Prysmian S.P.A. Ord

Good day and thank you for standing by. Welcome to the Prismian 9M 2024 Integrated Results Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one, one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Massimo Battaglini, CEO.

Thank you and welcome everybody to the third quarter of the course. Extremely proud to say that we achieved a significant uptake in our results in Q3. If you look at the right-hand side of the page where Q3 data is reported, you see 540 million euros of EBITDA, first time achieved by the company. Even more exciting is the 11.9% EBITDA margin and achieved in this specific quarter. And part of this is certainly due to the successful acquisition and integration of the anchor wire perimeter in our scope. Also, you see in the heading 1.8% organic growth across the whole company business unit, which is significantly for us, is extremely satisfactory and is suggesting that we are really leveraging on the capability of the company and taking advantage of the market trends. Also, let me complement this nice set of results with the free cash flow, close to 1 billion last one month, and the 36% reduction in CO2 emission coming from scope 1 and 2 versus our 2019 baseline. Of course, the significant growth in terms of EBITDA has been achieved through a strong performance of transmission, as you will see in a while, and power grid supported by the INC increase in perimeter and in profitability with stability in digital solution and slight decline in the spatial cable business unit. With this acceleration in results and also thanks to the change of perimeter of anchor wire, I mean, what we told the market one year ago is, I would say, obsolete. We achieved already the 2 billion EBITDA level in 2024, which was, by the way, the target in 2027. So we owe the market a new ambition. And we will disclose our revised and refined strategy and our vision for the next years in March 26 in New York City. Why USA? USA because of two things. First of all, we are super exposed to the US market, following the acquisition of AnchorWire, compounded by the original strong presence in many seminal business in legacy prism and transmission and power grid and digital solution. And also second reason, because we want to make investors feel and touch live the asset, the quality, the value of all the assets that we acquire. So there will be, after the capital market day, a visit to the McKinney site in Texas on March 27th. Moving to the first business transmission, super happy of the organic growth since 17.5%. This has been obtained mainly through pricing, mainly through installation incremental volume. we are still not close, we are close to benefiting, but we are not still benefiting from the capacity expansion, which on the contrary, we will benefit from next year, from mid next year onwards. So the 17.5% particularly satisfactory to us, but even more important is to recognize the EBITDA margin achievement in quarter three at 15.3%, coming from 13.8% reaches the average of first half 2024, and coming from 14% from the year-on-year comparison. The EBITDA absolute value is pretty high, 92 million. The 15% level is something we're going to achieve and maintain also in quarter four. So this is certainly giving us confidence that what we told that we would achieve next year, namely the 16% level of beta margin, is within reach. Definitely with our good execution, with additional capacity increase, and with the good margins coming from projects in the existing backlog. The backlog has remained at 18 billion level in this quarter. No major adjudication awards have happened in the market. There will be additional expectation for quarter four with some some business will be landed by us. And so we anticipate the year-end backlog will be higher than 19 billion euros. Let me move to Power Grid. Greater EBITDA margin definitely is the way, in my view, to describe the quarter three performance, 13.6. We are coming from a softening in EBITDA margin in quarter two, and we now consolidate in a solid 13.3% for the nine months of 2024. We also had good signs of growth, 2%. Of course, in this space, we embed a different segment of business. So there is stronger growth in medium voltage and HVAC. And there is softening in demand in low voltage cable and overhead bare transmission cables. But all of it compounded turns in a 2% organic growth. Remarkable results also consider we've been hit by some business interruption resulting from the hurricane that hit our South Carolina plants at the end of September 2024. Moving to INC, I think you immediately appreciate the value accretion coming from the anchor wire acquisition. Looking at quarter three per se, you see 11.5%. Last year it was 9.4%. If you take the first half EBITDA margin of INC, it was 9%. It is raised to 11.5%. So significant accretion. In this quarter, you should consider that out of the 211 million EBITDA, 100 million is coming from, are coming from amplifier perimeter appliance. We are happy to confirm a great progress in the integration process. The new agents structure is in place, has been set in place since August 1st. We're working on integrated organization. And I really excited to confirm also from my recent visit in September, October, that the quality of the asset that we acquired and the power of the service model and in addition, the value and the capability and the know-how of the EncoWire team are really and truly outstanding. Let me move to specialties. Here we are not satisfied by the organic decline and by the EBITDA margin percentage, although we have to recognize this is specifically coming from two business sub-segments. One is the automotive business where we recorded significant downturn in volume and in pricing. The other one is the oil and gas perimeter cables and also the whole technology solution, the one we provide to oil and gas platform to connect the platform to the seabed. So we had some contraction in margin and volume, which has resulted in today's performance in quarter three. We continue to remain positive in the business. Quarter four would not be much different from quarter three, we anticipate, but we are working on the mix improvement on the rest of the perimeter to make more satisfactory, to achieve more satisfactory results from quarter 1.25 onwards. Digital solution, it is stable volume-wise. You see the organic growth is slightly negative. We finally seen in this last month of October, not yet reporting importantly, obviously, significant volume uptake in the American market. So this is positive signs of that probably the market has finished longer lasting this stopping phase. And we are in a rebounding mode, particularly satisfied by the 14, almost 14% EBITDA margin. And in absolute value, we moved from 35 million EBITDA to 45 million this year, which is reassuring. We expect that this volume demand uptake continuing in the coming quarters and becoming even stronger in 2025. The nine months show, again, stability at 12% EBITDA margin, which for us is a good level for the current level of market demand and profitability. The comparison to 2023 is a bit unfair because in first half of 2023, we were still not at the peak of the market, but we were enjoying a significant level of backlog coming from 2022 that we, in the end, deliver in 2023. One important slide to comment how crucial to our growth strategy is sustainability. On the one hand, on the first KPI, you see the importance of the scope one and two reduction in emission, but this is our internal contribution to the decarbonization of the world. We are on track and actually very aggressive, despite that we have to align also the anchor-wide perimeter to these targets. We confirm our present targets overall. But even more satisfied we are from the second KPI, so the percentage of revenue of the company linked to sustainable products. This has risen to almost 50% of those total revenues. So this is not as important as it is in terms of the way we see sustainability as a lever to achieve organic growth, a lever to engage more customers. and satisfy more customer needs in terms of low carbon products in the market. And the third indicator, the recyclability content of products shows another important step change in performance. 15.7% level of recycled products in compound and copper material. With this, I will hand over to Francesco for the financial

Thank you, Massimo, and good morning to everybody. Profit and loss recap. Of course, as Massimo anticipated, the nine months include the anchor wire consolidation since July the 1st, so basically for the third quarter. Organic growth, which obviously exclude anchor, as Massimo said, is positive in the third quarter by 1.8%, driven up very significantly, very positively by the strong performance of transmission with a strong double digit growth and also positive growth pattern, both in INC and in power grid. uh a very solid uh ebda for q3 at 540 million i would say even better in terms of ebda margin which is 11.4 percent year to date and close to 12 percent for q3 of course this is benefiting of the accretion coming from the anchor consolidation in q3 other than this i would say that our ebta margin are quite stable around 11.1 throughout the three quarters to remark uh the very strong progression of the transmission business both in terms of total ebda and in terms of margin with margin in q3 exceeding 15 percent very well positioned for achieving our medium and long-term targets which were announced last year at the capital market day uh no no sorry The financial charges, of course, increased significantly, up from the 70 million last year to 133 million. Of course, the effect of the acquisition financing and of the acquisition kicks in the beginning of July, in the third quarter, and this is the largest part, almost the entire of this increase. The net income is extremely positive, 619 million, benefiting also from a pretty low level of tax rate at 22%. Let me remark that we plan to close the full year with a net income between 850 million And this is very significant in terms of the progression of our earning per share. You're reminded that the capital market, they were announcing a year-on-year growth greater than 10% starting from 2022. 2022 EPS was around 2 euro a share. I think that by the end, the full year 2024, we will be in the region of 2.9%. uh your share so it's definitely a progression which is much ahead of the targets that we had announced that that that capital market day okay we can move to the cash flow as massimo anticipated a very strong last 12 months free cash flow close to 1 billion and extremely well positioned to achieve our our guidance save the 900 million free cash flow for the full year uh the debt is reflecting the movements coming from the anchor wire acquisition you see 4.1 billion and also the movements coming from the convertible bond conversion which is a positive in in june july this year and also coming from the execution of the share buyback, which is ongoing. That so far has been executed for approximately 170 million year to date September and that of course we plan to complete between year end and the first quarter next year. Let me add that the expectation of net debt for year-end is absolutely in line with our original expectation and is for net debt in between 4.4 and 4.5 billion at year-end, which is a leverage in terms of net debt on EBITDA of approximately two times. So a very solid and very healthy financial structure. Back to Massimo for outlook and conclusions. Thank you.

Thank you, Francesco. So EBITDA-wise, you know very well the range. We confirmed that we will be in the midpoint level. Bear in mind that we had some headwinds coming from Forex and the hurricane. So both of them account for, in total, they account for some 15 million euros worth of negative impacts, so confirming 1925 is definitely a strong sign of strength across all our businesses and regions. We are also in line with what we told you last time, so we see ourselves in the 100 million neighbourhoods of the free cash flow for full year. And of course we confirm the emission targets of 36 foliar and for scope one and two and minus 13 for scope three. And so concluding this representation of a performance, I confirm the super strong result achieved by transmission and power grid. And this is a trend that we see lasting in our backlog, and last in our footprint, and last in across all our geographies. We are super satisfied by the AnchorWire acquisition. We've seen pricing normalizing already for the four consecutive quarters. And so we are going to use these assets to build the foundation and the growth of the coming years, thanks to the cross-selling opportunity, the complementarity to the portfolio products, and also thanks to the drivers of growth that are benefiting the US cable industry. Strong cash generation is another important asset to this company. And again, quarter four, quarter three result, quarter four, four-year guidance will definitely require us to provide you a new ambition for the company for the next coming years, which we will disclose to you in a few months from now. Thank you. I now leave the floor to your questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Akash Gupta from JP Morgan. Please go ahead. Your line is open.

Yes. Hi. Good morning, Massimo and Francesco. I got two questions, and I'll ask one at a time. The first one I have is on transmission segments. So you are already reporting double-digit growth when you have very little incremental capacity. And next year, you are telling us that there will be more capacity coming online in your Piccola factory specifically. So maybe can you tell us about what sort of growth can we expect next year and what sort of operating leverage shall we expect on this higher growth? So like if you're already at 15% run rate on margins, where can we go next year when you have more capacity available online and probably the mix will also shift to these newer projects? So that's the first one to start with.

Thank you, Akash. You are definitely right. In this year, we will have three additional lines of production, two in the submarine space and one in the land HVDC space, which will come to fruition from basically June or July next year. I'm a bit hesitant to tell you a number in terms of organic growth, but it will be significant. I would like to confirm that on the back of this level of profitability, 15%, we see ourselves beating what we told the market one year ago, the Capital Market Day. So the 16% target for 2025 is definitely within reach, and we hope, we think we'll be able to beat it. And you remember for the, our goal or regional goals was to achieve a 16 and a half by 2027. So we are well positioned to beat those numbers. Of course, we want to remain cautious because we have a larger scale of activity to run next year, more capacity, more projects, more complexity, definitely, but you know, we are well equipped to manage this complexity. So significant organic growth next year. and consistency in margin growth in 26, 25, 26, and 27.

Thank you. And my second question is on power grid segment. I think in your prepared remark, you said you saw growth in medium voltage and HVAC business, but a bit of softness in low voltage and overhead cables. Um, can you tell us a bit about, um, how these, how your power grid, uh, kind of split between these four product categories and when it comes to margin mix, are there, are there some categories that have better margins than the other categories? Thank you.

Yes. Thank you. I, I, I give you the sense of the state. Uh, so big chunk of this business is a power distribution. Let me call it two-thirds of the total revenue in this space is power distribution. And then you should consider almost one-third is HVAC, and the remainder is the overhead lines business. In terms of profitability, the EBITDA margin of HVAC is higher than the average, is higher than the 13.5% that you've seen in quarter three. D-medium voltage is also higher than the average. D-low voltage is somewhere between 8% to 10% in average. Of course, there are a bit of margin distinction by business unit, sub-business unit. Of course, geographically-wise, We have also significant spread between the margin of United States and the margin of Europe and LATAM. But this is to tell you that the growing margin, the growing volume is in the high margin segment, medium voltage and HVAC. This is what matters. This is where we are deploying additional capacity, both in HVAC in Europe to support customers like French TSOs or English TSOs in their deployment. And also medium voltage is where we are investing in both in Europe and North America to support the growth coming from the electrification needs.

So maybe just a follow-up to that. So if you are expanding more into HVAC and medium voltage, which are higher margin business, so we should expect some improvement from current level of profitability rather than the profitability staying at these high levels? Would that be a fair assumption?

I like to be cautious here because 13.5 is a streaming high margin for this business. You remember that this company delivered a 7% two years ago. So we've been very good at leveraging our strengths, capabilities, production footprints, and technological leadership in making this margin growth. consistently achievable and sustainable. So yes, on the one hand, I believe that the additional volume in HVAC and the medium voltage will bring some upside. At the same time, this weakening in low voltage is expected to continue. So where the net effect will be, I don't know, but we will be reasonably happy to maintain the profitability of the overall business unit around a range between 12.5 and 13, 13 and a half percent.

Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Josh Miller from Morgan Stanley. Please go ahead. Your line is open.

Yeah, thank you very much. Good morning, everyone. Just a quick question in light of some of your comments on maybe weakness in low voltage in power grids, but also in specialties. Maybe could you give us an update on the demand environment in US industrial and construction, particularly around the election? Have there been any noticeable changes to your business there? And then also, you've talked in the past about this part of the business having backlog. Is this still the case today? Or have you worked through that on a now in a more normalized environment?

Thank you, Josh. Yes, when I mentioned specialties, the specialty is not all about this business. Specialty is the electrification of equipment. In the specialty business, I mentioned February Automotive as a driver of volume and margin softening. and also the oil and gas case. On the contrary, the rest of the application fields, and we have plenty of them in the different geographies, crane, mining, rolling stock, defense, marine, irrigation, and all the rest is proceeding very well. And I'm confident that we will make this growth in the coming quarters more satisfactory. We're also working, just to complement these comments, on how to reduce our reliance on automotive. And we will show you in the coming weeks what those plans are and how fast are we proceeding in divesting some of the activity in automotive. Then the weakness in the voltage that I mentioned in the power grid space is not different from what we noticed in the past. There are much more investment in medium voltage than in low-voltage cable to electrify the grid, to strengthen the grid. And this is particularly heavy as a dynamic in the United States, where also the low-voltage overhead lines, which we call overhead lines, distribution of overhead lines, are pretty much under pressure volume-wise and also price-wise. then I don't expect anything to happen in the United States in terms of changes of the market demand following the election. Both presidents, both parties we had in the past, and in all cases, we had a stronger need of reinforcing the make-in-US approach. In both cases, we had a significant amount a significant push for subsidies and support to the infrastructural investment. In both cases, there has been a continued effort in reshoring manufacturing activity at the state. In both cases, we had a significant expansion of data center activity, which is a significant driver of our business growth. So I don't see how trends that are solid, secular, and well-established entrenched in the U.S. market might change as a result of the elections.

Great. Thank you very much. And then maybe just a second follow-up. There's article headlines this morning about potential investment from Prismian in Nexans' industry unit. I wonder if you could comment around that and maybe how you would plan on financing such a deal.

We are far from considering the financial impacts of how to organize that operation. We are working on the case. We've been just handed over all the information. It's an interesting opportunity. We'll have to assess it properly. It's a sizable space, 700 million revenues. It's an interesting space of business, of special cables, mainly in Europe. the same time there is some significant overlap with our footprint in europe which we have to assess so there is some complementarity in some product niches like defense like aerospace which like medical care which are particularly interesting to us but let us work on the case and in the next two three months we will make up our mind and we will let you know if there is an any solid interest in continuing this possible operation.

And sorry, just to clarify, is that that you're looking at the industry business X auto, also including the auto harnesses segment?

No, we're not at all, not at all interested in the automotive business and even less into the harnessing business, not at all. Great, thank you very much. So we're interested in the rest of the space, so spatial cables for electrical application in equipment OEMs, customer.

Great. Thank you.

Thank you.

We'll now move on to our next question. Our next question comes from the line of Vivek Mida from Citi. Please go ahead. Your line is open.

Thank you very much, everyone, and good morning. I have two questions. My first question is on channel inventories. Some of your peers have highlighted some destocking effects in the third quarter, whether it's in European construction or in U.S. distribution markets. So how do you assess the level of channel inventories today? Have you seen any significant movements in channel inventories in the last quarter? Thank you.

We've seen some destocking activity within U.S. distributors in the past months, I would say more towards second half 23 and beginning 24. Actually, at the beginning of 24, we started to see a significant rebound in demand from distributors in the United States. So I think there is stability in the market. I don't see signs of the stocking, further signs of the stocking. If there is some, let's say, softening in the residential space in the United States, there's light softening, but as you know, we are really very little exposed to this residential business in the US. And in Europe, there is no impact, there's no changes coming from the stocking activity within distributors channel across different countries. Of course, in the Nordics, we see more demand in the southern area of Europe. Lower demands in the second half of 2024, but overall we are extremely positive about this INC volume in the coming months. Thank you.

My second question is on digital solutions. So you mentioned an improvement in U.S. demand in the last month. How are trends in Europe? Thank you.

So US demand has picked up in October. Now is the first month where we see significant volume. Let's wait for the next month to come. In Europe, we have a stable volume over 2023, let's say. Of course, there is a declining market in France because France almost achieved the completion of the fiber-to-the-home route. There is more demand in Germany, Central Europe. in the UK and the Nordics and in Europe. So, but overall, let me call it flattish. There still seems, there's still some pricing pressure coming from the fiber as active players. And, you know, we are working on the case to set import duties as we did for Chinese cables two years ago. We will also do it for fiber imports into Europe from Indians and Chinese players.

you very much thank you thank you we'll now move on to our next question our next question comes from the line of monica bossio from intesa san paulo please go ahead your line is open yes good morning and thanks for taking my question my first question is on the industrial and construction

Out of the 211 million EBDA, roughly 100 million came from Anchor Wire. I'm just wondering if you can give us an indication on the weight of Europe on the industrial and construction EBDA for the third quarter, and if you can give us some flavor on the pricing trend in Europe. That's my first question, and... For the second one is on the digitalization. Volumes are picking up in USA. Maybe it's too early to bet for a new positive cycle, but I'm just wondering what could be a fair margin in a positive cycle and in the mid-cycle for digitalization? Thank you very much.

You're welcome, Monica. So INC... It said 100 million is anchor wire. And out of the rest, let me say that Europe is around 40 million EBITDA of the remainder of the EBITDA of the group. We don't see at all pricing deterioration in Europe. If anything, we are stable, slightly increasing over quarter three, quarter four last year. But you also remember that Europe didn't benefit much from the cost inflation process that has allowed the United States to enjoy a significant margin of take in the second half of 2021 and full year 2022 and partly in 2023. So stability in volume, stability in pricing in Europe with some pockets of opportunity in pricing upside and volume slightly growing also in Europe. Digital solution, they normalize the level of margin. I mean, you know, you remember that at the peak of the market, we were at 14%. We consider 12% a good level to achieve, to maintain for the coming years, considering that this 12% is a blend between the United States, which has some better margin in Europe, or used to have some better margin in Europe. So we have to say, with additional volume uptake if this margin in USA will be also restored. Maybe not in line to the level of 2022, but midway between today and that level would be nice achievement. And so 12% is a margin moving forward. Of course, what we miss now is the world size. We were larger than what we are today back in 2022. So with some additional activity in Europe, and maybe pricing improvement in Europe and volume growth in the United States, we should be able to provide this business a similar scale to the one we had in the past years.

Okay, thank you very much. And just a follow-up on data center. Is there any update on the performance of this market today? Overall, someone is talking about a bubble. Maybe it's too early. So just your opinion on this side. Thank you.

The growth, Monica, my opinion is that the growth is very challenging across the whole supply chain. And AI is prompting and pushing additional growth. And of course, the whole system has to align to this demand. there would be probably some normalization in demand because the current uptake is probably not mid-term, long-term sustainable. It's definitely one of the most exciting case for us, given our global presence in geographical, from a geographical perspective and leaving us our wider presence, wide presence in terms of product range. So let me just remind you that also in transmission, which from a first site, you will not expect being benefiting or touched by data centers, but I'm sure there are projects that are coming on stream because of the requirement of electricity and green electricity data center requires. So we are definitely satisfied by our current portfolio and our ability to participate to the use case in the coming years.

Thank you very much, Massimo.

Thank you.

Thank you, Monica.

Thank you. We'll now move on to our next question. Our next question comes from the line of Alistair Leslie from Bernstein. Please go ahead. Your line is open.

Yeah, thank you. Good morning. Just a few questions on INC North America. I was wondering whether you can talk about sequential development in demand in the quarter in North America for INC. Just maybe what the exit rates at the end of the quarter were. I understand maybe you started off slowly, but I guess that would appear to have sort of strongly accelerated. I just wonder if you could confirm that. And I was wondering if you could also just touch upon kind of pricing trends there in North America as well. And more, I think you've also talked about Encore really having a premium pricing model. I'm just wondering how much further kind of future upside is there now that you're obviously moving towards a kind of one-stop shop offering and the market's consolidated. Thank you.

All right. So first of all, pricing. As I said before, we see now full stability in pricing in the United States. We will reach this bottom after the three quarters normalization in quarter four 2023. Since then, we haven't noticed any price deterioration. If anything, we've been through some price improvement in different segment of this business to justify some cost inflation that we had in 2024. So we confirm the EBITDA margin of anchor in the range of 15%, which is not different from what we have in the legacy prism and perimeter in INC North America. I wanted to mention that it doesn't appear from the global organic growth, but in the United States, there's been a portal over here in organic growth of 4.7%. So suggesting that the demand of INC cables, low voltage, copper low voltage, and copper low voltage cable is pretty strong and resilient in the United States. The upside will come from the synergies. So we don't bank on additional upside coming from pricing improvement. We think there will be continued solid demand in this space, driven by the secular trends. We count on the few percentage points of margin improvement resulted from the 140 million synergies that we mentioned to you a few months ago, we would achieve in the next in the next three slash four years, faster in terms of commercial synergies, a little bit slower in terms of operational synergies, at least some of them, the one associated to some CapEx that we are to implement. I hope I answered your question. Great.

Yeah, you did. Thank you. I was wondering if I could just squeeze in a quick follow-up on data centers. I was wondering, is that maybe now around 10% to 15% of your North American INC business in terms of sales? And would it be fair to say that the kind of profitability there would rank towards the, I suppose the top end in terms of all your different, different verticals or end markets?

Is, uh, it is correct. And it is 10 to 15% of our MC space. Uh, uh, and, uh, and, uh, and also in Europe is, uh, we have a similar impact. Uh, we also have a volume delivered to data center customer. coming from other seminal businesses. You know in power grid that we are providing medium voltage cable and also low voltage cable to contractors and end users or data centers. And also you can imagine we are exposed to the optical business. Also the Ottawa business is pretty much exposed to data center growth.

Right, so profitability across all those different areas is good.

Yes, yes, definitely. Excellent. Thank you. You're welcome.

We'll now move on to our next question. Our next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Your line is open.

Hi, good morning. I have three questions, if I may, but I'll ask them one at a time. First, I wanted to ask you on digital solutions, your growth or your decline contrasts a little bit with what we're seeing from some of your U.S. peers. Can you talk a little bit about the mixed differences or if you're about to see those type of trends that we see now significantly growing in some of the U.S. peers or if there are any things we should consider and remember for why not?

Yes, Daniela, you're right. You're totally right. The USPS that you refer to are definitely Corning and Costco. They have, I'll say, a great complementarity to our products. They are very exposed to connectivity. So all those devices, passive equipment and active equipment, goes into inside building data center space, which we don't have in our portfolio. So we play in data center in the high-density communities fiber to connect data center among them and to connect buildings in certain countries to other buildings. But unfortunately, we don't have the same access to the great inside plant data center business as our peers have. So we are much more involved in fiber to their own deployment, which unfortunately have come to our halt at the end of 2022, begin 2023 with the downturn of the market. Now we see signs of recovery in fiber-to-dome business, and that's why we think in the coming quarter we see some organic growth in that specific case, that specific business segment. Unfortunately, our comparison to the big ones which can participate entirely to data center expansion is unfortunately a bit unfair to us. As you know, we will work and we are working on how to make our portfolio more robust and wider and broader in terms of passive equipment so that we can also enjoy some part of this market growth.

Thank you. And then the second thing, can you talk a little bit about how you see the supply and demand balance on high voltage Where, in which stage are you on your US investment compared to what your original plans were?

Yeah, thank you, Daniela. The demand in 2015, 2024, sorry, for high voltage businesses, somebody in HVDC and so on, is around 15, 17 billion euros. So coming from 30 billion last year, but you can recall very well that last year we had the 15 billion of market awarded through frame agreements and all customers basically placed all their frame agreements last year. So we see stability in the market in this regard in 24 to 25 within a range of 15, 20 billion market for the next few years. The market in the USA is not picking up. It is in line with what it was last year, what it was a year before. Where we are at in our expansion plan is that we are close to make a decision about the position of the land. All permits will come available around the beginning of 2025. And in quarter one, we will make our decision. It is obvious that we can still serve this market from the United States. It is equally obvious that to be present with local content is a value. We will weigh up pros and cons of the decision in the next few months.

Sorry, do I read that you might or might not proceed with the investment?

We are considering this. Yes, Daniela. We are considering the size of the market. We are considering the value of the local content. We are considering that we are customer asking us to be there. At the same time, we have to be cautious that same capacity invested in Europe will be much more profitable. And so those considerations are what we are going to assess together in order to come to a sensible and reasonable decision.

Got it. Thank you. Final question from me. Just in terms of what you had mentioned when you did Ancora, that you were looking at the potential dual listing into the US. Is that something that we should expect an update during the CMD or what's the state of that project?

Yes, definitely. By the end of March, we will have made up our mind and then we will communicate the decision. We will still need a couple of months or so to complete the full assessment through the advisors that we have engaged. And so early, beginning of this year, definitely by March, we will be able to communicate our decision in this regard.

And what you are deciding on is whether it would be a dual listing, not a full listing in the US.

Yeah, yeah. It would be definitely a dual listing situation, for sure.

Got it. Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Alexander Virgo from Bank of America. Please go ahead. Your line is open.

Yeah, thanks very much. Morning, gents. I wondered if you could just talk a little bit about cash flow for us. Obviously, reiterating the guide for the full year is important.

uh a good starting point but the q3 was possibly a little light um so just wondering if you could help us with the moving parts into the end of the year uh on that uh thanks very much thank you alex and it's over to francesco hi alex as i commented the last 12 months we are very happy is is close to 1 billion definitely above the line of the full year 2024 guidance. The midpoint, you remind, is 880. We had, by the way, a pretty strong contribution in Q3 coming from the consolidation of Anchor. The dynamic going to Q4 and therefore to full year, the dynamic of working capital in the transmission business shouldn't change that much, of course, The down payments were pretty strong in the first half and in particular in the first half. Maybe they will be a little bit softer than last year in Q4, but offset by very strong collections related to our projects milestones. So all in all, I think that transmission will be in line with, in Q4 will be in line with last year. Then we have an impact that we have to consider, which is the impact of the rising metal prices, which took place from August to October, basically. And this is certainly impacting Q4, but it's definitely absorbed within our guidance. But it's something that we have, of course, to absorb and Last year, maybe the last comment is that Q4 last year, we had a particularly high level of CapEx. uh and and uh you see this by the way reflected in the more than 800 million last 12 months as of september which includes the q4 2023 and in q4 the level of capex q4 this year should be a bit lower than last year that's a purely quarterly distribution by the way and should uh and should support our cash flow so all in all as i said all these elements all these movements uh position us very well for our uh for our guidance and say for a for a target of of 900 million very helpful thanks francesca welcome thank you we'll move on to our next question

Our next question comes from the line of Alessandro Tortora from Mediobanca. Please go ahead. Your line is open.

Yes, thanks. Good morning. I have two questions. The first one is on the performance of AnchorWire. Can you give us an idea, considering also the CapEx plan, ongoing CapEx plan of AnchorWire, which kind of organic group performance is doing today, Anchor Wire, but also a kind of indication of what you see in the medium term for Anchor Wire. And secondly, I heard your indication of, let's say, profitability, let's say, mid-cycle profitability of around 15%. Is it fair to say that probably today is running, let's say, closer to 16%, 17%? Just if I look at the contribution of SACE and EBITDA for this quarter. That's the first question. Then the second one relates to the installation of the German corridor. I saw a sort of presentation where you officially commented about the start of the installation in Germany. Can you give us also in this case an update on when installation will gain speed considering all the three major projects? So just understand if this is a matter of next year or maybe 2026 to see all projects contributing, let's say, in terms of both production and installation. Thanks.

Thank you, Alessandro. So AnchorWire, yes, the campus plan of AnchorWire is not about expanding capacity on cable space. It's about expanding capabilities, let's say, in distribution center. So they are further working on the expansion of the distribution center. And this will also suit significantly our cross-selling opportunity because we are shifting as much as possible volume from legacy Prisma perimeter to ANCO McKinney perimeter to benefit from the existing data center and its expansion. There will be other CAPEX in ANCOR Y to expand the compounding facility, so the further verticalized and also to invest in a new rod mill, so the production of a copper rod on-site, which is another important stream of synergy for us, because that rod will definitely provide rod activity, rod raw material to our legacy prism and plant. In terms of organic growth, organic growth anchor-wise is more or less around 2%, 2.5% in this quarter three, sequentially. And coming to the profitability, not sure whether the quarter three is at 16 17 percent but i see francesco nodding so it's probably right north of 16th yeah okay let's have a good sustainer which is uh which is uh as said before very in line with that or legacy prison but you we will we had already we already struggling to maintain a um distinct dual anchor wire from legacy prisoner because as said we are We already offloaded all the copper building wire production from prismium plants into anchor wire plant. We're also moving some low voltage aluminum production from our plant in prismium legacy perimeter into McKinney again to benefit from all this. And even worse is what we are doing in terms of blending the rest of the NC perimeter where we are proud of like portable cords and industrial product that we are moving into the distribution center of McKinney. So I think that from quarter onwards, it will be kind of possible to provide you with a distinct view, PNL-wise, organic growth-wise, of the two perimeters. And we like to consider this a great outcome of the fast integration that we are implementing. Germantown installation has started on two projects. And next year, we will see the whole project All the three projects are pulling a lot of cables, joining a lot of cables. We are up to speed with the training of all jointers and the pulling activity that will be required this year by the three German corridors operations.

Okay, thanks. And just to finish, a follow-up, let's say, on corridors. Is there any update on Italy? Recently I read about, let's say, the Hypergrid project for Paterna. Is it something, let's say, in your pipeline for next year, or in terms of a potential pipeline?

It's a well-known project, the Hypergrid. We will know that this project will make us benefit from some additional volume in Naples. So continue some MI paper. uh, uh, impregnation or cables in that factor would be essential to us to guarantee continuity to the planter. So hypergrid suits this case. Uh, we, we believe that in recent communication with Turner that the hypergrid project would be out for tender in a quarter four 25 slash quarter one 26. But now it's definitely maturing, uh, uh, to a different level of, uh, uh, stage in the financial approval process in the Turner approval process. Thanks. Thank you.

We'll move on to our next question. Our next question comes from the line of Lucas Ferhani from Jefferies. Please go ahead. Your line is open.

Thank you. I'll have two questions, please. Just on power grids. So you have new capacity coming on. You're also revamping some old lines. I just want to know when you expect to see an acceleration in organic growth to see really the impact of that new capacity. The second one is on digital solution. Can you provide a bit of an update on the BI program in the US? What kind of progress you're seeing there from customers and also from states? And also on digital solution regarding the portfolio, are you mainly working to improve the product portfolio organically or you're also considering acquisitions in the US? Thank you.

The power grid capacity expansion has come on stream in the second half of 2024, so that would be an obvious benefit in carryover for the full 25 of this capacity increase. Towards the end of 2025, there will be a second stream of upgrade of the capacity with two more lines installed in one Canadian plant. So in summary, I carry over the existing deployment in 2025. And in 2026, an additional wave will benefit USA. When I talk power grid, I talk here medium voltage capacity expansion. We are, as said before, seeing softening volume in overhead transmission for distribution and in low voltage power grid space But definitely the capacity will position us even stronger in terms of participation to the electrification needs and the enhancement needs of the grid in the United States. Digital solution. Yes, we see this rural broadband activity continuing. Finally, as I said before, the speed is not yet what we thought it would be. Certainly from the perspective that we have in 2022, so next quarters we'll have more understanding of how the market will evolve in this regard. Digital solution, I cannot tell you much here. Organically, we are working on the portfolio expansion, but we are definitely working on an inorganic way. I cannot tell you more about where and when we will make these M&As complementing our portfolio products, but we're definitely working on it. Thank you. Thank you, Lucas.

We'll now move on to our next question. Our next question comes from the line of Gabriel Gambarova from Banca Acros. Please go ahead. Your line is open.

Yes, good morning. Thanks for taking my questions. The first one regards the Sun Cable project. I think the Australian government made some steps in August, so I was wondering if, from your standpoint, do you see it as a concrete opportunity you could play a role in it, your thoughts on this project? The second is on artificial intelligence. Basically, we know that it is going to require lots of energy, and it seems that all of that will basically come from a nuclear, and specifically from small modular reactors, SMR. So I was wondering if you see this SMR. I understand it's a little bit strategic, but do you see this specific... as an opportunity or possibly as a threat because it makes, let's say, the distance between where you produce energy and where you use it, very short, in my understanding. The last one is on tax rate. It was incredibly low in Q3, around 19%, 700 basis points below last year. So I was wondering if you can confirm the 24% you mentioned back in August. Thank you very much.

Thank you, Gabriel. SunCable is a long-distance project connecting Australia's solar pharma with Singapore. It's a bit of a challenging project from a financial cost perspective. It is not that challenging from a cable technology perspective per se, but it is going to absorb a lot of capacity. decision has moved in this project, and the developer decided not to have any specific plants built to satisfy this demand in Australia. uh and they're gonna use existing capacity from different suppliers to satisfy this demand we are the technological partner to some cables for this project we've been since the very beginning the technological partner to them and we are there available uh with our capacity well technology to benefit from this opportunity should it ever come uh available in the coming years Artificial intelligence and nuclear is definitely an important use case. There are studies that foresee the nuclear will represent 10-15% of the total energy mix worldwide by 2050. And it's not a threat, it's not an opportunity, it's another vehicle to produce and channel electricity and satisfy the additional demand of electricity worldwide. Of course, we are present in the nuclear use case with our cables inside the buildings, inside the infrastructure, and also to connect the nuclear to the existing grid. So I would say that we are neutral to it. If anything, there are some more opportunities in terms of power grid enhancement and in terms of specific cables that we sell to the developers of nuclear power.

infrastructure and there are few of us qualified for this type of application i'll leave francesco for the tax rate question yeah ciao gabriele the i think the tax rate in 2024 is benefiting some from some positive uh one-offs related to the acquisition of uh anchor wiring related to the deferred tax liabilities that we had on the cash and in us which was by the way utilized by the acquisition this generated a positive one-off which is worth two three points of tax rate in 2024 and which will still be in place for the full year by the way so i expect the full year to be even lower than this 24%, say between 22% and 23%. And then I expect from next year a more normalised tax rate in the region of 25%.

Thank you very much, Massimo and Francesco.

We'll now move on to our next question. Our next question comes from the line of Luigi Debellis from Equita SIM. Please go ahead. Your line is open.

Hi, good morning. Just one question for me. Looking at the competitive landscape in transmission and power grid electrification, have you seen announcements of new production capacity from competitors or the situation is fairly stable compared to some months ago? Thank you.

No changes, Luigi. There are investments in transmission across all competitors. There are investments in medium voltage power grid in the United States, mainly from other players. And not that many investments on the country in the INC space. Definitely not in Europe and very limited in the United States, apart from our capacity expansions. I have to complement this comment with a sense of a relationship with a key customer. It is the first condition to have access to the market or global markets to have the capacity in place. But don't forget that especially in transmission, what matters more than the available capacity is the track records of the execution, is the technological leadership. is the relationship in terms of quality, service, and the technological advantage that you provided customers in the past years, what matters the most. And this applies to transmission, to a larger extent, but also to power grid, to a lesser extent, but still to a significant extent. So we have all this. We have the capacity. We have the increasing in expansion in capacity. We have the technological leadership and we have the relationship, long lasting relationship with those customers. So we are not afraid of what's happening. Of course, more capacity will probably strain a little bit pricing situation, but we are ready to face it with a technological advantage and with execution capabilities. Thank you very much. Thank you, Luigi.

There are no further questions at this time, so I'll hand the call back to Massimo for closing remarks.

So thank you very much for your attention. I confirm our full satisfaction for this great quarter three performance, and this really makes us confident that the full year will be a successful achievement, preparing us for the next challenges of the next three, four years, which you will be It is closed in March 25 at the Capital Market Day. Thank you all and have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.