Nexans S.A.

Welcome to the Nexen's Half Year 2026 Earnings Call. 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, Julien Hueber, CEO, and Vincent Piquet, CFO. Please go ahead.

So good morning, everyone, and thank you for joining us today for Nexon's first half 2026 result call. I'm here today with Vincent Piquet, our CFO, and together we'll take you through our H1 2026 performance. As usual, our disclaimer noting that this presentation contains forward-looking statements subject to the usual risk and uncertainties. Slide three, so let me throw you for the key highlights of our first half-2026 performance. Nexon delivered once again its strategy of profitable growth and further increased its exposure to the U.S. market. Starting with growth performance, standard sales reached €3.2 billion, up by 1.5% organically, driven by a strong electrification performance with organic growth up by 4.5%, More than offsetting the expected decline in other activities linked to metallurgy. The group delivered a solid adjusted EBITDA amounting by 388 million euros, representing a healthy margin of 11.9% of standard sales, also driven by our electrification business, which delivered a robust adjusted EBITDA margin of 13.2%. Let me highlight once again that this is a high level of margin supported by our positioning as a pure player electrification bearing fruits. On cash generation, our cash conversion ratios to that 42.7% underlying the quality of our earnings. Turning to capital efficiency, the group approaches to that 15% in H1 2026. On electrification, Roche was at 17.4%. The variation, compared to last year was mainly explained by the goodwill I did through our recent acquisition, notably Republic Wire in the U.S. With the completion of the acquisition Republic Wire, Nexon further expanded its North American footprint with now close to 1 billion euros of current sales, and that is a platform to further continue the buy and build story in the U.S., but not only the U.S., as we also remain opportunistic in our M&A pipeline. We also recently completed the divestment of Auto Electric on July 3rd, marking the successful completion of our transformation into a fully-fledged electrician pure-player. Finally, on being on H1 2026, on operations, our transmission M-A line will be loaded until mid-2028 with a project of interconnection in the immediate RNC that should start by the end of 2026, reflecting sustained strong demand for cutting-edge high-voltage solutions, leveraging our leading technological capabilities and engineering expertise. ELECTRA, our third caballering vessel, successfully entered into operation starting, as you know, in June 2026, further strengthening our fully integrated installation capabilities. And I also would like to highlight on Power Grid that we expect our capacity in Europe to increase by around 40% between 2025 and 2028, to answer a buoyant market where demand still materially exceeds supply. These investments are part of our 28 guidance, announced in 24. And again, the amount of work to be done in power grid worldwide is massive. The significant extension of duration of frame agreements with our customers, our platinum customer, is the best illustration of this. Moving to next slide. So before we dive into our segment performance, I really wanted to insist on a structural transformation that is reshaping our industry and creating unprecedented opportunities. This slide captures why our pure player model is so powerful. We are witnessing the emergence of a new market paradigm, fundamentally reshaping our industry. Our customers are rapidly changing the way they work, and this is opening the door to entirely new types of partnerships New Channel to Market and New Business Opportunities. This shift is particularly pronounced in fast-growing verticals such as data centers, battery energy storage systems and solar, where electrification needs are surging and where being close to the end customer is becoming a real competitive advantage. This is exactly why our pure player positioning makes sense. A preferred partner worldwide thanks to our agility and strategy built on three pillars. First, innovation. Our R&D center, Ampacity Lyon, is dedicated to addressing the critical needs of end users and decision makers directly, giving us a direct line into how these fast-evolving markets are shaping the requirements or making us design solutions ahead of the curve rather than reacting to them. Second, Industrial excellence. By mutualizing our industrial footprint across the group, we are structurally improving our time to market. And you know that this topic is important for me. And with our ongoing capacity expansion, we are positioning ourselves to capture a substantial share of demand growth. Third, M&A. We continue to consolidate our positioning across electrification, and the momentum speaks for itself. Three acquisitions in 12 months will ramp up our capacity expansion. Remember, we explained that RCT has increasing capacity as well as Republic Wire. We intend to keep pursuing external growth with our disciplined approach to further strengthen our electrification activities. Put together, these three pillars are precisely what allows us to address our customer critical needs for reliable, efficient, and sustainable solution with a speed to market that is now essential to winning contract in this new paradigm. This is a full strength of Nexon's pure player model. Moving to slide seven, our H1 summary. So let me break down our H1 2026 performance between electrification of activities. Electrification remains a clear engine of our performance in H1, with organic growth of plus 4.5% in the upper range of our mid-term guidance. The group adjusted the BDR margin reached 11.9% of standard cells, flat versus 2025 margin patterns, but slightly below compared to H1-25. H1-2026 remained constrained by an adverse mixed effect among the three segments of electrification with a strong performance of Transmission, Power Transmissions, Power Grids staying at a high level while Power Connect still facing a mixed effect. Finally, on over-activities, mainly metallurgy, the segment witnesses a minus 15% organic decline. And as you know, this is due to a strong comparison basis in H125 as customers brought forward cooperators that have type implementation in the U.S. Moving to the slide 8. Let's walk through business by business, starting with power transmission, which delivered a strong improvement in adjusted EBITDA margin in H1 2026. Here also, I'm very happy to announce that our MI line will be loaded up to mid-2028 with a project in the Mediterranean Sea. This project will start to contribute to performance by the end of this year. Standard cells. Coming at €777 million, up by 4%, which includes the growth of Manoeuvre 0.1, organic growth, as expected, as we are lapping an exceptional comparison base after two consecutive years of a strong momentum, and the growth pattern is now starting its normalization throughout the year, with comparison bases that will become even higher in Q4, while margin improvements will continue on their trajectory. Adjusted EBITDA reached 107 million euros, up by a strong 21% year-on-year, with a margin of up almost 200 basis points to 13.7 of standard sales. This confirms our strong operating leverage on that we are firmly on track towards our 18th margin trajectory by 2028. Our adjusted backlog stood at 7.7 billion euros at the end of June, essentially flat versus December. The backlog remains subsidy-driven and gave us good visibility into our activity all the way to 2028. And as you know, our MI line, in particular, being now loaded until mid-28. Moving to slide 9 on Nexans Electra. As you know, our third cable-laying vessel has successfully entered into operation in June this year, 2026. Accra brings a real step-up in capabilities with a three-tonne table to a total cable capacity of 13 final tonnes, which is up by 35%, versus our Aurora vessels, with the ability to lay up to four cables at the same time. Beyond the technical specifications, what matters the most is what these vessels give us strategically. Greater efficiency. Lower energy consumption and above all, additional agility. Indeed, owing our own vessel means we control our execution capacity directly rather than depending on the charter market, which directly supports future profitable growth in power transmission. Moving to slide 10. Let's move to power grid where Nexans continues to build on its strong positioning in a buoyant global market. First, the standard sales reached €702 million, which is up by 3.7%, including a solid 4.9% of organic growth in the range of our mid-term targets. This was supported by strong underlying trends on accessories business that remains particularly dynamic. All this driven by a robust customer demand for high-value added solution, need to grid modernization on the ongoing expansion of power infrastructure. The adjusted EBITDA came at 108 million euros with a high margin of 15.4% of standard sales. This level is fully in line with our expectation. It's worth recalling the structural mix of this business. Around two-thirds is underpinned by frame agreements. and the remaining third by project activity. Given the timing and execution profile of this project, some quarter-to-quarter margin can variate simply by the mechanical consequences of that mix. Overall, buoyant demand combined by the strong positioning and high value-added solutions continue to support pricing power. We are also seeing a strong momentum in North America in infrastructure projects and data centers. and Exxon is actively preparing to capture this business, and that has started in H1. Let me also touch briefly on inflation context. As we've explained before, we saw a slight effect in the early stage of the conflict, which was quite minimal and is now behind us. All our prices are now fully indexed to the current price situations, and we passed inflation through to customers. So at this stage, we do not expect any further significant impact on the pass-through. That said, we remain cautious and continue to closely monitor the situation both in the Middle East and at the macro level. And finally, a key point in that global demand is no significantly outpacing available industry capacity, which is why we're investing to expand our own capacity. On the next slide, slide 11, illustrate just how attractive the market perspectives are worldwide. I want to highlight two figures that really capture the scale of the opportunity. First, around 80 million of kilometers of cable will need to be built or replaced by 2040. This is the equivalent of rebuilding today's entire grid over the next 15 years. And second, Close to 50% of the world power grid will not be fit for purpose to handle this renewable energy by 2030. So these needs are driven by structural force, modernization of aging grid, the rising share of renewable energy in the electrical mix, the need for greater grid capacity and the growing importance of grid reliability. The reality today is that capacity is saturated globally and notably in Europe with demand Materiality exceeding supply. This is precisely why we are investing to expand our power grid capacity in Europe by around 40% between 2025 and 2028. These investments were included in our 2028 guidance we presented at our capital Marquet in November 2024. We are simply executing the plan we laid out to capture a demand environment that remains exceptionally strong and probably even stronger than expected at the time of our Captain's Arcaday last November 24. Let's go to slide 12, PowerConnect. So the business review with, let's finish with the business review with PowerConnect which showed very dynamic deadline momentum with a resilient margin performance despite an adverse mixed effect. First on standard sales, they reach nearly 1.4 billion euro up by 15.4% in total. This breaks down into 7.3% organic growth, an exceptional high level which supported a very dynamic trend in Latin America and several European countries, including growth from Italy, which illustrates our ability to progressively deploy our innovative solution in that market. On top of this, acquisition, recent acquisition added a 10% sales growth, reflecting a contribution of five months of Cabela City in Spain, six months of Electro-Cabela in Canada, and one month of Republiquio in the US, three value-creative deals. Second, on profitability, our adjusted BDI came at 162 million euros, representing a margin of 11.8% standard sales. As expected, these segments remain subject to a temporary adverse mixed effect driven by two factors. The Nordic countries where our best-in-class operations are still constrained by market conditions, and Italy where margins are still below the segment average. But the key message here is the sequential improvement. If you look at the progression from H2 2025, our margin improved by 80 basic points from 11% in H2 2025 to 11.8% now in H1 2026. This was supported by synergies in Italy, Improvement in Latin America on the continued expansion in high-value verticals such as data centers across our different geographies. So the trend is moving in the right direction, and despite the mixed effect, we see our efforts bearing fruits. A quick word on inflation. As we discussed for grid, the dynamic is similar here for Connect. With that, I will hand over to Vincent, who will take you through the financial review.

Thank you Julien and good morning everyone. Let me start with the standard sales bridge, which walks you from the 3,093 million euros in H1 2025 to 3,249 million euros in H1 2026, representing a total sales growth of plus 5%. Organic growth is at plus 1.5%. As Julien mentioned, this reflects a solid electrification performance of 4.5% organically partly offset by the expected decline in other activities linked to metallurgy down 15.6% and that should mechanically recover in H2 2026. The second and largest contributor was COPE at 3.8%. This is where our value-accretive acquisitions are really starting to bear fruit. It includes six months of electrocables, five months of cables RCT, and one month of republic wire, which we consolidated from June 1st. On RepublicWire specifically, we'll have a seven-month contribution over the full year 2026, so you'll see the scope effect continue in the second half. I would also like to say a word on RepublicWire as its integration is off to a very good start. We are progressively bringing in our know-how, our culture of operational industrial excellence, and we're already working on generating the first synergies. Finally, foreign exchange had a slightly negative impact of negative 0.3%. The US dollar and the Canadian dollar weighted on ourselves, though this was partly offset by the appreciation of the Norwegian krona. This brings us to 3,249 million euros in standard sales in H1 2026. Let me now turn to how this translated into profitability with the adjusted EBITDA bridge. The bridge takes us from 372 million euros in H1 2025, restated for IFRS 5, to 388 million euros in H1 2026, an increase of 4.3%. Looking at the organic contribution by segment, growth was primarily driven by the strong performance of power transmission, which added 16 million euros and was clearly the main engine of our profitability improvement this half year, thanks to the quality of execution and driving a strong operating leverage. Our grid contributed a further 2 million euros. Here I'd note that, unlike in some prior periods, there were no particular one-off projects this health. But we remain at very high level of margin, among the best-in-class performers, and we will continue to grow our margins gradually from here. Please keep in mind also the structure of the business, as reminded by Julien. Two-thirds with long-term firm agreements and one-third with projects. Our connect added 3 million euros, including organic and scope. We have deliberately combined organic growth and scope effects as we increasingly optimize production flows between our existing and recently acquired plants whenever it makes strategic sense. This reflects our industrial mutualization strategy and our ability to adapt to the new market paradigm as previously highlighted by Julien. And we will keep mutualizing our plants to optimize our production capacity, improve our time to market, and capture commercial opportunities. We are confident in our ability to extract value from this transformation of our footprint utilization, and the benefits will progressively, on time, be fully reflected in our figures. On scope, acquisitions contributed around 20 million euros, composed of 6 months of electro cables, 5 months of cables RCT, and 1 month of Republic wire. Foreign exchange accounted for minus 3 million euros, and other activities weighted by a further 2 million euros. All this brings us to a solid adjusted EBDA of €388 million for the first half. Let's now go through the P&L. Starting with our adjusted EBDA that grew at plus 4.3% as explained with strong contribution for power transmission, we then have the impact of depreciation mainly linked to power transmission recent strategic impacts as well as the acquisitions. Positive, correct mechanical effects of copper price increase over the period. offset by a negative forex impact related to our hedging activities. Our income taxes remain broadly stable at circa 60 million euros in H1 2026 compared to circa 65 million euros in H1 2025, resulting in an effective tax rate of 32.7% in H1 2026, more or less in line with the full year 2025 rate that was at nearly 31%. Net income from discontinued operations decreased by 17 million euros, reflecting the net losses generated by Auto Electric during the first half of 2026, while H1 2025 benefited from the net gains on the disposals of Amer Cable and Lixio, partly offset by an impairment related to Auto Electric at the time. Let me now walk you through the net debt bridge for the first half. The first item to highlight is the positive operational performance in EBDA and working capital. On capital expenditures, spending was relatively high this half, mainly driven by the investment in Nexans Electra. And I want to flag here that H2 CAPEX should be more or less in the same range as in H1 as we continue to finish the investment in transmission and metallurgy. This brings me to our free cash flow, which came in at 165 million euros, representing a cash conversion ratio of 42.7%. Without transmission down payments this half, this is a solid performance, illustrating our discipline on cash management. On dividends and equity operations, the cash out was lower than last year, because last year we ran the successful ACT employee shareholding plan. Again at Nexans, we believe it is important to associate our employees with the group's performance and long-term value creation. On M&A, this includes the acquisition of our public wire, together with the earn-out and the transaction fees associated with that transaction. Putting it all together, we end the half-year at a well-controlled leverage ratio of 1.4 times. It gives us ample headroom to continue investing in our growth, both organically and through M&A. Let me finish. The financial review was a word on our financial structure, which remains solid even after the acquisition of Republic Wire, giving us the flexibility we need to continue executing our investment plans. Our liquidity position remains very strong at around 2.5 billion euros, including 1.5 billion euros of cash and cash equivalents alongside our undrawn 800 million euros revolving credit facility and 250 million euros of undrawn EIB financing. In the context of the Republic Wire acquisition, we put in place a bridge to bond term loan of 500 million euros with an initial 12 months maturity and two 6 months extension options. This is a temporary instrument, indexed to Euribor, that partially finances the acquisition while we prepare a bond issuance. Setting aside that bridge, 100% of our debt is at fixed rate and our nearest maturity is our 200 million euros EIB financing due in April 2027. Our average cost of debt stands at around 4.1%, which is a very good level.