LEGRAND_REGISTRATION_DOCUMENT_2017

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MANAGEMENTREPORTONTHECONSOLIDATEDFINANCIALSTATEMENTSFORTHEFINANCIALYEARENDEDDECEMBER31,2017

Operating income

5.3 – OPERATING INCOME

5.3.1 – Introduction

The Group reports its finances and operating results on the basis of five geographic zones corresponding to the region of origin of sales. Information relating to operating results and finances for each of these five geographic zones is presented for 2016 and 2017 in note 2.2 to the consolidated financial statements shown in chapter 8 of this Registration Document. Each zone represents either a single country or the consolidated results of a number of countries. These five geographic zones are: W France; W Italy; W Rest of Europe mainly including Benelux, Germany, Iberia (including Spain and Portugal), Poland, Russia, Turkey and the UK; W North and Central America including Canada, Mexico, the United States and Central American countries; and 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; 5.3.2 – Main factors affecting Group results

W Rest of the world, mainly including Australia, China, India, Saudi Arabia and South America (including particularly Brazil, Chile and Colombia). Since local market characteristics are the determining factor in Legrand’s performance and net sales by zone, consolidated financial information for multi-country zones does not reflect the financial performance of each national market. Furthermore, for most regions, products may be manufactured and sold locally, or instead be imported from or exported to another Group’s entity. These factors may distort comparisons of results in various geographic zones. Consequently, with the exception of information and data relating to net sales, the discussion of results hereafter focuses primarily on consolidated results, with reference to national markets where these have a material impact on consolidated accounts.

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 following table presents a breakdown by geographic zone of the Company’s consolidated net sales (by destination: market where customer are based) for the years ended December 31, 2017 and 2016. Sales “by destination” mean all sales by the Group to third parties in a given geographic market.

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REGISTRATION DOCUMENT 2017 - LEGRAND