Nexans Unsp/Adr

Ladies and gentlemen, good morning and welcome to Nexon's full year 2024 earnings conference call. As a reminder, this conference call is being recorded. 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. 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, Mr. Christopher Guérin, Nexon CEO. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us today. Here is Chris Guérin, CEO of Nexon, with me, Jean-Christophe Julliard, Deputy CEO and CFO of Nexon on the Investor Relations Team. I will turn you over to Elodie. We will go to the over-conference call 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, nexons.com. And I'll turn you over to Chris, who will go over the 2024 highlights.

Thank you, Elodie. This was your last conference rule information. So, bravo and congratulations for your promotions. And we are now welcoming André Bourgeois, which will be in charge of the investor relations for Nexon starting today. Thank you. So, let's go to slide four. As you can see, in 2024, Nexon reaffirmed its ability to drive profitable, sustainable growth in a very dynamic and boiling market, setting new financial records. The group showcased the success of this structural transformation, as we repeat every year, on long-term strategic vision. What you can see in the course of the last three years, we have pursued our ambitious strategy centered on reshaping the portfolio, strengthening cash generation, and enhancing operational excellence. Our key achievements include M&A executions, successfully integrating three companies, expanding our market presence and boosting electrification revenue by 1.3 billion euros thanks to those three acquisitions, Of course, investments on capacity expansion. In Spain, it's investing nearly 1 billion euros in electrification sectors to enhance capabilities on advanced technology in key sectors, doubling our power transmission, manufacturing, and installation capacity. As you can notice as well, of course, record order growth, more than 8.2 billion euros of order intake over the period, securing unprecedented orders in power transmission. This is a testament to a strong market demand, obviously. And, of course, we are maintaining a very selective approach to ensure healthy and high-value backlog. So, those milestones have strengthened our foundation for long-term success. Let's go to page 5. I think we're very proud about these sections because in 2024, we did not just meet our financial target. We surpassed them, exceeding the upgraded projection from July on the commitments set during our February 2021 capital market day. Discipline execution in a dynamic environment enabled us to deliver results over expectations. As you can see, €804 million of EBITDA, adjusted EBITDA margin that was projected between 10% to 12% and will reach 11.4% on off-course records in non-normalized free cash flow. So, we achieved significant sustainability milestones as well, reducing our carbon footprint by minus 29%. If you go on the following page, page six on this slide, you can witness the continuous structural improvement of our performance Let's have a look on the numbers. So, in 2021, we were at 463 million euro EBITDA. Now we reach, we achieve 804, meaning an upside of 74% versus 2021, reaching a record of group history in terms of EBITDA's very strong cash conversion. result in a normalized free cash flow of 454 million euros, significantly above our initial expectation, while free cash flows stand at a record high at 313 million euros. Of course, return capital employed improved to 21%, reflecting our very disciplined capital allocation. But as you can notice as well, the electrification-only return capital employed is at 26%. Let's go to page seven. It's important because we would like to, of course, be a pure player of our strategy. So let's have a look. On the specific electrification contribution, that really outplays the overall group performance, reaffirming this pivotal role in our profitable growth strategy on simplification of our portfolio. You can see that now electrification accounts for more than 74% of the group, with an adjusted EBITDA reaching 13%. So, of course, outperforming the group overall margin of 11%. What you can notice as well is that the EBITDA of the electrification sectors is equivalent to the overall EBITDA of the group in 2022, which is as well a sign of vitality of that margin progression. Normalized cash conversion stand at 73%, exceeding as well the group performance. So, notably, our full-year EBITDA for electrification near, as I mentioned, which matched the entire Group 22 result, but, of course, is for us, behind those two ratios with all the others, a testament that our simplify-to-amplify strategy is fully in action. If we go have a look on page 8, We have, of course, achieved key milestones in strengthening our electrification portfolio, reinforcing the strategic focus on our position for the long term, Divestment of non-electrification business on one hand. We have successfully exiting non-core sectors like telecom. And most recently, the divestment of Armour Cable that we need to mention because it appears it happens on the beginning of January. Those moves allow us to sharpen our focus on screen line hour operation. Acquisition in electrification, expanding capacity in key geography, while accelerating the development of cost and revenue synergy ahead of schedule. This is what happened with La Trevineta, RECA, and Sant'Elsa. And, of course, as G.C. would mention, our level of treasury, but as well with the potential future proceed of LinkSeo and AutoElectric, we need to redeploy this capital for further acquisition That will be either unlock new value pools with technology solution, either scaling operations through targeted investment, either high-growth vertical, and, of course, we are willing to expand in some other geography outside Europe in the coming years. So that was the slide number eight. I love the slide number nine because it's You know, we, like all companies, we are caught in the vortex of listed companies that are forced to deliver results quarter after quarter after quarter. But these slides give us an overview, a kind of helicopter perspective of what we achieved in the last years. It highlights, more importantly for me, it highlights the coherence and the consistency of our message year over year, plan after plan. Numbers are crucial. Of course, but so is the business story. From the first equity plan, we have highlighted our structural capacity of transformation, whatever are the economical conditions. And this transformation power is still there and show its, I would say, success month after month. With the second plan in 2021, we were the first to highlight the circular growth potential of electrification and our desire to capture a big part of it and as well to simplify our portfolio. What is important as well for us and what is highlighted there is that All investments that have been announced, promised, have been made, promised, have been kept, commitments have been respected. We say what we do, we do what we say. On the page 10, starting in January 2025, we have implemented this new organizational setup designed to deploy this, of course, the strategy sparking electrification effectively. Power transmission, given the size of the backlog and the big focus on execution remains unchanged as a business group with, of course, clear ambition to deliver this ambitious plan. The change comes on the Power Green and Connect organization that will combine two market divisions as a kind of architect of next-sense future growth to strengthen the focus on high-value market verticals of a big focus on strategic customers and, of course, scaling up reputable innovation model offers region after region. In front of that, we have five regions to align our operations, resources, decision-making, close to the field, close to the customer, and to foster profitable growth across Europe, South America, Middle East and Africa, North America, on Asia PAC. With that, let me turn it over to Jean-Christophe that will guide you to the business highlight as well, the financial details. Thank you, Chris. So, if we look at the highlight of the achievement of 2024, you have them, I would say, the main achievement summarized on the page. I will start with a strong growth of our revenues. Standard sales grew 8.7%. I will come back in the coming slide about the organic growth but 8.7% reported growth on standard sales. As Chris mentioned, a record level of backlog in our transmission business, 7.4 billion euros adjusted backlog at the end of 2024. We continue to have a strong balance sheet, sound and strong balance sheet with a high liquidity level. I will come back on that. 1.3 billion euros of cash on the balance sheet at the end of the year. A leverage ratio which is slightly higher than it was at the end of 2023, mainly due to the acquisition of our new asset in Italy, La Triveneta Cavi. And as Chris mentioned, in terms of portfolio rotation, we completed acquisition of new revenue in electrification with La Triveneta, adding €800 million recurring per year to electrification of Nexance. And we have made significant progresses on link CO divestment, and we have divested since early January 2025 our unit in industry and solution, our unit in the U.S., Amerkeber. Turning to the next page, let's have a look at our organic growth. As I mentioned, 8.3% standard sales growth, organic growth at 5.1% for the year, a very strong finish of the year with a Q4 reported organic growth of 8.3%. We had... timing issue we highlighted when we presented the Q3 organic growth, and we said that part of the low organic growth in Q3 was the timing that was pushed to Q4, and this is what you see here with 8.3%. What is quite remarkable is that electrification has been the big contributor of the organic growth of 2024, with plus 13%. Obviously, I will get back to you on the detail, but a chunk of that, a big part of that is due to the transmission backlog execution in 2024. Non-electrification after very strong organic growth, positive organic growth in 2023 shows a decline of 2.5% in 2024, mainly explained by the automation business, which has been declining 27%, offset by some of the divisions, I would say industry like shipbuilding, for instance, that has been going double-digit. Other activities is mainly, as you know, our metallurgy business, which is part of strategy. We have been year after year declining that business to focus basically the whole production for our own needs in next sense, reducing external sales of fraud to competition. We have reached the target of 2021. We said we would reduce by 50% during the four years of the 21-24 equity story, the revenue, external revenue of that business. We achieved that. So from now on, it will not be a negative impact on the organic growth of the group. And it has been done in 2024 by 14%, as you can see here. If I move now and we start to look a little bit in the detail of the main division on page 14, I will start with power transmission. So as Chris mentioned, backlog is up 21% to reach a record high level of 7.4 billion euros. Organic growth is double-digit, high double-digit at 50% organic growth year-on-year 23 to 24, and also a strong Q4 organic growth. And importantly, the adjusted EBITDA has been improving by 72% versus the low point of 2023, made of a mix between additional revenue due to the new capacity at the same time improved profitability, where we gained 1.5% of EBITDA margin from 23 to 2024 through the project execution of the backlog. If I move now to page 15, I will give you a little bit of detail because I know there's a lot of questions about the backlog, our backlog. And so I will clarify what it means. $7.4 billion, again, record high adjusted backlog. It gives visibility for the top line of the business until 2028 at 90%. And our plants, whether Charleston or Alden, above 90% full capacity until 2028. That includes every year of the next four years until 2028. When we look at the structure of our backlog, we always say it's mainly subsea, so you see 92% subsea backlog, very low exposure to land, only 8%. 85% are from backlog customers, or TSOs. And also, very important to say, the U.S. exposure of our backlog is 4%, which is roughly €350 million, with four projects under execution today that have been confirmed, all of them, and that will be completed by the end of 2025. If I move now to the next page, page 16, and we have a look at our grid business, a very good year for grid, a 3% organic growth, but a 9% adjusted EBITDA growth. You see a fourth quarter organic growth, very strong, 8%, a slight decline in Europe, but a very positive organic growth in North America and South America. and in Middle East and Africa. What is interesting to notice here is also the mix of the revenue and the margin. We have had a 4% overall growth from the cable manufacturing part of grid, but the accessories business has been growing 34%. And you know that the margin on accessories are almost twice the margin of the cable supply, therefore explaining the one-point improvement that you see in the business between 24 and 23, reaching high time high of 14% EBITDA margin. I move to the next page and we look at our Connect business. A business that has been growing significantly in terms of standard sales with a limited organic growth, 1%, but a strong scope impact because of the acquisition of La Trivenita Cavi in June of 2024. A fourth quarter, 24, strong organic growth for the same reason, a lowered Q3, but a catch-up in the fourth quarter, with also all regions increasing but Europe, that show a slight single-digit decline in the quarter. A very strong improvement also of the EBITDA, mainly a scope effect because margin remains at a high level of 14%. But with the addition of Latribin and Takabi, we see a 24% increase in adjusted EBITDA value. So that's basically for the review of the operational businesses' performance during the year 2024. I will now deep dive a little bit in the financial performance of the company for the year 2024. So I move to page 19. So you see the improvement of the EBITDA plus 21% on the bridge here. You can see as well that all of the businesses have been significantly contributing to this EBITDA improvement, 21% to reach the record level of 11.4 margin and 804 million EBITDA value. So, that explained partially by the organic growth of plus 5.20%, I mentioned. We've had a little bit higher reorganization cost, mainly due to the cost of separation of the link CEO business that we announced at the end of 2024. Higher financial results versus last year, mainly coming from the fact that we financed the Latrivineta Caddy acquisition with issuing a new bond. I will come back to that in a couple of minutes. And higher income tax as well, mainly due to higher profit and also the origination of the profit in countries that have been improving with a slightly higher tax rate. and also the fact that in 2023, we recognize some different tax assets that lower the income tax level. Overall, a net income increase of plus 27% higher than the EBITDA increase of 21%. Moving to page 20, and we look at our net debt and our leverage. As I mentioned, slightly, I would say, increase of the leverage ratio from 0.32 times in 2023 to 0.85 times in 2024, mainly explained, as I said before, by the M&A financing of the La Trivineta Cavi acquisition. If I look at the cash from operation, you see that we continue to have strong positive returns Change in working capital, almost 180 million euros, but at the same time, continue to have high capex of 378 million euros, including into that the high-voltage strategic capex for 121 million euros, which is mainly the progress we have made on the building of our third vessel, Electra, that will come to operation the first quarter of next year. Overall, normalized free cash flow of €454 million and a free cash flow generation of €313 million for both ratios, for both cash flow metrics, this is a record high level. Moving to page 21, we look at our liquidity, record-level liquidity, €1.3 billion, as I mentioned, cash on the balance sheet at the end of 2024. When you look at the total available liquidity of Nexense, we are above €2 billion, if you include the undrawn revolver credit facility of €800 million. Our gross debt increased in 2024 by the issuance of two new bonds, one maturity 2029 and one maturity 2030, for both of them totaling 925 million euros. Again, the 575 million euros was used to finance the acquisition of La Tribunita Cavi, but the ratio remains below one in terms of leverage. Page 22, we will propose at the General Assembly an increase of our dividend of 13% to 2.6 euros per share. It's also, I think, every year we have been raising the dividend to our shareholders as part of our commitment We'll continue to do that. It's a payout ratio of a normalized net income of 35%, largely above the target we gave in the CMD of 21% of 20%. And if you look at the past four years, it's a total shareholder return of 97% and over six years of 390%. I will conclude my presentation with the outlook. So, two things which are important in the outlook. The first one is we have significant change of scopes, and I will explain that in the next slide. We will commit to an adjusted EBITDA range from 770 million euros to 850 million euros for 2025, and a free cash flow generation, and here I want to It emphasizes the fact that since the last CMD in November, we are talking about free cash flow, including all capex, not normalized free cash flow. So that includes all the growth capex we will have in the future. So it's quite different metrics. Just to remind you, in 2024, we had 120 million euros of strategic capex. So that's now included in the free cash flow metric. So a cash flow of 225 to 325 million euros, which is a 34% cash conversion on EBITDA. Just I will conclude on 25 giving you a little bit of explanation about the guidance of EBITDA for 2025. So we achieved 804 million for 2024. In 2024, you know that we have divested EBITDA uh on january 2nd 2025 our amer cable business uh uh in the us which has a scope effect obviously uh uh in 2025 so and we have also to add the five months of latrine that we acquired in 2024 because we acquired the business in june so obviously in 2025 you will have 12 months versus seven in 2024. Overall, you're talking about a negative school effect of roughly 30 million euros. So pro forma view of 2024 for the basis of the guidance of 2025 would be more 770. And we are proposing a range of 770 to 850. through basically organic growth that we committed, and also margin expansion. The range is slightly larger than we gave in the past. It's a 5% variance versus a midpoint, up and down, mainly to include the GSI risk. That concludes my presentation. I will now turn back the mic to the operator. Thank you. open for questions.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question on today's call, please signal by pressing star 1 on your telephone keypad. That is star 1 for your questions today. And up first, we have Lucas Ferhani from Jefferies. Please go ahead.

Good morning. So I have three questions, if we can take them one at a time. Just the first one on the free cash flow. Can you go over maybe the key drivers of that strong free cash flow in 2024 and maybe whether there are timing impacts that reflect on the 2025 free cash flow, which might be a bit below what we expected? Thank you.

Well, I think there's been a little bit of confusion because of the change from normalized free cash flow to to a full free cash flow conversion. The free cash flow of the guidance is, as I said in the presentation, is a 34% cash conversion from EBITDA. Just if you make it comparable, last year we gave a guidance of 19% on free cash flow. So it's a significant increase of the guidance of free cash flow. I'm talking free cash flow. of 2025 versus guidance of last year we achieved in 2024 39 percent So it's quite comparable to the guidance we gave, maybe a couple points lower in 2025. We had significant improvement in working capital in 2024 due to the increase of the backlog in GNT, in transmission, sorry, that we are seeing more normalizing in 2025. But again, overall, the free cash flow conversion is much higher than it was in the guidance of 2024. And the last thing to say, we have quite significant capex in 2025. as I have highlighted in the CMD in November. We need to continue to complete and build the vessel, our third vessel. There's about 100 million euros capex left to be spent in 2025. We have announced also that we will increase our recycling capacity in Lens to move from, as part of the CMD commitment, from 5-6% of recycling today to 35% by 2028. So that investment will start in 2025. We also announced a new plant in Morocco for grid. We start to put the first stones of that of that plant building in 20, I mean, spending the capex for the building that plant in 2025. And we have also a Charleroi capacity increase. So overall, we have about 200 million included in that 2025 guidance into the free cash flow, and we still reach 34% cash conversion.

perfect thank you that that's really helpful um and then on on to uh transmission and just the great scene death connector can you give us a bit of an update on kind of how it's running on on your side while you're hearing from the greek grid operator and how do you expect 2025 really to to unfold yeah thank you lucas yes that's of course that's a big burden of

Of 2025, the conversion of the notice to proceed of GSI project, which is meaningful in terms of EBITDA impact for 2025. What are the recent developments? It was a kind of statu quo in December and January. That makes us a bit nervous, but I'm much more confident because the analysis of the CBET have restarted a few days ago. in national waters of Greece and starting in international waters. We have a very, very strong support from IPTO, top management, but as well the Greek government, the European Commission and the French government, as well as Cyprus is very willing to pursue this project. So I would say as of today, I see a lot of green lights. We receive as well, maybe GC can comment, significant cash since a year ago. And we have the recent discussion that we have with IPTO is that we have not changed at all the final delivery date. And the production of cable is still in process, fully in process. Maybe on the cash point, GC, for GSI. Yeah, I mean, in fact, we have not received the final notice to proceed, as Chris explained, but we have been progressing on the contract as if we had, because we are fully mobilized on the project. We have received €138 million of cash from the end of 2024. We have recognized significant gross margin on the project and EBITDA on the project, and again... the project is going on for us and we were already scared in September and last year every quarter but in fact we are probably on the project and and that should continue at least we are confident that this should be continuing.

Great thank you and you have kind of a date in mind where you you think the notice could could arrive or you're not really kind of thinking about that?

Yeah, notice to proceed will be finalized as soon as the survey of the seabed will be over. So, we believe at the end of the month, beginning of March. But of course, this survey is operating in a complex geopolitical situation. So, we do not master all the topics there as a Nexon's team. But once again, I repeat, in the last two weeks, we've seen positive moves on signal, and today's survey is under operation.

Great. And the last one would be just on the disposals. Any update on NIGCO specifically? I think the carve-out was done and there's some progress on that process. And maybe any thoughts on auto electric, if there's any change to, is it most likely a 2026 or there's a change in the situation in Ukraine, could that come maybe a bit earlier than planned?

No, definitely. I mean, we're progressing. I cannot give you the exact timing, but what I can tell you is We are quite confident that link CO divestment should happen in 2025. I think it's reasonable to believe that. We'll see how we progress on this. But today, I mean, this is something which is ongoing. For auto electric harnesses business, it's like you highlighted, a little bit more complex due to the world situation. However, I remind you that we duplicated the CAPEX. The manufacturing facility has been duplicated outside of Ukraine. So, in fact, for a potential buyer, I mean, the worsening of the war would not have a significant impact on the business. But anyway, it's a little bit more complex. I think I see more of this happening probably first half of 2026.

Great, thank you.

Thank you. And our next question now comes from Akash Gupta from JP Morgan. Please go ahead.

Yes, hi, good morning and thanks for your time. I've got a few as well. The first one is on GSI. So you said in your prepared remarks that this year the guidance is a bit wider because of uncertainties in GSI. Can you help us understand when we look at the bottom end, midpoint, and upper end, what sort of contribution compared to last year you have assumed for a GSI project to help us understand what is there excluding GSI in terms of improvement in EBITDA? That's the first one. Thank you.

Yes, Akash, good morning. I will not give you the exact contribution at GSI in the number of 2025 because we don't give that level of detail by project. What I can tell you is that, as I said in my presentation, we are covering the worst-case situation into the range of the guidance, meaning that if the project was going to start tomorrow morning, like today, with no more cash inflows from the project, basically we will still be in the range of the guidance. So it's a worst case, and this is not what we are targeting and what we are seeing today. Again, I think we are rather optimistic in the project to be happening and receiving feedback. in the coming weeks, the final notice to proceed. I mean, we have been, as I said, we have been paid on a regular basis. And obviously, the more you get paid, the more difficult it becomes to cancel the project. So we are really, really confident about this project continuing and continuing hopefully sooner than later, receiving the final directive to proceed. However, I remained prudent and I wanted to be conservative in the low part of my range of the guidance of EBITDA in case of, but again, this is for me and for us, low probability. Yeah, I think we are prudent but confident. We have a lot of opportunities to potentially partially compensate in case of cancellation, and we can reallocate resources for other projects. But once again, for the meantime, for GSI, it's progressing, I will say, positively.

Thank you. My second one is on the other segment. So, Jesse, I think in your prepared remarks, you said you have reduced the revenues here, external metallurgy revenues by 50%, and now the drag is not going to be there. So just to clarify, are you saying that there will not be any drag in revenues or there will be a lower drag in the revenues? And then on the same topic, in others, for second years in a row, we saw first half was negative, second half was positive. So maybe you can explain the dynamics, what is driving there? And when we look at 2025, what shall we expect between H1 and H2? Thank you.

Yeah, so first question regarding the metadata revenue, yes, I confirm we should not see – we should see a stabilization, I would say, of the revenues starting 2025. I'm not foreseeing any negative results. I mean, obviously, we don't know how 2025 will look like, but definitely there will be no pressure on our side anymore to reduce any further the revenue, external revenue side. So we should be – the growth of the business should be on par with the growth of – the growth of the metallurgy activity should be on par with the growth of the business. That's the first question. In terms of the spread between H1 and H2 in others, we've had a little bit of runoff cost in the second half of 2024, mainly due to the cost of link CO separation. They might be a little bit more in the first half, so we could see a first half being slightly negative, but then as soon as BlinkCO is out of the scope, then this will normalize to a positive.

Thank you. Thank you.

And our next question now comes from Sean McLachlan from HSBC. Please go ahead.

Good morning. Thank you for taking my questions. I mean, firstly, just coming back to the free cash flow guide in 25. Can I just confirm the capex number that you're guiding now for 25? And can you break that, let's say, into your old strategic and non-strategic categories?

Yes. So the capex number is going to be around €450 million for 2025. So that's about €70 million higher than 2024. And in terms of, I would say, gross versus maintenance capex, it's about half.

Super. Thank you. Second question on the U.S. So it sounds like you're quite relaxed about the projects that you're delivering in 2025. Just thinking 26 to 28 about vessel utilization if you're delivering from the U.S. towards European projects, how we might think about potential margin impacts, And is that, in fact, your base case, that from the end of 2025, Charleston will only be delivering into Europe? Thank you.

Yeah, Sean, it's Chris. I will manage that question with Vincent. First, I will give you an update regarding our U.S. offshore wind farm exposure. A revolution project for us that is almost complete. So, that will be complete in 2025, in the coming weeks. Sunrise manufacturing is still ongoing, and we have no installation. So, we should finish this project mid-2025, and as well complete manufacturing on installation 25 for Empire Wind 1 for Equinox, meaning that in 2025, at the end of 2025, our exposure in regards to offshore wind farm in U.S. will be over. And Charleston will start in 26 manufacturing project that will be soon awarded for Europe. So I think it's important because it was a key risk factors highlighted by some analysts in the last weeks. There was some project been unhauled or delayed or canceled like New England, Clean Pass or all the others, but that's not an Exxon project. Those ones have not been awarded to Exxon. So our exposure to U.S. offshore wind farm is extremely limited, close to zero post-2025. Vincent, regarding the cost of supplying from Charleston to Europe, as well as installation capacity?

I think you have two answers to this question. Good morning. The first one is that, of course, when we plan our project and we plan the manufacturing, either in Alden or in Charleston, we do the costing according to the organization. When we have done in the past projects, In U.S., delivered both by Norway and U.S. So we do it in our costing. So that's the first answer. And after, just to illustrate the technical or the operational elements, when you want to deliver, for example, from Norway to a military agency or from Charleston to an agency, you have only one day of defense in terms of transport. So on a project which is around five to six years, it's basically nothing. So no impact.

Understood. Thank you. My last question is just on accessories. If you could maybe tell us what percentage of grid sales in 24 and where you see that by 28?

Sorry. Can you repeat the question?

Accessories are the percentage of sales in the business.

In grid business, it's about 20%. It's a very high percentage.

And where do you target that, by 28?

I don't give that number, because there is a mix of organic and inorganic moves in that direction. Understood.

Thank you.

Thank you.

Thank you. And up next, we have Eric Lemarie from CIC Market Solutions. Please go ahead.

Yes, good morning. Thanks for taking my question. I've got Three questions, actually. The first one on the competitive landscape in Europe. Do you see any change here? Have you observed any new players from Asia, for instance, investing in Europe, in new capacities? I've got a second question on Amercable. It was sold last year for an EV of 261 million, if I'm not wrong. if my calculations are right, it's equivalent to an EBITDA multiple slightly higher than five times, or maybe I'm wrong, but It sounds quite low to me, and I would like to check the number with you and understand why it could be so low. And I've got a third question regarding the pattern of the EBITDA margin growth in high voltage or in power transmission over the next years. Could you remind us the pattern? Well, what do you expect in terms of gradual increase in terms of EBITDA margin for high voltage between 2025 and 2028? Thank you.

Yeah, organic landscape, I take the first question. No major change. I would say Asian players are moving into Europe, specifically Japanese and Korean. in very minor steps. I'm sure you refer to the Chinese. The Chinese are very well right now loaded by their domestic demand, but of course are very active as well to support European energy transition. But I would say there is a kind of premium given always to the European players. And that's what remains unchanged, I would say, in all the contracts that have been awarded or the one that will be awarded in the coming months. Regarding Amerkebol? Yes, Amerkebol, just to precise the numbers, so the EV is 280 million USD. We have not, as Nexon, published a multiple of the transaction. It's coming from the buyer in its press release. What I can tell you is that the 24 EBITDA, that was a reference for the multiple calculation, was a peak figure. If you take an average of the past three years EBITDA, the multiple becomes much higher as well versus the five that you have. You're talking more about seven, eight times. So it's a question of reference as well. For the second question regarding the EBITDA, evolution, EBITDA margin evolution in our transmission business. As I said, we are on the path for improving the margin year after year. 2025 will still be a plateau year because of execution of the U.S. contract, mainly that was highlighted by CREA that will be out of the backlog at the end of the year. But starting 2026 onwards, there will be about 1.1 to 1.5 point improvement of the margin to reach around year 27, 28, 17% EBITDA margin. So that's the path in the next three to four years.

Thank you. That's very clear.

Thank you.

Next question.

Yes, from Goldman Sachs. We now have Ilaria Boricelli with our next question. Please go ahead.

Hi, good morning. It's actually Daniela over here. Sorry to ask again on GSI. I just wanted to clarify two things there and then ask another question on high voltage in general. But just to go back to the points before, I know you don't comment on 25, but can you clarify of the total GSI, how much have you already booked? And I guess to the point on progressing, you can progress with production, but how much is installation and when does it start? That's the first question on GSI. I will ask the second so that you can address them both together. And at Q3, I think you said it would be 55% to 65%. organic growth in transmission if you included progress on GSI and 50 if you didn't. But you came lower than that. Is anything else in the backlog progressing slower or where does the difference come from?

Okay, I will take the first part of the GSI question, Daniela. So the first part is we've booked in the backlog the full amount of the adjusted backlog, not the firm backlog, but the adjusted backlog, because it will move to firm backlog when we have the final notice to proceed. So right now it's in adjusted backlog, 1.2%. 4 billion euros of amount related to GSI. So it's within the 7.4. We've progressed on the project. I remind everyone that we have a safe approach. We are progressing on the project based on the cash received. The cash we receive is non-refundable over the incurred cost and the margin of the project. So everything that has been recognized to date whether it's 23 or 24, is secured even in the worst situation of the project being canceled immediately. Is that answering your question on GSI?

That's very helpful, but just I think in the first half you gave the number on how much you did in GSI. Can you give that number for the second half to be able to sum up of the total 1.4 how much has actually been already done?

I can tell you that we recognize 110 million euros of sales in GSA in 2024 and about 50 million of market.

Thank you. That's very helpful.

Yeah. The second question was related to the organic growth. Yeah, I mean, on the organic growth, I think we are, unless I'm wrong, I'm misstating, but I think we are within the expectation in terms of organic growth for the transmission business in 2024. There's been obviously a little bit of delays in the first half due to the GSI uncertainty over the summer, and some of the work has been a little bit pushed to the third quarter. And we had a very slow summertime. But I would say that overall for the bulk part, we are completely in line with our expected organic goals for the year 2024 in transmission.

So at Q3, I guess you were guiding the 55 to 65 with GSI. You expected to have done a lot more of GSI.

We were, yes, definitely. Because again, I mean, we wanted to be cautious and not... move on the project not receiving the cash beforehand. So, the main concern was to protect Nexance and to make sure that every cost incurred was backed up by cash received. And obviously, sometimes during the third quarter, and mainly third quarter, the cash didn't come. It took a little bit of time. So, I think part of the difference is coming from GSI being a little bit most through the end of the year rather than just the end of the year.

Understood. And then final one for me, just following up. I think before you said that you were going to start working on a project that you expected to be awarded soon. Not going to ask you what the project is, but just in general, the tenders and the awards in the industry have been quite low in the last few months compared to what we had been used in the two, three years before. Do you see a pickup? How do you see that tendering pipeline and awards for the industry and you know, 25, 20, 26, do you expect a re-acceleration back to where we used to be?

It depends on what is your point of reference, Damien. I would say the tundering is still very, very active. You have some major projects to come on the RTE side, as well from Tana and some others. As big as what we saw in the past, like GSI and all the others, I'm not sure. I would say we have a lot of tenders in the mid-size revenue, means from €300 million revenue to €600, €700, a lot to come, a lot. So, a pretty high number in quantity, but in terms of revenue by project, a bit lower than in the past. On the subsea part, Europe is still very, very, very active for offshore wind farm and interconnection, but we are losing in the dynamic of our world the offshore wind farm in the U.S.

Can the backlog still grow?

Yes, of course, it will.

Okay.

Thank you. We expect that, you know, ordering type of one-to-one, making sure that everything that, you know, we have an equivalent of 1.3 billion euro of revenue, 1.4 for transmission per year. Our objective is to get 1.4 billion euro of orders at the same time. Book-to-bill one-to-one.

Got it. Thank you.

Thank you. And as a quick reminder, that is star one for your questions today. And up next, we have Alastair Leslie from Bernstein. Please go ahead.

Oh, yeah. Thank you. Good morning. A couple of questions. First is just a follow-up on GSI and the clarification. I was just wondering if you could check. You said you received $138 million of cash in for GSI. Was that Was that a total cumulative figure or just for 2024? Because I was just trying to reconcile this with some numbers that we had previously. I think you said the figure was 120 million at the H1 stage. And I think you said at the Q3 stage, you received another payment of around or close to 30 million. So maybe you could just clarify the total figure that you've now received to date. Thank you.

Yeah, so 138 is for 2024 only. We received also some payments in 2023, so it's above that. It's above that.

Do you have the total figure?

I don't have the total figure in front of me. I just have the 138 for 2024. So you probably add 20 to 30 million to that for 2023 when we started to get the confirmation of starting manufacturing of the project.

Great. Okay. Thank you. And then the second question was just on grid. I think the margins there sort of showed a kind of bigger seasonality versus sort of prior years, and the H2 margins were actually down year on year. What's the kind of main driver behind that, please? I don't know how much of that's just explained by sort of changes in mix. maybe versus sort of industry-wide pricing or supply-demand dynamics. And I guess do you see that kind of H2 margin now as more representative of kind of current profitability levels rather than the kind of what looks to be in hindsight maybe a very strong H1-24 margin level? Thank you.

Yeah, I think there is no structural change in the price dynamic for grid. You have seasonal effects, you have mixed effects, depending on the kind of SQ sections that you manufacture, as well, of course, by customers, by definitions. But what is important is that We are running at 13.5% EBITDA ratio. It's a structural change versus the last 15 years. And today, what I can tell you is that we have very strong demand within the backlog in Europe, in South America, in Africa, in Canada. So, I'm extremely comfortable with the dynamic of grid. supported by everything that you see in the price for the matters of renewal of the grid, for a matter of electrification. Maybe we can give as well, maybe, Elliot, a word on the needs for data centers, which is, of course, a major driver of grid modernization. Maybe, Elliot, you can say a word. Okay.

Good morning, everyone. So yes, on the grid dynamics, very comfortable with the growth driven by indeed renovation of the grid, as well as energization projects of data centers, factories, And also, of course, the connection of renewables, starting with solar. I think everyone has noticed also the growth in renewables. So very comfortable with the growth that is going to be above 7% CAGR, as we explained in our SMD in November.

Great. Thank you very much. Thank you. Next question, please.

Thank you. And up next, we have Sin 1 from Barclays. Please go ahead.

Oh, hi there. Thank you for taking my questions. My first one is still on GSI. Can you maybe let us know what would revenue recognition schedule look like if we do receive the final notice to proceed in March? And then, at the same time, if GSI ends up being canceled, would you be able to pull forward production of projects in existing backlogs? And if this couldn't be done, how should we think about the capacity on the utilization impact, please?

Yeah, so right now, I cannot give you, again, the details for GSI for 2025. We're not giving you the revenue that we have. But right now, we are progressing on the project as if we had received the final decision to proceed because, again, we are getting paid according to the schedule of the project. Therefore, we are manufacturing and progressing on the project as if we had the final tools to proceed. So when we receive it, it will not change 2025 because, again, that's what we're progressing on as of now. Definitely, the project is canceled. Again, this is not what we believe will happen, but if it is, it will be. Collateral improvement on other projects. One of the bottlenecks in the project sequence right now is the armoring, which is the isolation of the cable and all cables go through armoring at one stage, and this is kind of the bottleneck in the plant. So, basically, having GSI cancelled will free up capacity of armoring for other projects and will improve revenue recognition in 2025 for other projects, therefore mitigating the net impact of GSI within the year. This is why I'm comfortable that the low point of the guidance is a worst-case situation of GSI being cancelled.

I don't know if you had any other question on GSI.

Thanks very much. So the capacity under-escalation question was more on, so based on your current backlog, including GSI, you're 90% loaded. Without GSI, if we're looking at 70%, then what would be the margin impact there based on the same kind of backlog with and without GSI?

I think you're doing very complex mathematics there to determine something that I don't understand. What I can tell you is that we will receive significant awards in coming weeks, and I think your question will become obsolete. And once again, what is important is that we show that structurally when you see the numbers of Nexans, if you don't focus on one specific point, that could be seen as only negative views. We are structurally improving the ratio of the group year over year, semester after semester. We are extremely confident in the future on our ability to deliver 2028 numbers. And, of course, we are managing a company with ups and downs, but it's more a question of prudence in the guidance, but we are extremely confident that everything will go smoothly as planned.

Good to know. Thank you very much for the comment. My second question is auto harness. So you commented in the release that auto harness was stable during the year, but we know auto production was lower, especially in the second half in Europe where Nexon is more exposed. But earlier in the call, in prepared remarks, you also commented on weaker auto harness contributing to the the decline in non-electrification business. Would you be able to comment on the divergence here?

I think what we have been seeing in 2024 is that the volume has been, the top line has been slightly decreasing with a negative organic growth explaining part of the The report of the non-electrification minus 2.5%. However, the margin has been improving. We gained a couple of points in margin in the business. So in terms of profitability, we have nothing. We are not below our expectation. It's more top-line situation. Right now, for 2025, we're expecting to see sales drop. basically mostly flat versus 2024, slightly improving, but not that much, and margin being at the same level. Yeah, we can say that the automotive sector is not the most boiling sector on the planet right now. Of course, our exposure is very, very limited, but we may have a lower volume in coming months, slightly lower than 2024, but really it nothing much. But I think what is important to say is that the risk of disruptions in production due to the war of Ukraine touching wood is behind us. And that was certainly the biggest threat of Renaissance is to have a massive disruption of this production line that will stop BMW, Porsche assembly lines, which is now not at all a risk. So that's the good news of this part of the business.

Thank you. So my last question is on PowerConnect. So, would you be able to give a bit more color on the split of performance or organic growth by region? Because I think residential weakness in Europe doesn't seem to be so much of a headwind to Nexon.

Yeah. Yeah, I'll let you comment 24, and I will give you some perspective for 25. Yeah, so I confirm what you said and what I explained during my presentation. We've had a growth in PowerConnect of 1.4% in 2024. When you look at North America and South America, basically it has been growing almost double-digit. Middle East and Africa also double-digit. And the two regions that have been declining is Europe and APAC, mid-single-digit. That's what we have seen in 2024 in terms of top-line neighbor issues. For the beginning of the year, at least backlog-wise, visibility is shorter. shorter than the other sectors, but very strong dynamic in South America, North America, very, very strong Middle East. And I would say I believe that we reach a low point in Europe in Q4. And today, the load of our factory is not close to back to normal, but not far.

Okay, great to know. If I can possibly ask a quick question on Sunrise Land, please don't hate me for it. But Orsted, on 21st of Jan, made another impairment of €580 million and commented in the public call that a defecting cable was discovered, leading to a redesign and a remanufacturing of cables. They expect this to be finalized in Q1. Do you see any impact in ExxonSexos?

No, that was a preproduction that had been remanufactured. So it's not a cable that had been installed. It's a cable that had been produced in Charleston that had been remanufactured. It's only one length of a cable. So this is behind us. It was part of the... So it's two years old now for us.

Thank you. Thank you, Ching.

Next question? Yes, from Ecuador, we now have Luigi Debellis with our next question. Please go ahead.

Hi, Luigi. Luigi, we don't hear you.

Hi. Hi. Good morning. Just to follow up on grid and connect. What we can expect in profitability for power grid and connect for 2025, also considering the contribution of accessories in grid in 2025 vis-à-vis 2024. And in terms of organic growth for the coming months or for starts, depending on your visibility for these two divisions, do you expect a speed similar to that of Q4 2024? And lastly, can you give us an update on pricing dynamics for low-voltage business both in Europe and North America? Thank you.

In terms of... and Connect Insider. We are right now forcing single digit organic growth and a little bit higher for grade in 2025 as we explained to our CMV in November a few months ago so part of the expansion of the EBITDA will come from the top line because it's quite active and you've seen some of the dynamic in connect and some of the market we've seen a lot of A lot of momentum for growth. I think also, I mean, definitely we will continue to progress on our shift transformation. We continue to have some units which are slightly below the average of the group in Connect, and we continue to basically improve the margin, as we have been doing for the past four years successfully. So there's probably a couple of points that we can get from the lowest performing units in Connect to bring them to at least the average of the Connect business, which is 14%. So that's, I would say, so we are quite confident that we will maintain and continue to expand EBITDA in Grid and Connect. And Grid, definitely, there is also a lot of momentum regarding accessories, as we've seen at the end of 2024, I mean, second half of 2024, and we'll continue to support that. Yeah, maybe let me reinforce a bit the message as mentioned, GC. Grid, innovation are really based on accessories, growth, very high growth on the cable, on the profitability, structural profitability is coming from the saturation of the line, cost competitiveness, and also a very high level of selectivity. And this is the joke between you and me, Luigi, those levers of margin, structural or conjunctural, every year we have the question. I confirm this is structural for grid and for connect. It's a hard battle, but everything of the margin improvement is coming from innovation. We have been able, thanks to our innovations in the last years, to generate an improvement of 25 up to 50 million euros EBITDA. And our customers are eager to get more innovation like MobiWeb platform. which is fully patented and that have been launched six months ago in some countries, and that will be now deployed in all the other countries where Nexance is present. So this is why innovation is not only a matter of growth, like a matter of growth for Connect. It's a matter of bringing innovation to our customers with a premium service on a premium price. And to conclude on why we are structurally improving those numbers as well year over year is what mentioned VC is we still have a high level of spread between top performers units versus medium or low performer units and where the shift program of transformation is spreading fully to reduce the spread. So we have a lot of room, even if we have some downturns in some region, still a lot of room to improve our financial ratios in that, I will say, market.

Thank you very much. Very clear.

Thank you, Luigi. Next question? No, no more questions.

There are currently no further questions in the queue, so I'd like to hand the call back over to you, Mr. Garand, for any additional or closing remarks.

No, I think we have a very, very large audience this morning. Thank you for everyone being connected. As you can see, Nexense is demonstrating its structural performance semester after semester, year after year. And what is important is that we are concluding our second equity story We are surpassing our projection on our objective for 2024. So we are running in very good shape and in full confidence to start 2025 onwards for our objective in 2028. Thank you for your attendance and see you in the roadshow. Bye-bye.

Thank you for joining today's call, ladies and gentlemen. You may now disconnect.