Nexans Unsp/Adr

Good morning and welcome to Nexon's nine month 2025 financial information conference call. My name is Laura and I will be a coordinator on today's event. Throughout today's recorded presentation, all participants will be in the listener remote. Later, we will open up the call for questions. You may register for the questions at any time by pressing star one. And we kindly ask you to limit the number of your questions to one to two questions per person. And now, I'd like to hand the call over to Mr. Julian Hubert, Nexans CEO. Please go ahead, sir.

So, good morning, everyone, and thank you for joining us today on the Nexans conference call. It's a special moment for me to be speaking with you for the first time as the CEO of Nexans. With me today, I have Christine Prevolezzi, our Interim CFO, and Audrey Bourgeois, our VP, Investor Relations. I would like to begin by thanking the Board of Directors for their confidence. It's an honor to take this role and to lead a strong, high-performing company with a clear vision for our future. I also want to express my appreciation to Christopher Guerin for his leadership and the remarkable transformation he has led, a transformation I was proud to have drive as part of the Executive Committee. Chris leaves behind a strong company built on solid foundation that will keep strengthening. I spent more than two decades at Nexense, always close to operations and transformation. From my early years in manufacturing to leading our activities in China, South Korea, or globally for the industry solution project, I've seen how performance is built on operational excellence, flow-wise execution, and a deep understanding of our customers. As a member of the Executive Committee since 2018, I helped shape a growth strategy on the capital markets roadmap. Leading our €2.6 billion of power grid on Connect in Europe business reinforced my conviction that agility, execution and industrial excellence are the levels that will be key to an excellent next chapter. Our strategy remains unchanged, and the megatrends behind it have never been so strong. Electrification is accelerating and the need for secure modern infrastructure keeps growing. These dynamics reinforce next-gen positioning on long-term strategy. As a new CEO, I want to be very clear, we will continue to execute the roadmap presented at the last Capital Market Day, and we confirm our 2025 guidance on 2028 objectives as well. The direction is right. and the foundations are solid, and all megatrends are continuing. The environment, however, has grown more complex since our last Captain Market Day, from geopolitics, supply chains, disruption, or shifting policy environments around energy and renewable. This makes one thing clear. It is the right time to make next steps even stronger, stronger in execution, stronger in competitiveness, and stronger in agility. I will continue to fuel our model of value creation that delivers results, combining our shift program, complexity reduction, innovation deployment, and vertical developments. But building on that, I will also move forward and I will emphasize even more on further complexity reduction of the organization. efficiency optimization of our industrial operations, both in terms of productivity and cost competitiveness, further mutualization of our industrial footprint, and of course, keeping absolute discipline on cost and cash. All these priorities will further enhance the resilience of Nexon's model. Our ambition is clear to consolidate Nexon's competitiveness while amplifying selective profitable growth in electrification powered by digital acceleration on the smart use of new technologies and artificial intelligence. Nexense is entering this new phase from a position of real strength. We have a clear roadmap, robust financial foundations, and teams that are talented, dedicated, and united and proud of what we do. Together, we will deliver with strong discipline and focus the long-term value creation for all our stakeholders. So, after this introduction, let me now turn to the growth performance in Q3 on the first nine months of 2025 on page 4. In the third quarter, the group delivered a plus 7.7 organic growth, including a strong 12.6% in electrification. Over the first nine months of 2025, the group's standard cell reached 5.3 billion euros, representing a plus 5.8% organic growth compared to last year. Over the same period, electrification, which remains the core of Nexon's growth, recorded a plus 9.4% organic growth, confirming our disciplined execution across our three segments, which are transmission, grid, and connect. Our transmission-adjusted backlog reached €7.9 billion at the end of September, providing for Nexon's strong visibility for the coming years. No later than today, I am pleased to announce the acquisition of ElectroCable in Canada that will be reinforcing Nexon's position in PowerConnect in a highly dynamic market and with approximately €125 million current sales on a yearly basis. And I will come back on that on the next slide. In short, the first nine months concern the solid and disciplined growth of electrification businesses. This performance reflects our sharp focus on high added value solution and our selective approach to capture the strong underlying trends in electrification. So before we move to our segment in details, I wanted to highlight something that is important to me. I will move to slide five. Our innovation summit in Toronto that took place two weeks ago was a great platform for exchange with our platinum customers, our technology experts, and our partners. Nexon is becoming a pure player of electrification, so I believe that our role is to bring together the key stakeholders of the electrification ecosystem to imagine and to build collectively the next level of electrification that is critical to our societies, from powering homes and hospitals to supporting education and many other essential services. The choice of holding this event in Canada reflects our strong interest in North America. Canada is a powerful growth platform for Nexense, both for the grid and the robustness of its construction industry in our connector segment. So talking about Canada, I will now move to page 6 where I will present the acquisition of ElectroCable that was signed today, this morning in fact. ElectroCable is a Canadian player in low voltage cable system, delivering a high performance on service focused solution. This company represents a strong strategic complement to an excellence Canadian portfolio, offering an attractive growth perspective on a robust profitability profile. This acquisition also allows Nexon to further strengthen and complement its portfolio in Canada, enhancing its position in a very dynamic market while optimizing local supply chain efficiency. It also paves the way for valuable synergies driven by Nexon's expanded local presence and the rollout of its proven property shift program while enhancing innovation. This acquisition will be fully financed in cash, leveraging an excellent strong balance sheet, and is expected to be EPS accredited from day one and from year one. Now moving to page seven, let me now comment the overall growth performance over the first nine months of 2025. Standard sales reached 5.3 billion euros, representing a plus 5.8% of organic growth, confirming a solid trajectory for the group. The growth continues to be driven by electrification business, which make up the core of Nexon's strategy. It delivers a plus 9.4% organic growth over the period. Let me remind you that this is well above our Captain Market organic growth that we have announced last November of a CAGR between plus 3% and plus 5%. This performance reflects the disciplined execution in transmission and in-grid, as well as the recovery in CONNECT during this third quarter. Other activities, mainly metallurgy, a strategic segment for Nexon, posted a plus 4.1 organic growth over the first nine months of this year. And as you know, we observed unusually high level of external cells in H1, That was driven by customer bringing forward orders ahead of the US tariff. As expected, this overstocking subsequently led to correction in Q3 2025. The non electrification activity declined by minus 6% as expected. Given the challenging automotive market. We remain very active to make this disposal of the last remaining activity to finalize our portfolio rotation. So overall, the group growth is at a high level and fueled by healthy growth drivers in electrification, which remains our main engine of value creation.

So let's now take a closer look at our different segments, starting with transmission on page 8.

Performance was particularly strong over the first nine months of 2025, with standard sales above €1 billion, which is up by 25% organically, versus last year with a very strong Q3, up by 33%. This strong performance reflects solid execution, a favorable production mix, and a more installation campaign carried out in Q3 compared with last year. Now, regarding GSI projects, let me confirm once again that we keep working hand-in-hand with our customers. We have a very collaborative approach with them on this ongoing project that is on track as per schedule and milestones. Last but not least, transmission pipelines of activity remain robust, supported by sustained demand for interconnection on offshore projects across our key markets. Our adjusted backlog stands at 7.9 billion euros, which is up by 27% compared to last year, providing strong visibility until 2028. So in short, the power transmission segment continues to deliver thanks to the quality of execution.

I will now move to page 9 on the following slides regarding power grid.

So power grid reads the power grid sales reached 989 million euros, which represents a plus 6.7% hogging growth for the first nine months, which also represents a plus 9% in Q3. This reflects solid structural trends coming from replacement of obsolete grids and the connection of renewables to the grid, coming from electrification needs in verticals such as electrical mobility and data center, And it also comes from the high developments of our low-carbon offers, and I will be able to comment or answer any of these questions regarding this element. Also, our accessories business continues to be very well-oriented over the period. Overall, projects in Europe and North America ramp up under the new frame agreements with major utilities.

No turning to our Power Connect business on page 10.

Standard sales of the Connect amounted to 1.7 billion euros for the first nine months of 2025, compared to 1.5 billion euros in the same period last year, representing a plus 1.4% organic growth. You know how contrasted is this segment. We have indeed some strong performing regions with a double-digit organic growth, is the case for Canada, South America, Middle East and Africa. And so here again, our acquisition of today in Canada will further leverage on wind strength. We continue also to actively grow our tech product as fire safety product with sales growth progressions which are higher than the market average. That was a key element that we communicated during our last Captain Market Day last year in November. In contrast, And as you know, some regions remain more challenging. That's the case of Nordics in Europe, or the Pacific, specifically Oceania in Australia, specifically on the residential market. Countries like France, Italy, and Spain were quite resilient. And let me deep dive on Italy, where, as you know, we have started a shift complexity reduction program on the new LTC business that we acquired last year. This shift completion program is completely part of the integration process. So we are currently exiting from low margin products on low margin market as per schedule and I can tell you that the integration process of LTC is going very well.

Moving on now to page 11.

And before we move to the Q&A, let me confirm our full year 2025 guidance. which was upgraded in July. We continue to execute with discipline and focus and remain on track to deliver an adjusted EBITDA between 810 million euros and 860 million euros and a free cash flow between 275 million euros and 375 million euros. Let me remind you that this annual guidance upgraded in July is confirmed and does include only six months of link CO. Now entering the final quarter of 2025, we look ahead with confidence. Electrification keeps powering the group performance and Nexense is well positioned to capture this growth with resilience, efficiency and focus. Also, I would like to thank all our teams in Nexense for their commitment and hard work. They are the driving force behind our success on the journey that lies ahead. I am now happy to take on the questions.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. We kindly ask you to limit your questions to one to two per person. Thank you. We will now take our first question from Daniela Costa of Goldman Sachs. Please go ahead.

Hi. Good morning. Thanks for taking my question. I want to ask one sort of like more medium term and one a bit more shorter term, so I'll do them one at a time. But given the deal you've just done now in Canada, and I think in your commentary remarks on the press release, you mentioned that you're moving from, or Nexen's moving from execution to expansion. Can you talk a little bit about how you view the balance sheet? What's an ideal positioning? Should we see this deal have sort of more of a start of a wave of deals in electrification perhaps? And then I'll ask the second one.

OK, thank you. So so clearly the the the capital allocation is not changing, so my priority will remain the same. I will focus on accelerate the M&A as per we are based on the same logic as in terms of Thedis basically, which is. Priorizing M&A's in countries where we are already located. In order to reinforce our positions and in order to scale our innovations, And also the second thesis is to focus on M&As in countries where we are not, so basically we will be looking for bigger acquisitions in these countries. And then the third thesis is also to go on adjacent to cable, could be around accessories or any other elements.

Thank you. And then just it sounded like in Q2 that the commentary was very strong regarding the outlook for 3Q on Connect, and I think sort of the market in general had interpreted that maybe more like high single digits or maybe above that, and you ended up with some growth but relatively modest. Was it something in those countries that were weaker that deteriorated further, or maybe people just got overexcited with the growth rates after the Q2 call? What's your interpretation of the deviation there?

Yeah, of course. First of all, CONNECT is a very contrasted market. We indeed meet the double-digit growth in South America, Canada, and the Middle East. in line with our expectation for Europe. We were expecting a recovery in the Nordic part that did not happen. So what we have been doing is to accelerate the launch of innovation products. We are launching more than 10 innovations both in Norway, in Finland and Sweden in order to compensate this. So we will not have any impact in terms of profitability in this area of Europe. On the rest of Europe, we start to see some, in Q3, we started to see some signals of recovery, specifically in France, Belgium, Italy, and Spain.

So it was as strong as you expected at Q1? It was the same dynamics you expected at Q2?

So basically, you see the recovery In Q3 in CONNECT, it's a plus 3.6%, so it's better, it's an improvement compared to Q2, and I expect that Q4 will be on the similar trend in CONNECT.

Okay, thank you very much. Thank you, and we'll now take our next question from Lucas Verani of Jefferies. Please go ahead.

Good morning, thanks for taking my question. I just wanted to have a bit more information on the North America business. So you say it's about 20% of group revenues. Can you say how much it is in Connect and Grid specifically? And also, do we still have that same speed between Canada versus the US? And how would you characterize the EBITDA margins there? would you say that they're higher than group average? And the last point on that North America business, do you see any risk related to copper tariffs in the U.S. that might redirect some volumes towards Canada? Thank you.

Thank you, Lucas, for this question. So I just want to remind that when we talk about North America, we are not in the U.S., we are in Canada. We are well positioned in Canada on this acquisition will strengthen our position there. The split between Connect on Grid, it's mostly a Connect business and we are in both of course markets, but it's mostly Connect business. And this Connect business in Canada is very accredited to the group. We have an extremely high level of first growth, but as well as profitability and our choice to accelerate this M&A in Canada. Sorry, your last part of the question with the corporate tariff. Basically, we see that there is no impact for us in terms of corporate tariff because we are our own rock brand in Canada, delivering the market in Canada, so we have no impact for that. And the H1 and H2 will be as expected, so there will be no specific impact there in this part of the world for the tariff.

Thank you.

Thank you, and we'll now move on to our next question from Chris Leonard of UBS. Please go ahead.

Yeah, hi, morning, all. Thanks for taking my questions. I've maybe got two if I can, and focusing on the transmission business, obviously a very good quarter in Q3. Can you update us on the contracts that you're still looking at in terms of the pipeline and saying that there's good growth potential here. Is there anything we should expect for 2025 so that you can reach that book-to-bill level of one times? And within that, could you also help to give us some color on the UK national grid contract again and just give us a flavor for why I believe you decided not to bid and move into the tender on those contracts because so far the pricing is very strong on those contracts for Prismian and is a preferred supplier and NKT. So it'd be helpful to get any color there. And then a second follow-up question would be on your comments for GSI saying that the contract with, you know, IPTO is going well, very collaborative and on track with schedules and milestones. Is there anything more you can give on visibility of a plan B that you spoke to or your previous management team, I suppose, spoke to at first half results? That would be super helpful. Thank you.

Okay, thank you for your questions. I will start and then I will hand over to Vincent Desalle with me in the room today. So, basically, indeed, you've seen this strong performance transmission in Q3 on the year-to-date as well. In terms of backlog, you have noticed that we are book to bill of one in Q3, and we expect to have a similar approach during the year-end. we are active in term of in the quotation at this moment we are of course i cannot disclose the number of of project but we are quite active and we are positive to do some quotation in q3 hopefully with some award in h1 next year um um so that's that's basically the situations on regarding the gsi project as i said the project is ongoing extremely good relationship on collective work with hipto our customer, and for us there is no plan B, there is only one plan A, which is keep going and working with our customer to deliver this project. And I will not leave Vincent to continue.

Yeah, maybe to give some colors and to complement Julien's answer, regarding the backlog, indeed, we have a great improvement compared to last year, plus 27%. You know it. mentioned with some press release, typically the award of the RTE frame agreement in March, and more recently the Malta-Sicilia project. The pipeline remains active. We have indeed, and just to give an example, because it's public, recently, this week, Terna has announced a new tender for a major interconnection in Italy. So we just give an example of the robustness of the pipeline. And indeed, we are quite active on what I would call medium-sized project and large project. which are going to be awarded in the next 12 months. So quite active backlog and quite active pipeline in the coming months.

Thanks. Is there any comment on the national grid contracts that you guys weren't a part of?

Yes. Sorry, I forgot this point. I will answer to it, of course. You know, the story for Nexon has not changed. We have this shift approach in the project, which means that we are very selective in the way we choose the project that we want to target. We have commented this in the past. It's a mix of technical fit, terms and conditions fit, how it fits with the other project that we have already in the backlog. And indeed, when we look at this frame agreement, it was not answering from our perspective. to be different criteria. And as I said, we have other opportunities in the pipeline that we consider from our perspective more interesting for NextSense.

That's really good. Thank you.

Thank you. And we'll now take our next question from Jean-Francois Grenion of OdoBHF. Please go ahead.

Yes. Good morning. Two questions from my side. The first one concerns the acquisition of Electro-Cable. Could you give us some more details about the current profitability of this company compared to the profitability of the Connect division, and what do you expect? You mentioned an accretive impact, but could you give us some more details? Could you give us the V and the multiple for the transactions? And the second question, I will come back on the GSI project. So you confirmed the continuation of the operations. Could you give us the contribution expected from GSI this year in 2025? And what do you expect next year? I understood that probably there will be a ramp up and we expect a higher contribution in 2026 compared to 2025. Could you give us some more color about that? Thank you.

OK, so so first question regarding the new acquisition Electrocable. So this is this business is relative to an Exxon. It's. On Canada for us as well. So both can our business Canada on as well as with Electrocable is in the upper range of the above 20% of EBITDA, so it's extremely relative. To to an Exxon. This business is extremely well positioned in the market segment, which are for us priorities and fully in line with the market day. So, for example, the data center elements, the infrastructures, gigafactories, and so on. So, it's completely aligned with what we want to do. We also see some very interesting synergies from circulation standpoints. between Nexons Canada and Electrocable. So basically that's why we decided to move on to finalize this deal. So that's the first positive element. Regarding GSI, your second question, well, you know that we have received €250 million of payments the past month in different parts. So this year, we will do approximately €150 million as part of what we have communicated. So we will stay on this type of ratio. Maybe Vincent, you want to comment?

Hello, Jean-François. I think we will not comment in detail, of course, the coming revenue for GSI, but as a matter of fact, you know the amount of this project is €1.4 billion, basically. We have started in 23, so smooth ramp up. And after, you can consider that you have a kind of linear activity in the first year and with a kind of acceleration in the last two years of the project, 28 and 29, due to the installation, which is usually compact in terms of activity versus the production, which is split basically during five years. So that's basically the profile that you can expect in terms of activity.

Okay, thank you. And just for the additional questions, you expect to confirm an improvement for the EBIT margin for the transmission division next year compared to 2025?

I think here we will come back on you on this when we will publish a result in February with a new guidance. But what I can tell you is that we are extremely satisfied with the execution of the different projects ongoing and very proud of what the team is doing at this moment in this transmission stream.

Okay. Thank you, Julien. Thank you, Vincent.

Thank you.

Thank you. And we'll now move on to our next question from Scott Humphreys of Barenburg. Please go ahead.

Hi, good morning. Thanks for taking my questions. I just have two. The first is a very quick follow-up on the tariffs topic. So one of your peers has been speaking recently about kind of increasing their purchases of scrap in the US or in North America from a kind of European perspective. as the reduction in the amount of scrap that China is importing from North America. Is that having any impact on the cost of your scrap in Europe? Or was the Chinese buyer not as significant in Europe in the first place? So that's the first question. But I can carry on, please. Thank you.

No, so very clear here. So no impact at all in our scrap recycling activities in Europe. No incidents, nothing.

OK, thank you. And the second one, just a broader one on medium voltage. If you could maybe remind us where you are in terms of the process of adding capacity in the medium voltage business in terms of, I guess, Morocco. And then you mentioned briefly the low carbon production in France as well. So how are you seeing that, the level of capacity in medium voltage, given how strong the grid segment seems to be? And how does that tie in with this additional layer

uh of kind of a focus on production efficiency that you've you've talked about in addition to the cmd strategy so thank you this is a very interesting and important question so you can imagine when we grow your business by nine percent uh year on year of course it has an impact on the on manufacturing so here first of all i want to remind you that what the job we have done the past year was to increase the capacity because we anticipate this uh large increase in the grid to come. I just want to remind you the acquisition we did in Reka, Finland, two years ago with two CV lines. The announcement of the additional CAPEX in Bourg-en-Bresse on additional CV lines, as well as the SAFI, which is Morocco's new plant that was going to come. So, in terms of capacity increase, I mean, we are completely in line with our plans to sustain this growth. Now, regarding the existing footprint as well, we are on that. And you've seen in terms of communication that we have done the past last week, basically, that in order to basically deliver our commitments on objective for 2028, industrial excellence will be key. And that's why we are really accelerating today the efficiency, the productivity, and as well as the competitiveness of our plants in grid. So we have a full program on that, and that's extremely important to continue on this. And maybe one word, because grid is, of course, cable, but as well accessories, and I will let Elliot to comment on the accessories as well.

Thank you, Junior. So what we can say is that we are accelerating even further away in accessories. And indeed, as presented in our CMD, we mentioned that we had anticipated the investment in the plants with automation and robotization, so we are basically delivering at the scale that we announced in the CME.

Thank you. Thank you, and we'll now move on to our next question from Nabil Dejeab of Deutsche Bank. Please go ahead.

Hi, yeah, thanks for taking my questions. The first one is on GSI. I think you guys said You just said you had received 250 million euros of cash for GSI so far, and that's the same amount as what you indicated at the H1 stage, which you said should keep you going until early September on GSI execution. So I'm just wondering if you have received any more cash recently, or are you executing on GSI while waiting for a payment? And then the second question, given Julian, you've been in charge of the grid and Connect business for Europe. I was hoping to get your thoughts on how you see the margin potential for these two divisions. I think previously your predecessor alluded to a longer term range of around 15 to 16 and a half percent for grid. Is that a view you share? And what about for Connect?

Okay, so, well, I will start, of course, by the GSI. So, indeed, you know the amount of cash we received, €250 million. We have been here completely transparent on this. Here, once again, what I can tell you is that we are working very closely with IPTO in a very, let's say, collaborative way, and we are in discussion at this moment in terms of the next steps of this project on the milestone of payment is part of it. So I cannot disclose anything, but that's, of course, as you can imagine, part of our discussion. There's also ongoing discussion on the politics side as well, regarding the GSI, but on the cash payments, we have a close discussion with Wipto, and that's where we stand today. Now, regarding your second question, indeed, the European business, there are two streams, grid and connect. So grid, you're right with more than 15% EBITDA in terms of profitability. Here you need to understand that in grid there is basically three parts, three elements. First one being the long-term agreement with utilities. And here we are extremely satisfied with our relationship with Platinum customers of driving. We have signed long-term agreement with them. In the past it used to be two years contract agreement. Today we are talking about four, five, six years contract. So it gives us a very good visibility about the long term. The second part is project base of grid, which are renewable solar or wind. Here it's more, let's say, a project for a few months. And this business is extremely dynamic as well in Europe. I mean, Italy is one of them, Greece or the other parts of the countries. Here the profitability of this project are also at the right level of what we are looking for and what is in line with our capital market day. And then you have the third activity, which is accessories, managed by Elliott, which is, and we have communicated that a few times, that is extremely lucrative as a business, growing very fast, because you know that the accessories part is, let's say, the critical element of the grid. And our customers, Platinum customers, are replacing that regularly due to the climate change. And that's also giving us the reason why this business of accessories is going even faster than the cable. So that's basically for the grid part. Now talking about Konect. So Konect contrasted, as I said, businesses. Let's say the profitability in Europe is around 13% EBITDR. And we will be growing this step by step because we have growth patterns in our strategy where we will be growing in the sectors, in the verticals for which matter the most, data center, critical building, injecting new technology of products, injecting new innovation of products. On that point, I think just for you to understand, we are in the past two months, we have launched Claro, new innovation in Italy market with LTC. We are launching in September Ultimo innovations in Benelux, Mobiway in Norway. All these innovations are comforting the profit of this business and are providing also some resiliency because we try to avoid being too much exposed to residential and much more, let's say, focused to the market segments which are growing better.

And maybe to add on Julien's comment, just to remind that we have improved significantly over the last year the performance of the CONNECT business, thanks exactly to what Julien comments, the shift program deployment plus innovation, which are really the two pillars. And if you remember in the last call, we have not given any guidance on the percentage of EBITDA for CONNECT for very simple reasons. We have an ambition in terms of acquisition, and the acquisitions that we do usually are slightly below the average of Nexance. And we are after the deployment of our integration program in order to bring them at least to the average and sometimes above the average. And indeed, we know that in the coming years, we'll continue to do these acquisitions. So this is basically how we drive the evolution of the performance of Connect. But as mentioned by Julien, we are confident.

And one more comment. what is very important to understand, in ReConnect you can grow very fast and you can take any type of business, but remember the strategy of Nexons is to be selective. For instance, in the Nordic, in Q3, I asked the team to be extremely selective in that type of project because we don't want to consume cash for projects which are not accredited to our NBDA. So we took always the decision to... select the type of project, and choose the one that really brings both cash and profitability to an expense.

That is very helpful. Thank you both.

Thank you. And we'll now take our next question from Akash Gupta of JP Morgan. Please go ahead.

Hi. Good morning, and thanks for your time. My first one is on Outlook. So when you raise full year guidance in July, you were guiding double digit growth in grid and connect in Q3, but we saw grid growth in Q3 was slightly below double digit and connect was not below double digit level. And then we also saw some losing momentum in metallurgy business, which was pretty strong in first half. So my question is that today you are retweeting the guidance, but when we look at this guidance corridor and giving consensus towards the bottom end of the range, where do you expect to end up in the year? Like how much confidence do you have in the midpoint and how much confidence do you have on the upper end of the range? So that's the first one.

Okay. Thank you, Akash, for your question. So basically the metallurgy tariff impact was known at the moment where uh where where um we we upgraded the guidance so i think this one is there's no let's say uh negative impact whatsoever in terms of the guidance for for 20 for the end year in 2025 um we're getting the the the the grid on connect so so you know you know our strategy is not always to to go for volume it's also to go for profitable growth and and typically as i mentioned for connect part even though As you say, the volume has been slightly below the expectation of the market. I can tell you that the quality of the growth of the 3.6, based on innovation we are doing, secure our guidance for the year end. So I can tell you that's why we will be securing our guidance by year end. And I will not now comment where we'll be landing because we are still working on it. Of course, you can imagine, but... But the quality of the growth we have both in grid and connect secure our guidance.

Thank you. And my follow-up question is on transmission growth. So when we look at the comps in absolute term, I think you will have toughest comp in Q4. So maybe if you can comment about what sort of growth rates do we expect in Q4? And then when we move from 26 to 25, again, Is there any unutilized capacity where utilization can be driver for growth, or will the growth in 2026 will be mostly coming from project mix? Thank you.

Okay, so in transmission growth, you have seen that basically we will be – so you may have some spike from one quarter to another. You see a very strong Q3 number, 33%. I would say that our growth for the year-end will be first very well oriented and in line with the average of what we have announced in H1, this type of growth level. Now, regarding the vision for 2026, maybe Vincent, you want to comment on this one?

Yeah. Hello, Akash. Vincent speaking. I think you know the story very well. The significant increase of this year is the result of our decision some years ago to make several investments in terms of manufacturing, testing and installation. So it's a kind of expected, I wouldn't say mechanic, but at least expected growth. Now we have a backlog, as mentioned by Julien before, for the next four years. So we will be in line in terms of volume with this year because now all the capacity that we have added over the last three years are now running and they are fully loaded for the next four years. That's basically the profile of activity for the next four years. And as mentioned by Julien, depending on the different, I would say, planning of the execution, you can have from one quarter to another one, some differences in terms of volumes because you will have more installation, less installation. You know that we do more installation during summertime than during wintertime.

The usual approach of this business. Thank you.

Thank you, and we'll now take our next question from Yiming Zhanglin of Bank of America. Please go ahead.

Hi, good morning, everyone. Thank you so much for taking my question. So my first question is a follow-up on GSI. I was wondering if you could help us, you know, how should we think about the progress of GSI so far in relation to your four-year guidance? I think in the previous calls you had mentioned that, you know, even if the project does not go ahead, The 250 million that you had received so far would still contribute enough for the guidance to be hit, you know, in the mid-range of the guidance. Just wondering if you can confirm if that still is the case. My second question is on the power grid market. I guess we've seen a fair share of capacity expansion there. How should we think about pricing versus capacity expansion in power grid going forward? Thank you.

OK, so GSI, I think I will repeat what I just explained. So basically, yes, indeed, when the guidance has been raised last July and confirmed today, we completely integrate the GSI elements of the milestone we have with customers. So having no chance for that, I can contain this point. Now, regarding the power grid, your second question, So so so on it is also a very interesting question. So the growth is there. We demonstrated 9%. The capacity in Exxon manufacturing capacity in Exxon is also ready to to sustain the growth and we do not see any change. Any pressure on on on price. Why? Because first of all we are we have a. Launching extreme launching low carbons innovations which are extremely. Let's say in line with the expectation of our customers, platinum customers, because you may know that the type of medium voltage low carbon offer that we are providing and selling to the market today, they are reducing by 50% the CO2 emissions. So you can imagine the importance it has for our customer utilities. That's why we are able to differentiate from our competitors that are not offering the same thing. And as well as the strong, let's say, no pressure on price in grid is also linked to the growth we are making in accessories. Here again, I think you've seen last communication where we are launching innovations on new type of accessories, new joints that are also accelerating installation phase for more electricians on the field.

That's super helpful. Thank you very much.

And we'll now take our next question from Miguel Borrega of BNP Paribas Exxon. Please go ahead.

Hi, good morning, everyone. Sorry to come back to GSI, which you say is on track and there is no plan B, but it seems you're now more at risk than where you were in the first half. If the project is really canceled, what are the remedies? How can you replace the production reserves for next year And do you think there are other projects out there with such a margin? I'm just trying to understand if the previous 17% margin for transmission as a whole is still possible without GSI.

OK. So first of all, the project is not canceled. We are still working on it. that there are extremely close discussions on the relationship with our customers. There are ongoing discussions on the political side supported by the European Commission. So, I mean, we do not see that as a risk. And we'll come back on that, of course, when we have some more, let's say, information to share. But this project is not canceled so far. Regarding now, we have enough pipeline of projects ongoing. Some of them are insecure, some of them are also under quotation. So so here we we have so far we have no let's say we don't we don't forecast any any problem for next year on on this this part so. So so basically on on maybe that's if you want to add.

Yeah, maybe to hello to to give you some colors. I mean just keep in mind that this this project is what we call a mass impregnated project with deep water installation. and let's be clear on the previous projects with this type of technology technological content we have been only two players to be qualified so you don't have so many players able to deliver so far this technology and basically when you look to all the coming projects in mediterranean sea for example they will all request this type of activity and today both players are fully loaded for the next four years so you can imagine that the other project coming in the pipe are just waiting the available capacity so As mentioned by Julien, there is no plan B. Today, we are working with our customers in very good collaboration, and we are already working with some potential projects after GSI, which will be 28, 29, basically.

Okay, thank you. And then, just a high-level question, as you were previously head of PowerConnect and Grid, what can you tell us about recent performance in terms of growth and profitability, and maybe some insights on what will be the number one priority from here on? Is it accelerating top line growth? Is it continuing to expand margins or accelerate M&A? And then if I just can squeeze one more on industry and solutions, I think there's only auto harnesses left to be disposed. Is that still the plan? And do you see other areas potentially up for sale? Thank you very much.

OK, so so I will start by your last comments with auto electric. So the answer is yes, it is a still ongoing discussion with potential buyers. On the on the this discussion are progressing so that we will be able to come back to you as soon as something is a bit more concrete on that. But but that's that's something that partly part of our strategy to dispose on to become 100% electrical pure power electrification. Now, regarding the, let's say, what would be the priorities, basically, capital allocation is clear because we want to accelerate the M&A. That's really my objectives. I think the announcement of today for Canada can demonstrate it. And we have the team, M&A teams of Nexance is also very active with different pipelines, so we will use that very quickly to move on these elements. Growth, yes, but profitable growth. Selective growth, like we have demonstrated since several years. I think we will continue to do this. And also we will be extremely, and we explained that in the Quetel Marquet Day in terms of innovations, we have a pipeline of innovations. Recently, a big event with one of our customers, Platinum customers in France, we have seen a lot of electricians understand talking about innovation as a big appetite for innovations. And the last on the list is the shift on shift AI that maybe we can also explain you. That's one of our priorities. We really want to grow in this segment. And I will give the floor here of Guillaume in charge of the strategy and AI for an example that maybe can give some color on that.

Thank you, Julien. Indeed, Shift AI is a hot topic for us. Basically, it's the platform from which we developed the Nexens AI solutions. And the choice we made is to amplify and accelerate the Shift program that has been very successful for Nexens. We focus on full access, costing, complexity reduction, dynamic pricing, client advanced segmentation. And basically, the idea of Shift AI is that When a normal manager uses 5% of the data available, we move to 20% with Shift. And with Shift AI, we will move to 90%. So at the moment, we are really in the topic of building up this platform, and we will tell you more in 26.

And maybe just to finish on your question, maybe one of my other priorities, which is for me extremely important, is to work on the industrial excellence generate mutualization of industrial footprints, both in Greenland Connect, because we have here a room of improvement, productivity, and competitiveness, so that will be also a key element of my priorities in the coming weeks with the team.

Thank you, and we'll now take our next question from Eric Lemury of CIC. Please go ahead.

Yes, hi. Good morning. Thanks for taking my question. I've got two. First one on GSI. I appreciate your various comments on this project, but could you confirm maybe that you are on time with the initial schedule on GSI and that the project has not been somewhat delayed as it is sometimes mentioned by the press? And could you maybe say when you expect to receive the final notice to proceed for GSI? And I got a second question on the backlog. The backlog on transmission is flattish. up year on year, I can see that, but it's flattened sequentially this year around 8 billion euros. Could you perhaps remind us your strategy here? Is it to properly execute and renew the backlog in good condition or is it more to expand the backlog to make it grow further?

Thank you. Thank you. Thank you for your question. Maybe Vincent, you want to comment?

Yeah, I can take the backlog if you wish, Julien. I think what we must have in mind, you have to take a kind of step back, I think. Why the backlog has increased significantly is that, if you remember, in 23, there has been this big move on the market with the Tenet Frame Agreement, which was basically the largest award of the history of the subsidy business, which has basically catch a big part of the capacity on the market. And as a consequence of this major move from Tenet, you have seen plenty of other players placing their tender in order also to avoid the lack of capacity on the market. So 23 was indeed a peak of order in tech. So I think now we are more in a normal process because basically all the key players, we have four to six years of backlog. So it's quite logical, I will say, that you have a lower activity of tender right now, even if As we said, it's still very active and very robust. The different players have announced awards around this year. But if you follow my logic, you should expect potentially a new peak or further when there will be much more free capacity, which means basically probably more in 2027 or 2028. And that's why we have said previously that we think the book to build will be around one this year and probably next year due to this, not due to us, but due to the cycle of the business. So we are focusing, to answer your question, to two points. First, to execute properly the backlog, because we have a good backlog to execute. And indeed, we are looking to the pipeline in order to, on time, prepare the next generation or further, which will start basically from 29 onwards. And this means probably, as usual in this business, tendering two years in advance before the available capacity.

And just, thank you Vincent, just to answer your first question regarding GSI, yes, I do confirm we are in time with initial schedule and we are in close discussion with our customers about the next steps. So that's where we are standing today.

Right, got it. Thank you very much indeed. Thank you.

Thank you. And we'll now take our next question from Xin Wang of Barclays. Please go ahead.

Hi there. Thank you for taking my questions. A quick follow up on GSI, given we can't see your financial statements. Can you confirm for the volumes produced since September, are these sitting as contract assets or trade receivables on your balance sheets, please?

Just maybe a clarification, because you speak a lot about production, and I think just as a reminder, a project is not only production. I will not give you in detail the scheduling of a project, but all that we have done since the beginning of this project is, of course, engineering, testing, production, and so on. So when we say that we are on track, as mentioned by Julien, it means that we are on track. not only with manufacturing but also with jointing activities with testing activities with engineering activities and this is basically what we are doing so we have produced i think probably around 240 kilometers more or less and indeed we are continuing with both production and jointing and testing that's the normal life of of a project from a pure to give some color on the what does it mean from an operational perspective it's not only production if not the project will not progress as planned

Okay, thanks for the additional, Carla. I think my question was more for the work you did since September. Are you able to invoice them?

So, yes, we have been, of course, we have been invoicing the customer as per normal, as per the ongoing project, as per the milestone. So, but that's nothing exceptional to us. As usual, yes.

Okay, great, thank you. The exposure is limited so far.

Sorry, I didn't quite get the last bit.

No, so it's Christine, our interim CFO, which was saying that our exposure is completely aligned. There is nothing special to report yet.

Okay, great. And then my second one is, do you think there is a temporary regional oversupply in Canada since the introduction of U.S. tariffs? In H1, it was very obvious that you were exporting a lot more copper to the US, which was reflected in very high other activity numbers. As you also commented in Q3, this was negative 6.3% year-on-year.

So I don't think so. For Canada, we have a very strong growth in Canada, close to 20% growth year-on-year, extremely dynamic. You know that we have two types of business grid on Connect. The grid, it's fueled by long-term project, long-term agreement with customer utilities. So here, we are very well secured on the visibility. And in terms of Connect, you know, what the team is doing is to really focus the activity on the specific vertical data center uh um critical buildings and on here again there is no no we don't see any specific additional competitive competition from from outside the canada or or from any other country so so basically we are very well secured in this market very dynamic with very long capability to grow in terms of construction infrastructure okay good to know

And then final one, is the 9% grid growth margin diluting? Because I think previously management commented on sensitivity table between organic growth and the margin. Is there a shift on how you think about the market?

I can tell you that it's not diluted. This grid business is extremely profitable. And so no dilution at all. Once again, we are aligned with the target we have communicated in KTM RKD. in terms of profitability and in terms of growth.

Okay, thank you very much.

Thank you. There are no further questions in queue. I will now hand it back to Julien for final remarks.

So, thank you, operator. So, let me just finish by saying that I believe the solid performance delivery in our training update today confirmed the robustness of Nexon's model and discipline with which we execute it. Now we enter into the final quarter with confidence, and we reiterate, you have seen and understood today our 2025 guidance. I'm very pleased to go now on the roadshows and to meet investors in the coming weeks. Thank you again for joining today.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.