LEGRAND / 2018 Registration document

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MANAGEMENT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2018

OPERATING INCOME

5.3.2 – Main factors affecting Group results

R 5.3.2.1 NET SALES Markets in the countries and regions where Legrand operates have their own features, essentially as a result of local economic conditions and lifestyles, which affect the scale of renovation and new construction of homes, stores and office buildings, as well as the level of corporate investment in industrial facilities. Other factors include how buildings are used, in particular linked to new technologies. Changes in consolidated net sales principally reflect the following factors: W changes in sales volume (i.e., the number of products sold in each period) due to changes in product demand and business levels in all markets; W product mix;

W changes in sales prices (including discounts and rebates, cash discounts for prompt payment, general price changes relating to local market conditions, and specific price changes, such as those designed to pass on inflation in all costs); W fluctuations in exchange rates between the euro and the different billing currencies, which affect the level of consolidated net sales after conversion; and W changes in the subsidiaries consolidated by Legrand, mainly as a result of acquisitions or disposals (which are referred to as “changes in the scope of consolidation”). The table below presents a breakdown by geographic zone of the Company’s consolidated net sales (by destination: market where customers are based) for the years ended December 31, 2018 and 2017. Sales “by destination” means all sales by the Group to third parties in a given geographic market.

12 months ended

December 31, 2018

December 31, 2017

5

€

%

€

%

(in € million, except %)

Net sales by destination France

912.6

15.2

900.9

16.3

Italy

545.8

9.1

513.5

9.3

Rest of Europe

1,007.9

16.8

936.7

17.0

North and Central America

2,175.1

36.3

1,820.0

33.0

Rest of the World

1,355.8

22.6

1,349.7

24.4

TOTAL

5,997.2

100.0

5,520.8

100.0

R 5.3.2.2 DISCUSSION AND ANALYSIS OF CHANGES IN NET SALES

of the change in consolidated net sales at constant scope of consolidation takes into account sales of the acquired company, based on sales information of the acquired company prepared in a manner consistent with accounting policies, for the portion of the prior period equal to the portion of the current period during which Legrand actually consolidated the acquired entity. 5.3.2.2.2 Companies acquired during a prior period Where companies were acquired during the prior period, net sales of the acquired company are reflected in the consolidated statement of income for the entirety of the current period but only for the portion of the prior period from the date of first consolidation of such company. The calculation of the change in consolidated net sales at constant scope of consolidation takes into account the sales of the acquired company, based on sales data for the acquired company prepared in a manner consistent with accounting policies, for the portion of the previous year during which it was not consolidated.

In the discussion below, changes in net sales are analyzed by distinguishing variations due to changes in the scope of consolidation, organic growth (changes in net sales “using constant scope of consolidation and exchange rates”), and the impact of exchange-rate variations between the euro and other currencies. The Company believes that this measure is a useful tool for analyzing changes and trends in its historical consolidated net sales over different periods. Measures of organic growth are computed by making the following adjustments. 5.3.2.2.1 Companies acquired during the current period Where companies are acquired during the current period, the net sales of the acquired company are reflected in the consolidated statement of income only for the portion of the current period from the date of first consolidation of such company. The calculation

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LEGRAND

REGISTRATION DOCUMENT 2018