's finally the evolution of sales price, which is quite parallel to the purchase price. It means less pressure on the gross margin. At the same time, with the top line growing at 8.44% versus 10.4 points in nine months, less leverage is on costs. Does that clarify your- Yep. Okay. Thank you. The question? Yep. There was a question about the carryover. Let's remind it. The dynamic last year, Q1 was 1.9%, Q2 was 1.9%, Q3 was 4.3%, then 5.9%, the percent of increase. 2022, 7.8%, 10.4%, 11.3%. If the carryover that we share with you, that Benoît shared with you first, once again, I do insist it's very theoretical. If you remember the number we discussed during our prior earnings release, it was slower than what we did actually in terms of pricing. It's a very theoretical carryover. The point is, if we were to stay at the current level, meaning if pricing in Q4 were to stay at Q3 level, then full year would be around 10%. 10% growth. Understood. That's great. Thank you. Okay. Thank you. Next question comes from the line of Aurelio Calderon from Morgan Stanley. Please go ahead. Hi. Good morning. Thanks for taking my questions. I've got two. I'll take them one at a time. It's a bit of a follow-up on what you mentioned on market share in the U.S. and some peers being more aggressive in terms of pricing than you have been. I wonder if you could quantify the gap that you have in terms of pricing compared to what some peers or some competitors have done in the U.S. and how you think market share dynamics are evolving there? I've not really said that the competitors were more aggressive in terms of pricing. I said that it seems like the pricing dynamics have been pretty different between the business in which Legrand is and business related to industrial automation, robotics, utilities, and so on and so forth. Just looking at what most oil and gas and just looking at the release of my U.S.-listed peers or my listed peers which do have a sizable U.S. arm. Looking at their release, it seems like they have experienced stronger price increases, mostly coming from pieces of business in which we are not. Typically, again, utilities, oil and gas, and so on and so forth. Now, when it comes to my business, the business segment in which I am, so data center, conduits, wiring devices, audio/video, high-end lighting fixtures, smart home, and so on. I don't believe that we are lacking pricing. We are doing the appropriate level of pricing. We're not doing too much pricing. Again, that's the reason why I believe we retained our ability to do a bit more in the U.S. as elsewhere if needed, but we don't have a huge gap versus our competitor. No, my comment was really about the fact that some market segments in which we do not operate, utility, oil and gas, industrial automation, and so on, apparently, we're not specialists of those businesses, but from what we read or experience even stronger pricing increases than the electrical products. Okay. That's helpful. Thank you. My second question is around data centers, and I think you've already mentioned some of the growth rates that you've seen in third quarter. I wonder if you can, one, clarify the growth rates that you've seen, if you could, and two, we've seen some announcements from hyperscalers not cutting down CapEx, but maybe moderating into 2023. What are you hearing from your customers? Could you give us an indication on how 2023 could look like for data centers? Thank you. No, we are not hearing of any slowdown in end demand, neither from hyperscalers nor from other data center specialists. We are hearing from them that they would like us to be better at delivering products. Data center is typically an area where it has been extremely difficult not only for Legrand, but also for other manufacturers to supply products because most of those products are incorporating electronic components, and some of them are coming from China. The underlying demand remains strong, if not very strong in Q3, as in Q2. We have faced significant supply chain issues, and we've not been able to fulfill the orders coming from our customers as much as we wanted to. Hopefully it will support our top line going forward indeed. Great. Thank you. The next question comes from the line of Jonathan Mounsey from BNP Paribas Exane. Please go ahead. Hi. Thank you for letting me ask a couple of questions. Taking the first one, you mentioned that you intend maybe over a couple of quarters to get inventory to sales back to maybe historic levels. I mean, you are at kind of 19% on a trailing twelve-month basis, even a bit above that. I mean, could we just understand what's in that inventory? You've mentioned the higher price of purchases. I'm just wondering how much of the elevation in that ratio is just a function of the fact that the purchase price you've paid is actually more than the pricing on the P&L, so on the sales line so far, and that actually it's not just about higher volume. You mentioned 20% earlier. Is that how much extra volume you have on the balance sheet right now, roughly 20% versus the normal level? As a follow-up question, obviously, I mean, we're probably going into a slowdown. I don't expect volumes to re-accelerate anytime soon. If they don't, how are you gonna actually address those higher inventories? You're not gonna unwind it from an accelerating top line, higher volume demand from customers, so you're gonna probably have to underproduce. When you do this, won't that impact your margins? I mean, consensus is modeling 19.8% for next year, for 2023. If you try to bring that volume number down on the balance sheet to something more akin to where it used to be, sort of 15% of sales, surely you're gonna have to underproduce, and isn't that gonna impact margins and make it very difficult to keep the margin at that 20% level, next year? Okay. Let me take the questions one after the other. Maybe to make sure that again, everybody has the right numbers. Our ratio of inventory to sales, which is above 19%, is more or less 5 points above our historical level. Out of those 5 points, you can break down that between, let's say, +1 point, which is purely mechanical, basically FX and scope, +1 point, which is net inflation. The inflation of raw materials, components, and so on, which is in inventory versus the last 12 months' inflation, and 3 points, which is increase in coverage. That's the reason why I was saying that increase of coverage is about 20 points. Well, yes, you're right. If our level of inventory to sales increase, it means that even though not all of inventory, of course, is coming from finished goods, you also have an inventory of raw materials, components, goods in transit and so on and so forth. When our level of inventory to sales will come down progressively from 19.4%- 15% and 14%, it will weigh on our margin for a couple of 10 days, and maybe Franck will elaborate on that. Now, all that is of course embedded into our midterm guidance and model. This is not the reason why we would deviate from the average 20% we are shooting for. I don't know, Franck, if you want to be more specific on that. Yeah. Perhaps share with you a few numbers to quantify what could be the impact on margin. When you look at our inventory today, first 40% of our inventory are raw material and components, meaning that the 40% there is no question of cost absorption, of added value, which would penalize the margin in the future. By the way, you have probably noticed that our accounts payable on sales were slightly decreasing, meaning that it will progressively flow into the inventory part of raw material. Looking back then, there is 60% of the inventory, which includes some added value, but it's not all fixed cost, not at all. I really think, like Benoît, that by decreasing progressively and smartly our inventory, we will be able to manage that in our margin. Thank you very much. Before we go to the next question, as a reminder, please press star one if you'd like to ask a question. The next question comes from the line of Eric Lemarié from CIC. Please go ahead. Yes, good morning. Thanks for taking my question. I've got two actually. First, you mentioned already your faster expanding segment, but could you be maybe more specific there and share with us the growth generated in the first nine months or maybe in Q3 from this faster expanding segment? And do they still represent 33% of your sales, or is it maybe more today? And a second question regarding this antitrust investigation in France. I appreciate you can't say much, but do you have any idea of the possible timing there? One of your competitors mentioned nothing before mid-2023. Could you confirm that the reason? And did your spirit change a bit with this recent indictment regarding this investigation? Thank you. Okay. As far as the fastest expanding segments are concerned, we'll give you more, meat on the bone or color in February, but clearly it will not be a very good year, 2022, for the so-called faster expanding segments, which have been growing more or less, at the same pace as the rest of the group. The reason being, again, the shortage of electronic components. Most of those products do include electronic components, and we have had a number of product families where we had to stop selling for a few weeks because we were lacking components. It will not be a good year, and we will not see the same over performance, in the fastest expanding segments compared to the rest of the group than the one we saw last year and the previous years. Is it a concern? No. Very briefly, no, it's not, because we don't believe that it had any significant impact on our market shares. We believe that our competitors are facing the same electronic component shortage issue. All the mega trends we've been commenting for a couple of quarters now actually are accelerating. You know, I was mentioning that energy efficiency related products have grown 10 points faster than the average of Europe over the past two years. We expect this trend to continue, and we have product families such as, despite the electronic component shortage, EV charging stations, connected thermostat, electrical valves, high efficiency transformers, high efficiency UPS, and a few others which have been growing very significantly. Even though it's a short-term concern, because of course, we would have loved to have the electrical components, and we would have loved to deliver more growth than what we did. It is not a concern mid-term, because we believe we have the right positioning, and we should be able just to come back to a faster trend compared to the traditional infrastructure-related products. Well, when it comes to the French competition topic, we have issued a couple of press releases. The last one on October 20, where we confirmed that one of our French entity was indicted and where we were ordered to provide security for an amount of EUR 80.5 million. We made it clear, I think the press release that, we will challenge and we are challenging this process and that, we are strongly convinced that our trade policy is fully compliant with applicable law, and we intend to demonstrate it clearly to the relevant authorities. As far as timing is concerned, I have no reason to believe that there would be a different timing compared to my peers. Indeed, it's highly unlikely that anything would come out from that before late 2022 or even 2024. This is a kind of process which can last years and years and years. I wouldn't like to make it such a big deal. This is part of corporate policy or corporate life let's say. When you are leading a company such as Legrand you always have, you know, complaints or investigations on IP, on competition, on taxes, on quality, on HR, a number of topics. This is our role as managers to deal with that. As far as the timing is concerned, I believe that you shouldn't have any news on that before a couple of quarters, if not a couple of years. Thank you. There are no further questions in the queue, so I will hand the call back to your host for some closing remarks. Well, thank you very much for your time. Renaud, Marc, [Sammy Bensaïd], of course, Franck and myself remain at your disposal if you want to have more color on the results. Thank you very much for your time. Thank you for joining today's call. You may now disconnect your lines.