2007 reference document - Legrand

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THE GROUP’S BUSINESS
Legrand’s business
Legrand’s market also offers medium-term natural growth
potential linked to increasing interest in high added-value
products, with a focus on both functionality (new features and
ease of use) and aesthetic features in an approach referred to as
“trading up”. For example, the successful commercial release of
Céliane in France and its high-end product line Axolute in Italy,
combining wiring devices, access control and home automation,
had a very positive effect on Legrand’s sales. By way of illustration,
the “trading up” effect contributed to 23% of revenue growth in
France and Italy in 2007.
In addition, Legrand sees strong growth potential in integrated
systems and high added-value products in the United States
(home automation systems, energy saving systems and highend
lighting control), where the combined revenues of OnQ,
specialized in structured cables for housing, The Watt Stopper, the
No. 1 player in high-effi ciency lighting control in the commercial
sector, and Vantage, No. 2 in high-end residential lighting control,
increased by 22% in 2007 (at constant exchange rates).
Emerging markets
Moreover, in emerging markets such as Brazil, China, India,
Mexico and Russia, the constant development of electrical
infrastructure and data networks creates demand for both lowand
high-end products. Notably, in E astern China, the market
for high-end products represents approximately 30% of the total
market. Finally, as nearly one-fourth of the world’s population
does not yet have access to electricity, Legrand believes that
the market offers significant long-term growth potential as
such access is provided. In 2007, net sales in emerging markets
represented nearly 25% of the Group’s total revenues.
Energy effi ciencys
Electricity now accounts for 70% of energy consumption in
buildings (source: 2007 Building Energy Data Book ). This is
associated with growing demand on all Legrand’s markets for
products and systems reducing energy consumption, together
with related environmental impact, and improving the quality
of electricity.
Legrand does so with a comprehensive range of solutions for
home automation and the control of lighting, electric shutters, hot
water supply, and equipment in standby mode. Legrand solutions
also enable customers to optimize the quality of electric current
through source inversion, compensation of reactive energy,
energy-effi cient transformation, and surge protection.
Sales of energy-effi cient solutions accounted for approximately
5% of Legrand’s consolidated total in 2007, showing a year-onyear
rise of 27% at constant scope of consolidation and exchange
rates.
REFERENCE DOCUMENT 2007 - legrand
< Contents >
■ 5.1.2.4 - FRAGMENTED MARKET
The accessible market remains highly fragmented, as Legrand
estimates that approximately 50% of worldwide net sales are
made by often local, small- and medium-sized companies who
typically enjoy only marginal worldwide market share. With
an estimated accessible market share on the order of 7% in
2007, Legrand believes it is a leader in, and a benchmark for,
the market. Market fragmentation is due in part to differences
between countries’ applicable technical standards and norms
and also to the various customs of the end-users in each
country. Historically, initiatives to harmonize standards in
order to make products able to be used worldwide have failed,
even within the European Union, notably due to the signifi cant
investment necessary to replace existing electrical networks for
only limited added-value. Consequently, a signifi cant portion of
the market for products and systems for low-voltage electrical
installations and data networks remains traditionally in the hands
of local, modestly sized manufacturers. The acquisition of these
manufacturers may offer growth opportunities.
■ 5.1.2.5 - FAVORABLE PRICE TRENDS
The market is globally characterized by a relative lack of
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commoditization. Electrical professionals, specifi ers and endusers
pay special attention to products’ technical characteristics,
without necessarily considering price as the determining factor.
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Therefore, as an example, electrical professionals tend to favor
products that can be effi ciently used (quality, reliability, ease and
speed of installation, compatibility with related products, long-
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term product availability, commercial and technical assistance,
safety) and that offer characteristics demanded by end-users
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(functionality, aesthetics, ease of use).
According to a survey conducted by Sonepar, a French electrical
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equipment distributor, in terms of electrical installers’ priorities,
price was ranked seventh behind quality, delivery time, availability,
on-time response to requirements, product documentation and
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ease of installation.
Whereas certain industries can be characterized by falling prices
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for products, Legrand’s accessible market shows a different
overall trend. The production and distribution value chain for
Legrand’s products benefits from an established ability to
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increase sales prices regularly over the long term. Moreover,
end-user sensitivity to product prices is mitigated by the fact
that electrical installations (excluding cables and cost of labor)
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generally represent around 5% of the total cost of an average new
commercial or residential construction project. Between 1992
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and 2007, Legrand’s selling prices have increased on average by
1.7% per year globally in its markets. Moreover, Legrand has a
degree of control over its prices, due to its strong market position
CT
and its ability to develop and offer innovative products.
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