Prysmian S.P.A. Ord

thank you good morning and welcome to the first half 25 result call i'm very excited to show the results achieved in quarter 225 about the 600 million this set A new record for the company to be done. The last best quarter was quarter 24, the first quarter after the consolidation anchor wire, 540, but 605 is definitely an outstanding performance. That is beaten in our performance. the past results. It is true there is some 10 million plus from channel perimeter change, but there is also an adverse forex impact in our quarter 2025 results versus the previous 540 of quarter 2024. Amazing is the 14.3% in margins, indicating a significant accretion of margin across all business segments, transmission, power grid, but also INC and digital solutions. uh the the uh organic growth in the first alpha posted a nice four percent which is basically coming across all the summit of business one billion is the frequency of the last four months confirming that we are solid in delivering the frequency of guidance that by the way we updated for the full year to be noted the faster consolidation of channeling of perimeter from June, only two, less than two months after the signing, and also on the CO2 emission and the energy targeting. We see later a significant reduction of CO2 emission in scope one and two versus 2019 of 30%, heading for a 40% for the full year scope. Moving to some achievements. I think we never celebrate our achievements. Here we want to make sure that we all understand that not only are we focusing on the results, on the company improvement, on the growth, we are also setting the foundation for the future opportunity for growth. There are, in the first packet of comments, achievement in the different segment of business in the blue front, Mona Lisa and Piccola Crystalline, so an important milestone in confirming our in delivering this functional capacity both manufacturing and installation on time and on cost. Several agreements in power grid space. Stargate data center, a larger project adjudicated to us in U.S. for a Texan project in terms of electrification cables and also digital solution cables. And very important, the consolidation and expansion of connectivity space within Prismian, leveraging Channel and Warren Brown. But I'm much more proud of what is underneath. A lot of innovations. The first cables 245 for dynamic solution for floating wind offshore platform. A solution for connecting the substation to the grid with a medium voltage plug and play cables with connectorized edges. Fire resistant range of products, new range of products for the U.S. And probably the most striking one is the hollow core fiber technology. We partnered with a startup in U.S., the developer solution. We are industrializing it. This will allow to produce and sell cables, fiber optical cables, whose core is empty, is void, so that the light data are transferred at a higher speed in air than in glass, allowing the data center to be spread over the territory without insisting on the same power grid. So making the data center's function facilitated. So these innovations are key. to confirm our leadership in technological space and supporting the growth of the company in the coming years. Let me move now to the individual business. Transmission is the star of this first half. I'd like to comment on the first half result, 250 million EBITDA for the full first half versus 150 last year, so 100 million more in the same period. with an important and significant growth in EBITDA margin from 14% to 17%. This again remarks the solidity of this business, remarks our confidence in achieving the 18% to 20% target in margins by 2028 as per our capital market day. And with 250 million per semester, we see the journey to 1 billion gold by 2028, 1 billion gold EBITDA, within reach, thanks to the solid expansion of the capacity and thanks to the solid execution of the project of better margin that we have in our backlog. In power grid, we are also happy to confirm stability of margins. Infine margin had gone up. 15.6% EBITDA margin in quarter two is higher than what we reported for quarter one, 25. The growth is substantial, 5%, leveraging the capacity that we unlocked towards the end of 2024, and signaling that the market demand in the U.S. in terms of grid enhancement is pretty strong and solid, and driven by solid secular trends. INC, also in INC quarter 2, you see the significant jump in EBITDA margin, indicating the highly accretive contribution of AnchorWire to the performance of the INC business in the US and in the entire group. 10.6% of the reported numbers for 2024 quarter 2, Overall, year-over-year is at 14.1% this year, with a significant improvement over last year. The growth was not seen certainly significant in this quarter too, but you know the environment is pretty bumpy, and our focus is on profitability. We didn't lose market share, actually grown market share thanks to our solid service level coming from AnchorWire. Quarter two last year was particularly stronger. We really want to focus on service and profitability and maintain our leadership in the market in terms of setting prices in the U.S. market. Specialties, we have some organic growth, not bad, dividend margins not yet at the level of the steel, we are still suffering from the softening that we see in the automotive space, We are close to finally disposing the last two factors that we want to get rid of in the automotive space. This will happen before the end of quarter three. We also had a negative impact coming from exchange rate, but more importantly coming from a softening in the residential innovative business in the US. All the rest is solid driven by significant amount of projects across all the verticals, shipyards, defense, fire-resistant products, and crane and mining and so on. Digital reflects the benefit of the perimeter change, twofold, the EBITDA margin, surged from 13.3% last year to 16.8% and this account only from one month out of three where we consolidated a channel that namely was June and the 20 million improvement in EBITDA partly come from channel for more than 10 million plus per June month and the rest is the organic growth of the company masternated channel is outperforming our expectation as we've seen market rebounding in the favor to the old cable business in u.s channel is enjoying a significant rebound in volume and also profitability in the connectivity space in u.s the combination of the two will make us a stronger provider of favor to the old solution to this market with exposure also to the data center esg uh kpis a rather common set the two on the top right side of the page 44 is a big share of the total revenue which is linked which is associated to sustainable solutions or recycled content or material products whose carbon footprint is low uh products that can enhance our position in terms of uh supporting customers to us their goals in making them uh allowing them to achieve the sustainability goals. Remarkable is also the 19.9, the 20% of recycled content in our product. This is driven, paradoxically, by the tariff. The U.S. market had an excess of waste of copper available. China that used to buy this waste didn't buy it because of the additional cost. ANCO, we took immediately the opportunity. ANCO recycled up to 30-40% of waste into the virgin material in the McKinney facility. So ANCO has proven to be taking advantage of the cost benefit of your recycling waste, but also taking advantage of the recyclability part, the energy part of this topic. Let me hand over to Francesco for more financial insights into the P&L and the free cash flow.

Thank you Massimo, and good morning to everybody. A very robust set of half one results as Massimo anticipated. Revenues not far from the 10 billion level, 9.6 billion in the first half and the first half organic growth at 4%. recapping the main messages on growth, certainly a very strong transmission business, where the growth confirmed the strength that we had already seen in the first quarter. A nice improvement in terms of growth in the power grid business, both in Europe and in North America, I would say. Good growth also organic in digital solution with particularly strong North America. And also definitely an improvement in terms of sequential improvement at least in the electrification, namely in the INC. where we posted some good growth compared to the first quarter. So, all in all, 4%. I think even better in terms of EBITDA performance. Massimo anticipated a record second quarter at 605 with margins at constant at standard metal price at 14.5% and also half year you see the accretion at standard metal price is very significant from 12.6% to 13.8% plus 1.2% is an accretion which is mainly driven by transmission which is achieving already in the first half the 17% level in terms of ebda margin but also power grid with margin staying stable actually even slightly improving at a very good and very high level and of course is an accretion which is also benefiting of the significant changes of perimeter that we benefit of in this first half the anchor wire consolidation of course compared to the first half 2024 and last but not least the fast and quick closing we have on the channel acquisition, which is starting to contribute and to enhance our profitability quite nicely in the month of June, since the month of June, and which will be a definitely better upside on the digital solution in terms of margin for the second half. Below the line, below the adjusted BDA line, very few comments. Basically, neutral adjustments, 2 million. benefiting from the gains that we realized on the 8% stake that we have so far of YSE. These 8%, by the way, excludes the further 5.5% that we disposed of in July. Of course, the cutoff date is end of June. We have definitely a level of financial charges at 145 million, which reflects the new perimeter. It is substantially in line with our expectation and tax rate in line with the 27% that we were anticipating at the capital market day. All in all, this results in a very strong boost on our group net income. You remember that the first quarter reached 150, this means the second quarter at 276 million, giving the 426 million year-to-date June. I think we are very well set to achieve the first year of our four-year plan for growth growth, which is, I'm sure you remember, a metric that we were setting, a very important metric we were setting in New York. And you remember that we were setting a range for the four-year in between 15% and 19% CAGR. And I'm very confident that in this first year of the four-year, we may even achieve this. We may even exceed this range with an EPS growth, which, in my opinion, will be higher than 20%. Let me now flip to the very solid cash flow delivery that we had in the last 12 months, solid and pretty much stable at the level of $1 billion compared to Q1, last 12 months, and also the full year, 2024. This is even more solid if we think that in this $979 million we discounted pretty much a peak in terms of CapEx. You see this 940 million. This very high level of CapEx will progressively decrease on full year base to the level that we have already anticipated to you of approximately 740-750 million. For the simple reason that this year CapEx are distributed much more heavenly, much more linearly. than last year. And this will drive our cash flow up towards the new level of guidance that we have decided to upgrade and that Massimo will comment in a while. Let me maybe remark here that you see that this is a bridge of debt from June last year to June this year. And you see the accounting treatment of the hybrid bond. You see the cash inflow close to $1,989,000,000 net of some transaction costs. This means that IFRS, as I'm sure you are aware, the hybrid bond is treated as equity. So basically it's a reduction to our debt. This is, of course, a different treatment than the view that, for instance, the rating agencies is having where half, 50% of the hybrid bond is treated as debt. Just to clarify the accounting treatment, which may be not so easy or not so simple for you to understand. Excellent. I think I'm over and I ended back to Massimo.

Thank you, Francesco. Let me move to the guidance and let's draw your attention to the chart on the right-hand side of the page. You see how we built it. It's a starting point. The previous guidance was set at 2.3 billion euros plus minus 50 million. We are happy to upgrade the premium perimeter guidance by a number that you can figure out is 40 million. And then there is the perimeter threat added on top, unfortunately offset in our assumption by the Forex. As I said before, we are happy about the performance of the channel. The consolidation of June is extremely accretive to the group. And the trend of the bid that we see in the coming months is comforting us on this important position for the American perimeter, for the US telecom space set, and giving us a significant upside. Forex, maybe we've been too cautious on this assumption, but we think that was the right way to define the new guidance with a possible offset between China and Forex. Said this, I mean, today, after having seen last night changes in the tariff system of the U.S., whereby now the 50% that was expected to be applicable to copper, cathode and rod imports from all the other countries, from overseas, and only to raw material and not to derivatives, to finish products, after what happened last night, whereby the tariffs are going to be applied to rod only and not to cathode, But also to all cables imported from overseas, I must say that I feel much stronger today for what this guidance is expected to deliver for 24, for 25, and also I would like to say that I see upside coming for the new tariff system. Also in light of the possibility that the same approach that has been set for copper will be also applied to aluminum, where for the time being we have only tariff applied to aluminum. raw material and not to product, finished product imported from overseas. So we feel much more relieved. We feel that administration is taking the right decision to finally protect and preserve local jobs and growth of U.S.-based manufacturers And we are one of them. 99.5% of what we sell in the U.S. is produced locally. And finally, this will do justice to our investment in the U.S.-based territory. We have also upgraded the frequency flow guidance from the 1 billion mark minus 50 plus 50 to 1 billion minimum, 1 billion 75 max range, 1 billion and 40 midpoint. So moving to the closing remarks, I'd like to confirm the positive and outstanding performance delivered by all segment of business in Quarter 2. Also INC that posted some negative growth versus Quarter 2 last year, in reality has grown by 5.4% in Quarter 2, 25 over Quarter 1. So sequentially there's been a significant growth and uh and and implementing a bit of margin you know you see north america um the margin expansion across all segments the one million level of repair show confirmed and uh the upgraded guidance um set an important milestone for us in confirming that the targets that we set for 2028 in New York a few months ago are within reach, and possibly we might see some upside. So the 2.3 billion, 2 billion, 340 million EBITDA paves the way for the 3 billion, 3.1 billion level of target for 2028. The 1 billion plus trickle-throw of this year is in line with what we want to achieve by 2026, 2028 with 1.6 billion trickle-throw. APS, in fact, actually has already the target of CERPO 2028 and the innovation that I showed you in this second page of the presentation highlights how important it is to move towards solutions in order to strengthen our portfolio and our customer relationship and our opportunity for growth. So thank you for this preliminary presentation. I'll leave the floor to your questions.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now take the first question. From the line of Daniela Costa from Goldman Sachs, please go ahead.

Hi, good morning. Thank you for taking my question. If it's possible, I would like to ask three things, but maybe the first one just expanding on the comments just now regarding the potential from the copper tariffs announced yesterday. Can you talk through like what do you think this is going to do? How much are imports now? Could this cause sort of the shortage and fears about shortage that we had like in 2021? What would you see as potential on core margins outside from that? I'll start on that one and then I'll ask the others.

Thank you Daniele. So the original assumption was that tariff would have been applied to cattle and rod imported from overseas. But of course, the local production would have raised prices to the level of the imports. So the driving impact would have been that we would have needed to pass 1.3 billion, 1.3 billion of extra copper costs to the market. creating a potential shock to the local demand. This was our concern. With a new situation, only road imported are going to suffer this. And as far as we're concerned, out of the total road that we need in the US, we only buy less than 10% of this road from Canada. So we will have a marginal impact in cost in this import of road in the US. But on the contrary, all the imports of cables, medium voltage, low voltage, high voltage copper cables that are imported from overseas, Korea, India, Mexico and so on, will be penalized by 50% applied not only to the copper content of the cable, but to the entire cable value. So this, on the one hand, we will not see a significant inflation impact due to the copper cost rise in the market. You must have seen that already the COMEX, which is the metal value of copper in the U.S., has increased by 50% even ahead of the target application in the last few weeks versus the LME European value. And so this inflation will not hit the local demand And on the contrary, the local producers, like we are, will benefit from cost of cables imported from overseas much higher than today. So this will certainly benefit our guidance, our forecast for the full year, but we will see in the coming weeks how this will come into play.

But just a little quickly on that, what percentage is imported? Is it around 30% of the market in copper? I know in aluminum it's higher, but how much do you assess it is in copper?

The copper demand in the U.S. across the whole industry is 1.6 million tons. Out of this 1.6 million tons of copper, 75% is produced locally, 25% is imported. But 50% of the cathode is produced locally and 50% of the cathode is imported. So in the previous version of tariff, the cathode was penalized with 50% tariff. Now this is not the case any longer. And only the raw import in the U.S., which is only 25%, will suffer this 50% import.

I don't know if I've been able to explain it. Cable imports.

But the cable import is what matters to us, because at the end of the day, we don't rely much on road imports, on cattle, not at all. On road imports, we have only 10% of the total needs for our business. So Anchor Wire, as you mentioned before, will benefit from it, because there will be no an unnecessary cost to be passed to the market, and on the contrary, not necessarily in the amplifier space, but across power grid high voltage, we will have importance of power grid cables, high voltage cables, penalized by the 50% applied to cables. Thank you.

It's super helpful. Thank you. My second question was going to be, I think in electrification in the U.S., you have a sizable share of data centers. We've heard many companies having very big double-digit growth in data centers, but when we look at your electrification business altogether, the organic growth was still one and a half. Can you maybe divide it up between data centers and the rest? Why wasn't the growth higher during the high data center explosion?

Thank you for the question because this has allowed me to explain the dynamics of the market. Until yesterday, we noticed that the residential market was kind of sluggish and has been very soft over the last 24 months. But the non-residential market, due to this potential negative impact of tariffs on the cost of the products, has started to soften also. Data centers, which are considered non-residential businesses, have made the total non-residential market growing in 2025 over 2024. But if it wasn't only for the non-residential excluded data center, we would have seen a slight deterioration in market demand. So, data center is growing, our exposure to the center is larger. The organic growth that you see in NEC is in the first, in the quarter two, sequentially over quarter one, high, is 5.4% growth. And this is driven by data center, basically. And the softening in non-residential business demand that we notice in quarter one, quarter two, we think will revert into a positive trend given the recent, last night, new resolution on the copper tariffs. Tariffs for copper at 50% were certainly settling the entire project cost with an unnecessary incremental cost. This will, in my view, relieve the investors, relieve the companies, data center, not data center, infrastructure investment U.S., and remove some heavy uncertainty that has waited on the U.S. market in the last six months.

Sorry, thank you. And just finally on the backlog in transmission, which is sequentially slightly down, do you still expect that we will end up the year with a backlog above, higher than we started?

This is the expectation. There's not been much order intake in the industry in the first half of this year. We expect significant worth of business from National Grid in second half, from ITTO and from Tern, from other TSOs in second half. So what we expect to gain in second half will not fully upset by the revenue that we have to deliver and second also we do expect to see a slight improvement on the 16 billion level of backlog which is by the way not as low as we want it to be because the the high backlog is nicer on the one hand but prevent us from competing from being able to compete on your tenders because our capacity is fully sold out to 2029 so A level of backlog between 14 and 16 billion is what we reckon is more healthy to allow us to be competitive in terms of flexibility for the worker and respond to the new project intake.

Thank you very much.

Thank you. Welcome, Daniel.

Thank you. We will now take the next question. One moment, please. From the line of Sean McLaughlin from HSBC, please go ahead.

Thank you. Good morning. I had two questions. Firstly, on grid, so organic growth bounced back from a negative Q1. We're at the mid-single-digit organic growth level that ultimately you've guided for out to 2028. I mean, is this the new trend? normal or could we see an acceleration of that organic growth in in h2 i just wanted also to understand regionally what drove that rebound in in q2 that's the first question thanks thank you sean for the first time is worth talking about other regions in the us the organic growth has been pretty high in europe europe investment across all utilities has grown massively

We should consider this growth in Europe well above the 5% global growth of the group. Across all countries, we're seeing these revamped needs of intensifying and electrifying final uses, which push additional pressure on the existing grids, especially in high-voltage grid, but also in power distribution grid. But to be honest, also in the United States, the demand has been pretty solid in this quarter two over quarter one. It's also by design that quarter two is stronger because the summer season allows installation, allows contractors to work to a different extent than what happened in quarter one. As far as GSM is concerned, we expect the second half to benefit from additional capacity expansion. This will come to fruition at the beginning of quarter four. Then as far as the growth rate for PM4, we had to gauge. Now, as said before, we are in the middle of a transition from a tariff system that was not supporting a local producer We had in this space to pass on to the market significant cost of copper increase, which is not the case any longer. So I'd rather hold my judgment on Second Alpha until we see how this will be deployed in the market, the new system of tariff will be deployed in the market. But I'm pretty positive about Second Alpha organic growth across the regions.

Thank you. I mean, staying in Grieve, I just wanted maybe any comments on broader overhead transmission project risks in the U.S. following Greenbelt's X-Best project had its government loan guarantee canceled. I mean, are there any other projects maybe that you're involved in that face these kind of risks, or how should we think about the transmission market in the U.S.? ?

But we had, we have one large project with, in energy, in the so-called overhead line transmission, overhead line project, grain belts, which was vanishing from, and is a kind of renewable project because it's connecting grids of different states, three states. There was also benefit in this project from incentive that had been removed, but the project stood up also without incentive. In fact, the project started without incentive benefit, and custom confirmed it would continue with execution of this project, for which we already received a good down payment, an advance payment a couple of years ago when the project was launched. As far as new project concerned, I don't see this happening. On the contrary, the one There are a lot of, let me say, facilitation to spur the demand of power grid cables to strengthen the grid. It is true that the investment in renewable solar and wind will not benefit from tax credit any longer, but equally it is true that there is a strong push to make the grid more robust, facilitating permitting. and facilitate the local production and incentivize the local production to support the probably the spanish in u.s so i i also see positive market trends arising from this one big beautiful builder and has been just implemented a few weeks ago thank you thank you welcome sean thank you we will now take the next question

From the line of Akash Gupta from JP Morgan, please go ahead.

Yes, hi, good morning, and I have only one question. My question is on INC growth in the quarter. You had like minus 3.2 percent negative in Q2, and I'm wondering if you can provide some color on what did you see in different regions in Europe versus U.S. and within U.S., what was the growth rate in NCOR and outside NCOR? And then when we look ahead into Q3, do you see prospect of double-digit growth in some region in INC, as indicated by one of your peers recently? Thank you.

Yeah. Thank you. One of the drivers of the negative growth in quarter 2025 is, unfortunately, the difficult tough comparison towards quarter 2024. uh especially in u.s quarter 2 2024 uh including uh to form across the perimeter of anchor wire there was a significant demand uh which benefited anchor wire back in quarter two last year but sequentially as mentioned the inc growth in quarter two over quarter one is high is 5.4 percent across the board uh it is high in u.s It is actually stable in Europe, the demand of INC business. We noticed it also from comment from our distributors, which sees stabilization of demand in Europe for the time being. And luckily, we can compensate some stabilization in INC with additional demand data center space also in Europe. Then what we see in quarter 3 and quarter 4 is probably a new scenario, because this scenario discounted all these organic roads over 24, or discounted a significant uncertainty in the US market, arising from this huge cost that comes from the application of aluminum tariff and road tariffs. With the new scenario, I mean, a lot of those inflations, of the inflation that we expected to see in the market, which could and had partially slowed down the non-residential business, excluding the centre, will disappear, will fade away. So it is probably too early to say what will be the scenario in terms of organic growth in Q3 and Q4, but I feel, as I said before, much more positive than I was 24 hours ago.

Thank you.

Thank you. We will now take the next question from the line of Uma Samlin from Bank of America. Please go ahead. Hi. Good morning, everyone.

Thank you so much for taking my question. First is a follow-up on INC. you know, given the current corporate situation, do you think, you know, it seems like you're saying you've been getting market share and you're expecting to see a better H2 going forward. Then should I, you know, should we be able to expect both a pickup in growth rate and also better margins on the back of the corporate tariffs?

We will see... Finally, a lack of deterioration of the demand in the U.S. because the huge cost coming from 50% applied to comics. And the comics cost is pretty high. We're talking about $10,000 per ton, which has become $15,000 per ton as a result of the original tariffs will disappear. so we expect the market to rebound in terms of demand data center were already even despite the tariff in quarter one quarter two a strong driver of growth in us so i expect to see more organic growth in quarter three quarter four but i said before that's the way you can see it would certainly be another trigger of opportunity if they apply this principle of not penalizing the road cost, but then analyzing the cable imports from overseas with higher tariff, this principle has been applied to copper, will also be extended to aluminum. So if in both situations of this material, copper and aluminum, we had tariff applied to cables as happened over last night for copper, we will have a simpler situation and much less cost to pass to the market and all the importance being disadvantaged less of the local producer this will certainly drive our organic growth massively but let's wait and see i hope this will also happen for the aluminum space thank you very much that's super helpful um my second question is on your new guidance

So you updated that by 40 million. Is that more of a reflection of the better INC and primarily INC earnings in the first half? So I guess, you know, what are your growth and margin assumptions for INC and GRID for the second half to support this guidance? And, you know, do you have any growth acceleration in H2 already baked into this guidance?

I think the 40 million rate of the Legacy Prisma Guidance is based on the growth in transmission, which is coming in pretty well. A higher expectation is also based on the growth in power grid that we've seen in Portal 2 sequentially year over year. It's also based on the fact that there are some additional volume opportunities that we think we'll be able to capture in Portal 3 and Portal 4. As I said before, it doesn't reflect at all the new change in tax dynamics because we didn't know this until midnight yesterday. That's why I said we might see some upside from what we posted today as guidance for the full year.

That's very helpful. Thank you very much.

Thank you.

Thank you. We will now take the next question from the line of Monica Abosio from Intesa San Paolo. Please go ahead.

Good morning, all, and thanks for taking my questions. I hope you can hear me well. I have four. The first is on the power grid in the USA. I'm just curious, what is now the balance between demand and supply? Is other players capacity coming on stream and do you see any effect going forward on the market in terms of higher competition or pricing? That's the first. The second is on the pricing in the digital solution, how it's going on this side. And I was wondering if you are still supplying part of the USA demand from the European plans. The third question is maybe on the data center, which are growing above the rest within the construction. Can you just share with us some number? What is the growth that you see coming in terms of revenues by year end? And the very, very final story is for Francesco. As the Forex impact, the impact at the adjusted EBITDA level is very clear. If I can share with us the potential impact, if any, at the free cash flow level. Thank you.

Thank you, Monica. So, power grid demand in the U.S. is certainly more balanced with supply than it was one year ago. Some competitors, like us, are completing the expansion capacity. But the money is still growing, you know, because there is a lot to do in power grid, and one big, beautiful thing is pushing utilities to invest more in strengthening the grid and making also the expansion of the data center feasible, achievable. Because as far as today is concerned, this data center expansion is somehow constrained by the lack of electricity delivered to the new location. um price evolution is early to say but said before also in this space we will benefit from tariff for copper tariff applied to cable imports and not only to raw material digital solution demand is super stronger we are still using european capacity which was a great opportunity for us to gain market share because activating this flow using existing capacity in europe we could respond to the market surge in demand faster than the local players like conscope and cornic it is true that we will probably see And as of today, we will see 15% import tariff applied to this flow. But the benefit of the share gain will outpace the possible margin contraction resulting from this 15% tariff application. Data center demand is so strong that it is overshadowing the rest of the residential business. In terms of growth, we will perform in 2025 twice as much revenues than what we had in 2024. And this is not just due to the expansion of data center per se. It's also due to the fact that we are a full-fledged player in data center. We sell the full range of cables from digital solution to electrification to power grid and somehow also in transmission. So this is a unique position, secure, thanks to our synergistic portfolio, and data center use case is the best use case that proves how crucial for us is to have this synergistic portfolio and such a broad portfolio. Francesco?

Thank you, Massimo. Thank you, Massimo.

Thank you, Monica. Hi, Monica. Thanks for the question. The Forex impact, the free cash flow level depends on the conversion rate of EBITDA into free cash flow. To simplify, let's say that if versus the original guidance, the Forex impact on EBITDA is around 80 million, you can assess in between 40, 45 million in terms of impact on the free cash flow. Of course, also in this case, it is taken into account already in the new guidance upgrade of free cash flow that we have given.

Okay, perfect. Very clear. Thank you very much to all of you.

Thank you.

We will now take the next question from the line of Xin Wang from Barclays. Please go ahead.

Hi. Thank you for taking my question. So maybe I'll ask one on digital solutions. On Chanel, obviously, it's already contributing to strong supply and margin. Can you replicate their model to a legacy Prismian Digital Solutions business so we get a further upside?

Thank you Shin. We already have this model of combining connectivity with cables outside the US. In Europe we have a stronger connectivity business which supports the cable business. In APAP also we have the same solution. So CHANNEL was the best opportunity to complement our cable business in US with connectivity in what we consider, the US, the largest by far and fast-growing fiber-to-dew market in the world. So there's no need to replicate it because you already have it, but this will boost the opportunity in U.S.

Okay, that's really good to hear. Does that mean that we can expect 30% EBITDA margin for the segment anytime soon?

You have to take it. You have to take a proper balance between margin and channel are about 35%. Margin and prism are in the perimeter around 12, 13, 14. 30% would not be the proper weighted average of the two margins, but they will certainly go about 20% mark. That's coming from 12% is a significant accretion of the global margin of the group.

Okay. Good to know. Thanks. And then the other one is a technical one. So I wanna confirm on the hybrid borrowing, this one billion, the borrowing costs will go out as dividend instead of financial expenses. So there's no change to how we think about financial targets this year, is that right?

It is absolutely correct. They will be out and treated as dividends, so they will not impact interest expenses in the profit and loss. They will not impact free cash flow also, because basically they will impact debt, because the coupon will be distributed and treated as a dividend, so it will impact debt, but not free cash flow. The only nuance is that the hybrid interest will impact on the other end EPS, are impacting EPS. And by the way, in the estimate that I'm giving, of course, I considered this because being treated as preferred dividend, the net earnings are adjusted to account also for hybrid bond interest expenses, but only for EPS calculation, not for net income.

Okay. That's very clear. Thank you very much. Maybe the last one, if you can comment on this. So you mentioned, so when people ask about the backlog or tender activities in transmission, you said obviously H1 market activity was not so satisfying, but H2, we can expect some level of activities from National Grid and IPTO or IPTO. obviously we all know there is one problematic project right now that one of your peers is having and yesterday they commented on the call that the other possible plan B is to work with Ipto on another project. Do you think that compromise your competitiveness in future tenders with APTOL, how do you view yourself positioned for APTOL tenders versus other market participants?

For us, it's easy to comment about competitors' projects, but our position at APTOL is pretty strong, and we don't see any impact coming from other competitors. in our relationship and leadership with the IPTO business.

That's very clear. Thank you very much.

You're welcome.

Thank you. We will now take the next question from the line of Miguel Borrega from BNP Paribas Exxon. Please go ahead.

Hi. Good morning, everyone. Thanks for taking my questions. I've got a few first on low voltage. I remember last time we spoke, you returned to making a 15% EDTA margin in the U.S. Does that apply to only Encore Wire or also Prismian U.S.? And then just a measure of comparison, can you share how much you're making in Europe at the moment? I would imagine a little bit lower than the U.S. And maybe big picture comparison, How is the competitive landscape in Europe? Does that come from also foreign players or is the market more fragmented on a local level? In other words, why doesn't Europe do the same as in the U.S.?

The margin in the U.S. is 15%, including ANCOR and including the legacy prisoners. We restored thanks to the solid market demand and our pricing leadership 50% of the margin across the entire INC space in the U.S. Europe is around, depends on the different countries, a country at 7%, a country at 15%, similar as U.S. I'd rather also talk about LATAM. LATAM is a country where we are close to the level of margin that we have in U.S. So there are countries in LATAM where we have 13, 14% dividend margin. In average, we have 12% in LATAM. We will, of course, try to maximize the margin across the border, but you're right, the competitive landscape scenario in Europe is different than that in the US. And it will never be close to that in the US, because there is fermentation, and because the market is not protected. But still, the differentiation coming from sustainable solutions, innovation and so on, will help us I'll face the others in terms of margin increase in the IC space in Europe and other regions outside of the U.S.

Thank you. And so if you're making 10% in electrification and the U.S. makes 15%, what is dragging the margin then?

First of all, you should not confuse electrification and INC. INC we make in the U.S. 15%, and globally, as you see, this has been confirmed. But I told you that there are different geographies where the market is not as high as 15%.

Thank you. And then in high voltage, if I may follow up here, you mentioned limited order intake here today. How do you explain that? Is that just timing? Are there projects being canceled or not new tenders going on? And how do you see the supply-demand balance evolving from here? Are you still keen to keep expanding until 2028?

it is a it is a matter of a size of project and length and complexity of tenders and you should not you should never read the market as a flat market in terms of ordering tape per month evenly spread across the year so it happens in other years that you had a lot of intake in year one in first half sorry and lower intake in second half and the other way around this year there will be a significant level of work in second half for this year as opposed to first half uh because this is the facing of the tenders organized by by customers we will we haven't seen a particular solution whatsoever where there is still a significant imbalance between capacity and demand and as you see the foreign players are not winning shares in this market because there is a significant technological barrier. And being as the technological leader of the market, we like enjoying creating even further barriers for reporters, like China's or India's or other companies. The lack of installation capability is the main reason why this European business has not been awarded to Asian players. And among these installation capabilities, we are the most capable, thanks to and our continuous effort in innovating in the space of installation capabilities. I hope I answered the question. Thank you very much.

Yes, you did. Just wanted to confirm also. you're still keen to expanding until 28.

All projects have been launched in 22. We will continue. And, in fact, we have accelerated adding additional expansion of capacity in submarine and land space to cope with the demand that continues to remain strong. Agreed. Thank you very much.

Thank you.

Thank you. We will now take the next question from the line of Alessandro Tortora from Mediabanca. Please go ahead.

Yes, hi. Good morning to everybody. I have three questions, let's say. The first one is a follow-up on the digital solution profitability. Can you give us an idea of the driver behind the margin expansion we saw, even sequential, Q1, Q2? Q2 versus Q1, I remember that profitability was around 10% and now we are talking about 14-15% because considering the organic growth, it seems much more related, I don't know, to say it mixed or maybe some savings or pricing. So just understand driver behind this 14-15% because if understood well, With such a profitability and also probably with a good demand outlook, you mentioned a combined profitability for digital solution closer to 20% including channel. That's the first question. Thanks.

So there is an expansion of margins at Prisma level thanks to the organic growth in quarter two. over quarter one, so sequentially it was pretty high, it was almost 10% growth in quarter two, and this is also matching what I said before, we are supporting U.S. demand with European production, making organic growth stronger than that of other players, local players, and the second component to this bit of margin improvement comes from the channel acquisition, so we are blending In quarter two, one month of channel at 35% EBITDA margin with the typical 12%, 13%, 14% margin of the legacy treatment. So this has enhanced the margin of the quarter two. And since from now onwards, the channel will be fully embedded in our monthly numbers, you will see the EBITDA margin that was set at 16.8% in quarter two turning towards the 20% EBITDA margin in the coming quarters.

Okay, okay, thanks. And then the second question is your comment on the data center-related safe including tunnel and also the comment on twice the revenues we bought last year. So basically, considering, let's say, the whole perimeter, we are talking about, I don't know how much, around 10% of your group safe, even though, let's say, group safe is inflated by copper. But let's say around 10% of your group safe could be linked, let's say, to all these data center expansions.

This is a bit too much. It was last year around 600 million euros, the revenues associated with the centre. This year, with this pace, we will be getting past the 1 billion level. But you should see this in combination with a non-residential space, uh while last year there was a strong growth especially in quarter one and quarter two in terms of infrastructure investment for uh no residential buildings so airport the commercial center and so on this year due to the inflation the car the tariffs the aluminum cover tariff there's been a softening in the monday no reservation only when you couple the traditional non-residential with data center, the global non-residential data center market shows an increase. So data center is adding significant growth. Part of this growth is eroded by the softening in the mind in the typical and the original non-residential space. But overall, as I said before, the non-residential including data center is growing by a mid single digit growth.

And is it fair to say that, let's say, all these data center growth drivers for you, we say that is chiefly related to the U.S. market in the sense that Europe, as you mentioned before, is kind of stabilizing the INC demand also in Europe, but it is fair to say that so far this data center, that driver for you is chiefly a European driver.

sorry an american driver data center setting a strong driver for our growth in us we are much better positioned in us than in other geographies but we are working on it we have a significant share in us and a limited share in the other european country or a pack but we are especially running one-off projects one-off activity to create more engagement with the contractors in Europe, which are the real channel to market to data center expansion, conversely from distributors who are the channel to market in the U.S. So we are adjusting our go-to-market channels in order to be also in Europe a significant player in the data center space.

Okay, thanks. And sorry, the last question is just on the EPS growth for the target for the current year. I know about the 20%. If you can help me to understand the capital gain, the amount of the capital gain, also including the last disposal you made from YFC that would help with the bottom line and the expectation for financial charges for the full year. Thanks.

Yeah, I start from the second, Alessandro. The expectation of the financial charges for the full year is in between 270 and 275 million. So, as I was commenting, the second half, which is slightly declining, slightly decreasing compared to the first half. On YUSC, we sold so far 8% stake. Actually, not so far. Here today, June, 8% stake moving from 23.5, 23.3% down to 15%, and then we sold on top another 5% in July. On the part realized by June, the gains were around 30 million, say 29 million to be exact. And on the, I'm checking, on the path which was already done in July, the gains are, let me say, 45 million, more or less. Of course, not included in our half results yet.

Sorry, the remaining 5%, the capital gain was 45?

Correct. Because it was sold at a much higher price.

Okay. Okay. Okay. So let's say we can assume so far with your disposed stake is 29 million plus 45.

Correct.

Okay. Grazie. Prego.

Thank you. We will now take the next question from the line of Vivek Mehta from Citi. Please go ahead.

Good morning everyone. Thank you very much for taking my questions. I have two if I may. The first is on the transmission pipeline. One of the US high voltage companies commented on their calls that they've seen a softening in the European HVDC project pipeline due to affordability concerns for customers. What are you seeing here? How are you seeing the European pipeline develop? Thank you.

We haven't seen yet this possible softening, but it is true that after a big wave of awards that happened in 22-24, TSOs will have to realize that capacity is not yet at the level they need to have to have a shorter distance between the award and the start of the execution of the project. So I think now the demand is adjusting. down, you know, adjusted down. It's adjusted to the level of capacity and taking stock of the fact that the capacity fully saturated across all players until 28, 29. And so we've confirmed the 15 billion level of market in the coming years, as we said a few months ago.

That's very helpful. Thank you. And my final one is just a follow-up. Really appreciate all the color on the copper tariffs, the impact on copper imports. I'm a bit curious around the rod, the copper rod imports. You mentioned that's about 25% of the market. I'm just curious, how much spare capacity do you see within the industry for the existing U.S. rod mills? i.e. if there's any reduction in those imports of copper rod, can all that shortfall be met by the US mills that are existing, or indeed any new addition to the market, or do you see any risk of shortages?

Thank you. US players, rod producers, are investing to expand local capacity. Only 25%, as you said, is the gap between the demand and the current capacity. We are also planning to invest in new road capacity in Anchor Wire as part of the plan for synergies. So gradually, this 25% gap is meant to fade away over time.

Understood. Thank you. You're welcome.

Thank you. We will now take the next question from the line of Lucas Ferani from Jefferies. Please go ahead.

Thank you. I'll have a few as well. Maybe we do them one at a time. So the first one is also on copper and also the discussion in the paper on copper scrap. Do you see that also as a win? Because that can be used. That generally comes at good prices. and now they're forced to keep it domestic. So can you talk again about kind of copper recycling and your use of copper crops and whether that could be also a competitive advantage on price? Thank you.

The copper scrap is sold to the market at a discount over comics. So when the comics went up from $10,000 to $15,000, there was still a discount over the level of comics. So the real advantage is that we have, regardless of the level of comics, some, let's call it, should not disclose it, but anyway, is $300 saving per tons of copper produced at Anchor Wire using the scrap. Of course, as we edge towards higher recycled copper in our road facility at McKinney, this $300 per ton saving is going to increase. We used to have an average of over 15%. uh recycled waste in our copper rod now tends to the excess of waste available in the wet market this level has risen to 30 percent so this level of saving the level of saving is is is growing um yeah that was probably that's clear lucas yeah no that's clear

um then the second one was just on the the holocaust fiber um technology can you talk a little bit about the agreement essentially you're kind of buying the ip and then you can produce sell the cable what will that work uh as a jv can take us a little bit into how that will work financially and also generally on the size of the market there my understanding um is that it's only really required and you know peak application and the the addressable market is probably quite small, so just wanted to have your view on those two points. Thank you.

Aside from the market, this is a new market. For the time being, this technology was not available. This company, RelativeNet, developed a solution, and they had a commercial partner to us. They have sold cables to Microsoft, other players, hyperscalers, which were not, they were not able to produce, apart from what they could do in their lab. So we became the industrial partner to this company, so we are industrializing their solution, their process for hollow fiber in our factories in Europe. So the combination is two companies, us and RelativeNet, we provide the market with an industrial cost-competitive solution to sell hollow fiber to hyperscalers, enabling them to distance the data center further out. Then what will be the market size? It is early to say, you have to wait to see what will be the cost of this industrialized solution. Certainly there is a lot of interest from data center because the current latency of the fiber solution provides, I mean, sets significant constraints in terms of selecting the possible areas where data center can be built, could be built. so we will have to figure out this market size in the coming years but certainly the profitability of this market of this solution is pretty high as we speak pretty high thank you that's very helpful and then the last one just on what you're doing exactly in the specialty business in the automotive segment

I think if I understood correctly, you said you were kind of in the last process of divesting some of our automotive exposure. Do you mean kind of winding it down where you're no longer producing some of those kind of more commoditized automotive cables, or are you actually selling some of the factory capacity? Thank you.

We are selling the asset, the equipment, and the customer attached to or the contact attached to this business. for three plants out of the seven plants that we had in our perimeter and these three plants disposal one has happened already in in quarter one the other two will be completed in quarter three

And what would be roughly your exposure to automotive after that in terms of revenues?

We had before some 600, 700 million worth of revenue in this space. With this disposal, we would reduce this 700 down to 450 million, only on business that is worth keeping, like the one that we have in the U.S.

Okay, perfect. Thanks a lot.

Thank you very much.

Thank you. We will now take the next question from the line of Chris Leonard from UBS. Please go ahead.

Yeah, hi there. Just two quick ones for me, if I may, please. The first is regarding the US fuel listing. I just wonder if you can give a timeline about when you might consider repositioning on that, given acquisitions now have been bedded in with Encore Wire and the business for more than a year and channel is going well. Equally, the US market looks like it's going to be very strong on the back of commentary on the copper tariffs. So I just wondered what your thinking is there on dual listing. Thanks.

Thank you, Chris, for that. This is still a project on hold. We are super focused on the execution of what we are to complete. The transmission growth is solid, but we have still a few steps to achieve to target the one billion goal for 28. we are just entering to the channel integration as we speak and by the way the or not will continue through your end and so the real integration will be more executed in 2026 than 2025. So, we also invested much more time in engaging the U.S. investor than we did in the past. So, try to capture in a way the benefit of U.S. dual listing without performing U.S. dual listing. It remains an opportunity. At the proper time, we will make the relevant decision.

Okay, that's super clear. Thank you. The second question was just on the guidance range and thinking of the upper end. Is there anything you can help us on the sort of moving parts of what might take you to the upper end of that guidance range at EBITDA? Thanks.

As I said before, 24 hours ago, we didn't think to modify it and to consider the upper end really within reach. Now let us assess what the dynamics, the new dynamics of the market in the U.S. will be. following the announcement on last night, and we will be more specific in the coming months. But, as I said before, we feel much stronger than 24 hours ago, as far as delivering the guidance and some upside.

As a follow-up to that, was there much in the upper end of the current guidance range that was attributed to sort of INC and electrification business, or were you more focused on power grid and transmission?

I think I see electrification probably there would be the possible upside over this current guidance, having transmission be fully recognized in this guidance already, and digital solution as well, apart from the channel piece, that we had one month after the trajectory and the trends and the outlook for the coming quarter is positive, but we have to wait and see what happens. So there are three possible areas of upside, channel, follow grid, and electrification. really kind thank you for the color have a good morning all thanks thank you thank you welcome chris thank you there are no further questions at this time i would like to hand the conference back to massimo battagni for closing remarks i'd like to thank you for spending this time for that with us uh very useful to hear your question and try to answer your question with uh giving you the sense of what's happening in the market there's a lot of things that happen at once but i see very positive about the quarter three and quarter four looking forward to talk to you in the coming quarter and for those of you are going to have a summer break please enjoy the break thank you very much