Nexans Unsp/Adr

Ladies and gentlemen, good morning and welcome to Nexans full year 2023 earnings conference call. As a reminder, this conference call is being recorded. You will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star 1 on your telephone keypad. I would now like to turn the call over to your host for today's conference call, Mr. Christopher Gurin, Nexans CEO. Please go ahead, sir.

Yeah, thank you. Good morning, ladies and gentlemen, and thank you for participating in Nexans Conference Call. I'm Chris Guérin, CEO of Nexans. We are here with Jean-Christophe Julliard, Deputy CEO and CFO on Elodie Ramouillot, VP Investor Relations. I will turn you over to Elodie, who will go over the conference call rules.

Thank you, Chris. I would like to remind participants that statements made during the conference call, which are not historical facts, Our forward-looking statement 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 URG, along with the audio replay of today's call that will be posted on our website, nexons.com. And Antonio, back over to Chris, who will go over the 2023 highlights.

Thank you, Elodie. So, as you can see, Nexons' robust performance in 2023 were, once again, demonstrated by Demonstrating once again the scale of our transformation since 2019. We delivered a record adjusted EBITDA margin, exceeded our normalized free cash flow generation expectation. All these were done despite our difficult start, as you know, in generation and transmission due to the ramp-up cost associated with our unit in U.S. and the termination of contract with a low margin. This GNT business is still transforming under the new leadership of Pascal Radu, and we look forward to its future success with a strong improvement already associated with the H2 result. Overall, the 23 performances also confirm the transformation of Nexon's year-over-year into a more profit-oriented, innovative, and customer-centric group, thanks to our transformation platform. In parallel, and as well, we are very proud about it, In parallel to this profit generation, we have made considerable progress on our sustainability goals with a significant reduction of CO2 emissions across the group. I'll come back to that. Let's shift to page three to start this presentation with the, I cannot avoid it, the recent announcement linked to the signing of a landmark agreement to acquire the iconic company called La Tribinetta Cavi. an organization recognized for their excellence within the European medium and low voltage sectors. Based in Italy, La Trebinetta Cavi primarily factors low voltage cable for building application on infrastructure as well as fire retardant cable system on medium voltage cable for renewable application across 30 countries. The company is about 700 talented people and generate current revenue of more than 800 million euros over the last 12 months. So four main units, and we mentioned as well the transactional terms. It's a 5.6 multiple, based on 2023 EBITDA, EBITDA, EBITDA, sorry, pre-synergy, and a 4.6 level of multiple post-synergy. Moving to slide five, um with the 2023 mining light as we mentioned last july we have make a significantly upgrade of our guidance in 23 for midpoints from uh to reach a midpoint from 600 million euro to a midpoint of 6 30 million euro so despite the difficulties as mentioned on gnt the action we took to keep improving our profit profitability overall on cash flow generation through the year 2023 are here showing the evidence of their robustness to reach this financial performance. So we have been able, as you can see, to reach the high end of the range at €652 million EBITDA, including share-based compensation expenses. But as we mentioned last July, to be comparable with PEERS, we have adjusted for those elements, and we are then concluding the year at a €665 million adjusted EBITDA. In terms of normalized free cash flow, our profitability, productivity improvement led to significantly improve our free cash flow conversion in all businesses. It's not only a topic of down payment, it's as well a significant improvement on the working capital aspect in all sectors. But on top of that, we had a down payment collection for some important projects. that exceed our expectations. So as a result, as you can see, we reached a free cash flow of 454 million euros for a guidance that were around, I would say, 250. So as I mentioned, I'm very proud about it. In parallel to this profitability increase and free cash flow conversion, we have continued to reduce our CO2 emission at minus 36% supported by our E3 performance model. that now systematically measure the efficiency of each individual businesses in terms of economics, environment, and engagement, and making sure that everything converts to the same direction. Moving to slide six, let's take a deeper look of the key highlight of the year in a broader perspective. As you can see, we are making solid progress, advancing in our market leadership, strengthening our profitability, improving cash flow generation, even if sometimes we are facing a lower demand environment in some regions. So as you can see, we reached a double-digit EBITDA at 10.2%, a very, very strong result compared to the legacy of the group uh superior cash generation reflecting reflecting a very strict working capital management so we have reached 68 normalized cash conversion return on capital employer 20 20.7 percent on the i will come back to it uh we will propose to the general assembly a dividend of 2.3 euro per share, and we, GC will comment it, we have a very, very solid balance sheet, which is maintained. We, in terms of M&A, for the highlight of 23, so, of course, is the acquisition of RECA at 160 million euro revenue, very solid backlog, 6.1 billion, and with all projects that have been confirmed, and we received in the last weeks the recognition to be on the A list of CDP climate. Let's go to the number on the page 7. So, as you can see, we reached an EBITDA of €665 million, adjusted EBITDA at 10% profit, free cash flow €454 million on return capital employed at 20.7%, taking into account that electrification reached a level of 26%. Page 8. So, as I mentioned, this E3 unique performance model empowers our managers everywhere in order to keep improving our financial and environmental indicators. This is why we are now calculating both, of course, the return on capital employed for each individual unit per customer and product, but to ensure that the growth is not on the growth of our businesses and revenue and profit are not detrimental to our carbon footprint. In addition, we calculate the return on carbon employed for each individual business, plus, of course, reduced transportation, more and more local for local, and reduce the carbon content of our product. This is the recent announcement of our partnership with Trimet or Alcoa that we just published with low carbon aluminium. So, as you can see, very great, I would say, success in the CO2 emission, because we are at the minus 37%, scope 1 and 2, on minus 36 for scope 3. A word on slide 9, you know, the key levers of supporting the transformation of the group. it's uh it's about um that we established in 2021 for during our capital market day all our strategic initiatives are outperforming thanks to the deployment of repeatable offer in the renewable energy on amplify reach already 80 million euro where the target was 50 million euro at the end of 2024 so above the target obviously overall but as well a year ahead The same for the premiumization of our offer, which really represents for us a structural effect on our margin improvement. We reached a shift prime at 47 million euros incremental margin, where the target were at 40 million in 2024. This is linked to the fact that the customers are really happy and satisfied with our new offer. On page 10, the evolution of our shift platform, both performance and prime, keep raising the bar on the threshold of EBDA on cash flow conversion. Sometimes we say a value burner for one day could be a value burner forever because we keep raising the bar every year. But what you can see is that we made a significant improvement on converting our low margin unit into profit driver as 20% of our electrification revenue has been converted into profit driver thanks to our unique transformation platform. On the page 11, a word regarding our asset rotation. So I will not come back. We have made the disposal of our telecom system in 2023. So Nexon has no connection at all or link with the telecom business, at least on the land part. We have acquired RECA, 160 million euros, of course, on Tesla. I will not comment on what you know, but let me announce as well the level of synergy uh that have been uh incremental we are plus 20 percent from night synergy at santelza plus 50 percent from night synergy at reka as you can see twice bigger twice faster because we reach in both case in the first year of integration, the total amount of synergy that was planned for the third year of post-integration. So, of course, this M&A blueprint integration that we have made very well structured gives us a very high level of confidence for the new integration to come. Let's move on the next page. So page 12, just a reminder that we have made a significant investment. Alden plant expansion in Norway that has been completed. We have qualified and started the first production of cable in this expansion. Everything is running perfectly well. We have announced as well a third cable laying vessel. that will benefit us in terms of new revenues in 2026. I've signed an MOU with the American government last December for an opening of a new, of a greenfield unit in Morocco. in the south of Casablanca that will open in 2026 to support all the electrical grid of the Moroccan territory, but as well African. And we keep investing in our usages business in terms of technology for more fireproof product and as well implementing Industry 4.0 everywhere in all our units in the world supported by our key partner Schneider Electric. In terms of shareholders' returns, let's go to page 13. So we will propose a dividend of €2.3 per share, which is a growth of 92% versus 2021. And you see that constantly we keep improving, which gives us a dividend payout ratio of 40%. But we need to notice as well that the feedback that we received from investors, that in terms of total shareholder returns at the end of 2023, we are in the three-year base, we will reach plus 48%, but on the five-year base, and that's the start of the management team, we reach 270% growth of our TSR. Let me turn now to Jean-Christophe that will guide you to the business overview and the financial items.

Thank you, Chris. So now I'm moving to page 15. And now if we look at the evolution of the top line and the organic growth of Nexon, you see that at group level organic growth for 2023 is at minus 0.9%. But again, it's always what we communicate. You know that part of that and you see that on the other segment as We have a strategy, the aim of reducing the metallurgy business, the external sales on the metallurgy business that was announced in 2021. So if you exclude this, I would say, objective of reducing those sales, which are down almost 18% in 2023, the group organic growth stands at plus 3%. When we look at the margin, group adjusted EBITDA margin, it improved by one point versus last year to reach plus 10.2%. It's an important step for Nexance because it's the first time Nexance is reaching double-digit adjusted EBITDA margin on sales, number one. Number two, if you remember, 2024, we had the commitment to reach EBITDA margin percentage between 10% to 12% by the end of 2024. So we are already within the objective a year ahead. Now if we look at the different segments of business, I will start with electrification. So electrification organic growth is minus 1.5%. I will comment in the coming slides basically each businesses of electrification. Again, here we have announced that we would terminate the umbilical business, oil and gas, offshore cables, so this is explaining part of the negative organic growth of the electrification and in G&T. If you exclude basically this also strategic decision to get out of oil and gas, the electrification organic growth is plus 2.4%. On terms of margin, you see that despite the issue we've had with high-voltage GNT in 2023, the overall adjusted EBTA margin of electrification is improving in 2023 by 0.5 points, 12.5% adjusted EBITDA margin on sales, which is also a record for electrification, and I will detail where this is coming from. non-electrification had very strong positive organic growth at 13.7 percent mainly explained by two falls number one the harnesses business that continue to grow plus 18 percent growth organic growth on harnesses and 10 percent growth on the other industry industry segment isp So quite strong, I would say, organic growth of non-electrification. And you see also that the margin on non-electrification is growing by two points to reach a record of 10.6%. And that's driven by different factors, but one to notice is the tremendous, I would say, profitability improvement of the mining business in the U.S. And finally, I commented that other activity minus 18%, this is mainly driven by the sales of metallurgy, that we purposely decrease as per our strategy. Now, let me detail a little bit the evolution of the businesses. And I move to the next slide on page 16. And we look at generation and transmission. You know that generation and transmission, it has been a difficult year in 2023. We announced in the first half of 2023 a low point in terms of margin of that business despite a record backlog we we said that it would be a low point in h1 in the first semester then we will gradually recover this is what happened in the second half of 2023 you see on the graph that the margin improved by three points to 10.8% which gives us a 9.5% EBITDA, adjusted EBITDA on sales margin for the entire year. We will continue the improvement of the margin gradually in 2024 first half and then higher level in the second half of 2024 when we will start recognizing revenue on the recent award of the Euro-Asia contract. When we look at the organic growth, it's plus 1%. But again, if you exclude the umbilical termination of the business, the growth of G&T top line is plus, organic growth is plus 17%. Then one word on the record backlog. We moved from 3.5 billion at the end of December to 6.1 billion euros at the end of 2023. This is a 74% growth of our backlog. Obviously, the two major projects that were awarded to Nexens in 2023 are the Euro-Asia, 1.5 billion euros, and the Tenet frame for 1.7 billion euros. If I move now to the next slide on page 17, and we have a look at distribution, distribution is it has definitely be a record year for nexon's in distribution both the top line increased by five percent organic growth plus five percent and the margin improved by 78 percent with a record adjusted ebta margin of 13 percent um definitely this business has been performing extremely well in all of the region of the world where now we are in a situation where basically all utilities are realizing that grid replacement and investment are now a must I would say that the margin expansion is mainly linked to this high demand and the price power that we're having, but also the successful development of our shift transformation. I move now to usages on page 18. You see that on usages, we've had a negative organic growth of 6%. which we explained by the normalization of the volume we've said that in 2022 we had abnormal level of volume in sales mainly in north america these have come to a normalization the second second quarter of 23 and third quarter of 23 explaining the minus six percent again mainly in north america if not completely north america but what is interesting to notice is despite This lower revenue level in 2023, we continue to improve the margin of the business. Adjusted EBITDA reached a record level of 14%, 13.5% to be precise. Adjusted EBITDA on sales, which is a growth of 4%. And this is coming again from what Chris explained on our shift transformation, stronger pricing, and our Amplify Solar Tracker offer. So we are continuing to be very positive about the future of usages even in 2024. Now I would like to take you through the main financials for the year 2023. I will start on page 20 with the profit and loss. So again, A record adjusted EBITDA of 665 at 10.2%, as I said, within the objective of 2024. I remind you that adjusted EBITDA since June 23 excludes the IFRS 2 charge, which is our share plan, basically. This amount was 13 million for 23 and 16 million euros for 2022. For this table, for comparison purposes, we updated 2022 adjusted EBITDA reflecting that. You see from the bridge that the increase of adjusted EBITDA of plus 8% versus 22 is coming from the electrification business for 25 million, despite, again, the generation and transmission issues we've had, plus 25 million. And then from industry and solution, that that outperform and generated incremental EBITDA of 53 million euros. In 2022, we had a one-off gain of 55 million euros for the sale of land in Europe. That was in the line of other operating items, explaining in 2022 the higher operating income. The world on net financial results, That increased significantly due to the higher cost of debt, obviously, and some refinancing we've done at the beginning of 2023 on the matured bond. And we had also some adverse forex impacts. Income tax is lower in 2023, mainly due to a lower tax base, and also to the reversal of different tax assets for 2022 million in some countries, since the business plan that makes sense is improving and the visibility is better. Net income from operation stands at 223 million euros. I will now move to the next page, page 21, and we look at the net debt and the net debt evolution of Nexon. You see that the balance sheet of the company remains very strong. The leverage ratio remains flat at 0.4 times net debt to EBITDA. And we have significant headrooms on our covenant. despite the acquisition of the Reka asset in Finland. Cash flow from operations stands at 511 million euros, And we continue to have a working capital improvement of very significant of 287 million euros, mainly explained by the high down payment we receive from G&T, which is a consequence of the big awards of 2023, but also continuous improvement thanks to shift and our transformation on the other cable business segment that improve working capital by 70 million euros. CAPEX stands at 377 million euros, including almost 200 million euros of strategic CAPEX, with the extension for 150 million euros of the Alden new lines of production, which are now in operation since the beginning of 2024, and also the first spending on the new third vessel of Nexens for 50 million euros in 2023. After financial interest paid, dividend payment and cash outs from the acquisition of RECA, net debt amounts to €214 million at the end of 2024, which is again a flat net debt despite acquisition of RECA and massive investment in our high-voltage business. I move now on page 22, and we have a look at our liquidity, so very strong liquidity, strong balance sheet, cash on the balance sheet, flat versus last year, in excess above 1.1 billion euros of cash, which give us obviously tremendous maneuver to develop our expansion plans. Total liquidity of €1.9 billion, including €800 million undrawn revolver credit facility. And you see here the maturity of our growth debt, total growth debt of €1.3 billion, and the different maturities. We refinanced one bond at the beginning of 2023. The next one is a 2024 bond, €200 million you see on the bridge that will be refinanced in the coming weeks. Now I move to the page 23, and I just want to maybe spend a few seconds on having a look of where we stand. We are one year before the end of our equity story, so it's a good time to start to have a look of where we stand on the different commitments we took in SEMRAID 21. You see that for each of the commitments, We are whether in line or we exceeded the target. Obviously, we are already within the commitment for EBTA. At the group level, we are at the beginning of the range, but electrification activity, we committed 11% to 13%. We are almost at 13% a year ahead. And again, despite the issues on DNT, Cash conversion has been outstanding at 70%. Return capital employed 26%, way above the target. And operating working capital, again, is at a record level, almost 0%, 0.3%, so very strong performance. And leverage, as I explained before, remains very low. Now moving to page 25 and have a look at what we will be guiding for this year, 2024. So we will continue to improve, we will continue to deliver, and we are committing to an adjusted EBTA guidance range between 670 million euros to 730 million euros. This does not include the announcements of Latrivineta acquisition, since by definition it's not closed and it's not part of the guidance. A normalized free cash flow between 200 million to 300 million, obviously taking into account the very strong level of down payment received at the end of 2023 and therefore explaining the big part of the big achievement of cash flow in the year 23. This being done I will now turn to the next page to Chris.

Yeah just so we as you can see we are very solid guidance for 2024 but we know as well that we need For our main investors, more catalyst with long-term projections. So this is why we confirm our next capital market day that will be holding on November 13th in London. Now let's open for questions. Thank you very much.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question from the queue, please press star 2. So again, that is star 1 for your question today. And our first question comes from Daniel Acosta from Goldman Sachs. Please go ahead.

Hi, good morning. Thanks for taking my questions. I mainly wanted to focus on two things. Regarding the guidance for this year, can you give us a bit of a color in terms of the expected improvements on a divisional basis, particularly how much of it is just G&T recovering from some of the issues last year versus the more cyclical parts of the business? And the second point is related to that and is just regarding G&T and the situation in the U.S. with some of the contracts still being retendered, Euro-Asia coming in the back end of last year. What's the sort of utilization that you model into this guidance for the first half and the second half? And sort of what are the puts and takes on that given the situation with some of the contracts? Thank you.

Okay. Good morning, Daniela. I will take the first question or the first part of the question, which is basically giving some meat around the guidance of 2024. Definitely, as we always do, we are not betting or we are not putting our numbers on our guidance on more volume and growth in distribution pages. So, basically, we assume the same level of organic growth, zero organic growth, in fact, in those businesses for 24. So, we are quite conservative, but we continue to expect Expand the margin like we've done in the past on distribution and usages. So that will be a contribution, basically that margin expansion will be a contribution into the increase of the adjusted EBITDA in 2024. That's one thing. We are seeing more normalization in industry, no more further industry and solution, no more further growth, both in terms of top line and in terms of margin. So more, I would say, continuity. And finally, the last piece, which is very important, obviously, for the guidance of 2024, is basically the recovery that started in the second half of 23 on the adjusted EBTA margin of the G&T business, because, number one, the one-offs we've had on the first half are behind us. uh we we they will not repeat themselves in 24 by definition and then the contract that has lower margin that were executed in 2023 will start to significantly diminish and have lesser impact uh i would say um on the on the margin of the business in 24 and as you rightly said we will start now to execute the euro asia contract mainly starting the second half of 2024 which has a very very strong margin margin level so basically yes a very i mean a ramp up i would say continuous ramp up as we said of G&T, and also in G&T there is a hump up of the margin percentage, but there is also a quite significant lift up on the revenue because we have now the extension line producing revenue, so the top line will grow by by about 40% in terms of revenue. So you will have both versus 23, the improvement of the margin gradually, as I explained, and at the same time, a bigger, much bigger revenue line due to the extension lines and the bigger backlog will start to execute. So that's basically how we come up with this increased guidance for 2024.

Sorry, can I just actually... Just a clarification on two things that JC just mentioned there. Distribution, you said no growth, but given the hypercycle, just a bit surprised on that given the commentary on the outlook on that.

There is a little bit growth, but not significant growth. There is a little bit, but we always prefer to be, you know, Daniela, I think you know us now, we always prefer to be conservative and not assuming in distribution and usages significant organic growth, because obviously, by definition, we don't know what will be 2024 and... but we have uplift in margin so uh margin will continue to improve quite nicely in 2024 as we see it a little bit of distribution growth definitely no usages growth at all a little bit of distribution growth but mainly margin uplift thank you but the dynamic on the frame agreement for for the medium voltage cable distribution are very very positive right now uh i think the second uh part of your question is uh

An update regarding a contract in the U.S. First of all, maybe you've noticed that NYSERDA in New York have announced as well with new full auction coming up at the end of February. We know that as well that Sunrise is in rebuilding process with Empire Win One with new submitted proposal. The customer should have a feedback at the end of the month. The only thing I can tell you is that Sunrise is already under production on our side, and we receive as well advanced on-payment from the customer. So we consider that it should be a positive catalyst for us, but we need to expect the final feedback from the customers. Okay. The GNT recovery, yes, recovery point in terms of margin from one semester to another one, keep improving in first half and second half, again an improvement. Overall, what we see in terms of utilization is a fully loaded situation in all units. including the ones that were most bold for awaiting the Euro-Asia project in Japan. So you should see a very strong organic growth in GNT in 2024. Thank you.

If I may just quickly on Euro-Asia, the advance you got seemed very low in comparison with the size of the contract. Was that a trade-off on lower advances, better margin, given what you just mentioned, or how should we think about it?

No, it's not. We will receive the total advance payment of 15% of the contract value. The rest will come in the coming months. I remind you that we are still, there is one milestone that needs to come, which is a financial close of the project. Despite the project is 70% funded by the European Union, there is a portion of that that needs to be funded. However, we will get the remaining down payment of the contract in the coming weeks, a month the i would say first first second quarter uh the the piece we got uh is part of the down payment but it's more a reservation fee to lock the capacity for uh for euroasia to lock the line and it's a non-refundable uh reservation fee of 62 million euros that's what we received uh because the president is to proceed and the notice to proceed and so on but it's a part of the down payment which is non-refundable

you thank you next question and we're moving on to akash gupta from jp morgan with our next question please go ahead yes hi good morning and thanks for your time i have two as well the first one is on portfolio so you made a good progress on acquisitions with the um acquisition of la trivanetta kavi announced last week. But maybe perhaps you can update us on where do we stand on the divestments and what's the plan in terms of disposing the remaining non-electrification businesses? So that's number one. And number two is on profitability of La Triveneta Kavi. If you can elaborate, how does it compare? And maybe also provide some rough split of revenues of 800 million plus between medium voltage and low voltage. Thank you.

Hi, Akash. Thank you for your question. I will start with a divestment, an update on the divestment. So now Telecom is behind us. We have, I remind you, two blocks we want to divest. The first one is harnesses. Unfortunately, this one is not progressing that much due to the situation in Ukraine. Despite the fact that we said, we explained that we have duplicated the asset outside of Ukraine. So if the war was going to move further into the country, we would be able to switch production somewhere else. And now we are basically, with that being done in 2023, we are now... I would say restarting the process of divestment, but to be transparent with you, it's not progressing that much. And I guess until this situation in Ukraine improves or changes a little bit and gets more visibility, I think harnesses will be the last piece to be divested, and probably not in 2024. The second group of assets is the entire industry and solution block, 800 million euros. So this one we are progressing well. We always said that it would be the last one to go because of the carve-out. We've completed, I would say, a big chunk of the carve-out. We are now attacking the – we started to attack at the end of 2023 the information system ERP separation, which is well in progress. We should be done by that, I would say, in the first half of 2024, and we will start disposal of the asset, I would say, end of first half, beginning of second half, and hopefully get the asset divested by the end of 2024, or I would say first quarter of 2024. of 2025, so that's what I can tell you on the divestment.

And regarding La Trevinetta KVI, so it's a roughly 90% or 9-0 on low voltage cables, so for various applications, and the rest is about medium voltage on solar, but we have already a huge plant in Italy, in Battipaglia, doing a medium voltage show. There is a very, very low overlap versus what we have already. And one-third of their revenue is located in Italy, 20% in Germany, and another 20% in France, and after in very various countries. We don't disclose the profitability at that stage, but it's a pretty good number.

And maybe a follow-up on the guidance. So when I reconcile your comments that in usage and distribution, you are looking for flattish top line and margin expansion, and then in G&T, it's 40% organic and margin expansion in both first half, second half. What is implied for industry business? Because it sounds like you are probably guiding for at the midpoint big correction in profitability of industry segment. Is that correct or am I reading too much into it?

No, industry will not go down in 2024. There will be a slight improvement in top line, mainly driven by the continuous recovery of, I would say, aerospace that is continuing to improve. We don't know, obviously, all of the segments. What we're foreseeing is maybe a weaker situation in the first half due to automation backlog being low. So there's probably going to be some impact on sales on automation, which is one of the large part of industry and solution. But we see a rebound in the second half. So overall, I would say that you have a moderate top line growth. and the margin will also increase a little bit. But it will not be, I mean, that different than the level, extraordinary level of 2023, but it will continue to improve.

Taking into account that aerospace is booming, you've seen the record backlog of Airbus this morning, and we have more than 50% market share in that territory, fully loaded on as well some business like medical, which are very, very... I would say positive.

Thank you.

Thank you. And up next, we have a question from Sean McLaughlin from HSBC. Please go ahead.

Good morning, and thanks for taking my question. Firstly, just thinking about CapEx in 2024, given hypercycle, given, I guess, your growth expectations, just what should we be thinking about Capex this year? And I guess, is that then a new normal level going forward?

Yeah, thank you for the question. So the Capex in 2024 will pretty much be at the same level than 2023, slightly below, but not that much. We will have the bulk part of the investment in the new vessel, That started only at the end of 2023. The investment, second half of 2023, last quarter of 2023, will have the full remaining execution on that CapEx in 2024. So that will kind of offset the investment that we did in Alden in 23. So we'll spend about 140, 50 million euros on the vessel in 2024. And then we have basically maintenance capex that will be around 210 million euros. So basically we will be around 350 million euros on the total capex versus 400 million. 423. So slight reduction, but not yet significant. The capex normalization will really start starting 2025.

Thank you. And a second question just regarding the high voltage market environment. I mean, all the cable suppliers now have record multi-year backlog visibility. I'm just wondering how current market demand are, how transmission operators and offshore wind developers are looking at cable contracts going forward, and what you expect in terms of new water intake in 2024?

Yeah, I think we have still significant tendering activity. You've seen as well the evolution of the backlog of our competitors. We are certainly the one that still have some slot available in 2027 and 2028 that give us in good position for future negotiation. But I will say we don't see any slowdown in the tendering activity so far. All nations are waking up for energy transition on more interconnection. So I'm not concerned regarding future negotiations And you've seen as well that in U.S., new auctions coming up in New Jersey and New York. So, there's a kind of race between states in U.S. between each other. And RT as well announcing new offshore wind farm coming up in France. So... The objective for us is not to show additional CAPEX so far. We would like to get the returns of the CAPEX that we already made on the one that we already announced. But we are on the, I would say, evolution of a full utilization ratio of our line, both in production and installation. So very high confidence in that regard. Thank you. Thank you, Sean. I know it's a very busy morning with many, I would say, publications. Maybe another question?

Okay, so just as a brief reminder, that is Star 1 for your questions today. And up next, we have a question from Miguel Borrega from B&B Paribas. Please go ahead.

Hi, good morning, everyone. A couple of questions for me. First generation transmission, Obviously, the margin remains below your expectations. And just wanted to ask, you have two out of three impacts that will disappear essentially in 24. So just can you give us some color around the percentage of legacy versus new awards in the 2024 P&L? How much is that is legacy? How much is that is new awards? Just trying to calculate. the step up in the margin we should see in the second half and then also in 2025?

I cannot give you the exact percentage. I will tell you that we have some contracts that were executed in 2023 that will go through the first semester of 2024 with lower margin level, mainly impacted by mainly coming from pre-inflation time and that we need to complete execution on. So that will continue through at least the first half, second half of 2024, but diminishing in the second half. And then in the second half, as I said, you have the Euro-Asia revenue starting to kick in, and the margin on that project is definitely at a different stage and much more accretive. You will see an improvement. It will be gradual. The bulk part of the improvement will be in the second half, and then it will be in 2025 and 2026, we will be back to the 17%, 18% target EBITDA margin. uh definitely what what we don't have and you're rightly to say we had some one-off pure one-off like we took and liquidated damages in the account of the first half of 2023 that by definition it was on the contract called figuring this contract is finished this one-off is behind us will not repeat itself so this is why also uh each one was 23 was a low point and and from now on uh the the manufacturing plant both in charleston alden are functioning and manufacturing according to our expectations. So, the question is just to evacuate, terminate the contract with lower margin pre-inflation, and then start the execution of the big backlog with a big contract that was awarded to us with much better margin. And you'll see the hump-up coming up in 2024 and 2025 to reach a level of 26% or 18% margin.

That's very clear. Thank you. And then if we turn to usages, margins have now normalized. Where do you expect this to go in 24? Is there further weakness that you're seeing from the second half into the first half of this year?

Oh, yeah, it's normalized in North America, at least on our side. What we see is that we're not based on growth on usages because the level of predictability is pretty low there, even if we believe that North America will go back to single-digit growth in the incoming months, and Europe may have a first semester very weak. But overall, we still have our... transformation program that keep feeding our margin improvement because we still have some unit at a single digit ABDA on sales that are going into our transformation program in order to reach a 10 to 12% ABDA on sales in the coming year. Even if the year-end demand could be a bit lower and may affect the slowdown, we are very, I would say, positive on the margin improvement in the coming months.

Thank you. And then, just one last question on metallurgy and others. So, this was 13 million eBTI positive in 2023. Can you give us some color on what this includes, and should we expect a similar figure for 2024? Thank you very much.

Yes, Miguel. So, basically, this is the adjustment of IFRS2 charge that went into the other segment. This number was 13 million, so in fact, this is why you see the number. This number for 2024 will be around between 18 to 20 million euros. The rest is basically the metallurgy margin of the metallurgy business, which is, as you know, quite low, the margin on the metallurgy sales. offset by some corporate costs that are not recharged, net corporate costs not recharged to the unit. So that's basically the combination of those three, and the reason of the increase is IFRS2 recharge that we took out of the adjusted EBITDA.

Okay, so 18 to 20 million in 2024, that's correct. Yes, that's right, that's right. Thank you very much. Thank you, Miguel.

Thank you. And we have a question from Bastian Aggel from Burenberg. Please go ahead.

Good morning and thank you for taking my question. Regarding the acquisition of La Trovinita Cavi, when do you expect the transaction to be closed and to be taken into your account? Thank you.

We have our, let me, thank you, Bastien, for your question. Let me pass over to our general counsel, which is Nino Cusimano, Italian.

Exactly. Hello there. Hello, Bastien. Nino Cusimano here. As Chris says, I'm Italian, so I've been very involved with the acquisition of the trade. We're all very proud of it. of the transaction. We're expecting, to your question, we're expecting closing in June. There's, you know, the statutory time that you have to wait for the antitrust and Golden Power filing, but we expect everything to go smoothly through June. We should close the deal.

Okay, perfect. Thank you. So, I have another question. If we, let's suppose, expect the closing to be successful, that means your new EBITDA guidance, which excludes the acquisition, should be definitely higher, right, if we take into account this acquisition? Completely agree, yes. You're right. Perfect. Thank you very much.

Thank you, Bastien. Do we have a last question?

And our last question comes from Akash Gupta from JP Morgan. Please go ahead.

Yes, hi. Thanks for taking my follow-up. I had a follow-up on seasonality. Again, last few years, we have seen your first half has been a bit stronger than the second half. And just wondering, this time around, given you're expecting a stronger seasonality, projects in the second half and also a bit of slowdown in first half in some areas. So any commentary on how shall we expect the phasing of this guidance between first half and second half? Thank you.

That's a very valid point. You're right to say that typically we have a stronger half. Again, like you say, with G&T we foresee the improvement more coming in the second half than the first half. First half would be more at par with what we've done in the second half of 2023. So we will have probably a more balanced situation between first half and seven half than we had before, where it was a stronger first half and a weaker second half. But again, the backlog we are seeing today in usages, for example, we have a higher backlog at the end of... 23 beginning of 24 than we were last year uh so it's plus eight percent on the it's a short-term backlog obviously by definition it's usages but but uh we talked about the trend and distribution which is very strong we have already frame agreements for 2024 with volumes that are much higher than before We have usages backlog, which is plus 7%, 8% higher than last year, beginning of the year. So the signal, at least for the first quarter on usages, are good. Distribution first half should be good. But the only one that will help up the second half will be GNT. So yes, because of that, we will have a more balanced EBTA between first half and second half.

Thank you.

We have other questions. No? Thank you for your attention and I wish you a very good day. Thank you. Thank you.

Thank you. Ladies and gentlemen, that concludes today's call. You may now disconnect.