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Investing.com -- Schneider Electric (EPA:SCHN) shares declined Thursday after the French company posted record first-half revenue and adjusted earnings but reported lower margins and a sharp drop in free cash flow.
Revenue rose 6.4% year-over-year to €19.34 billion in the first half of 2025, or 7.9% on an organic basis, according to the company’s financial report published July 31.
Adjusted EBITA increased 3.8% to €3.51 billion, with organic growth of 6.9%. However, the adjusted EBITA margin narrowed to 18.2% from 18.6%, mainly due to lower gross margins.
Free cash flow fell to €474 million from €889 million a year earlier, down 47%. The decline was partly attributed to a €207 million legal fine paid in France and higher working capital buildup. Adjusted for the fine, cash flow dropped 23%.
Gross profit rose to €8.2 billion, up 5.6% organically, while gross margin slipped 90 basis points to 42.4%.
The decline was linked to raw material inflation, tariffs, and an unfavorable product mix. Support function costs increased 4.6% organically to €4.69 billion.
Adjusted net income edged down 1% to €2.23 billion, though it rose 5.8% organically.
Adjusted earnings per share fell to €3.97 from €4.01. Net income attributable to shareholders rose 2% to €1.91 billion.
In Q2, group revenue reached €10.01 billion, up 4.6% reported and 8.3% organically. Energy Management led growth with a 10.5% organic increase, while Industrial Automation declined 1.1%.
North America posted 12.5% organic growth in Q2, supported by strong demand in Data Centers and Buildings. Asia Pacific rose 7.4%, led by India and Australia.
The Rest of the World grew 10.4%, with gains in Saudi Arabia, Egypt, and Chile. Western Europe grew 2.1%, with weakness in the U.K. and softness in residential construction.
Segment-wise, Energy Management contributed €15.89 billion in H1 revenue, growing 10.1% organically.
Adjusted EBITA was €3.41 billion with a margin of 21.5%, down 70 basis points reported.
Industrial Automation revenue declined 1.0% organically to €3.44 billion, with EBITA falling to €471 million and the margin shrinking to 13.7%.
Software (ETR:SOWGn) and services grew 11% organically in Q2. AVEVA’s annualized recurring revenue rose 12% year-over-year, while digital services posted strong growth in cybersecurity and sustainability solutions.
Schneider reaffirmed its 2025 guidance of 10% to 15% organic growth in adjusted EBITA, supported by 7% to 10% revenue growth and margin expansion of 50 to 80 basis points.
The company expects foreign exchange to reduce full-year revenue by €1.25 billion to €1.35 billion and to weigh on margins by about 40 basis points.
The company’s net debt rose to €11.98 billion from €8.15 billion at year-end, due to dividend payments and acquisitions, including a €5.5 billion deal to acquire the remaining 35% stake in its India joint venture.