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Good morning, and thank you for participating in this Rexel H1 call, especially as I know it is a busy day for all of you. I'm here today with Laurent Delabarre, our CFO.
As you have seen in our press release, our results in H1 were a historical high in all dimensions. And I think it has to do with 3 factors. First of all, a good market, which continues to be supportive and in which the electrification trends are visible.
Secondly, our transformation over the last few years, which clearly bear fruits. As I said, during our Capital Market Day in June, Rexel has become over the last few years, more digital, more agile, more robust and more resilient. And thirdly, the Power Up 2025 plan that we have just announced in June and that we are starting to implement actively and that is providing an additional boost. We have, for example, actively pushed our portfolio optimization in the second quarter with 2 acquisitions and divestments after the very successful Mayer acquisition from last year.
So very happy with both our set of figures and with the way they were obtained. But let us go into more details. As I said, Rexel posted an outstanding performance in the first half, building on the momentum of previous quarters to deliver record numbers. And I will contextualize this performance on the next slide, but let me begin on Slide 3 by 4 KPIs that sum up in a nutshell, the robustness of our activity in the first half.
First, our same-day sales grew by 13.9% in the half with strong 12% growth in the second quarter. Second, we achieved a record level of adjusted EBITDA margin for our first half at 7.7%, circa 230 basis points above the H1 2021 level. Third, our free cash flow was also a record for the period at EUR 232 million, which is exactly double the amount we posted in the same period last year. And last but not least, our first half indebtedness ratio was also at a historically low level of 1.26x EBITDA after leases, down from 1.79x 1 year ago.
Slide 4 details the context and drivers of these excellent H1 numbers. First of all, we continued to see robust activity in Q2 with double-digit growth both in Europe and in North America. What is particularly noteworthy is the acceleration of volume in North America as well as the increase across the board of the selling price for noncable products.
On this particular topic of price, I would underline that in Q2, we fully passed through price increases from suppliers on noncable products, and we anticipate further price increases in H2. At the same time, we continue to have -- to show great agility to help our customers deal with product and labor shortages in the first half, notably on product that embed electronic components. We continue to juggle on a day-to-day basis to make the best use of our inventory and our supplier relationships to deliver the best possible service to our customers.
And these factors are really critical to me if we do a good job managing supply chain constraints and passing through price, then the value added of a professional distributor becomes very clear. I mentioned our record high EBITDA margin on the previous slide. It benefited from approximately 86 bps of positive one-offs linked to inventory price inflation on noncable products. But it also reflects the continuing positive effects from our transformation over the past few years that makes us both more efficient and more resilient throughout the cycle.
Looking forward, I'd like to mention a couple of key points. First of all, on the back of our strong H1 performance and supported by record high backlog, an easier base effect in Europe in the second half and a return to growth in China, we are confident in reaching the upgraded 2022 full year guidance that we provided to you on June 16. And second, in line with our stated strategy of an active M&A agenda and continued portfolio management, we are announcing today 2 acquisitions, 1 in Belgium and 1 in the U.S. 'and 2 disposals of our activities in Spain and Portugal. I will detail this a little bit more later on, but I would like to stress that these moves will make a positive contribution to our sales and profitability as soon as they are closed.
With that, let me hand over to Laurent to detail our financials.
Thank you, Guillaume, and good morning to all of you. On Slide 6, we take a look at our overall Q2 '22 sales performance. Our sales of EUR 4.7 billion were up 26.3% on a reported basis and 12% on a same-day basis. The calendar effect is close to 0 in Q2 '22 after plus 3.1% in Q1 at group level, mainly due to North America and Europe to a lesser extent. This effect will reverse in H2 '22.
This reported sales were boosted by a favorable scope effect of 7.9%, driven by the acquisition of Mayer in the U.S. and also by a positive impact from foreign exchange of 4.7%, mainly from the appreciation of the U.S. and Canadian dollars. We now anticipate the full year '22 scope impact to be close to 7% and the full year currency impact to be close to 5%, assuming spot rates remain unchanged.
On Slide 7, we see that Q2 '22 is the sixth consecutive quarter of sales growth for Rexel post-COVID confirming our capability to fully capture the rebound. The same-day sales growth of 12% in the quarter can be split between a volume effect of plus 0.6% equivalent to a plus 1.7%, excluding the exceptional COVID situation in China that is now completely over. Noncable price effect of plus 9.2%, a cable price effect of plus 2.2%.
Moving to Slide 8 that focus specifically on volumes, which contribute to plus 0.6% to the growth in Q2 '22 with differing performance by geography. Indeed, North America further recovered with volumes up 5.1%, accelerating from 4.5% in Q1 '22. This strong performance offset the slightly negative volumes in Europe, down 0.5% due to a stronger base effect in Q2 last year and negative volume in APAC largely from the lockdown in China.
As already said, [ restated ] the temporary COVID situation in China, overall volume stood at plus 1.7% in the quarter. Now looking at the bottom of the slide, which shows the evolution of volumes at group level and by geography since 2018 on an indexed basis. We clearly see that H1 '21 is the highest point reached last year as it corresponds to the reopening of the economy post-COVID with a very strong catch up at that time before seeing normalization of the trend in H2 '21. Therefore, we anticipate the base effect to be easier in H2 '22. On the graph, we also see that at group level, volumes are above the 2018 level, largely thanks to Europe, 7% above 2018 with a strong post pandemic rebound, while North America remains below 2018 levels.
Moving to pricing on Slide 9. Its contribution to same-day sales growth was 11.4%, of which 9.2% from noncable products and 2.2% from cable products. Specifically on noncable products, the 9.2% effect is similar to Q1 '22. And it is interesting to note that the expected lower carryover effect has been fully offset by additional price increases that occurred during Q2. For H2, while the carryover effect is expected to decrease to 0 in Q4, we anticipate additional price increases.
Specifically on cable products, the 2.2% contribution in the quarter is lower than the 4.1% in Q1 '22 as copper prices increased in Q2 last year. For H2, assuming copper price remain at the current spot rates, we anticipate the contribution to turn negative as copper price dropped to USD 7,500 per ton versus circa USD 9,500 per ton in H2 '21.
Slide 10 focuses on the contribution of our 3 geographies to the group plus 12% same-day sales growth. I'll have all the detail in the press release on a country-by-country basis. So I will just highlight the key evolutions of the quarter. In Europe, our Q2 '22 is up 10.4% versus Q2 '21 as a result of the combination of further price increases on noncable products and a slightly negative volume impact of minus 0.5%. Growth was driven by strong momentum in Germany and Benelux, where we gained shares coupled with faster growth in Europe from green-related products such as PV in the context of growing uncertainties regarding energy availability. This more than offset the tapering of growth in some countries like France, where in France, we continue to outperform the market.
In North America, we posted same-day sales growth of 17.2% in the quarter with sales growth in both the U.S. and Canada. More specifically, for the U.S., the 3 end markets grew at similar pace by region. The country benefited from strong overall momentum in Mountain Plains and Gulf Central, notably driven by oil and gas as well as robust growth in commercial. In Canada, the good performance was driven by industrial and markets, more specifically oil and gas and mining activities.
Finally, backlogs have improved significantly in both countries. In Asia Pacific, sales were down 2.6% in Q2 '22, largely from the lockdown in China in April and May, driving a minus 10.9% same-day sales evolution in the country. The Pacific on the other side is positive, growing at mid-single-digit pace, largely driven by commercial activities.
On Slide 11, you see that we continue to have a record level of backlog, which bodes well for the coming quarters. Similarly to previous quarters, -- this is due to several factors such as strong underlying demand as well as delayed in project because of labor and product scarcity that disrupted the activity. Let me illustrate this by our backlogs in the U.S., Canada, France and China that you see on the graph.
As you know, while backlogs represent a material part of the North American and Chinese businesses, representing around 3 to 5 months of activities, they are much smaller in France, let's say, around half a month of business. But this illustrates the positive trend in those countries and give us some visibility for part of our business in the coming quarters.
On Slide 12, we show you the building blocks that led to a record adjusted EBITDA margin of 7.7%, up 228 basis points. The progression can be explained by a positive operating leverage impact of plus 190 basis points, largely from our capacity to pass through price increase. A net positive nonrecurring effect of circa 86 basis points as a result of, on one hand, a positive one-off gross margin gain on noncable inventory price inflation for 109 basis points. On the other hand, a negative 23 basis point one-off effect from higher performance linked to bonus, notably for our sales force in the context of better-than-anticipated activity of our [ CECL ] initial budget. And an OpEx inflation impact of minus 60 basis points, notably due to wage inflation and transportation costs corresponding to an OpEx increase of plus 3.5%, of which plus 2.4% in salary and benefits and plus 7% in transportation, building and utilities and occupancy costs.
On Slide 13, you see how each geography contributed to our record profitability. Our gross margin in all regions benefited from our ability to pass through price increases to our customers. Moving to adjusted EBITDA margin, profitability improved in all geographies, even restated from the positive one-off effects. Europe, adjusted EBITA margin stood at 8.4%, up 149 basis points, including circa 90 basis points of nonrecurring items, a robust performance in the context of lower volume growth as we have seen and stronger selling price increases that helped offset OpEx inflation, notably on salary and transportation costs.
North America adjusted EBITDA margin stood at plus 8.5%, up 297 basis points, including circa 95 basis points of nonrecurring items, largely driven by the same factors as in Europe. This strong performance was also delivered, thanks to robust activity and synergies from Mayer. Asia Pac's adjusted EBITDA margin stood at plus 1.4%, up 57 basis points, largely thanks to the positive progression in the Pacific and the favorable country mix as China sales were down, while other countries were growing.
On Slide 14, we look at the bottom line part of our P&L. Let's start with our adjusted EBITA of EUR 704 million, up 63% on a comparable base. Reported EBITDA stood at EUR 709 million, including a positive nonrecurring impact of EUR 5 million from copper price compared to EUR 44 million in H1 '21 as copper price started to rise in Q2 '21. Other income and expense amount to EUR 19 million, including restructuring for EUR 2.4 million as well as termination costs for our Russian activities, where we no longer have presence yet and the impairment of IT development costs.
Moving to financial expenses. They stood at EUR 52 million versus EUR 60 million restated from the one-offs related to the refinancing and interest on [ readability ]. Our financial costs decreased from EUR 33.7 million to EUR 30.1 million, reflecting the good work done on the balance sheet over the past years and the sustainable bonds refinancing completed in 2021, which offset the increased interest rate on the receivable financing.
Going forward, we anticipate financial expense, excluding one-off and interest lease liabilities of circa EUR 65 million in '22 and EUR 80 million in '23 in the context of rising interest rates, assuming current interest rate conditions remain unchanged. Our income tax rate stood at 27.2% versus 27.9% in H1 '21, down 70 basis points, notably thanks to lower tax rates in France. For 2022 onwards, we confirm our tax rate estimated of below 30%.
As a result, net income was EUR 460 million versus EUR 271 million, and our recurring net income stood at EUR 471 million, up 95% and reaching all-time high level for half year. We generated record cash flow before interest and tax, reaching EUR 232 million. This reflects the robust operating results, which more than offset the cash outflow from working capital in the context of disrupted supply chain and the cash outflow of the 2021 bonuses. Free cash flow after interest and tax reached EUR 46 million after paying EUR 24 million in interest and EUR 161 million in income tax, notably from higher performance in H1 2022.
Let me just remind you that the income tax benefited in H1 '21 from cash savings due to the last utilization of the remaining French tax losses carry forward. CapEx stood at EUR 55 million, representing 0.6% of sales, including 50% for IT and digital, a low point, mainly due to the phasing of projects, and we confirm our ambition to be around 0.9% of sales of other cycles. In H1 '22, we also paid EUR 230 million in dividends related to 2021 results or EUR 0.75 per share.
Let me add, due to the appreciation of the USD and euro, our net debt increased by EUR 84 million in the first half. All this leads to a net debt level post minor acquisition and dividend payments, slightly higher than last year at EUR 1.8 billion. Our indebtedness ratio stood at 1.26x and reached an all-time high low. If the [ 4 ] portfolio management transaction announced has been finalized in H1 '22, the indebtedness ratio would have been 1.31x.
Let me turn on Slide 16 to our balance sheet and liquidity picture, which shows that we have no significant short-term repayment scheduled. Let me start by saying that after the Moody's upgrade to positive outlook issued in May, Standard & Poor's upgraded in July directing of our 2028 sustainable linked bonds by 2 notches and the issuer rating to BB+, considering the group's deep transformation, the recent results and the midterm ambition shared during our CMD in mid-June.
As of June 30, we have EUR 1.1 billion of liquidity, including EUR 850 million in [indiscernible] facilities on our senior credit agreement. Overall, our active financial management over the recent years and more specifically, the 2 refinancing completed in 2021 is reflected in the very low average effective interest rates on gross debt, down 46 basis points year-on-year to 2.01% in the context of rising interest rates.
Let me now hand back to Guillaume.
Thank you very much, Laurent. As you know, we had the pleasure of presenting to you last month in Zurich, our new strategic plan, Power Up 2025, and this plan will be instrumental in taking Rexel to the next level. We have not wasted time and have started implementation with a few very tangible results, and I would like to update you on that.
On Slide 18, I wanted to remind you what the Power Up 2025 plan is about, but also why it is important in today's environment. Power Up 2025 is based on 2 main pillars. The first pillar is about further optimization of Rexel's core model. And the second pillar is about the development of a leadership position on topics shaping the future of the industry. Those 2 pillars complement each other, and both contribute to our main objectives, midterm growth, of course, but also short-term profitability and resilience. It means that whatever the time horizon and whatever the economic environment, working on those topics makes perfect sense.
The first pillar is mainly driven by operational excellence on our fundamentals. For example, digital, supply chain excellence or productivity. And as you see on the slide, working on those fundamentals may be a moderate driver of growth. But on the other hand, it contributes strongly to improved profitability and resilience. This pillar is our first and immediate priority in all countries. In the second pillar, we developed leadership positions on topics such as energy transition and electrification solutions, advanced services or the use of data. This pillar is more growth-driven, but it will also boost profitability and further enhance our resilience as the macro electrification trends tend to be less dependent on the short-term variations of the economy.
One very good example of that is what we are seeing right now in Western Europe, which is detailed on Slide 19. As you know, unfortunately, the war in Ukraine is dragging on with a terrible human toll that we all deplore. While we all hope for a speedy resolution, the war has also had an important silver lining in that it is accelerating investments in energy savings projects and alternative energy sources as a result of European and national initiatives, especially in those countries which are more dependent on Russian gas.
And these efforts have included, for example, an acceleration in the deployment of solar energy panels and Rexel is playing an active role in this. PV sales have grown by 109% year-to-date in Europe this year versus last year, and we have launched a number of strategic initiatives to support this growth such as a dedicated distribution center in Germany, offering training to customers, the creation of expertise centers or support to activate further public incentives.
Other categories could also benefit from these efforts, such as, for example, energy monitoring and piloting for buildings, heat pumps, and EV charging stations and ecosystems. This is really not what we would have liked to see, but it also illustrates what I was seeing as a CMD in June. Electrification trends will become increasingly real and short term because they are at the convergence of many topics, 2 very important ones being global warming and geopolitics.
Another key aspect of our strategy is the continued digitalization of our business, which is a trigger for more productivity and more profitability. And Slide 20 shows you that we reached EUR 1.2 billion in sales in Q2, up more than 24% versus the same quarter last year. Digital thus represents 1/4 of our sales in Q2, up 244 basis points. Europe continues to lead the way with digital sales representing nearly 35% of total sales, growing by 109 basis points. France continued its progression with digital up 184 basis points to 28.7% of sales.
But as you see, North America, which was something of a late adopter is catching up. Digital sales grew by 467 basis points in Q2 and rose to 16.7% of total sales. This is the result of the continuing digital journey of our U.S. operations and processes, notably at Mayer.
In Asia Pacific, the amount of digital sales remains low at 4.8% of sales. But as you know, this largely reflects our business mix in the regions, which is heavily skewed towards industrial automation. We continue to roll out digital tools and are accelerating on the web shop search engine and e-mail to EDI initiatives while also scaling up our AI solutions, for instance, on assortment optimization in the U.S. and AI pricing in Switzerland. M&A is also a key part of our strategy.
And on Slide 21, we announced 4 transactions, which are very representative of what we want to achieve through active portfolio management, which is to concentrate our energy on our strengths. This means acquisitions like Mayer last year, which, by the way, is doing very well, are the 2 that we are announcing today, but also divestments when it makes sense. We closed on July 4, the acquisition of Trilec, a Belgian family-owned electrical distributor operating mostly in Flanders with 15 branches, 172 employees and a semi automated distribution center.
Trilec is the #3 player in Belgium with sales of EUR 80 million in 2021 and its strong complementarity with our business there allows us to project high level of targeted synergies. And on July 7, Rexel USA signed a definitive agreement to acquire Horizon Solutions headquartered in Rochester, New York with 10 branches and 219 employees. The company is an industrial automation players that generated 2021 sales of USD 170 million.
It further strengthens Rexel's Industrial Automation business in the Northeast. The transaction is projected to be accretive to Rexel's earnings per share in year 1 and value creating in year 2, fully in line with the group's commitment notably, thanks to the synergies. And this transaction is expected to close in Q3 2022. At the same time, we are disposing of our activities in 2 countries that we consider noncore, Spain and Portugal, and we have signed yesterday the divestment to Sonepar of these businesses, which had combined 2021 sales of EUR 170 million and were dilutive to profitability. We see better opportunities for capital allocation elsewhere.
This transaction is subject to approval by the Spanish Competition Authority and is expected to close by October. All in, the combined M&A operations will contribute positively to our sales, earnings and return on capital employed in year 1. They will add combined circa EUR 75 million in annual sales on a net basis and be accretive to adjusted EBITDA margin. So overall, outstanding strategic and financial moves.
Looking a little bit more long term, ESG is a key focus of ours. And as I said at the CMD, we can do more and we will do more. And I'm happy to report on Slide 22, a first important step in this direction as SBTI has recently validated our targets to be a net 0 company by 2050. That makes us the only electrical distributor to have its net 0 standard targets validated by SBTI.
This recognizes the upgraded 2030 target that we presented at our Capital Market Day and which constitutes a key milestone in our journey. We intend to reduce CO2 emission by 60% in absolute terms on Scopes 1 and 2 by 2030 by optimizing transportation and building efficiency and switching to clean energy in our own operation. And we will reduce CO2 emission by 45% in value on Scope 3 by 2030 by forming partnership with suppliers and influencing and helping customers to move to energy-efficient solutions. We believe that we are uniquely placed in the value chain to have a real impact on the use of products we sell, which represents the biggest part of our CO2 footprint.
And finally, to finish on this Power Up 2025 implementation, Slide 23 is a good demonstration of how this plan, building blocks all come together in the case of a particular country, in this case, France. During the month of June, we were very pleased to host our traditional Rexel Expo event in Paris for the first time since the outbreak of the pandemic. This fair brought together 200 suppliers and 22,000 visitors over 5 days and was a real window into the future of electrical distribution, an opportunity for us to present a number of innovations and aspects of our offers that are clearly aligned with our strategy, be it in energy efficiency, electric mobility, smart buildings or connected solutions.
I could cite dozens of examples and a few of them are listed on this slide that we can talk about in the Q&A, if you wish to. But beyond individual examples, what is important is what all those topics have in common. They demonstrate how the role of electrical material distributors will expand in many directions in the future, securing a more and more central spot in the value chain and creating differentiation to the advantage of advanced players like us.
During this week in France, it was really of use for external observers for our suppliers and also for our customers who were quite enthusiastic about it.
Let me now conclude with our outlook and confirmation of our full year guidance. So how do we see things in the coming months? Obviously, there are a few uncertainties, but our current business trends as well as our backlog in many countries give us some visibility for the rest of the year, which should be good.
In North America, we continue to see solid activity ahead supported, as Laurent mentioned, by a record high backlog. In Europe, we cannot rule out a gradual slowdown of growth, but this will be partly offset by the continued positive trends linked to the energy transition and further market share gains. In Asia, a lot depends on the evolution of the COVID situation, but we are tabling on a rebound.
In terms of cost and price, we think that we will continue to operate in an environment marked by high inflation for noncopper-related products with price increases for H2 already announced by suppliers. Now even though we are clearly confident about H2, it doesn't how to prepare for possible more difficult times, and this is what we have done since the end of Q1, focusing in all countries on head count, inventory and receivables, which are what you need to zoom on quite early if you want to be able to react with agility should there be a change in trends. So we are not currently in a situation that calls for a plan B, but plan B is ready. And more importantly, minds are within the company.
Now let me conclude on Slide 26 by talking about guidance. We recently upgraded it in June at our Capital Market Day. One month later, with an excellent H1 in the pocket as well as solid backlog in important countries like the U.S. as well as a perspective of an easier comp basis in Europe and the China rebound versus H1. I can say that I am confident in our ability to deliver this guidance.
We don't underestimate the growing macroeconomic concerns. And as I said, we are prepared, but the current trends are robust and 2022 will be a very good year for Rexel. So as a reminder, we target for 2022 at comparable scope of consolidation and exchange rates, a same-day sales growth of between 7% and 9%, and adjusted EBITDA margin of circa 6.7%, including 50 bps of nonrecurring items and a free cash flow conversion above 60%.
Thank you very much for your attention, and Laurent and I are now happy to take your questions.
[Operator Instructions] The first question is from Martin Wilkie with Citi.
It's Martin from Citi. Just a couple of questions on the outlook. I mean, obviously, you've had a very good second quarter. You obviously raised the guidance a few weeks ago, but it does imply a slowing in the second half. Just trying to understand is there some caution in that? Or how are you seeing things like tendering and projects and clients and things like that as to how you see the volume development in the second half?
Okay. So first of all, yes, we -- since the guidance update in June, we had fairly good news. As you said, we had a very good set of H1 results. And that's the reason why we said in our press release that we are confident about the guidance for 2022. So you could translate that into being a little bit conservative on the conservative side because the trends that we are seeing right now are solid trends, as I mentioned, with a very robust level of backlog in many countries, including the U.S., Canada, France, China, which is boding well for the rest of the year. So the trends very clearly are confirmed, and we are confident about the end of the year. I don't know, Laurent, if you want to elaborate a little bit more on that?
Yes, just to say that the lower end -- well, you can calculate the -- what means H2 with the H1 we have provided to you today. Basically, it's a top line between 0.2% and 4%. And that in the lower part of the guidance, we wanted to be quite resilient. So we had assumed a lower level of copper, and we have taken some prudence on volume in Europe to be on the safe side on the lower part of the guidance.
Look, I think, Martin, the keyword is confident in this guidance. We have felt that in the current -- a, little bit uncertain context and despite the fact that the trends that we are seeing are good 1 month after our recent upgrade, it was not a time to change our guidance for the year, but the keyword is really confident.
Can I have a follow-on on pricing? I mean, obviously, you've had sequentially better pricing in the second quarter. Obviously, some raw materials look to have -- look at peaked. Just to understand how you see your suppliers thinking about pricing and how you're thinking about pricing? Some companies have talked about surcharges, which suggest those could be reverse. But just generally, how you see the pricing development given the raw materials, in some cases, have peaked and come a little bit lower?
Look, I mean, I would have 2 buckets. One is about copper, and one is about the rest, basically. On copper -- I wouldn't bet too much on the copper market. As I said already consistently, the evolution of -- I mean, you have analysis on the copper market. We think that midterm, the gap between supply and demand will be on the direction of a shortage in general for copper, but what the timing is going to be, how it plays out with the Chinese demand, et cetera. I mean there are many people in the market who are more eligible than us on that.
On the noncable part of the business, what I can tell you is that we have several price increases in all categories already announced or preannounced by suppliers for the second part of the year. So clearly, definitely, we see continued inflation there. You have to understand that there is not only the raw materials part for our suppliers. There is also the labor part, which is starting to weigh on their cost pie and also the transportation pie, which is -- and obviously, the energy cost which are weighing on the cost pie, which means that they have an important incentive to increase price. And from what we see from our discussions with them, we are going to continue to have an inflation environment in the second half of the year sequentially.
The next question is from Andre Kukhnin with Credit Suisse.
I'll just go one at a time and I want to first follow up on the demand question where you said that you're seeing robust demand across the board, across the regions. I think there are some wider indicators that point to a bit of a slowdown in residential, at least in North America. So I just wanted to double check on that as well as on any recent developments in Europe whether that kind of electrification energy efficiency drive is overwriting, what's an underlying slowdown for you? Or are you seeing that sort of softness as well?
Look, I mean, I can only comment on the trends that we are seeing in our current figures about the future, first of all, I will start by commenting about the future. I read the newspapers just like you and I see the macroeconomic environment. And that's the reason why I mentioned in my last part is that within the company, we are preparing in terms of controlling costs, in terms of controlling headcount, in terms of making sure that our inventory is in the right shape and that our customer mix is in the right shape. We are preparing to any situation, and we are monitoring very closely the market.
When we look at the trends, it's a little bit difficult to read because there is a comparison basis of last year, first of all, and there is also the backlog effect, which is creating a tailwind in fact, to ourselves. But overall, what we are seeing is an acceleration of volumes in North America in Q2 compared to Q1, it's very clear. So we are on good trends in North America, especially driven by a rebound of some industrial sectors in the U.S., the rebound of the oil and gas, for example, in the U.S. is clearly helping southern regions of the U.S.
And in Europe, we see a sequential slowdown of activity between Q1 and Q2, but in front of a very high comparison basis last year in H1. So overall, you see we are -- that's the reason why we closed those trends quite solid. As far as the future is concerned, it's difficult for me to comment more than that and more than the fact that we are making the company completely ready to any possibility and any trends. But that being said, right now, at present, the business is good.
That's very clear. And yes, I really appreciate the difficulty on coming forward and acknowledging your comments on readiness. My main question I wanted to ask was on inventory levels. I just wanted to really hear your opinion and overview on how do you view the current inventory levels across yourselves and your peers and maybe kind of elsewhere across the supply chain as well. Have you seen any maybe excess stock buildups at customer levels or suppliers in your opinion?
So I don't know exactly what your question is. I mean our inventory level is slightly -- I mean, there is our inventory level. Our inventory level is slightly higher in terms of number of days than it was last year at the same time of the year. It's a mix of several effects, one of them being stranded inventory. The backlog that we are talking about very often, it corresponds to real projects, and which are waiting for one particular part to be shipped and to be shipped to the customer. And this is what we call stranded inventory.
I mean you see that also in other parts of the economy with GM cars and all those kind of things. We have the same effect in our inventory which creates a bump in the inventory. And the second part, when you look at the inventory in a number of days, is that because of the supply shortages, service and ability to deliver to the customers becomes a very differentiating feature. And selectively on some high turn items, we have decided to increase slightly our level of inventory to be able to provide better service to our customers. So we are comfortable with that, but we think that there is a limit also to that. And so we will make sure that we keep that under control for the rest of the year.
As far as the second part of your question, which is, is there more inventory at our suppliers or more inventory at our customers. I think our customers right now, and you see that in the level of backlog, they are asking for products. They really are waiting for products to be able to complete their jobs. And I don't think from this point of view that they are speculating in any way on electrical materials. I have not seen any evidence of that. And I have not physically seen any location where I could see a big pile of cable or a big pile of electrical materials. So I don't think this is the case.
I mean, right now, the whole supply chain is focused on one thing, which is delivering the best service to the end user at the end of the road, we're waiting for the projects to be completed. And as far as suppliers, I cannot comment. I mean many of them are listed, so they would comment on that. But I think from what I understand, they also struggle to make sure that their supply chain is delivering the best service to us and to their other customers. I don't know if it answers your question.
Yes, it does. That's exactly what I'm looking for.
The next question is from Phil Buller with Berenberg.
Can we talk about cable, please? There's still a pretty tight correlation in the share price versus copper pricing, which is a bit of a shame as it feels like a lot of the good stuff you're doing in terms of the underlying gets overlooked by copper prices. And you do break out the cable growth rates. But can you remind us how much of the business is cable, both in terms of sales, but also as a percentage of operating profit? That's ignoring any nonrecurring items, which I think would be pretty helpful so we can assess the business ex-cable. That's the first question.
Yes. Obviously, it depends from the level of copper. But cable is around 17% of our sales -- and the sensitivity we have already given that for around USD 500 per ton of price increase in copper price. The impact on the top line is around 0.8%. Well, and then usually the margin is lower than the average of the group. And then you have variable costs linked to the commission and the bonuses. So at the end, it has an impact of a bit less than 10 basis points on the profitability.
Great. And Martin asked a question on the top line in terms of the guide. I'd like to ask one about the margin expectation. The full year guide of 6.2% underlying if we strip out the 50 basis point one-off. It looks like you're actually baking in a pretty ugly H2 margin given you just did, I guess, 6.8% underlying in H1, if we strip out the 86 basis points. So how should we think about what you're baking into the H2 margin guide, please?
You know Andre -- there is no secret message in the fact that we kept our guidance from June. As I said, the key word is confidence. And as I said also, we upgraded our guidance in June before we knew the full year, the full H1 results. The H1 results were better than expected. But that being said, we decided not to change our guidance because we cannot change it each time we go out and because also there are economic uncertainties, and so we prefer to wait a little bit later in the year to change, if needed, the guidance. But clearly, you're right, the guidance if you do the reverse calculation based on our H1 figures, is conservative, and that's the reason why we added the word confidence.
And just finally, Guillaume, can you just expand a bit on what you're doing from this plan B scenario you're talking about? I'm asking the question because given what you presented at the Capital Markets Day with regards to a need to invest in digital, does that mean that you'd likely choose or need to keep cost high?
No. I think very clear. I mean when you look at our -- I mean, there are things, obviously, on the margin side, which is about selecting the right customers, the more resilient customers. And so there are things which are linked to the sales part of it. On the other hand, if you look at the OpEx part of it, which is a short-term thing on which we would work in case of a more difficult environment. Our OpEx is mostly headcount. There is a little bit of digital, but it's mostly headcount.
In terms of digital, I truly believe that long term, but also midterm and short term, those actions in terms of digital, first of all, require consistency and they are providing results. I mean you know at the Capital Markets Day, we talked about the positive effect on margin of AI initiatives, for example. Digital is also a tool which is able to bring productivity, additional productivity. So we will continue our course on digital. And yes, it requires continuous investment. But that being said, we think it's the right thing to do for the company even from a short-term basis.
So when I'm speaking about plan B, it means basically working on productivity, on headcount, on expenses. And you know when changing the headcount level and the productivity level, it takes time and there is a lag effect. I mean you hire people, you don't replace people. All of that takes a little bit of time to have effects within the company without disturbing too much the commercial part of the business. And so that's what we are doing right now, working specifically on productivity, working specifically also on our inventory level to make sure that we have the right stuff in the right SKUs and not having too much inventory on SKUs, which are not turning enough. So those are the things that we are working on at this stage and which we call plan B. But I can tell you that the mindset of the country CEOs right now is extremely cautious on those 2 aspects.
I guess just to be clear, I was asking the question about headcount as well, really because your predecessors took out a lot ahead during the pandemic. But from your side, there's still a pretty big dial there for you to use should you need it.
No. If I look at prepandemic, I mean, we took lots of people during the pandemic. We reincreased a little bit, but we are still below the level of prepandemic substantially. But we still think that there is ongoing productivity potential in our business because we think that the rise of digital, for example, is giving -- is freeing time from our sales teams doing what we call on productive tasks to focus more on selling and to be able to increase the sales, for example.
And that is something which is bringing a potential for productivity. And also, as I said during the Capital Market Day, some countries are very optimized from a productivity point of view, but some others that are at the beginning of the past of operational improvement. So there is potential for more, absolutely.
The next question is from Akash Gupta with JPMorgan.
My first question is on volume growth in Europe, which was minus 0.5%. And if you can provide a split of that volume growth between green and non-green products. You already said that your solar PV was up like 109% in the first half, but I'm just wondering if you can say how much total green portfolio was up versus non-green portfolio. And maybe was there any supply chain impact that might be prohibiting your level of volume growth that is worth highlighting here?
Yes. I think, yes, we talked about specifically the PV growth. The PV growth is at this stage, a relatively small part of our business. It's single digit in terms of the proportion of ourselves. So not this is not a big and substantial effect, and we hope that it will continue, by the way, because we see continued demand for that. We don't see that as a short-term burst in terms of growth.
In terms of the overall volume in Europe in Q2, what I can say also is that when I look at the comparison basis compared to '2022 to before the pandemic to 2019. We had a relatively high comparison basis, which is becoming more in-year in the second half of the year. So that's really the main reason. I don't know, Laurent, if you want to expand a little bit more?
Yes. I mean volume are slightly down. But when we compare to before the pandemic, we are still above in terms of volume. It's also important to note that Q2 of last year was our highest quarter. It was just the post-COVID, and the base effect will help us in Q3. And we have, to the PV question, the country where it is significantly helping them, but we have a governmental measures that are there, such as Germany, such as the Netherlands. So overall, at group level, it's not a significant impact, but in some country, it has. But so overall, steel volumes that are at a high level, even if they are slightly decreasing.
And my second question is on price increases and this nonrecurring margin impact. So maybe if you can elaborate on what level of price increases we are expecting in Q3 or second half of the year versus what you had in the first half, especially in the noncable portfolio. And when it comes to this margin impact, I mean, you're guiding 50 bps for the full year. We got 86 in the first half, which would imply roughly 15 to 20 bps one-off in the second half. Could there be upside to that 15 to 20 bps number on the back of these price increases that you have in the pipeline?
I will let Laurent do the calculation for the second part of the question. I can tell you -- I mean, there is no precise answer to your first question. I mean the price -- the way the price increases work today is that the suppliers don't give a lot of advanced warning on that. I can tell you directionally that we are seeing important price increases coming our way in noncopper products for the second part of the year. But having a visibility on the total second half is difficult for me. But I don't -- I clearly see no signs of a slowdown sequentially of the price increase in the noncopper part, as I was mentioning in response to a previous question.
Laurent, I don't know if you wnat to comment on 50 bps?
No, but on the one-off, you can do the [ material ]. Obviously, it means that in H2, we have a far less one-off than in H1, again, that is baked in the guidance on which we are confident. And probably, we may have a positive evolution going forward. But we don't want to bet on inflation to drive additional action on the business. That's why we had this quite conservative approach.
And my final one is on M&A pipeline. Maybe if you can talk about are there more opportunities given the macro environment that many of the companies may prepare to put themselves on saying that are then -- so anything you're seeing on M&A pipeline that is different than before?
No. I mean we continue in, first of all, you know that since 1 year, we have started to replenish our pipeline of opportunities rather than being opportunistic before, we are quite systematic in the way we look at opportunities. So we are confident, I mean, as we said during the Capital Market Day that we will continue in between now and 2025 to have a strong contribution of M&A.
The current environment, it's a mixed bag because in the same time, there are many people who are sellers. Their price expectations are relatively high, and we are quite cautious about what we are doing because, I mean, when I say that the price expectations are relatively high, the multiples in the markets are going down a little bit, but people still have in reference the recent results. And we want, when we do acquisitions, to make conservative assumptions of what the future may look like. And so this is the old equation that we need to solve. But there are opportunities of the same kind and the same size as what we have done in H1.
And we'll see where it goes. What we are very happy with what we did in H1. One of them was a very synergetic acquisition in Belgium. Belgium is one of our strong countries in terms of profitability, and we are excited with the opportunity to add more scale and also to add synergies. And the second one is a Rockwell distributor, in the Northeast of the U.S. You know that we are the largest distributor of Rockwell in the U.S. It reinforces this position.
We have experienced very good success in our previous acquisitions of Rockwell distributors. And on top of that, the Northeast and especially this part of the Northeast, which is Upstate New York is an area where we can have synergies with our existing business. So quite exciting that we are able to do those acquisitions.
As I said, I think what is really interesting in the 2 acquisitions and 2 divestments that we have announced in H1 is that it's representative of what we want to do, focus really our business and our strengths, reinforce our strengths and in the places where we think our strengths are not big enough, don't hesitate to divest. And so that's what we are doing.
The next question is from Alexander Virgo with Bank of America.
Just a quick follow-up, I guess, just thinking about the comments that you made and some of your suppliers have been making with respect to the customer dynamics around spending patterns. I think much of the concern in the market at the moment is around the impact of the macro headwinds on spending decisions now despite the obvious benefits of making investments regarding energy efficiency and inflation or what have you. I just wondered if you could give us any color around the changing dynamics of customer engagement given what's going on with, I guess, real time in terms of energy costs and whether you've seen that reflected in any acceleration or deferral.
I guess the right example is to look at what we disclosed on our PV sales. Our PV sales are exactly that. They are representing the fact that customers -- and it's really easy to identify because it's linked to a specific category. They are linked to the fact that customers are concerned both about the energy price and also about the security of supply, which is another concern. I mean it's one thing to act on energy prices. It's another one to be -- to have the risk of having to shut down something or to cut the global supply somewhere.
And so this is really a one good translation of what you are saying. We are also seeing a lot of activity with large customers in terms of CapEx dedicated to energy efficiency very clearly. And you know we are doing the same. We are doing the same. We are revisiting our buildings and looking at where it makes sense to invest marginally to make the buildings more efficient and usually, the payback of monitoring the consumption, monitoring the energy and delivering control solutions is relatively quick.
And if I take an example, in France, we have a service that we are just starting, which is exactly about that, about allowing commercial buildings to -- for a relatively moderate cost to monitor the consumption first of all, and then to control the way they are operating. And so when we see lots of initiatives in many countries about lowering the temperature of buildings, about controlling the air conditioning, et cetera. All of that includes controls, includes electronics, include connected products that we sell and that -- on which we are able not only to sell the products but also solutions and services.
So yes, we are seeing activity in this area. And I think we will continue to see activity in the balance between being afraid of spending and being afraid of CapEx. And on the other side, wanting to invest on the specific topic on energy efficiency. I think on this topic, the balance is clearly in our favor.
The next question is from Eric Lemarie from CIC.
Yes. I got 3 actually. First one, a bit of a follow-up on the last one. Regarding your exposure to energy transition solutions that you mentioned at your last Capital Market Day, so [indiscernible], PV data center and IA. Today, it represents 15% of your sales. But does it include any sales generated by cable because I suppose that cables for electrification, for instance, contribute to energy transition as well, the overall exposure to this transition solution are higher than 50%? That's my first question.
I got a second question on this plan B you mentioned during the call. What could be the financial impact of the implementation of such plan B? So maybe if not in euro, maybe in terms of percentage of revenues concerned by this plan?
And last question, very general. I was wondering today, do you feel immune to the macro cycle currently?
Okay. Thank you very much, Eric, for those 3 questions. On the first one, when we say 15%, I think, we have quite a conservative vision of the products which are involved in energy transition because you're right. In general, there are many products that we sell and which one way or the other, go into energy transition projects, and we don't know so much about. So we really try to be quite strict in the way we measure.
So we measure projects, which are really linked to heat pumps to EV projects that are identified or to PV projects that are identified. If, for example, a plant is electrifying the old process because they switch from, I don't know, a dryer, which was a gas dryer to an electric dryer and to controls, which are more advanced, we are not going to see that. And we are not going to see that. And so I suspect that there is more in our mix of products than the 15% I have mentioned. But we prefer to give you figures, which are backed by internal [indiscernible] which are trackable. So that's for the first question.
The second question about the financial impact. What I would say is that you have to -- I have to reinsist on the fact that plan B is being prepared, but it's not implemented because the thing is the demand for the moment. I mean, right now, if you go to our customers, if you go to our branches, the customers are not concerned about volumes. They are concerned about supply of products right now, and they're concerned about service.
So it's not right now the time to scale down and to reduce the service level at a time when the customer concern is really about that. And so plan B is about, okay, if something happens, what are we going to do? And so it's difficult for me to measure the impact because the impact is both in the effect of the plan B in the something which is going to happen. So it's an offset in a way.
So I cannot give you a precise answer on that. No, really, I mean, what you could look at if you wanted to have examples of how agile and how reactive we can be, look at what we did during the COVID crisis. Not [ allowed ] to say that we are facing a crisis of this magnitude, but just to tell you that we are agile and resilient. And so we are preparing to be the same, whatever the environment in the future. But for the moment, we are not in a position to activate it, and we are just in a position to being cautious and being ready.
And the last topic is about are we immune for the macro. I wouldn't say that. I mean just like any company, we are not immune from the macros environment, very clearly. I mean we have talked during this call about our sensitivity to inflation, about our sensitivity to volume, et cetera. And yes, there are very nice positive trends which are happening and very nice electrification trends.
So it will really depend on the offset of that. But I would say, in case of a big financial shock, yes, we are going to be impacted. But believe us, we are going to be active, agile and resilient. And if I compare the Rexel of today to the Rexel I didn't know, but which is a Rexel of 5 years ago, I would say that we are much more resilient than what we were 5 years ago.
Mr. Texier, that was the last question. I'd like to turn the conference back to you for the closing remarks.
No, thank you very much for being here today. I mean I will repeat what I have said in my introduction, very good set of results, guidance reiterated with confidence and a company which is both benefiting from midterm trends and also ready for any scenario in the future. Thank you very much. Have a good day.