Nexans Unsp/Adr

Ladies and gentlemen, good morning and welcome to Nexon's 9 Months 2024 Financial Information Conference Call. As a reminder, this conference call is being recorded. Please note, your lines will be on listen-only mode for the durations of the call. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. I would now like to turn the call over to your host for today's conference call, Mr. Christopher Guerin, Nexon CEO. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you for participating in Nexon's conference call. I'm Christopher Guerin, CEO of Nexon. With me, Jean-Christophe Julliard, Deputy CEO and CFO on Elodie Romoglio, VP Investor Relations. Let me turn over to Elodie. That will go over the conference rules.

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 URD, along with the audio replay of today's call that will be posted on our website, nexos.com. I now turn you over to Chris, who will go over the nine-month highlights.

Yeah, thank you, Elodie. So if we go straight to page three, as you can see on the nine months revenue level, we are at plus 4% with a weak Q3 that I will comment, obviously. Acceleration in electrification close to plus 8% on the framework agreement and backlog visibility is still very high in generation and transmission with some new awards to come in coming weeks. Maybe a word because I'm sure that will be the main questions on the revenue on sales, on revenue on distribution and usages. Let me highlight the fact that we have been certainly a bit too aggressive in the month of August in terms of reduction of our inventories, which caused delays in deliveries in September and which by the time of October have been now caught up. So we had very delays in both sectors in the two last weeks of September that have been caught up in October. The months of October, beyond the catch-up of September delays, is higher than budget, so with a robust trend for October, November, and December. So there is just a I would say, a phasing of issues that we had on distribution and usage, but nothing alarming in regards to our organic growth for the year. We remain prudent on some markets that will come out of the GC, like a residential market in Europe, because we've seen that our customers suffer from some, I would say, order intake decline. But overall, 2024 will be a great year. Maybe I'll highlight some capex. we continue to reinforce our capacity because we have overall a high demand both of course in a high voltage but as well in a medium voltage i'm very proud to announce because it's more than a two years work with our partner property the launch of recycling i will say new capabilities in a launch from him that which is a capex of 80 million euro that i will comment if we go in page four that's uh specifically in regards to that uh i would say new investments uh we are very concerned by the risk of copper scarcity but more i would say willing to bring green copper offer to our customer We know that the demand for secondary copper, recycled copper, will be extremely high in the coming years, and that can as well generate a price premium. So our new recycling capabilities will allow us to recycle an equivalent of 80,000 tons, million tons, sorry. So that means... That's an equivalent of a small copper mine. A small copper mine is about 80,000 to 100,000 tons per year. So a very important investment in regard to circular economy. For patch 5, on patch 5, so we are building a new tower for onshore cables for 525 kV to support the Tenet frame agreement, but as well as some other frame agreements coming up in high voltage. So that's an investment of €90 million that will be in Charleroi, plus ARN Bodegan for the accessories, but as well Calais for increasing our, I will say, testing capabilities. And keep expanding on low-carbon, medium-voltage cable because of the grid renewal in Europe, a €50 million investment in Bourg-en-Brasse. that will be, I would say, commissioned in the incoming year. So keep pace in increasing our capacity. Let me now turn over to GC for the revenue, I would say, items. Thank you. Thank you, Chris.

So moving to page six, 4% organic growth, nine months, 24 versus nine months, 2023. If we exclude the metallurgy, as I explain every quarter, Our strategy to decrease our external sales on the metallurgy business, if we exclude that strategic intention, then the organic growth nine months is almost 7% at 6.9%. Quarter on quarter, Q3 2024 versus Q3 2023, it's a minus 0.5 organic growth. However, when you split that slightly negative organic growth, in fact, you have a positive plus 8% in electrification and a minus 8% in non-electrification, mainly due to two sectors in non-electrification, automation, which continues to be slow to recover, and automotive harnesses, which is also a double-digit sales decrease obviously reflecting what you see in the market right now for automotive. And then, of course, 19% decrease Q3 year-on-year on the other business. So, in fact, the electrification businesses, again, are growing 8% quarter-on-quarter. If you look at the nine months year-on-year, electrification, 4% for the group, 12% for electrification, minus 4% for non-electrification, again driven mainly by automation and an automotive business and 14 percent negative for the other segment which is again metallurgy so globally speaking uh what is important for us is that electrification businesses whether it's on a quarter to quarter basis plus eight percent on a nine months to nine months basis are growing twelve percent now if i move to the next page Page 7, and we look at generation and transmission. First to notice a strong growth of almost 20%, 19% of the backlog, adjusted backlog, that reached a record level of 6.2 billion from September 24 to September 23, mainly driven by the inclusion of currency interconnection in the adjusted backlog. In terms of sales, a 36% growth quarter on quarter, and a 54% growth nine months to nine months, explained again by the additional lines of production to execute the backlog to new lines of production that started operation in the month of January of this year. Moving to page number eight, and we look at distribution. So in fact of distribution, we have, I would say, two different aspects. The first one on a quarter-to-quarter basis, it has been flat with a mixed between the region. We start to see a very nice rebound in APAC, where we've been growing 9% quarter-on-quarter. However, we have seen, continue to see, this talking North America, minus 7%. Europe is plus 1% flat, And the Middle East and Africa is growing two-digit, double-digit, so very strong momentum in Middle East and Africa, plus 11%. When you look at the nine months, the cells are growing organically by 2%, mainly driven by accessories, plus 5%, where territories are plus 1% growth, rather stable. If I move now to page 22, nine and we look at usages on the usage part so we had a growth in sales due to obviously the acquisition of attributable contributing in the third quarter of 2024 when you look organically you have a minus one percent organic growth mainly driven by the residential sector which is declining many in europe Whereas the commercial industrial sectors are catching up, are growing single digit in the region. Also to notice that in usages, North America is strongly growing, plus 30%. Quarter on quarter, we had a very low Q3 of 2023. And on the nine-month basis, it's a flat organic growth, mainly driven by a negative Europe and partially offset by a quite strong North America, plus 7%. Also, South America is improving on a nine-month basis, growing 3%. And again, globally, what we see is a decline in residential offset by an increase in the commercial and industrial market of usages. Now I will turn to page 10 and we confirm the guideline on adjusted EBITDA that we raised in July at the end of our first semester. 700 to 800 million euros adjusted EBITDA for the year 2024. We also in July raised the normalized free cash flow guidance by 75 million euros to reach 275 to 375. We also confirm basically the two guidance for the full year 2024, which will be again a record level of profitability for Exxon. And I will conclude again to remind you on page 11 that we have two upcoming events, significant events for Exxon, November 13 in London for Capital Market Day and U.S. Investor Day in New York on November 26. Thank you very much. Now I will turn back to Operator for Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will take our first questions from Daniela Costa from Goldman Sachs. Your line is open. Please go ahead.

Hi. Good morning. I have three questions if that is possible, but the first one I just wanted to ask you a bit more about. Can you clarify on the grade C interconnector? How much of the contribution that you had already in Q3, if there's anything from what you did in Q3 that you couldn't book and you will book in Q4 and just help us thinking through the booking of Great Center Connector from here. That's the first one and then I'll ask the others one at a time.

Yeah, thank you, Daniela, for the question. So on case interconnection, as you know, and I'm sure Chris will explain a little bit the momentum of the discussion right here, but just to speak about the figures and the booking. So we still not have received the final notice to proceed, but that should be coming in the next days. So Chris will talk about that. What we've received, though, is another down payment in the third quarter. In fact, it came early October. We received another close to 30 million. So we have continued to make progress on the contract, recognizing sales, recognizing margin. However, at a slightly lower pace than what we expected, because, again, we are waiting. We are, you know, that We don't want to expose the company and we are making progress according to the cash we receive and not faster than the cash we receive to not expose the company in case unlikely but still possible case the contract is postponed or canceled. We have received more cash again in October. We have continued to make progress in the third quarter. We've recognized about 30 million sales in the third quarter. Obviously, as soon as we get the final notice to proceed, which again should come quickly, there will be a catch-up on the project with much faster booking and acceleration for the fourth quarter of the year. So right now, I would say we're progressing, but I would say at a medium to slow pace until we get the final notice to proceed.

Sorry, on that, what was the original normal? What would have been the 30 million if you had had the notice to proceed? And so how big is the catch-up?

Yeah, it would have probably been about twice the number.

Okay, got it.

Maybe I like on the contractual, I would say, abolition. So you know that all the stakeholders have signed Recently, all the agreement required for the project between EFIPTO and Cyprus government on the European Commission. So all the revenue framework process has been agreed on. The main milestone coming up is the phase two of the survey of the CBET that should be planned, which is planned already in the incoming weeks. So that's the critical milestone to make sure that as it will be under, near the international water, and we need to make sure that there is no issue doing this survey. And in that, if no issue, notice of procedure will be signed just after this survey is received. So I would say mid-November. That's the situation.

Thank you.

And just to finish up on the numbers, Daniela, is we were expecting in july we were expecting the final notice to proceed by the end of august so in fact there's only for the quarter three there's only one month difference the fact that it's postponed now to uh to november for the quarter so that's why the catch-up would have been slightly higher if we had the notice to proceed in august we would have had a full blast of one month in september of revenue recognition so we would have been higher but not like that significant higher because okay

Got it, thank you. And my second question is regarding your comments on the medium voltage and I think also on the usages you mentioned on both the stocking. How shall we think about this in terms of the trends going forward and is it impacting pricing in those areas where we have had very strong pricing dynamics in the last sort of year and a half?

Yeah, I think it's a fundamental question when I see the reaction of the share price, Daniela. The destocking is more on our side. We have been a bit too aggressive on the level of inventories because the signals that we received from the market, specifically on usages were a bit negative in some areas, like in Europe for September. And we have been ourselves too aggressive in the destocking effect. So that encountered delays of supply on our side for our customers. that we have been able to catch up. So October and November are very, very strong months. Beyond the catch-up, we are at budget. We remain very vigilant. I think there is no issue on the major voltage side because it's a secure trend. So that may be facing delays because lack of labor resources to install the cable, but demand remains very high. And we have just renewed, and we are not able to communicate, but very strong frame agreement for the next two years with one of the key players with a very high level of volume for next year. On low voltage, I would say there is a mixed effect, as we can see from our I would say customers and partners are looking at Rexel Commons and Saint-Gobain Commons. Construction in Europe is pretty weak, so specifically in residential, but technical buildings and critical buildings are very, very strong. So I would say that we may have a disturbing effect from the market at the end of December, but nothing alarming in terms of revenue reconnection at this stage.

And not impacting pricing?

Yes, pricing remains stable, and this is why we are confident in regards to the financial guidance.

Thank you. And my final one is just more longer term. You have over the past couple of months made a lot of communications regarding this intent to use more recycled copper. I guess ultimately the clients pay for the metal, so they assume they will pay for the extra costs related to ramping that up. Or how is that likely to impact your margins and your financials going forward as you put more investment into that? And I assume that ends up with a slightly higher final product for the client?

Yeah, it's a great question. Let me answer in two steps. The first step is that, you know, we will purchase some scraps. So we will purchase secondary copper that have a low value at LME versus primary copper. So you have a cost advantage there. And secondly, we know that we have interviewed more than 150 customers recently in regards to access to secondary copper. We know that there is a premium for, I would say, green product made of recycled copper plus recycled polymer. This is what we will be able to offer starting in 2026. A complete 100% low-carbon offer. Because we will be able to, I would say, manufacture, I would say, road wire 100% recycled by campaign. So that's something that will be unique in terms of offer. But of course, I would elaborate a bit more during the capital market day. Because I think this vertical integration will be a strong disadvantage for the future.

Okay, thank you so much.

Thank you, Daniela.

Thank you. We will take our next questions from Akash Gupta from JP Morgan. Your line is open. Please go ahead.

Yes, hi. Good morning and thanks for your time. I got two as well and I'll ask one at a time. My first one is on usage and distribution. So you talked about some de-stocking on your side which impacted your ability to deliver and caused some weakness. Can you comment about underlying market and a bit of underperformance there? Was the underlying market was still growing in these two segments or was there some issues on the market as well? And then I'll ask my follow-up later.

Yeah, I would say that on distribution, demand remains very, very strong. You know, Akash, if we would have seen something different in terms of trend, we would not have announced this new CapEx. Our lines are still very saturated. But there is some up sticks depending on some contract because we have some, we received some big contract on solar farm, on the renewable farms. And as this project base, you know, we can shift from one week to another week. And that's what exactly what happened in September. We have some revenue recognition that we're supposed to be at the end of September that shift to the first week of October. So no concerns on distributions. We have as well a negative effect because we had consolidated two units into one in Finland. So we have to stop production in Finland to make this, I would say, transfer of production. So that affects our Q3 as well in the distributions. But now it's done, so they're running a full blast. In usages, I would say, I will not bring... more, I would say, granular comments than the one from our customers. There was a downward trend in residential market up to 8% to 10% in Europe. It's same in US. When I say US, it's North America, of course, obviously with a focus on Canada. But in Canada, it has been upset by industrial market in Q3. clearly, where in Europe, we're still facing some low volume on headwinds. And I would say that Europe will remain at that level to, I would say, the end of first quarter of 2025.

Thank you. And my second question is on GNT. I think in your opening remarks, you talked about some framework agreements that could be announced or that could be coming for award in the coming weeks. Maybe one question broadly on the demand supply situation. How do you see the demand supply situation given we also have a national grid in the market with a large framework that we heard from other market players? And when it comes to your capital markets day, how shall we think about potential for further capacity expansion on the subsea part? Is that something that you are considering or you are still not interested or not keen to invest more on the subsea side? Thank you.

I guess good try on the question for the capital market day. You know that I will not answer that and you have to be patient. on wait that we meet all together on the 13th of November. So I will not answer on capacity extension. I will talk about it on the 13th of November. Regarding frame agreements, you know that we are in discussion with RTE that has been announced in October. We are at least in exclusive negotiation for Centre Manche, one and two on Oléron project. And if everything goes well, we expect... remounted in roughly December with fall off in January.

Thank you Chris. Maybe a question on the demand supply situation like how do you see the demand supply situation now versus let's say at the start of the year in high voltage given we have some projects that might be getting pushed out while other projects that are being added to the pipeline. So how do you see the high voltage demand supply situation in general?

In general, very strong, specifically in Europe. Very strong, specifically in Europe. So no concern, no change of dynamic. We still have some, I would say, free capacity to offer compared to some of our competitors for some specific years. So it's pretty strong. We remain, of course, extremely vigilant in North America in regards to the elections. But so far, I would say no change of dynamic. Thank you. I think that will be the case up to 2030. We may have a change of dynamic post-2030, Akash, to be honest. But demand remains very, very strong.

Thank you.

Thank you. We will take our next questions from Miguel Borrega from BNP Paribas Exxon. Please go ahead.

Hi, good morning, everyone. Thanks for taking my questions. I've got three. I'll go one at a time. Chris, you sometimes talk about the hypercycle in medium voltage. Can you help us understand that in the context of your nine-month results? So your organic sales growth was 2% and flat in Q3. Maybe give us a sense of pricing and volumes here, especially in Europe and North America, and help us understand these new framework agreements that you often talk about. In what elements are they different relative to what you've seen a few years ago?

Thank you. So yeah, cycle on medium voltage is, of course, in very positive territory. I get the question very often from investors, which is to say why your growth ratio is not higher. I would say you need to take it as a sensitivity table, which is crossing organic growth versus EBITDA generation. We can grow up to 5%, 6% without any issues, but it could be for the margin. We know that between, I would say, 2% to 3%, it's still very accretive in terms of EBITDA percentage. And we can be, of course, it requires to be extremely selective, not only by customers, but more specifically by SKUs. If you want to capture more growth, it will be negative in terms of EBITDA generation percentage-wise. So this is, I think, this selectivity approach that we have since the beginning. In terms of frame agreement, what is the dynamic? It's related to all the investment announced by the DSO in the last years. You can see that they are all up plus 25%. And all nations are waking up at the same time. So that's creating a pretty high level of saturation of the equipment. But the difficulties on their side is that financing is there, demand is there. Their potential bottleneck will be access to labor resources because you need labor resources to install the cables on the ground in Europe. And that's the risk of, I would say, potential scarcity on their side.

Thank you. And then in G&T, Help us understand the evolution of your backlog sequentially. So there must have been something out of the backlog in Q3 execution-wise. And maybe also talk about new orders. Are you being restrictive in some way? How full are you? And then with regards to the Great Sea Interconnector, should we expect another 25 million EBTA in the second half of the year? Thank you.

No, in Q3, in backlog, we recognized revenue and we basically booked a project called in the quarter. That's the movement of the third quarter on the backlog of GNT. And the second part of the question was?

So if you can talk about orders, if you've been restrictive, How full are you? And then the impact on EBTA from Eurasia in the second half.

So the impact on EBTA, as I explained in the past, and we are on the trend of basically gradually improving our EBTA. I said that second half would be likely at the level of the first half in terms of EBTA margin for the business of G&T because we need to continue to fully execute the project With lower margin, that will gradually improve next year and the year after next to reach a much higher level when we fully execute the contract of the large contract of Tenet and KTC Interconnect two years down the road chart. Higher margin project. So that's basically no changes versus what I explained last quarter.

Okay. And then, if I may, one last question, maybe big picture. Can you give us your views if, indeed, we see copper shortages? What kind of impact would that have in your business? And maybe if you can break it down by business segment, if you can. Thank you very much.

In case of – so what do we see in terms of copper shortages today – not much at our level because we have a privileged access. And I would say the big names of the sector cannot see any copper shortage because of their size and the volume they represent for the supply chain or for the mining producers. We've seen that in the last acquisition made recently that medium-sized players are difficult of access. We are pretty active in M&A, and that's always something that comes out. Access to copper for medium-sized companies starts to be a potential issue. The big shortage could come if China and the U.S. are shifting to high demand in terms of energy transition at the same time, which is not yet the case in China and not fully the case in the U.S. So far, the main impact in terms of business would be in the one consuming most of the copper would be usages business, building wires, low voltage.

Major voltage is mainly aluminum. Okay.

Thank you. We will take our next questions from Alistair Leslie from Bernstein. Your line is open. Please go ahead.

Yeah, hi. Good morning. Thank you. A couple of questions, please. So just firstly on the divestments, you said last time out you were ready to kind of test the water in coming months. So can you maybe update us on kind of level of interest, potential timing, et cetera? And then maybe specifically for automotive harnesses, I appreciate you say it's obviously been relatively resilient, but does the more challenging backdrop there in autos Does that basically take a sell there off the table for now? And the second question is really on the selectivity strategy. It's clearly paying off in usage and distribution, but I was just wondering, do you think G&T might be maybe better served by a kind of broader and more diversified backlog? You can maybe avoid the oversized exposure to single project risks, the kind of volatility on sales and returns. Just be interested in your your thoughts about the future evolution of the GMT backlog.

Thank you. If I get the question right, in regard to the divestments, we will announce some, I will say, evolution in coming weeks. The automotive market is clearly down, but I think I don't need to elaborate that. We have launched the process of the divestment of the industry and solution businesses. It's now up officially. It will come up, but I don't want to comment much on that part because we'll make some announcements in the coming weeks. Regarding selectivity strategy, Jean-Pierre didn't get the question. Sorry for that.

Yeah, just I wonder, I mean, you've obviously had a very sort of success or selectivity strategy, which is paying off for the low voltage and medium voltage businesses. But it just sort of seems there's obviously on generation and transmission. I was just wondering just whether there's kind of limits to that strategy there for generation and transmission having a very narrow backlog. It does seem to kind of leave you very vulnerable to single project risks. We can see that sort of volatility there. sort of play out in terms of kind of expectations around sort of the, particularly on the margin. So I was just wondering whether you think that perhaps it might make more sense to go for a more diversified kind of sort of broader backlog and particularly, I guess, in terms of when we think about capacity additions and the mention there around sort of reviewing the potential for future capacity additions, whether that might come into play when you look at the size of the backlog in generation transmission. Thank you.

Yeah, I would say that as well, part of the answer is coming from the investment that we just announced in Charleroi. Charleroi is a 19 million euro investment to support, of course, all the land part of the subsea cable, but as well the high demand in frame agreements for land high voltage, which now we see a very strong improvement in terms of price dynamic. In regards to the evolution of backlog, there is a lot of activity right now on negotiation, so you will see the evolution of the backlog coming up in the coming months. We remain overall very cautious in terms of allocating our capacity and resources, because it's not only about volume, it's not only about margin, it's linked to risk and parent guarantees, and we want to make sure not to bet on specific projects that can jeopardize the evolution of the group on the long term.

That's great. Thank you. I wonder if I could just squeeze in a quick follow-up, and it's more short term, just on the, I suppose, helping calibrate G&T expectations, growth expectations for 2024 if you do get that notice to proceed on on gsi and you get a catch-up in 24 i think you said previously gmt could grow 60 with gsi i imagine it's maybe a little bit lower now just given some of the delays there but maybe you can help us kind of sort of update the the expectations there that'd be great thank you yeah exactly you you're right on i mean uh we were expecting uh we we said uh

closer to 60% at the beginning of the year because we're expecting the notice to proceed much earlier. I mean, now it's been postponed to early November and we're expecting it first in the first half. So definitely it has had an impact despite the fact we progress as I explained on the project because we continue to receive some cash, but a much lower level than the normal expected progress the project if we had a full down payment and a full notice to proceed, explaining why basically the GMT organic growth is today not as high as expected at the beginning of the year. So, I mean, again, there will be definitely a difference, but we should still be in a good territory for the year if we get the final notice to proceed at the beginning of the number as we expect.

Okay, great. Thank you very much. Sure.

Thank you. We will take our next questions from Lucas Farhani from Jefferies. Please go ahead.

Thank you. I just wanted to come back on the comments on distribution. Would you be able to give us the number roughly you're seeing in October in terms of the organic growth, just to see that come back and maybe compare that to what you saw in September? And also in that division, is there any revenue impact from the manufacturing consolidation in Finland, and could you give us the number there on that impact?

Yes, I think that I will not give you the revenue impact on Finland because I don't want to be as granular for that, but it has been important. It was linked to Reka. It was planned, but it was associated with the different, I would say, factors, like the two-aggressive distocking effect that we had on our side. Regarding distribution, overall, we are, I would say, Q4, we are close to between 8% to 10%, plus 8% to 10%.

So we won't give you the October growth rate, but we have a QC slightly negative minus 1.0% explained by the season 6 mentioned earlier. We'll be catching up.

Perfect. Thank you.

Thank you. We will take our next questions from Eric Lemari from CIC. Your line is open. Please go ahead.

Yes, thank you. Good morning. Thanks for taking my question. I got two questions actually. The first one regarding the Great Sea Interconnector project. Do you see any risk of further headwinds regarding this project, especially political-driven headwinds? And what about the geopolitical risk mentioned by some observers, mentioning notably Turkey? Is this Is it a risk to consider for this project? And the second question regarding the U.S., you mentioned the U.S. election. What could be, in your view, the impact of an election of Donald Trump on your business? Do you see any risk? Or maybe, on the contrary, do you see perhaps new opportunities with the Trump administration? Thank you.

Yeah. Thank you. In regards to the bridge interconnector, there was an exchange on the meeting between Emmanuel Macron, the Greece prime minister, and the Cyprus president. in the recent months, the potential headwinds remaining in that project, because this project has been full of headwinds for the last two years, remains at the time of incoming weeks for the survey seabed. As we are in international waters, Turkey declared that it's not international water, this is their waters. So we may encounter some geopolitical risk at the time of the survey. But if the survey goes well without any tension, I would say from our stakeholders' views, that's the only major milestone or risk milestone that we may encounter after it should flow very well. So I cannot say more than that. In regard to the U.S. election, I would think if President Trump is winning, there will be a dual effect. There will be the negative and there will be the positive. The negative is that we know his posture in regards to renewable energy, which is, I would say, more negative than positive. than the others. But let me remind as well that I would say it's more a state decision of investments that government table. But the positive as well is the local content. Is that we are the only one right now to be able to come with made in America offer So our subsea cable for offshore wind farm are designed by Americans, manufactured by Americans in U.S. territory. So this local content, of course, will be in favor for Nexon. So I will say it's a dual effect, one positive catalyst and one negative catalyst. Let me remind that we spent $150 million upgrading our Charleston unit in 2019. in the time of Trump presidency, and that was a risk, but that has been pretty accurate for the last years. I'm not negative, I would say.

Thank you.

Thank you. Thank you. We will take our next questions from Sean McLaughlin from HSBC. Your line is open. Please go ahead.

good morning thank you uh a few from me as well so firstly just staying in in the us i mean what is your view currently on high voltage opportunities outside of offshore winds that you effectively could deploy the charleston facility for um secondly i'm wondering um we've seen french press commentary that you were approached um and turned down the beard uh just any comment on on the dynamics would be helpful. And thirdly, on auto harnesses, just to check, is that 100% auto car exposure, or is there an off-highway or heavy-duty exposure that diversifies your overall end-market mix? Thank you.

Yeah, so what is the opportunity for high voltage outside of show-and-farm in the US? Of course, We can manufacture a low-light voltage product because that was what the, I would say, initial design of the unit before 2019. But the demand in Europe is so strong that, of course, maybe in terms of carbon footprint, it's not the best, but If we have a hole in Charleston due to a decline of demand offshore wind farm for a certain period, we prefer to leverage the capacity for offshore wind farm business in Europe to cope with the demand. Regarding auto harnesses, JCCC, for auto harnesses,

Yeah, it's linked to the automotive market, obviously, because we're providing the hard cable harnesses for key German manufacturers and luxury brands. However, we are in the niche market. First of all, we only do the... engine harnesses we don't do harnesses for the body of the car so it's a little bit more complex and added value than the rest of the body harnesses of the car so and uh and again we have very selective uh premium customers so but to answer your question yes it's it's exposed to the uh it's exposed to the uh automotive market for sure i'm getting the questions that uh um

in line with the article on the Bloomberg floor of yesterday, running those rumors of a takeover of CDNR and Nexance. First, I will say, as a co-lonser, we do not comment market rumors. You know, in the course of our business life, company Nexance has been regularly in contact with partners and investors. It's normal life. The market capitalization of Nexance in 2018 was about 800 million euros. Six years later, we have 6 billion euros. The only thing that I can tell you is that with what we will present, and this is what we've discussed in depth with our board of directors on the 13th of November, I think 6 billion euros is not our limit. We believe that you will see very ambitious goal for the company in coming years. There's still a lot to do in terms of value creation. You will see that. And the only thing I can add up is that we don't have today any ongoing discussion with CDNR.

Thank you. More questions?

We will take our next questions from John Francois Grandjean from Adobe HF. Your line is open. Please go ahead.

Yes, good morning. You have also answered a lot of my questions. Nevertheless, two other questions. The first one, I just want to come back on the backlog at 6.2 billion versus 6.7 billion previously. Could you explain this little bit decrease by the more selectivity for new agreements? And the second question concerns the guidance. You have improved the guidance at the end of July. Currently, are you more comfortable with the high end range of the guidance or not?

Thank you. Yes, Jean-François, I will answer the first question. We didn't book anything in Q3, so we recognize sales and basically there's a combination of probably different elements, but sales recognition is the largest one. Again, we will likely book orders to hold the backlog furthermore in the coming months. So nothing really specific to say about the backlog evolution between H1 and H3. For the guidance, I mean, again, depending on GSI, of course, because we still do not have the final notice to proceed, so I want to remain cautious, but assuming we have the final notice to proceed and continue to make progress on the project revenue recognition, cash received revenue recognition within our plan for the next three months. This is definitely an objective to be part of the guidance.

Okay, thank you. Thank you. We will take our next questions from Xin Wang from Barclays. Your line is open. Please go ahead.

Hi, thank you for taking my question. The first one I'd like to ask on distribution. So on the pace of frame agreement renewal, last quarter we said there is 40% to be renewed. Would it be possible to get an update on this, please?

Everything that was supposed to be renewed this year has been renewed. So there is no more... negotiation ongoing in regards to distribution. And it has been renewed with great volume perspective and with stable pricing.

Great. Thank you very much. My second question on GSI. On the arrangement for cable production and transportation, my understanding is that you're making these cables in your Japanese factory. Are you using Aurora or a simple vessel to ship it over to Europe on a regular basis, or are you currently storing all the cables produced in Japan? Would you consider rescheduling your production capacity to produce them in Norway instead, for example, given the long-haul shipping costs and the environmental impact?

I think, given the size of the GSI project, that would be a dual production. The first lengths are currently being produced in Japan because this workshop is specifically dedicated to mass impregnated technology and was, I would say, was waiting for this project to come. But the major length of the contract that will be starting, production will be starting, can continue, but start in Alden in 2025-2026, where of course will be done in Norway. So we need both plans to combine to be able to deliver this project on time. And we will use our Aurora vessel or SkyGerak to manage the transfer.

Great. That's really good, Carla. Thanks. So my next question is on US projects. So in Austria, the interim reporting back in August, they made an impairment to Revolution Wind and delayed the commissioning date from 2025 to 2026. They also flagged the risk of Sunrise Wind commissioning sleeping from end of 26 to first half of 2027. Would you be able to talk about the impact on cable installation schedule, please?

Yeah, I think in the revolution, we don't have any specific impact on Sunrise. We are not in charge of the installation. So today, we're running the production of Sunrise, and of course, we... discuss what do we do with the cable that will be ready for installation with the customer. But those details, in terms of production-wise, does not affect our schedule.

Right. Thank you very much. My last question, if I'm allowed. So... We saw some news on French rolling. So Rexel, Schneider, Legrand, Sonopal were fined by the French competition authority on special price agreement mechanism. I think cables could be a big part of this. Do we expect any impacts, any fine to Nexon, please?

I cannot comment on this issue in regards to our partners and customers, and we are not concerned. but what happened on this topic.

Thanks.

Thank you. I think that's the end of the question session. So thanks a lot for your attention. I'll see you on the 13th of November in London for the Capital Market Day. Thank you.

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