Nexans Unsp/Adr

Welcome to the 2025 full year results. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers Julian Huber, CEO, and Vincent Piquet, CFO. Please go ahead.

Thank you, so good morning everyone and thank you for joining us today for Nexon's full year 2025 result call. This is Julien speaking. So let's start as usual in slide 2, a short disclaimer noting that this presentation contains forward-looking statements subject to the usual risks and uncertainties. Moving to slide 3, so before diving into the presentation, I would like to officially welcome I'll introduce Vincent Piquet, who, as you know, recently joined Nexons, our CFO. Nexons brings a wealth of experience from the automotive and industrial sectors and was previously CFO of Ampère at Renault Group. So I am very pleased and we are all very pleased to have him on board. He's fully already engaged with the teams and deeply involved in the preparation of his result and our outlook. You will, of course, have a chance to hear from him in a moment. So before we move into the result, just a brief technical clarification. So in compliance with IFRS 5, the industry and solution businesses are now classified as discontinued operations in the 2025 consolidated financial statements. This is reflected both in 2025 and in the comparative 2024 figures. Let me now walk you through the key highlights of our 2025 performance. Let's move to the results. 2025 was a pivotal year for Nexense, marked with an excellent financial performance. We have reached a major step in our portfolio rotation, fully refocusing the group on electrification, and we delivered a strong set of results across all key metrics. The group standard cells, if I start by this, reached 6.1 billion euros with an organic growth of plus 8.3% year on year, well above our mid-term guidelines on demonstrating strong momentum across all our electrification businesses. The adjusted EBITDA amounted to 728 million euros, representing an adjusted EBITDA margin of 11.9% of standard cells. Excluding other activities which mainly consist of metallurgy, our electrification organic growth and EBITDA margin were even stronger with 11.6% organic growth and a 13.3% adjusted EBITDA margin. The cash generation was also very solid in 2025 with a cash conversion of a ratio of 47% underlying the quality of earnings and strong cash discipline across the board. From a capital efficiency standpoint, Roche reached 21.3%, confirming value creation power of our business model. And finally, we ended the year with a sound balance sheet with a leverage ratio of 0.36 times. Vincent will come back on that later on. And at the same time, we continue our M&A activities with two major acquisitions. The one in Canada, Electrocable, that we concluded in December last year, and the one in Spain, RCT, that we also concluded in June mid-year 2025. Moving to page 7. So this slide illustrates the consistency of Nexon's performance over time. The adjusted EBITDA has increased steadily. reaching €728 million in 2025 with a margin of 11%, as I just explained, compared to 10.3% in 2024. This result illustrates the group's strategic focus on operational excellence, selectivity and value growth driver. The free cash flow reached €344 million, with a cash conversion ratio of 47%, up significantly compared to previous years, and higher compared to our mid-term guidelines. A strong performance that illustrates the cash generative nature of Nexon's business model, as well as the strong cash discipline across all business units, and a working capital-favorable evolution. also continued to improve, reaching 21.3% in 2025 compared to an 18% in 2024, and reflecting disciplined capital allocation and a strong operational execution. In a consistent manner over the years, Nexon's transformation is delivering sustainable growth, improving profitability and strong cash generation year after year. Now moving to page 8. So as a reminder, during our KTL market day in November 2024, we clearly stated our ambitions to become a global electric chain pro player, fully focused on our three core businesses, transmission, grid and connect. In 2025, This year marked the final step of our portfolio rotations, and as announced, we have entered into exclusive negotiations for the disposal of the last part of non-electrification, which is auto-electric or automotive wire harnesses activity. This transaction is expected to close mid-year 2026. With this transaction, Nexon's complete its strategic refocus and now is fully dedicated to electrification with a simpler, more focus on more resilient business profile. Moving to page 9, so alongside with the divestment we just explained and you've seen in 2025, we continue to pursue targeted acquisition to strengthen electrification footprint. In 2025, we complete two acquisitions representing around 260 million euros of cumulative full year sales. The first acquisition, ElectroCable in Canada, reinforced our positioning in low-voltage cable on a high-heighted solution. It brings attractive growth, a robust profitability profile, and supported by a strong industrial footprint in Canada. This acquisition fits very well with our Connect strategy and offers clear opportunities to deploy our operational discipline. The second acquisition, RCT in Spain, in Saragossa area, strengthens our expertise in flexible fire safety solutions, especially in data centers and critical buildings, to fast-growing and high value-added segments that we are targeting. The newly industrial capacity that was announced at the time of the acquisition is now up and running and delivering portfolio, and we are very proud and satisfied with the new team that has effectively put in place this new machine and capacity increase. What is critical in both cases is not only the asset acquired, but how value is created after closing. In line with our approach, synergies are being deployed through the rollout of our Proprietary Shift program, ensuring smooth integration, execution discipline and value creation. Taken together, this acquisition illustrates how NextSense uses M&A to reinforce its electrification pure player positioning, expand selectivity in key geographies, and replicate its value creation model in a disciplined and repeatable way. Now moving to slide 10 regarding the sustainability. So let me focus on sustainability which is fully embedded in Nexon's operating model and group strategy. In 2025, Especially on our decarbonisation trajectory, Nexons pursued the same trend and exceeded its mid-term target for Scope 1 and 2 with minus 49% of CO2 emissions, mainly driven by energy efficiency solutions implemented on-site on significant levels of renewable energy usage. In the meantime, the current performance on Scope 3 was reached following low-carbon product innovations and circular material integration through our initiative like Cable Loop that was launched in France and Spain with our Platinum customers enabled us to reach 880 tons of cable collection during the year. We will explain in the deep dive session how we will expand these solutions. Through these initiatives, Combined with the METARJU project in Lens that will be commissioned in 2027, or another example of the partnership with RTE, the French TSO, where we have launched the first European closed-loop recycling system for aluminium, we are not only reducing our environmental footprint, but we are also reinforcing supply security and reinforcing a structural competitive advantage on the energy sector. Let's move to slide 12 and go now deeper in the business review regarding the year 2025 performance. So first, let me first focus on the fourth quarter, which was particularly strong. In Q4 2025, the group delivered an organic growth of 11.8%, or even 18%, excluding other activities, reflecting an exceptional high level of activity, notably in transmission and in power connect. With Q4, performance was well above our normalized run rate, supported by a combination of strong demand, high project execution intensity and a favorable phasing effect. Of course, we anticipate a normalization of the first quarter 2026, reflecting a more balanced phasing of projects. Beyond Q4 Dynamics, the strong finish of the year further supports the structural improvement of profitability, with the group adjusted EBITDA margin reaching 11.9% on 13.3%, excluding other activities, which was mostly driven by power transmission and power grid, and supported by our selective approach and quality of execution. Overall, 2025 clearly demonstrates an extensibility to translate long-term electrification trends into profitable growth. Let's now move business by business, and I will start by power transmission, which delivered an exceptional level of learning growth in 2025. Indeed, organic growth reached plus 29.8, so almost 30% for the full year, accelerating at the 40% rate in the fourth quarter of 2025, reflecting a very high level of activity and a strong execution. Bear in mind that the last two years, we have registered an unusual high level of organic growth, thanks to capacity increase, and we should go now back to a normalized level in 2026. The standard sales of transmission amounted to 1.6 compared to 1.2 billion euros in 2024. The adjusted EBITDA reached 203 million euros with an adjusted EBITDA margin of 12.3, up from 11% compared to the year before. This margin improvement was mainly driven by quality of execution on projects and increased efficiency following a full year of operations at the expanded plant in Halden in Norway. Finally, the adjusted backlog stood at 7.7 billion euros at year end, including 1.2 billion euros of the GSI project, still in phase of rescheduling with our customer. This adjusted backlog provides us a good visibility until 2028. Now moving to the power grid parts. Our grid business... delivered a growth of 5.5% in 2025, in line with our mid-term guidelines, and confirming a favorable momentum. In the fourth quarter, organic growth was plus 3.5%, reflecting seasonal softness, particularly in winter-sensitive activities and project phasing. Standard sales amounted to 1.3 billion euros compared to the 1.2 billion in 2024. The adjusted EBITDA increased to 217 million euros, which is up by 19% year-on-year, with an adjusted EBITDA margin of 16.4%, which is an improvement of 226 points. This strong performance reflects our focus on operational excellence with the continued strength of our accessories activities, increased selectivity in high-demand environments, as well as some one-off effects linked to some European renewable projects that we had in the last part of the year. This strong performance reflects our focus on operation excellence, the continued strength of our access to those activities and increased selectivity in a high demand inventory, as well as some one-off effects linked to some European. Importantly, the business, Importantly, the business benefits with strong visibility supported by multiple long-term frame agreements with recent contracts such as Enedis, providing increased visibility going forward. And if you remember, we have communicated the wins in the contract with Enedis for the coming seven years. Now let's move to slide 15, the finally PowerConnect business, which grew organically by 3.6% year-on-year. in line with our mid-term guidelines. In the fourth quarter, organic growth accelerated by a plus 10.9% driven by delivery of large infrastructure and data center-related projects. Standard sales reached 2.3 billion euros, which is compared to 2 billion in 2024. The adjusted EBITDA amounted to 289 million euros compared to 271 in 2024 and it stood at 12.3% compared to 13.1 last year. Margin performance reflects strong profitability in advance offer on platinum customers while the more conventional part of the business remain under pressure particularly in Asia Pacific and in Oceania. Finally, The integration of Latvian Acta KV in Italy and the roll-out of the shift program continue as planned with a strong focus on operational and industrial excellence. Again, let me remind you that PowerConnect is a contrasted segment where we have some very strong performers both in top line and margin, and our objective is to make all business units catch up with the best in class. We will now move to a key financial on Vincent, Welcome on board and over to you now for the financial part. Thank you Julien and good morning everyone.

Before going into the details, let me take just a brief moment to say that I'm honored to be here today. I want to thank Julien and the board for their trust. I've now been working closely with the teams for a few weeks and I'm very excited about the fundamentals of the business and the road ahead. With that, let's start with the 2025 revenue bridge. As you can see, group standard sales increased by 10.1% year-on-year, reaching nearly 6.1 billion. Growth was primarily organic, with a strong 8.3% increase, reflecting a solid underlying momentum across the group. Scope effects contributed a further 5.1%, illustrating the growing contribution from our recent acquisitions over the year, mainly RCT and RTC full-year contributions. These positive drivers were partly offset by an unfavorable foreign exchange impact of 3.3%, mainly related to the Turkish Lira and the Canadian dollar. On the profitability slide, adjusted EBITDA increased by 27.3% year-on-year, reaching $728 million in 2025, with the margin improving from 10.3% to 11.9% of standard sales. This evolution reflects the contribution of our electrification businesses, supported by growth and margin improvement. First transmission delivered both growth and higher profitability, making it a strong contributor to the group's EBDA improvement last year. Grid also recorded a positive year with strong improvement in profitability year-on-year. And in Connect, performance was more contrasted across regions and business units, as described by Julien. Asia Pacific and the Nordics were slower, and the process of improving LTC's performance is ongoing, and we also have the impact of a full year versus a few months in 2024. That said, we are confident in our ability to bring LTC up to NextSense's standards. Overall, within Connect, our structural drivers performed well, while we remain focused on enhancing the profitability of the rest of the portfolio. The Connect segment includes 26 million off-scope effect in the full year of LTC versus only 7 months in 2024, and RCT with a 7-month contribution. In other activities, the variance is mostly driven by negative one-offs recorded in 2024. As expected, metallurgy was impacted by the US tariffs effect in H2 after a strong H1 and accounts for a negative 6 million of impact on a full year basis. Overall, this bridge illustrates strong operational leverage in 2025, with EBITDA growth clearly outpacing sales growth and translating into a meaningful margin expansion. Moving on to net income. As we've just seen, the starting point of the net income progression in 2025 is a very strong increase in adjusted EBITDA from 571 million in 2024 to 728 million in 2025, an increase of 27.3%, well above the 10.1% of growth of our top line and demonstrating our strong operational leverage. This EBDA progression is also the main driver of the increase in net income from continuing operations, which reached 219 million, up 31.1% compared to last year. Beyond EBDA, a few additional elements are worth highlighting. First, financial expenses decreased significantly, mainly linked to hedging effects, in particular the evolution of the forward spread on the Norwegian kroner. At the same time, depreciation and amortization increased to 253 million in 2025 compared to 175 million in 2024, mainly reflecting investments in our Norway transmission plant in Halden. Net income from discontinued operations increased to 138 million, reflecting gains on disposals linked to Hammer Cable and Link CO, as well as the operating performance of industry and solutions partially offset by an impairment on Auto Electric as we moved it to discontinued operations. Overall, group net income reached 358 million in 2025, up 26.6% year-on-year, illustrating the strong earnings conversion of the group's operational performance. Moving now to cash flow and net debt. 2025 was another year of solid free cash flow generation which reached $344 million, compared to a restated amount of $177 million in 2024, translating into a 47% cash conversion rate above our midterm guidelines. This level reflects first a strong performance of adjusted EBITDA, but also a strict cash discipline, as shown by working capital evolution, and also helped by above-average down payments in power transmission. CapEx amounted to €383 million, mainly driven by power transmission, as we continue to execute on the capacity expansions decided in prior years in both Norway and Charleroi in Belgium. Dividend and others includes the cash impact of our employee share buyback program on top of the dividend payment. And the M&A column mainly reflects the contribution from the closed acquisitions of Electro Cables and RCT. It does not include the impact of Auto Electric as the closing of this transaction is expected mid-2026. Change in discontinued activities relates to the divestments of Linkgeo and Hammer Cable, as well as the reclassification of our automotive activity under discontinued operations in compliance with IFRS 5 standards. As a result of these transactions, combined with strong cash generation, net debt decreased significantly from 681 million at the end of 2024 to 266 million at the end of 2025. As you can see, overall the company is in great financial shape. Let me now spend a moment on our financial structure. At the end of 2025, NexSense benefits from a very solid liquidity position. We have significant cash on hand, complemented by committed and largely undrawn credit facilities. This gives the group ample headroom to operate comfortably. Our debt structure is well diversified and fully fixed rate, which protects us from interest rates volatility and provides good visibility on financing costs. And importantly, we have no material debt maturity before 2027. From a leverage perspective, Nexance remains very conservatively positioned with a low financial leverage ratio of 0.36 times. This trend is also reflected in our credit profile with an S&P BB Plus rating with stable outlook. It confirms that the group has the financial firepower to pursue targeted M&A, growth capex, and continue to deliver shareholder returns. In fact, shareholder return is a core component of our value creation model. Over the past 3 years, Nexance has delivered a total shareholder return of 59% and 250% over the past 6 years. This performance reflects the consistency of our execution over time. As shown here, the dividend per share has increased steadily over the past years, reaching a proposed 2.9 euros per share for 2025, an increase of 11.5% compared to 2024 and another historical record. This dividend growth is anchored in a group's improved profitability, strong cash generation and disciplined capital allocation. Our approach remains very clear. We aim to reward shareholders while preserving flexibility to invest in our growth and maintain a sound balance sheet. Looking ahead, this discipline remains a key area of focus. Our dividend policy is fully aligned with our financial trajectory, with a target payout ratio of at least 30% by 2028, while remaining consistent with our leverage and investment priorities. And with that, I now hand over back to Julien.

Thank you, Vincent. So let me now turn to Outlook for 2026. So we expect for 2026 the adjusted EBITDA for a full year to be between €730 million to €810 million, and for the free cash flow to range between €210 million and €310 million. We expect the first half of 2026 to be softer than the second half, mainly due to project phasing across different segments. This guidance... exclude the contribution of a non-complete acquisition and does not assume the execution of a GHI project in 2026. Overall, and in conclusion, I think that you can see that from the combination of our 26 guidance on the dynamic nature of divisional overview that we are excited for the future. We have successfully transformed into a high return business with a robust balance sheet focused on electrification as a global pure player. Nexense will continue to operate with a disciplined financial framework for the benefit of its shareholders, employees and the broader economy. So before moving to the Q&A, I would like also to remind you that we will host our business deep dive sessions today, shortly after this session at 10.30 Paris time. We will go deeper into our value creation model, market and strategic priorities. We will provide you an additional insight into how we are executing on roadmap. So with that, thank you all for your attention. And with that, we will be happy to take your questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. Due to the high number of participants, please limit the number of questions. If you wish to withdraw your question, please dial pound key 6. The next question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking my questions. I was hoping to ask two related things, but the first one just, can you clarify in the guidance on EBITDA between the bottom and the top end, you're very clear that you've taken off GSI from it, but do you have any contracts mitigating the undercapacity that you would potentially have from not executing that? How much is included in the bottom end? and in the top end of guidance. I'll start there, and then I'll ask the follow-up.

So, hello, Daniela. So, thank you for your question. So, clearly, yes, GSA is not included into our guidance, even though we are, as we have communicated early January that because this project is risk-reduced, that we are at the same time launching specific actions both industrially speaking but as well commercially in order to offset partly the gsi element so we are actually actually quoting different projects on mi on a part of it of course i will cannot display precisely because we are still quoting and we don't know precisely when it will start but the part of it is inside the guidance

So just to be very clear, on the 730 at the bottom end of guidance, that includes part mitigation on things that are not yet in the backlog, but in tendering.

Exactly right. We are still quoting on some MI projects. We have considered some of them. We have a good chance to succeed, but the timing element is not yet clear, so we have included some of it, but not fully.

And the top end of the guidance is the full compensation of GSI or also not fully?

So the guidance is not only about transmission, it's also about different elements, typically the restart of the European business that you know has been relatively soft in 2025. We consider some Some elements have a restart of activity, specifically in H2. Softer in H1, stronger in H2 for restart of the business, and that's mostly impacting the Connect business.

Okay, got it. And then just the follow-up also in transmission. You mentioned that you will have, I guess, two other things. Normalized level. Just wanted to clarify what should we interpret as normalized. Do you think transmission business, top-line-wise, can... be up or given taking off GSI? And also, can you clarify your comment on the first half versus second half EBITDA? How should we think about the first half margin for transmission given that's potentially the mitigations I would imagine if you're still tendering fall more into the second half, what type of profitability should we think about between the two halves?

So overall we foresee an improvement of our EBITDA during the year 2026 in transmission with indeed a stronger increase in second half due to the reason we just explained about steel coating for the MI parts. That's basically why we see a softener in H1 stronger in H2.

I agree that the timing of the quoting makes it a bit second half loaded. And beyond transmission, also the other businesses, we feel very good about grid. And Connect is, as Julien mentioned, a bit dependent on the improvements of the European market. And we're being cautious in terms of what will happen in the second half. And then finally, I'll mention in terms of explaining the range of the guidance, there's a metallurgy which is quite impacted potentially by tariffs volatility in the U.S. And so we're trying to take that into account in a range we're proposing today.

Okay. And you can't comment on transmission first half versus the second half of 25, for example, just to help us understand how much is underutilization in the first half could mean?

In 2016, the underutilization of the MI line will be manageable in H1 as we're basically working to do some cost actions. And then in the second half, we're planning on winning a number of short orders and new orders that will fill the line.

Got it. Thank you. I'll go back and pick you. Thanks.

The next question comes from Akash Gupta from J.P. Morgan. Please go ahead.

Yes, hi, good morning. I have a few as well. The first one is on your cash flow bridge. So when I look at your full year cash flow bridge, you have minus 371 for M&A and disposals. And if I compare it with H1, you had 613 million in inflows from divestments. So I wanted to ask this $370 million, $371 million is only what you paid for two deals and not the disposals. So now the disposals have accounted separately. So that's the first one to ask what that $371 in the cash flow brace is.

You got it right. We've separated the disposals from the acquisitions, and the way you explained it is the correct way.

Thank you. And then my second one is on M&A. Clearly you have been quite vocal about your M&A ambition in the press release, but I wanted to ask what are the area of focus? Maybe you can talk about the regions and business areas. And can you also talk about the hurdles because some of the growth growth business could be quite expensive compared to where you trade. So do you have any hurdle rate that you would like to highlight on which acquisition you want to go ahead and which you will not? Thank you.

So we will deep dive a lot on the M&A on the second part and the deep dive session just after, but basically our strategy remains very aligned with what we said at the end of last year. It's based on three elements. One part, one pillar of the M&A strategy is linked to mid-sized companies, small to mid-sized companies in countries where we are already here, in order to create industrial synergies in some markets where we are already present. Second pillar of the strategy is based on slightly bigger size of M&As in new geographies. And the third one is based on, say, adjacent to cables, so basically could be anything like accessories. So that's our strategy, and we're fully in line with this. It doesn't change. It's the same strategy. Having said that, today we are looking specifically at some geographies like North America. You know the example of Electro we did in December is a good example, but we are looking for other types of targets in North America, as well as other parts of the world could be Middle East or the other parts.

Thank you. And lastly, a housekeeping question. Depreciation amortization last year was 253 million, and I believe it might be including someone off there. It was 175 million in 2024. Can you tell us what shall we expect in 2026 for DNA? Thank you.

Yeah, I'll stay in line. We're continuing to see the impact of the investment we've made in Norway especially, and that's hitting our P&L. And from a cash standpoint, the major outlays in line roughly with what we've had in 2025 are driven by the third vessel, as well as the investments in Charleroi in Belgium, the land cable plant.

Roughly to 50 million DNA in 2026.

Roughly.

Thank you.

The next question comes from Lucas Farhani from Jefferies. Please go ahead.

Thank you. The first one will be on the free cash flow. Can you give us an idea of what do you expect the conversion could get to? We're still investing quite a bit in 26, 27, and it's running at 30% plus at the moment. But what could it get to the EBITDA conversion of free cash flow in the next few years as the capex kind of comes down a little bit? And the second question was just on the grid margin. Obviously, it's very, very strong in the second half. um can you give us an idea of maybe what's the normalized level you do talk about you know some kind of pull forward of activity or some one of effects in in there kind of how should we think about that margin going forward is 17 something you can do again in h2 next year or maybe that should normalize it thank you

So thank you, Lucas, for your question. I'll take the first one on free cash flow conversion. So free cash flow conversion in general is improving on the flow businesses, but the transmission business, as you can see, is obviously big and lumpy, and it depends a lot on down payments. So we had a bit of a strong year in 2025. We will continue to improve progressively as we grow all of our businesses, but it's a bit dependent on the down payments we'll get from the different deals in the transmission business. And so we're committed to our 2028 guidance on the cash conversion, and we'll continue to drive that in 26 and 27 as well.

Regarding your second question, yes indeed, you have seen the jump in the margin for grid, moving two points up, 14-16% EBITDA margin. We are very pleased with this business. The demand is very strong. We expect, let's say, at the first stage to maintain this level of margin. It's driven by innovation, driven by accessories that are still growing at higher margin events. So in order to continue to push, we need to continue to develop specific verticals. And I will explain that the deep dive is just after the importance of data centers that are big drivers of margin increase for the grid parts. But I would say, let's say in the coming months, we should be at, let's say, a similar level of margin before we acquire new capacity and we are working on it currently in order to continue to grow and develop the business. But it's a very solid, resilient business and a big part of the result of Nexense.

Thank you.

The next question comes from Sean McLaughlin from HSBC. Please go ahead.

Thank you. Good morning. Thank you for taking my question. Firstly, taking maybe a fresh look at margin progression in transmission, how confident are you on the journey to high-teens margins by 2027, 2028, and what, in your view, are the key steps to reaching that level? Thank you. That's the first question.

Thank you, Sean. It's a very important question. It's something we spend a lot of time on with the team. We see significant improvement. You saw it between 24 and 25, and we're still committed to the direction we've given historically of continuous improvement. It's driven by a few things. First, much better quality of execution. We've invested a lot in the team to drive that quality of execution and not have bad surprises during the execution phase of the project. And we are seeing that investment pay off in 2025. The margin improvement is driven by this better quality of execution. Second thing, The selectivity we've applied to the deals that we've taken into the backlog is paying off as well. We're continuing to execute on historical bad cholesterol, if I can say, deals that are hurting our profitability. The new deals we see ahead of us, the ones we're starting to execute on now, are much better in terms of margin accretion, and that gives us very much strong confidence in our ability to get to the high teens in terms of profitability for the transmission business.

Thank you. If I could touch also on Connect. You've talked about need for recovery in Europe. You've also talked down AsiaPAC in Q4. Again, can you maybe just walk us through what are the main components of improvement in profitability in Connect in 2016?

I will take this question. So Connect, indeed, you've seen a lower margin in second half. We understand very clearly and we are working on it precisely. It's coming from a few elements. First one is indeed pressure on price in Oceania, specifically in Australia, second half of the year. That has impacted us negatively and we are currently changing things to come back to a normalized level of profitability in this part of the world. Second is that one of the high contributors of margin in Connect is the Nordics in the north of Europe. I mentioned that in Q3, but it remains in Q3 the same, that the market there has been softer. So we have had less volume. We didn't lose any market share. In fact, we even win market share. But the overall market has been very soft in this part of the world. And we expect to see, hopefully, an improvement, let's say, mid-year Q2 or mid-year 2026. And the third element is, you know that our strategy we did in the M&As is clearly to buy... make some acquisitions at a low multiple and therefore the margin level of the company that we bought are lower than our average they are not yet at the maturity of innovations technology verticalizations and all our job is to transform them into a much higher level of profitability. In the case of 2035 specific second half, we had a full year effect of LTC, which is not yet at the level we expect from them. They are working very hard, we are very satisfied with what they do, but the size of this LTC business has an impact on their overall margin of connect. Having said that, All the other, and you know that we are clustering our businesses different, cluster innovation drivers, profit drivers. This business, you know, the top end of our business, which is a large part of our Canadian business, is doing very well, both in margin level, both in growth.

Thank you.

The next question comes from Scott Humphreys from Barenburg. Please go ahead.

Hi, thanks for taking the question. I have two, actually. I'll ask them one at a time. The first one on the high voltage demand out through the next decade. How have recent UK offshore wind auction results and some stronger pledges from the North Sea companies around offshore wind influenced your view of supply and demand in high voltage into the next decade? I think the first question.

Okay, so I will start. So I guess you have seen some In Hamburg, a month ago, a big meeting with the politics, energy ministers from seven countries, highlighting the need and the importance to deploy offshore wind businesses from 2030 to 2040, with an increase of capacity of offshore wind of 15 gigawatts per year for the coming 10 years. So the demand is there, and it's supported by the different states in North of Europe. So we see that this business will continue to grow. So 15 GB per year is huge, because you need to keep in mind that currently we have 34 GB already installed, so the ramp-up of this business will be extremely important. Second, interconnections. Here again, there has been a very supportive European Commission to accelerate the interconnection links between countries, funded by European Commissions, and they have committed, I don't know if you have seen this, but in December. So basically both businesses of our submarine, both wind offshore and interconnections, are basically positive in the outlook in the next 10 years.

Great. Thank you. And moving over to the metallurgy business and other activities, how has the continued rise in metal prices influenced your view on some of the pros and cons of vertical integration in bond production? And maybe as a follow-up to that, why don't you think peers or why do you think peers might not be following your footsteps in this regard?

Thanks, Scott, for the question. The metallurgy business is strategic to us. We see a lot of advantages of this integration. It's security of supply, which is key. It's recyclability. We control prices much more. We have long-term agreements with mining firms that gives us a lot of stability in our supply. So we clearly think that strategically it's really important for us to keep this metallurgy business. And we're driving it. And it's obviously quite impacted short term by the movements in the tariffs. It's adapted well. As I mentioned, after a very strong H1, it had a tough H2. But net-net overall, it's been quite neutral. And so we're managing it strongly and investing in that business. We think it's very important for us. The rise in the copper price is obviously having an impact. We're quite protected. We transmit that increase in price to our customers. We're protecting ourselves and protecting the financials very strictly. And we see maybe a long-term impact in terms of corporate demand and evolution, but in total for us, in the mid-term and short-term, it's really, really strategic. And having that integrated business actually gives us more levers to react and to adapt to the current volatility in the price and tariffs.

And I will add one point. If you remember that Four years ago, Nexons has clearly mentioned that by 2026-2027, there will be some kind of scarcity of copper supply. And now you start to see the impact on the basically tons of copper reaching $13,000 a ton. So we anticipate that a few years ago. That's why we have massively invested in our metallurgy and road breakdown in Lens. because it gives us a capability to recycle scrap of copper. This project is well ongoing. It should be in operation by 2027, and we will have access to the ability of scrap copper, scrap cables, already on site in Europe. So it will also give us an additional security of supply.

Thank you.

The next question comes from Chris Leonard from UBS. Please go ahead.

Hi, morning. Thanks for taking the question. Can I maybe go with two questions to start with? And the first is digging in, again, on the Connect business. And maybe it would be helpful if you could give us, as you have previously, what the divisional margin might have been for 2025 if you were to exclude LTC. I believe you commented on that in – uh first half results and equally could you also help us dig into how big the the asia exposure is or oishiana which you commented on being weak um when we're trying to judge you know how the margin in second half of the year was was 11 so the weakest since 2021 i'm just trying to get a read of this as an aberration and and uh the short term and then the second question actually i'll wait for the second question thanks

Okay, so for sure, if you exclude the M&As on LTC, but RCT is the same, by the way, because we're just taking over this business. If you exclude the newly acquired businesses, which are ongoing in the transformation, the average... of EBITDA would be much above, and we will not see any decrease of the percentage of EBITDA. So that's why we are putting a lot of effort and focus in order to accelerate the transformation of this business. We have launched in Q3 and Q4 some innovations for the Italian market with a brand So we're on the way to transforming business, but clearly it has an impact on the overall businesses. And your second question regarding the businesses in Oceania, it's an important business for us, but it's not, let's say, it's less than 10% of our overall activities in Connect.

And maybe I would say, Chris, also, if you take a bit of a step back, We've taken the profitability of that business from mid-single-digit levels to strongly above in the double digits, and there are some ups and downs. We're integrating, as Julien mentioned, businesses that we're improving as we're bringing them up to the next level. So if you take a step back and look at the trend over time, clearly it's very positive, and we know how to do this. We've done it in the past, and we'll continue to do it.

And we will present you just this next session, an example of RECA, which basically we acquired two years and a half ago, which is exactly at the level we expect, above the average of Nexon in terms of profitability.

Thank you. That's helpful. And the second question, Julian, is maybe related as well, but just looking at the 2028 EBITDA guidance range, that's remained unchanged. And I know that you guys are focusing industrially here and maybe there could be some further synergies that come through. And I just wonder, on your look at the portfolio, if there's been any view as to where you think the possibilities are on the industrial angle for you guys looking into 2028? And then as a follow-up, could you also comment as to how much of the GSI contract is currently factored into that 2028 EBITDA guidance for the group? Thank you.

So here you are a little bit on the industrial part. You are already at the second session that I will describe just after. But basically, you're right. It's important for us. You know, our DNA, we are industrial people. Our DNA is industries. We have launched already several actions on the industrial excellence, on the operational excellence. That will provide us some competitiveness in order to help our business to grow. and to continue to grow our ABDR margin. And that connect is clearly one element in this. Regarding the guidance for 2018, indeed, we maintain the same guidance of ABDR, no change in this. we are clear that we will achieve these targets. We have in this guidance 2028 some utilization of the MI line, of course. So either it will be GSI if this project resumes, and we have good hope that it will come back, or we will use ongoing large projects to come in MI, as I think we have explained also recently, that could also replace. But we have the possibility to to do either JSI or another one, but it's included in our number for 2028.

And just to clarify on that, in terms of other projects you're looking at, should we view this as the sort of, you know, previously discussed Plan B for GSI, or should we view this more as like sort of the Malta-Sicily contract that you signed last year as a small extension and a book to ship within the year or within 12 months? How should we kind of look at these projects you're looking to sign currently for the transmission business?

Thanks. So, regarding MI specifically, it's nothing to do on the plan B. In all, let's say, deep water project requires MI technology. There are some project queuing today that we will be able to quote. Now that we have announced, and this is why basically I've taken decision to make this communication early January, was to officialize the fact that we have a MI line available, and that triggered some opportunity and discussion with some customers that know that we have this line available for some time. And therefore, we are now discussing with them to basically quote and win this project of MI. So MI will be loaded by 2028. I don't see any problem on that.

Wonderful. Thanks a lot.

The next question comes from Nabil Najib from Deutsche Bank. Please go ahead.

Hi, yeah, thanks for taking my questions. Just staying with GSI for a little bit, first off, and sorry if I didn't catch this, but what is the current status of GSI exactly? Is the rescheduling now done? And if so, what's the ultimate timeline that you have settled on? And is the cable that has already been manufactured going to be stored until the customer then decides to restart work? And is there any compensation that Nexens gets for the idle capacity in such cases?

Okay. So the situation is the same as what we have communicated early January, meaning that there is a rescheduling ongoing with customers. We have some very close discussions with customers about different dates to restart the project. So this is what we call rescheduling. So there is no date specific yet because there are things ongoing. And you know, I'm sure you understand, these discussions are more at the political level that I will not describe. What is for sure is that all the cables that we have produced and stored today belong to the customers. So Nexon has no financial impact on this matter. So today we are talking with customers, rescuing, but there has been no specific news since the communication within early January.

Just to be clear, All the cable produced has been paid for, so financially we're completely covered. It's being stored. The customer is obviously working through its own processes and decisions, and we're working with them to see when it can be installed. But financially for us, it's fully neutral now.

Got it. Thanks. And my second question is on the mitigation measures. I wonder if you could give us a bit more color on the various mitigation measures that you're considering. Specifically, which, if any, projects are you hoping to bring forward from the backlog? And I realize you have started some discussions on new projects, but are there any specific new projects that you are looking to win? And finally, how would the margin profiles for repair work differ from those for large interconnected projects?

So I would say the mitigation measure, there are three types of categories. The first one are purely industrial. So we are relocating the workforce, we are reducing some expenses, we are doing what needs to be done in a plant when you have a line which is basically uh not running so that's that's done that's ongoing and where the reactivity of our teams in in norway has been at a great level second is that we have already win some small orders for repairs because the line is available you know it's an important uh business of doing the repair on what matters when you do repair is the speed So you need first to have a cable available to do reparations as well as a vessel available. So we are setting in place an organization to be able to both produce, and we are producing some cables for repairs with our customers. Basically they own the cables, so this is ongoing. And we are, let's say, setting an organization in order to be extremely reactive in case a cut of cable appears under the sea. is the commercial activities, so I'm not going to give you a name of the project because I guess some of my competitors could hear what I'm saying, but indeed we are currently quoting for some project on MI, and we expect to have some answers during Q2 in order to see and hopefully win some of these projects.

Understood. Thank you. If I could squeeze in a short one. Just on the MI workshop that you have in Futsu in Japan, what's the plan for that?

We have communicated, if you remember, I think it was September, October, the fact that we have basically sold this workshop to a company. We can use it, but it does not cost anything. So when it's idle, when the machines are not loaded, it doesn't cost anything to us. We sold the land, the building on the machine, but it's available to us as soon as we have some load to do. So no cost for us in Fudzu. That's great. Thank you very much.

The next question comes from Eric Lamari from CICCIB. Please go ahead.

Yes, good morning. Thanks for taking my question. I've got two small questions. Precision first. You mentioned when you talk about backlog, you mentioned an adjusted backlog in your press release, and I was wondering what kind of adjustment are you talking about here? And when I look to the backlog, should I consider that the project within the backlog are 100% secure? Is there anything specific to know here? And a second question about the project you mentioned, you mentioned you are quoting on some new project to mitigate GSI. Are you talking about similar, are you talking about window show or interconnection project or similar project in terms of profitability, really the larger project you are currently quoting, just to have an idea of the profitability difference between this potential new project and GSI profitability?

Thank you, Eric. I'll take the first one. So the adjusted backlog is basically due to the nature of the type of contracts we enter into the transmission business. Everything that's in a backlog is executable. So it will convert into cash. That's why we put it into the backlog. But the timeline and the exact call-offs by the customers in terms of when it happens have different levels of certainty. And so there are things that are extremely firm and certain. There are things where the timeline can move a bit more, which is why we use this notion of adjusted backlog. But overall, what we report as adjusted backlog is, unless there's a major cancellation and change in contract, obviously, but it's convertible into cash in the future to drive our cash and profitability.

And by the way, it's the same definition of the backlog like we always did, so there will be no change on that. I will take the second question regarding the other MI projects. So to answer your questions, it is interconnection type of projects. So specific to MI technology. So meaning it's a deep water type of projects. And in terms of profitability, of course, we are quoting so difficult for me to tell you a number, but we are in the similar type of profitability as the GSIS. Same technology, same type of margin.

Very clear. Thank you. And really, the backlog, how much could be considered as an extremely firm project within the backlog?

We don't really communicate on that. We just communicate on an adjusted backlog. Fair enough. Thank you. That's right.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, so thank you all for your questions on forward discussion we had together. So we now look forward to continue this conversation with you in just a few moments during our business deep dive. We are together with Vincent Piquet and Vincent Dessal. We will go deeper into our value creation model, our markets, and how we are intensifying execution across the group. Thank you again, and I hope to see you very shortly. Thank you.