Earnings call transcript: Nexans Q1 2025 shows strong growth, stable stock

Nexans (NEX.PA) reported a solid start to 2025, with its Q1 earnings call highlighting notable growth in its electrification businesses and a robust financial outlook. The company’s stock, which has seen a -14.95% decline over the past six months, closed unchanged at 91.15, reflecting cautious market sentiment. According to InvestingPro analysis, the stock is currently trading at an attractive P/E ratio relative to its near-term earnings growth potential.

Key Takeaways

• Nexans achieved a 4.1% organic growth in Q1 2025, with sales reaching €1.8 billion.
• The company’s electrification segments, particularly Power Transmission, saw significant growth.
• Nexans maintained its full-year EBITA guidance and targeted positive free cash flow.
• The stock price remained stable, indicating a neutral market reaction.

Company Performance

Nexans delivered a strong performance in Q1 2025, driven by its electrification businesses, which saw a 6.8% organic growth. The Power Transmission segment was a standout performer with a 21.7% growth. The company’s strategic focus on premiumization and innovation in safety technology cables contributed to its robust results. InvestingPro data shows the company has maintained a consistent dividend growth track record, raising dividends for five consecutive years, demonstrating strong financial management.

Financial Highlights

• Revenue: €1.8 billion, representing a 4.1% organic growth.
• Adjusted backlog: €8.1 billion as of March 2025.
• EBITA guidance: Confirmed at €770-850 million for the full year.

Outlook & Guidance

Nexans expects continued strong performance, particularly in the Power Transmission segment, with double-digit organic growth anticipated for the full year. The company is also targeting over 15% organic growth in the second half of the year. While InvestingPro analysts anticipate some sales decline in the current year, they maintain confidence in the company’s profitability outlook. For deeper insights into Nexans’ growth prospects and detailed financial analysis, subscribers can access the comprehensive Pro Research Report, which provides expert analysis of key metrics and growth drivers.

Executive Commentary

CEO Christophe Guerin remarked, "2025 will be a pivotal year for Nexans," emphasizing the company’s strategic initiatives and growth potential. CFO Jean Christophe Julia indicated that the company is likely to achieve the mid to upper range of its EBITA guidance.

Risks and Challenges

• The planned divestment of the auto electric business by year-end could impact revenue streams.
• Market stabilization in Europe may limit growth opportunities.
• Supply chain dynamics, particularly in metallurgy, could pose challenges despite current advantages.

Q&A

During the earnings call, analysts queried the potential financial impact of US offshore wind project cancellations, which Nexans downplayed. The company also expressed confidence in replacing potential GSI project capacity and noted no significant concerns about aluminum or copper supply in Europe.

Full transcript - Nexans SA (NEX) Q1 2025:

Conference Operator: Ladies and gentlemen, good morning, and welcome to NEXON’s First Quarter twenty twenty five Information Conference Call. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. Now I would like to turn the call over to your host for today’s conference call, Mr. Christophe Guerin, Nexon’s CEO.

Please go ahead, sir.

Christophe Guerin, CEO, Nexans: You. Good morning, ladies and gentlemen, and thank you for joining us today. This is Chris Guarent, CEO of Nexence with me, Jean Christophe, Julia, Deputy CEO and CFO and of course, the Andre Bourgeois, Investor Relations team. I will turn you over to Andre that will go to conference call groups.

Andre Bourgeois, Investor Relations, Nexans: Thank you, Chris. I would like to remind participants that statements made during the conference call, which are not historical facts, are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers and listeners are strongly encouraged to refer to the disclaimers, which are an integral part of our universal registration documents along with the audio replay of today’s call that will be posted on our website, nexon.com. I now turn you over to Chris, who will go over the Q1 twenty twenty five highlights.

Christophe Guerin, CEO, Nexans: Thank you. So let’s shift already on Page three. As you can see, the group had a promising start to the year demonstrating a structural strength on lasting impact on next answer transformation with a plus 4.1% organic growth for the group, reaching EUR 1,800,000,000.0 on our sales in Q1. But this performance as you can notice is driven by our electrification businesses, Power Connect, Power Grid and Power Transmission with a very robust organic growth of 6.8%, reflecting excellence in operation of execution on a good trend as well for Q2 that we’ll comment during Q and A session. Talking about execution, keywords in our transmission activities, we reached an adjusted backlog of 8,100,000,000 at the March 2025, confirming a strong positioning in power transmission that you have seen as well.

The FTI frame agreement that have been signed, which is a significant order above €1,000,000,000 but as well yesterday, Malta CCE for a project that will be produced in Nixon’s Charleston in U. S. In Q1, in terms of past M and A on recent disposal, we continue to see good results in the integration of Laksivinet Akavi. That’s delivering synergy as expected. Finally, as you are all aware, we have announced exclusive negotiation with Lateral Capital for the divestment of Linksio that is now expected to be completed in the course of Q3 twenty twenty five.

It will be, of course, a major step in our journey to become a pure player in electrification. In overall, will be 2025 will be a pivotal year for Nexans, and we know that we have a as you know, we have a very clear and defined strategy, robust business model as a pure play of electrification and of course very strong transformation program supported by Shift to keep delivering great results. If we are now moving to page four, let’s take a closer look to the organic growth performance. Of course, you’ve seen a very strong, I will say, growth in electrification business. This quarter is particularly driven by power transmission, which has delivered more than 20% organic growth in Q1.

You You will have the details with GC. Power Grid was top priority affected by a phasing effect that should recover with a very good strong Q2. Power Connect remained on a solid trajectory. Of course, plus or minus lower demand in Europe, stronger in the other area, but we expect as well a good recovery in Q2. Metallurgy project is at 5.7% Our non electrification has been pretty slow start due to automation on highway market, not too negative in automotive this quarter.

On the page five, we we we have done, like, every two years, our employee survey calls for for all the employee of Nexans. So what we see is that first, the the participation ratio, which a record of this revenue group, 92% of the employee participated to this survey. And what we see is that we are happy, but we have missed the 80% target in in in in 2025. And what we we reached is 79%. I can see that there is a hiccup in the in the slide.

It’s not ’27, but 2025. We reached 79% of engagement ratio in this year, which is a very good result. Let me hand over to GC for the presentation of the business trends on the result for Q1.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Thank you, Chris. So turning on page six, looking at the performance of Power Transmission for the first quarter of twenty twenty five, so an organic growth of 21.7%, very strong double digit organic growth, mainly coming from the new capacity installation that started last year, not in Alen. We have been performing well on Celtic and Great C interconnector in the first quarter, explaining partially the strong organic growth of 21.7%. The backlog, as you can see, is in strong evolution, almost plus 10% versus the end of last year, mainly again, as Chris mentioned, coming from the booking of the RTE frame segment. If I turn to the page seven and we have a look at Charleston, just to answer your main question regarding the load of our plant in The US.

So again, we reconfirm what we said at the end of last year, meaning that the plant is above 90% loaded in 2025 through 2028. Of course, there will be during the year 2025 a shift of the project between the completion of The US project, mainly Empire Wind one and Sunrise, and the plant will be loaded with the new award we just announced yesterday, Malta, Sicily. And therefore, the backlog U. Backlog at the March only represent 2.7% of the total backlog of Power Transmission, so U. S.

Project is not an exposure anymore for Nexans. And just to go back to the recent news flow about Empire Wind one stop, it has no impact material impact, no financial impact on the company’s performance if the project is stopped. I will move now to the next page, on Page eight, our Grid. 1.7% organic growth on grid with, I would say, a low single digit percentage growth. It’s a saving effect with the second quarter of the year where you will see a rebound.

So we had a timing phasing situation mainly in Europe, but we have, I would say, a nice growth in the beginning of the second quarter. So we will catch up in the second quarter about this phasing and will come with an organic growth for the first half, which is in line with the commitment we took during the CMD of mid single digit organic growth. So really a question of timing here on the first quarter, which is always a little bit slow due to weather condition, mainly winter in Europe. Always to say that North America, South America and Middle East have been performing quite well against again the phasing in Europe, and we have also the good performance on accessories. If I move to the next page on Page 1.9% organic growth on Power Connect.

Sensing, a little bit the same situation, we will see a rebound in the second quarter of the first semester the organic growth of Power Connect. So I would say a slower start of the year, but definitely we see today a good momentum for the second quarter of the year. So we remain optimistic that we’ll reach the objective of the growth for the year as we committed in the CMD in November 24. Again, the difference here is mainly coming from Europe and Asia Pacific, which has been negative organic growth, offset by a very strong growth in Middle East and Africa. It’s very strong growth also, double digit growth in South America and a strong growth in Canada.

And again, the European situation, the Europe slightly negative organic growth of minus 4% is will be offset in the second quarter mainly due to a timing situation. And now I will move to the slide 10. I will give Theresa will give you a little bit of detail on Power Connect.

Christophe Guerin, CEO, Nexans: Yeah. Sure. Thank you, Jesus. So just to remind on Power Connect and the aim is to to move from a commodity business to a premium business. Two two main elements to to to make this to make that journey positive.

First is on the technology shifting from PVC, standard cables to fire safety technology. So it’s just like that you’ve already seen in the past. It’s on the left side is expressed the overall demand for cable for the, I would say, building market. The second column explains you the trend for wires, for cables, of course, the electricity consumptions, the new build, the renovation acceleration, the safety regulation that I will comment, the electrical networks reliability. We know that it’s a big topic and specifically with the event that Europe seen in the last days.

Our new electrical usages like EV stations, solar panel on top of building, and, of course, high demand for data centers. So when you go to the third column, which is the safety technology adoption, we see it reversing versus the global demand for cooling wire that the penetration of of safety cable is up 14%. And that our revenue that you can see on the graph on the graph move from twice higher number versus 2020 with a record revenue in Q1 twenty twenty five for this FidroSaf Technology revenues. If you go on page 11, technology is not the only elements that bring us to premiumization. It’s as well new standardization of packaging to support the use of the product by the electrician.

We have an excellent start on MobiWebPub that has been introduced during the Capital Market Day last November 2024. The end, I remind you that it’s a full propriety solution with a lot of patents on it. We’ve

Jean Christophe Julia, Deputy CEO and CFO, Nexans: launched

Christophe Guerin, CEO, Nexans: it in one country last year. This year would be five countries and after eight and twelve countries. We have each time the adoption is very, very high each time that we have been able to introduce this packaging. The refill is really a great success. Take this PowerConnect MobiWay pop as a kind of Nespresso model where they get access to a machine and after they have to recharge with our patented capsule.

So it’s a great success. We’re very happy about that. Let me turn over back again to GC for the M and A part. So on the M and

Jean Christophe Julia, Deputy CEO and CFO, Nexans: A front and the portfolio rotation, we are progressing quite well. On the M and A first, we are very active in the same line of our CMD targeting acquisition in the core business of medium and low voltage cable in different geographies of the world. And we are quite, I would say, optimistic that we should announce some positive news flow in the coming months. On divestment, you are fully aware of the divestment of Linxio, which is now extremely well advanced, and we are confident that we should be closing early Q3. So that will be a major step into, of course, our completion of towards becoming a pure player in electrification.

The remaining asset, auto electric, is under process as we speak right now for divestment as well. And we are confident that we should come also with a final position on the divestment of this asset by the end of the year, very early next year. If I move now on Page 13, just to confirm that the progress we are making on this big acquisition we’ve made in Italy La Triveneta Kavi is doing well. We are on track to deliver the synergies.

I remind you that we had targeted about €20,000,000 recurring synergies that we will reach after three years. We had a plan to progress on those synergies and we are progressing well. So the contribution of these assets to NEXON’s performance is going to be significant starting 2025. Linxew, I just mentioned, again, you know the asset. You see the size and the enterprise value that was signed with Lato Capital.

Not much to say, but just to confirm that this is on track and this will be out of the portfolio of Nexans midyear twenty twenty five. And I will conclude after this good performance of the organic growth, good start of the year 2025. We are in line for a very strong first half of the year, and we confirm the guidance that we announced in February of this year, ’7 ’70 million to €850,000,000 on adjusted EBITA and February to 25,000,000 in free cash flow generation for the year 2025. That being said, that concludes the presentation. I will turn now to the operator for Q and A.

Conference Operator: Thank you very much. The first question comes from the line of Eric Lemarie calling from CIC. Please go ahead.

Eric Lemarie, Analyst, CIC: Yes, hi. Thanks for taking my question. Good morning. I’ve got three questions, please. The first one on GLETI Interconnector.

Could you tell us if you have received any notice to order if I notice to proceed yet? And maybe if you can share with us the sales and maybe gross margin or EBITDA that you have generated on that project in H1? This is my first question. I’ve got a second question on Germany. If I’m not sure, Nexans is quite exposed to Germany, and I was wondering if you consider that you could maybe benefit in the future from the German investment plan.

And my last question is on The United States. You mentioned a 19% exposure to North America on the Slide 24, if I’m not wrong. But I was wondering but these figures exclude our transmission and auto analysis. And I was wondering if you could share with us your exposure to United States in sales and maybe to give us maybe more details on the project ongoing in The U. S.

Currently in Sunrise, Empire Wind and maybe a word on Revolution Wind? Thank you.

Christophe Guerin, CEO, Nexans: So me take the first question. So regarding GSI, so we are of course, we don’t yet have the notice to proceed. There’s still a lot of discussion with some different stakeholder in the area, but we are in close cooperation with the clients to continue to produce and advance the production. We have received again down payment in April this week that position us to keep producing the cables up to the August. So for that, everything goes well.

We follow, of course, closely all the issue with affected G side in case of geopolitical, would say, event. But for the moment, we don’t have any significant change in the project on neither in terms of production. We received the down payment. We keep producing on very close contact with the client. I cannot elaborate more because we are not at there’s a lot of political aspect in that contract, but we are not part of the develop negotiation.

Regarding the second question on U. S. Maybe, let me take the one off U. S. Yeah.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: So the 19% is not U. S, it’s North America. So it includes, of course, our flagship in Canada for medium and low voltage, which is a significant contributor of the sales of the region. And then you have, of course, the revenues of high voltage in Charleston. So that’s a combination of the 19%, but the bulk part is coming from Canada.

Andre Bourgeois, Investor Relations, Nexans: When it comes to Germany, so as you know, we have a historical presence through power grid accessories there. So of course, with the German investment plan in the infrastructure, both the renovation of the grid, the extension of the grid and the connection of renewables, we are there to be able to rest the growth, including with our historical customers, whether it’s Aon in Germany or large contractors. So we see a positive growth coming up in Germany for Paraguay.

Christophe Guerin, CEO, Nexans: Well, it’s not Chris speaking, but Elliot Tru. Thank you, Eric.

Eric Lemarie, Analyst, CIC: Okay. Thank you.

Conference Operator: The next question comes from the line of Sean MacCulling from HSBC. Please go ahead.

Sean MacCulling, Analyst, HSBC: Thank you. Good morning. I just maybe wanted to follow-up on Eric’s question on The U. S. Offshore projects.

I’m not sure we got the full answer there, just kind of where are we on the remainder of your committed backlog? And secondly, building on that, just thinking about the mechanics of supplying European projects from The US. I mean, I would assume higher production costs in The US and also the vessel costs. So I mean, how can these how can this be margin neutral? Is it is it just an offset because the loading of the factory remains very high?

Just just thinking, how should we think through the margin impacts, you know, cost versus benefits of of this new model?

Christophe Guerin, CEO, Nexans: Yeah. Yeah. Sean, good morning. This is Chris. So regarding the where do we start regarding the the production of US offshore wind farm project?

Empire Wind has been produced. So the cable is ready to be installed. So that’s everything is in the end of Equinor. And we still have a back end production for Sunrise, and it will be very, very soon completed in coming weeks. And we will start the production of the Malta TCD interconnection project in Sharshan in incoming months.

Regarding the second question, GC, do you want to add?

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Just to maybe to step back one second on the financial impact. Like we said, the cable is produced on Empire Wind one. There’s not much to recognize in terms of revenue and margin on the project. And if the contract is confirmed to be canceled because of The U. S.

Authority decision, then definitely we get a termination fee and there will be no financial impact to us on this project. And it’s a very similar situation on Sunrise where basically we are at the end of the production of the contract. And if the contract was going to be terminated for the same reason as Empire Wind one, the financial impact on EXANSE would be extremely limited. So we are not worried about financial consequences about termination of those projects. And those two projects are the only one, again, in the backlog of Nexans for U.

S. And it represents less than 3% of the total backlog of Nexans. So really for us, we have no other contract in the backlog for U. S. So no material, I would say, negative news flow could impact really coming from The U.

S. When it comes to your last part of the question regarding the cost of basically loading the plant in Charleston with non US project, I guess, mainly European project, the cost difference versus producing in Alden is not different. You know that definitely Norway is a high labor cost country, not different than than than South Carolina. So there will be no impact on on on labor cost differences. Remind you that the total labor cost in a contract is roughly between 7% to eight percent of the total value of the contract, so it’s not that meaningful.

It’s not a labor intensive, I would say, business. And then on top of that, we have significant contingencies in the project ranging from 10% to 12% in average of the total value of the project that if any variances in cost could materialize, it will be absorbed by the contingency. So overall, there will be no there will be no significant financial difference whether producing in Charleston or producing in Norway, and I will complete both transportation cost. I mean, shipping the the the cable on the vessel from US to, let’s say, somewhere in Europe or Mediterranean Sea because we are very active in the Mediterranean Sea with with many project right now. The difference in terms of transportation cost is not significant, and the timing of shipping from Charleston or shipping from Alden, the cable, is only one day difference.

So, again, it’s meaningless. And again and finally, the total just to to to go back to the perspective of the total cost of transportation within the project, typically, it’s about like labor, about 7% to 8% of the total cost. So and we have the contingency. So whether it’s transportation, whether it’s labor, manufacturing and shipping from Alden, we don’t see that as being a disadvantage to our supply chain and to the margin of the project. Very helpful.

Thank you.

Conference Operator: Sure. The next question indeed comes from the line of Jean Francois Ganjon calling from ODDO. Please go ahead.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Yes. Good morning. Just a quick question regarding the new firm agreement with Herteo for more than EUR 1,000,000,000. Could you give us some more color about the timing expected for this project? And probably you mentioned probably more than €1,000,000,000 so the potential amount expected?

Christophe Guerin, CEO, Nexans: Jean Francois, this is so that’s above €1,000,000,000 project. It’s DC cables on that. Of course, there there could be some potential upside closer will be from the project. So that that would be in ’28, ’20 ’7, ’20 ’8, ’20 ’9 on walls. So significant order that could be produced in Alban.

And the RTE still have a very, very strong pipeline of further order of that magnitude coming up to be awarded in coming years. So actually it will be very important for customer for us to keep in from 2020 to ’32.

Jean Francois Ganjon, Analyst, ODDO: Okay, perfect.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Thank you.

Christophe Guerin, CEO, Nexans: The

Conference Operator: next question comes from the line of Chris Leonard calling from UBS. Please go ahead.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Yes. Hi, guys. Hope you

Chris Leonard, Analyst, UBS: can hear me. Just two questions from me, please. The first on the low voltage exposure in Connect. You spoke about good product momentum for new sales and premium customers and avenues. Do you still anticipate or have more confidence in improving margins for the year in Connect than you do in the Power Grids segment?

And then the second question is on the buyback. I think you’ve launched a buyback in April for 750,000 shares. Just wondering how you’ve progressed on that. And I believe you have authorization to go above that potential level up to $175,000,000 of share purchases. So is there any time frame you have on when you might decide to upsize that buyback?

Thank you.

Jean Francois Ganjon, Analyst, ODDO: I will take the

Christophe Guerin, CEO, Nexans: You take the second question. Yes. Yeah. We’ll take the first question. Thank you, Chris.

So regarding the first question, yes, we keep improving our margin. Two two two main, I would say, driver for margin improvement. The first driver is the penetration of the fire safety technology, which is, of course, it’s a very complex high density polymers with a very strong entry buyers. We only few to be able to provide that to the market. So that’s give us a premium effect on the price.

The second is everything we can do on ergonomics like the MobiWipUp, of course, that’s driving up the margin. So that’s element number one. Element number two, it’s our transformation program. We love to do acquisition of companies that have a very high level of diversity where our shift program can play a significant level of synergy by reducing complexity. And we still have a significant spread in the connect world from low performer unit, from high performance unit.

So what we behave, of course, is to keep duplicating the best practices from high performing unit that are above 18% EBITDA on sales to the others. So we have great offer to lift up the margin. And second, we have our transformation program that play a significant role to ensure that our margin improvement is not made of conjunctural effect, but real structural effect. Regarding the complex the second question?

Jean Christophe Julia, Deputy CEO and CFO, Nexans: No. It’s a second question. I will repeat what we announced in terms of capital allocation in our CMD in November. I mean, resources, the cash generation as well as the proceeds of the divestment we are currently making will be towards M and A. And we are very active, as I said in the presentation, versus M and A.

So quite confident we will deploy that cash for M and A. We will do a share buyback, but share buyback right now is only limited to avoid dilution because of our share employee plan. We have this year an additional plan because every other year, we have employee plan where full act where employee can basically acquire share of the company at a discount. So we will have one specific plan on top of the regular LTI plan. So we will just do share buyback to avoid the dilution of those plan on our shareholder base.

But so far, there’s no other commitment on share buyback. Now if it happens that we are not, I would say, successful or the M and A plan is delayed and we are not against doing share buyback if that would be the case. But right now, this is not the main objective and the main willingness of deploying our resources.

Conference Operator: Sure. Thanks. That’s super clear.

Chris Leonard, Analyst, UBS: If I can, I was just actually going follow-up with third question on GSI in terms of the seabed surveys restarting? And I think in the press, there was commentary that the Greek government were going to support with their own military vessels so that those surveys could continue. And I think there was also commentary of support from the Israeli Prime Minister as well. So when should we expect that the surveys restart and if you have visibility on that? And previously, I think you said you’re around maybe about halfway down on those surveys.

Is there any update on on what percentage you’re through on on the surveys? Thanks.

Christophe Guerin, CEO, Nexans: Chris, no. I’m not able to comment that that that that that that part because that that that’s in the end of the on on Ipto. So I I I commit to them that I will not make any specific additional information on on the top of the one that have been official official on the press. So the the important for us is that the project is keep moving on and we keep producing and we receive on payment. This is the only thing I can comment today, Chris.

Okay. Thanks very much.

Conference Operator: The next question comes from the line of Daniela Costa calling from Goldman Sachs. Please go ahead.

Daniela Costa, Analyst, Goldman Sachs: Hi, good morning. Thank you so much for taking my questions. I have two things. I’ll ask them one at a time. But the first one, I just wanted to go back to the Charleston facility, the European contract.

So it’s an HVAC contract. And I think historically sort of HVAC contracts weren’t maybe as profitable as HVAC and there’s a lot of demand on HVAC. So interesting to hear. Is there anything specifically about these contracts that is just more attractive than normal? Or why you’re prioritizing an HVAC contract versus potential HVDC demand that could be done there?

Christophe Guerin, CEO, Nexans: Yes, Daniel. It’s not a question of technology. It was just a question of lead time. That was the project in terms of lead time that fit perfectly for the production of late twenty twenty five on the beginning 2026. We have some other projects coming up in DC technology in Charleston.

So it was not a matter of technology, but just a matter of lead time. With the sudden drop of US offshore wind farm, we we didn’t have to have either, I will say, production for for more than six months in in the factory. That this project just fit perfectly the the load aspect for for 2025 on ’26 for Summit.

Daniela Costa, Analyst, Goldman Sachs: You can still add more before ’26 on the plant from other contracts? Yes.

Christophe Guerin, CEO, Nexans: We have other projects to come on ’26 that will be officialized in the coming months.

Daniela Costa, Analyst, Goldman Sachs: Got it. Thank you. And then my second question is more related to competitive dynamics. And I know you’re not in The U. S.

On the low voltage end, but there was a sizable amount of, for example, aluminum imports that were going to The U. S, which with tariffs and your main peer has talked about this a few times might not be going to The U. S. I think it was even up to 40% of the aluminum market that was imports from outside. Have we seen any signs of these redirecting to Europe?

Is there a problem at all? I know some come from India, some from Vietnam. So they travel a pretty long distance to go to The US. Can they travel that distance to come to Europe? And is that feasible?

What are you seeing? And what are the mitigators there?

Christophe Guerin, CEO, Nexans: Yeah. Not much. Running aluminum is huge, mainly in medium voltage. US is in deficit in both aluminum and copper. Just in copper, the the the the capacity fraction in US is about 1,200,000 metric tons on the consumption is above 2.5 to close to 3,000,000 metric tons.

So there is a deficit in copper, there is a deficit in aluminum. In aluminum, I would say in Europe, don’t need those diverse source from Asia. It’s coming mainly from Europe or Middle East. Europe already moved on, I would say, rethink entirely supply chain with the start of the war in Ukraine because there was a pretty high level of dependency of aluminum coming from Russia. So we have all players have completely rethink their supply chain.

So we don’t have any specific attention in aluminum supply in Europe so far, neither in copper. But I don’t know exactly what is the dynamic in U. S. So

Daniela Costa, Analyst, Goldman Sachs: I think my question was more is, is there a risk of dumping of aluminum from imported to Europe from Asia, from the places the ones that were importing exporting to The U. S. Can they aggressively dump into Europe?

Christophe Guerin, CEO, Nexans: So far, we’ve not seen that. But I think your question is very relevant and we need to be extremely vigilant on the evolution in coming months.

Daniela Costa, Analyst, Goldman Sachs: Got it. Thank you so much.

Christophe Guerin, CEO, Nexans: The

Conference Operator: next question comes from the line of Max Yates calling from Morgan Stanley. Please go ahead.

Max Yates, Analyst, Morgan Stanley: Thank you. Good morning. I just wanted to ask about the potential kind of termination fees related to Empire. How do those actually work mechanically? I guess you’re saying there’s no financial impact, but would you still get, say, the fee for the installation that would be attached to that contract?

Because I think this was about a €200,000,000 contract. Then do you just get the cost of producing the cable back. So potentially, it’s a kind of lower EBITDA number than you would have assumed on €200,000,000 of revenues. Just trying to understand kind of how it actually works in practice.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Yes. Thank you, Mac. So there’s two parts of the termination fee. There’s a contractual termination fee, which is seven to 10% of the contract value. And then there is a termination fee for convenience, and we have to look at what it means exactly into the contract, but that basically covers any incurred not paid cost and subject to exposure that you might have left on the contract if the contract is canceled.

So basically, the analysis we’ve made is that the termination fee on both contract, especially for Empire Wind one, basically covers the lack of margin and revenue and margin and and cash, I would say, that is remaining of the project. For installation for Sunrise and the installation, if if cancer, which is, again, this is not the case. You know, Empire Wind has been notified as a as a stoppage from The US authority. We’ve had no news on Sunrise. So for us, Sunrise is a contract which is progressing as normal.

We’re just taking a worst case situation here on Sunrise. We’ll have to look of about the installation, what it means. But, basically, the principle is a little bit the same of any any you get eight to 10% termination fee. And then after that, you have termination for convenience, which covers basically any incurred exposure you have. But again, Sunrise is not canceled or it’s not stopped as we speak today.

Max Yates, Analyst, Morgan Stanley: Understand. That’s helpful. And maybe just on medium voltage capacity in Europe. Do you have a sense of kind of what your competitors are doing and what you’re doing on adding capacity in medium voltage? Because I understand that kind of I guess most people are bullish on distribution spending in U.

S. And in Europe. But how would you sort of frame the capacity that has been added, the sort of utilization of the industry and whether there are shortages, excess capacity or we’re about the right level when you look at the industry as a whole? Thank you.

Andre Bourgeois, Investor Relations, Nexans: Helios? Hi, Helios speaking. As you know, we cannot comment on competition and investment when it comes to medium voltage capacity in The EU. What we can comment is what we already announced in our CMD that we did early investments in several plants to be able to cope with the high demand in terms of medium voltage for power grid. So as you know, it’s driven by the main trends of grid renovation and connection of renewables and data center and factories.

So this we continue. And as you know, we have announced several investments, like I said, in several countries. Hope it answers.

Christophe Guerin, CEO, Nexans: But today today, will say the utilization ratio of our capacity in Europe is pretty well saturated, and you will see that in the Q2 growth so that we will we will generate in the coming months.

Max Yates, Analyst, Morgan Stanley: Excellent. Thank you very much, everyone.

Conference Operator: The next question comes from the line of Uma Salin calling from Bank of America. Please go ahead.

Christophe Guerin, CEO, Nexans0: Hi, good morning everyone. Thank you so much for taking my question. So first I have a follow-up on your Charleston plants. So how does it work with any of the potential tariffs in The U. S.

If you’re producing in The U. S. But delivering to European clients, do you are you exposed to any of the raw material tariffs?

Christophe Guerin, CEO, Nexans: No. No. We we that was that was in in US. There was a clearance for copper on aluminum supply. So I would say the the the chemicals are local in US, and the the the main question was on the excess aluminum to copper on the they they have been exempt on the type new type policy of a.

Christophe Guerin, CEO, Nexans0: Okay. Thank you. But then I also heard from some of the companies saying that even though, you know, the local players have also raised prices post the tariffs, is that something you see in The US?

Andre Bourgeois, Investor Relations, Nexans: Is there any sort of

Christophe Guerin, CEO, Nexans0: yes. Or, you know, for aluminum?

Christophe Guerin, CEO, Nexans: For for for for for the copper for the copper, we have our own source of supply because we have a vertical integration integration of metallurgy in Canada that source directly Charleston.

Christophe Guerin, CEO, Nexans0: Okay. Thank you very much. My second question is on the GSI. So I guess if I understood correctly, you mentioned that you haven’t got the notice to proceed, but you’re continuing to produce in advance. So if we’re thinking about the worst case scenario, if the project does not proceed, so what are your plans to use the the current capacity that’s reserved for the GSI, and what kind of contingencies do you have?

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Well, I mean, GSI is, you know, MI technology, which is the mature technology and then I would say technology which is diminishing. I mean, there’s less and less awards and contract on MI technology replaced by XLP. We have two lines of production out of the six lines of of in high voltage. And, basically, if we if if GSI was going to be canceled, we have other project out there that we are working on to basically get the world that will replace GSI. The situation is there could be a period of time with a a gap for sure between the time you get the award and the time you can fill the the line.

What we would do as well, we will close our shop small facility in Japan, which is MI Technology, and we’ll therefore, we’ll be remaining with only one line of MI in ALDEN. And I would say the financial impact of the loss of GSI and between the time the gap between the time of replacing GSIs, we don’t see as being that significant and definitely not impacting our target for 2028 even though the contribution of GSIs through 2028 was significant. Have you can imagine that every day we are working on a plan B. If GI was going to be stopped and we are focused on that and we have a detailed plan on how to replace the project if it was going to stop. Yeah.

Christophe Guerin, CEO, Nexans: I think, Jisi, you’re right. Think it’s fundamental element. Consolidation six months ago would have been a very, very complex for us to manage. But now now the plan B is progressing. So we are working on both parallels.

So that’s our level of confidence is to replace in case of is much higher and higher every month at best.

Christophe Guerin, CEO, Nexans0: That’s super helpful. Thank you very much.

Conference Operator: The next question comes from the line of Luca Cerni calling from Jefferies. Please go ahead.

Jean Francois Ganjon, Analyst, ODDO: Good morning. Thanks for taking my question. I’ll have three if possible. The first one just on what have you seen on trends in April specifically for grids and connects. She talked about recovery in Q2 just to see if April is starting to show that.

The second one is just how are you thinking about maybe the second derivative effects from tariffs, from the uncertainty and potential kind of macro slowdown? Are you seeing any signs of that specifically in Connect or nothing so far? And the last one is just on what happened in Southern Europe with the blackout. Do you see any kind of risks related to kind of cable damage? And otherwise, how do you think your portfolio in grids and accessories really benefits from kind of helping grid resilience, which is now more of a topic?

Thank you.

Christophe Guerin, CEO, Nexans: Thank you, Lucas, for those great questions. So maybe, Elias, do you want to comment on grid for the trend of April?

Andre Bourgeois, Investor Relations, Nexans: Yes, absolutely. So for the trends in April, we are already full and executing indeed with the momentum that has been announced by JC. Basically, it’s a phasing effect as you know. So we will completely deliver not only April, but the full Q2 to be in line with the mid single digit that we announced prior to the CMD.

Christophe Guerin, CEO, Nexans: In regards to Connected Wizard, we have a good and strong April, but I cannot be 100%, I would say, sure for June because we have only a month of visibility, but we are very we scrutinize as well the announcement of Rexel, Sonnetpar, West Coast, but this year a pretty good dynamic in coming months. So we are, I will say, confident for Q2 both for Connect and for Grid. Regarding the second questions, do we see any macro slowdown in Connect? I think we are already in some region in addition, and that’s the case since Q3 for Europe, since the beginning of 2024 in Oceania. We’ve seen a very strong rebound in Canada, a very strong rebound in South America, a very strong rebound in Middle East, Africa.

And we believe that even if we have no much visibility on Oceania right now, but that’s in Europe, we believe that we reach already the low point of the and that we will see a strong improvement in good improvement, I will say, in coming months. Regarding element three, Elliot, maybe?

Andre Bourgeois, Investor Relations, Nexans: On the last one, at this stage, I think no one can say if it is related to any network cable topic. By the way, usually in the networks, the issue doesn’t come from the cable. As you know, we have actually in Europe and also in The U. Very old aging cable systems. We have explained during our CMD that usually the problem comes from the connecting point, which is where we have the accessories.

So for sure, what we have announced in terms of having a smart portfolio and advanced offers, both for grid and accessories will contribute to the resiliency of the grid as it is already today. And we have loyal customers that are indeed in Spain and Portugal purchasing from our portfolio for the underground network. So we are pleased to say that we contribute to the grid resiliency and we are looking forward to know what are the reasons behind this back out because maybe we will not be able to contribute with our office.

Christophe Guerin, CEO, Nexans: Yes. Indeed. I think it’s it’s an unhappy event. It seems like it it you know, those events reminds everyone that electrical grid is the backbone of the country economy. And when you have a blackout, it’s not only a direct damage on the hardware, it’s life stops.

Transport stops. A lot of all all all our life has has suddenly see that we are extremely dependent from electricity. So of course, that we’ve seen the announcement of the TSO this morning from all the place in the world saying that they will work on the residency of their backbone of grid, of the power grid network and they will keep investing because that will be of course strong elements of growth for us in coming years. Thank you, Lucas. Thank you.

Conference Operator: The next question comes from the line of Alasdair Leslie calling from Bernstein. Please go ahead.

Christophe Guerin, CEO, Nexans1: Yes, thank you. Good morning. So a few outstanding questions. Firstly, just a follow-up on transmission. So thanks for the detail on the transportation costs and times from The U.

S. To Europe, I guess, from Charleston. How does Asia compare in that respect? So let’s say, from Japan, in your case, to Europe, just in terms of costs and timing. And maybe just more broadly on transmission.

I was just wondering if you could help us kind of calibrate your kind of full year growth expectations now there. You obviously had very strong growth in Q1. Consensus, I think, is around 6% for the full year. What kind of growth range should we think should we be thinking of taking into account, I guess, GSI risk still, I suppose, for the full year? And then the final question, if I can just squeeze it in, maybe just on Connect.

You said sort of Europe’s lagged in residential. Did you see a sequential deterioration there in any markets? And then maybe just you talked about improved momentum in Connect in Q2. Wasn’t clear. Is that coming from a rebound in Europe?

Or is it more driven by other regions? Thank you.

Christophe Guerin, CEO, Nexans: Let me start by the last question regarding Connect. Residential market overall is very low, very low in North America and very low in in Europe. The the the main growth generation is coming from commercial infrastructure not infrastructure, commercial and entry also, and as well data centers. But residential remained a very weak market and we had as well a pretty high demand for building renovation. Regarding question number one or two, which

Jean Christophe Julia, Deputy CEO and CFO, Nexans: So question number one, Asia and Japan is a little bit more expensive in terms of cost and producing in Alden or Charleston for sure. I mean, it’s a little bit longer as well, but I remind you that we have only MI technology and it’s a small it’s not it’s not the same level of production or the same speed of production and quantity of production than the the lines that we have in London. It’s really, I would say, 50 to 60 people up. I would say more than it’s full, I would say, full capacity, production as we have. But but, again, the cost is a little bit higher.

But when you have a project that we like GSI, for instance, which is very strong margin with very high level of contingency, the difference in cost and timing to ship the cable to to the military and sea is not making the difference for the reason I explained regarding the low portion of the cost and the total cost of shipping logistics and and labor in the total magnitude of the project cost. So, I mean, definitely on a project like GSI doesn’t doesn’t move the needle, and any difference is absorbed with within the contingencies, and and it’s building into the cost structure of the project. The second part of the question was the forward looking of the organic growth on transmission. We have a good year in transmission in terms of our organic growth. We will be double digit organic growth for transmission for the year.

We have a stronger first quarter for the reason I explained in my presentation, meaning that last year we had only the full benefit of the ramp up of the new production lines in the middle of the quarter when obviously this year we start from first day of the quarter. But despite that, we’ll have a second quarter that will be double low double digit and then a strong H2 with, I would say, in line, I would say, above 15% organic growth in H2. So globally, it’s going to be a quite good year in terms of organic growth for our transmission business, which makes sense, obviously, larger backlog that we need to execute and the ramp up of the new big contract we have in the backlog. And like you rightly said in your question, this is, of course, also dependent on how GSI is confirmed or not.

Christophe Guerin, CEO, Nexans: Lovely. Thank you very much.

Conference Operator: The next question comes from the line of Miguel Boiga calling from BNP Paribas Exam. Please go ahead.

Christophe Guerin, CEO, Nexans2: Hi, good morning, everyone. Thanks for taking my questions. I just wanted to understand your EBITDA guidance a little bit better. You previously said that if GSI is canceled, the low end of the range was still achievable. The project has not been canceled so far.

Now you’re saying that the next milestone will be in August. So you’ll probably book full revenues and profits in the first half. Does that mean that the low end of the range is now secure and that we are more looking between the midpoint and the top end of the guidance?

Jean Christophe Julia, Deputy CEO and CFO, Nexans: Well, I mean, I I I don’t have I mean, I don’t have moved or changed the expectation on achieving basically the guidance for the year. You’re right you’re right to say, Miguel, that if GSI what I said in February, if GSI was canceled immediately in the beginning of the year, then we would be more on the low part of the range. That’s definitely the case, and it’s becoming less and less likely because as we receive payment payments and cash in then, obviously, we are securing the year more and more. And now most of the I mean, at least 50 or 60% of the year is behind us. So, definitely, I’m I’m I’m we are not likely to get to the low part of the range, but more around the middle mid mid part of the range.

And, if the organic growth is confirmed in the second quarter the way we see it, both in terms of Connect and Aid, especially more on Connect, which has less visibility, then definitely we should be shifting to the higher part of the range. So that’s the way we see it. Right now, the momentum is is quite good. And don’t forget that that does not include the divestment of Linksio because the guidance excludes any change of perimeter. So don’t forget that we are divesting Linksio, which is roughly a €45,000,000 EBITDA on six months, which should be out of the out of the perimeter of the company since starting July.

So that needs to be restated within the guidance, obviously, because this is a change of scope. And and potentially but timing is more uncertain about when m and a will come in the year, if it’s going to be second, third quarter third or fourth quarter within the year, there will be some contribution there. But that’s basically that’s basically where I see it. Scope being the same as of today, we should be now in in in a in a, I would say, normal case situation more in the middle part of the range and confirming the organic growth in the second quarter, we should be moving to the upper part of the range I confirm.

Christophe Guerin, CEO, Nexans2: Great. And then just to finish off, in power grids, I remember the second half of last year, the margin was a bit weaker sequentially. Anything to worry about this year? Or still think that you can top last year’s full year guidance full year margin of 13.7%? Thank you very much.

Jean Christophe Julia, Deputy CEO and CFO, Nexans: No. I mean, today, the way we see it today is that we should be at a strong margin level in grade. There’s no we should be definitely at the level that we’ve seen in 2024. We don’t foresee any major differences.

Christophe Guerin, CEO, Nexans: Thank you, Miguel. Last question, maybe?

Conference Operator: Indeed, indeed. The last question comes from the line of Philippe Schweinck calling from DWF. Please go ahead.

Jean Francois Ganjon, Analyst, ODDO: Yes. Good morning, gentlemen. One two questions, please. Firstly, on autos, you said you might dispose that already early next year. I think that’s different from previous communication when you said it needs a settlement in Ukraine First.

So what has changed here? Secondly, in The United States, there’s a lot of tendering for onshore networks. Is your Charleston factory able to compete for those deals? It used to do onshore cables in the past, I believe. Thank you.

Christophe Guerin, CEO, Nexans: Maybe maybe let me take the second question. Yeah. Of course of of course, Charleston is able to do both land interconnection and subsea interconnection, But we keep we we we, you know, we we keep prefer as much as we can to use our facility in Charleston for subsea interconnection because we have a balance, I will say, both in installation and production. If you do land interconnection, you don’t use your vessel anymore. Of course, on the margin that we see in the subsea interconnections for the moment are a bit better than what we see in the land in The U.

S. Market. Regarding the first question, GC, do you want to

Jean Christophe Julia, Deputy CEO and CFO, Nexans: take that? Yes. So for Autoluxic, maybe we’re not clear, we don’t need end to the conflict between Russia and Ukraine to divest the asset. I mean, remind that the asset has never been impacted at all since the beginning of the war in 2022. It has been fully producing, fully operational even with more load than expected due to some other competitors like Leoni, if you remember Leoni that went bankrupt.

So in fact, the asset has been performing very well. I mean, so the end of the war was not triggering event for the divestment. And then today, we are progressing on that front. And even though the war is not over yet, it’s not stopping or having any impact on whether the business or the process of divestment.

Conference Operator: You. There are no further questions. So I will hand it back to your host to conclude today’s conference. Thank you.

Christophe Guerin, CEO, Nexans: Thank you very much. Thanks a lot for your attention and see you for future results and for the half year results in July. Thank you.

Conference Operator: Thank you for joining today’s call.

Christophe Guerin, CEO, Nexans: You

Conference Operator: may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.