NKT Q1 2025 presentation: 11% organic growth continues as capacity expansions progress

Introduction & Market Context

NKT Holding reported solid first-quarter 2025 results on May 9, showing continued growth across all business segments despite a more challenging market environment. The Danish cable manufacturer achieved 11% organic revenue growth and increased its operational EBITDA to €81 million, up from €75 million in the same period last year.

The company’s stock (CPH:NKT) responded positively, rising 1.66% to close at 559.5 DKK following the presentation, as investors appeared to appreciate the company’s steady progress on major capacity expansion projects and maintained high-voltage order backlog of €10.7 billion.

"High activity level and progress on ongoing investments across all three business lines," was highlighted as the key message by NKT’s management team, led by President & CEO Claes Westerlind and CFO Line Andrea Fandrup.

As shown in the following comprehensive overview of the quarter’s main results:

Quarterly Performance Highlights

NKT’s three business lines all contributed to the company’s growth in Q1 2025, though with varying performance levels. Total (EPA:TTEF) revenue at standard metal prices reached €630 million, representing 11% organic growth compared to Q1 2024.

The Solutions segment, which focuses on high-voltage power cable systems, delivered the strongest performance with 20% organic growth and operational EBITDA of €57 million, up from €52 million in Q1 2024. This growth was driven by "overall satisfactory execution and continued high activity level" on major projects including Champlain Hudson (NYSE:HUD) Power Express, East Anglia 3, Hornsea 3, SuedLink, and SuedOstLink.

The Applications segment, which produces medium and low-voltage cables, achieved 11% organic growth with revenue of €203 million and operational EBITDA of €18 million. However, the operational EBITDA margin declined by 1.6 percentage points to 8.9%, which management attributed to "the subdued construction-exposed segment, increased competitive environment in selected markets and a slightly different product mix."

The Service & Accessories segment saw a 6% organic revenue decline but more than doubled its operational EBITDA to €13 million from €6 million in Q1 2024, reflecting improved profitability in both business areas.

The following chart illustrates the company’s financial performance in Q1 2025:

Strategic Initiatives

NKT continues to make progress on its major capacity expansion projects, which are central to the company’s long-term growth strategy. The high-voltage factory expansion in Karlskrona, Sweden is proceeding according to plan, with the roof of the extrusion tower finalized during Q1 and ongoing construction of other buildings and installation of machinery.

The company’s new cable-laying vessel, NKT Eleonora, had its keel-laying ceremony in January and is also progressing according to schedule. Additionally, two out of three planned medium-voltage capacity expansions in the Applications segment have been successfully completed, with the remaining expansion in Denmark ongoing according to plan.

In April, NKT signed a long-term supply agreement with Hydro, securing aluminum supply until 2033, which management emphasized "strengthens our European value chain and ensures security of aluminum supply."

The following image provides an update on these major capacity investment projects:

The high-voltage market remains robust, with NKT estimating that the value of projects awarded in its addressable market was around €2 billion in Q1 2025, with the majority based on DC technology. The company maintains its expectation that its average addressable high-voltage market will exceed €10 billion per year between 2024 and 2030.

NKT’s high-voltage order backlog stood at €10.7 billion at the end of Q1 2025, largely unchanged from the end of 2024. This substantial backlog provides good visibility for the coming years, with European Transmission System Operators accounting for more than 85% of orders. By application, interconnector projects represent approximately 55% of the backlog, while offshore wind accounts for around 40%.

Detailed Financial Analysis

NKT’s income statement reflects the company’s continued growth trajectory, with Q1 2025 revenue at standard metal prices reaching €630 million, compared to €534 million in Q1 2024. Operational EBITDA increased to €81 million from €75 million, though the operational EBITDA margin declined slightly to 12.9% from 14.1% in the same period last year.

The company’s net result from continuing operations improved to €57 million, up from €48 million in Q1 2024. The average number of employees increased to 5,904 from 4,978, partly reflecting the acquisition of SolidAl, a Portuguese power cable manufacturer.

The following table provides a detailed view of NKT’s income statement:

Cash flow was negative in Q1 2025, with free cash flow of €-308 million compared to €-16 million in Q1 2024. This was primarily driven by high capital expenditures of €167 million (up from €64 million in Q1 2024) related to the ongoing capacity expansion projects, as well as a €234 million negative change in working capital.

Management explained that the working capital increase from €-1,432 million at year-end 2024 to €-1,184 million was due to "normal phasing between milestone payments and project execution in Solutions, and timing effects following a strong end-2024 position."

Despite the negative cash flow, NKT maintains a strong financial position with net interest-bearing debt of €-953 million (a negative figure indicating a net cash position) and a NIBD/Operating EBITDA ratio of -2.7x. The company’s return on capital employed (ROCE) improved to 32% from 22% in Q1 2024.

The balance sheet data shows these key financial metrics:

Forward-Looking Statements

NKT maintained its financial outlook for 2025, projecting revenue at standard metal prices of approximately €2.37-2.52 billion and operational EBITDA of €330-380 million. This guidance is based on several assumptions, including satisfactory execution of high-voltage investments and projects, stable market conditions for Applications and Service & Accessories, and limited supply chain disruptions.

For the medium term, NKT reaffirmed its 2028 financial ambitions, targeting organic revenue CAGR from 2021 of more than 14%, operational EBITDA exceeding €700 million, and ROCE above 20%.

These targets align with the company’s Q4 2024 guidance, which projected continued strong performance despite some investor concerns about market volatility and competitive pressures, particularly from Chinese manufacturers. The company’s significant investments in capacity expansion, which are expected to peak in 2025 as part of a €2 billion investment program, are central to achieving these medium-term ambitions.

The company’s financial outlook for 2025 is presented in the following visual:

In conclusion, NKT’s Q1 2025 results demonstrate continued growth and progress on strategic initiatives, albeit at a more moderate pace than the exceptional 26% organic growth achieved in 2024. The company’s substantial order backlog and ongoing capacity expansions position it well to capitalize on the growing demand for power cable solutions driven by the energy transition, though investors will be watching closely for execution on major projects and the impact of increasing competition in certain markets.

Full presentation:

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