Prysmian S.P.A. Ord

Welcome all, and thank you for taking your time to attend the call for 2025 for your result. I would like to highlight the 25. You see a record results across all KPIs, strong performance in EBITDA with 2.4 billion, which is itself a 500 million growth in terms of the EBITDA over the 24 performance. A strong net income, 1.3 billion, of course, supported by the disposal of the YEC share, but still remain an outstanding net income result. And a cash generation with a 50% conversion feasibility. 1.2 billion, again, record result in free cash flow generation. Even the margin grows over 2024. To appreciate it, I will We wait for the next slide. And from growth EPS, also with 18%, which is well above the range that we committed to achieving at the capital market rate, that was 15 slash 70%. And we'll jump to the next one to deploy, to display the scenic account Acceleration in our performance. You see stability with slight growth in 22, 23. Then the first step up, 1.9 billion EBITDA and 2.4 billion this year. This 500 million is a significant hike in EBITDA. mainly coming from perimeter change, the full recognition of anchor wire impact in 2025, the new acquisition channel, and the strongest EVA performance that comes from transmission with 200 million growth in EBITDA. To be honest, there is another 80 million benefit in terms of organic growth in the 2025 result that is hidden by the Forex that was 80 million, 75 million to be specific adverse in 25-24. I will not comment on the guidance now, but you see that 2.7 already positioned us, I would say, slightly ahead of what is the target that we have to achieve by 2028, considering that we still have two years to go. Freakish flow, similar trend, significant acceleration. 1.2 billion is a very good conversion rate for the economy. 1.350 is again another step up. This definitely positions us ahead of the target of 2028. Let me move to the important contributors to the growth of the company in the last 18 months. This is an 18-month worth of effort in reshaping our portfolio. making it more suited to our goal of becoming a stronger solution provider. It's seen 24 in electrification anchor wire give us the access to electrification space in the United States and tested that access. Now we have a unique asset and unique opportunity to leverage the expansion of the center. We followed this with the digital solution expansion portfolio with connectivity with Warren Brown in 24 in Asia Park, and Channel in the U.S., and also Palsari in the U.S. And lately, we had this two important acquisitions with Dosmall, the XTERRA, and the SCSM still give us access to the submarine telecom long-distance connection, helping us complement the strength that we have in the submarine energy business with submarine telecom opportunities. SCSM is, again, an important step up in verticalizing our capabilities and is also one of the most critical phase of the execution of the project, the survey assessment and the rule preparation. which will help us become more efficient on the one hand, but also able to sustain the possible risk that comes from the burial depth that always rely on customer survey and not on survey. We also work on our portfolio in terms of disposing shares of YMC, which is not considered any longer a crucial asset for us. And we made a couple of, actually, three-factor reduction in the automotive perimeter to help us avoid evolution coming from the difficult time that automotive is living worldwide. There are also standing remarkable achievement on the sustainability journey. Our newly defined target is to move to sustainability-linked revenues, so revenues that are associated to low-carbon products, sustainable solution. 44 is the target, is the achievement for 25. Our target for 28 that we declare that is 55%. 11, 12 billion revenues in 28, and who knows whether this will be 11 or 12 or more, depending on the perimeter change, with these solutions that can offer benefit to our customers in terms of sustainability, significantly hiking the recycled content from 16 to 21%, and we continue our consistent journey of reducing scope 1, 2, and 3 to achieve and meet our commitment to be net zero by 2035. We are also particularly proud of this record 50% achievement in a share of our employees, the old shares in the company, which is a sign of consistent and growing confidence in the future of our company. Let me start with the start of 25. There are many KPIs, but I will draw your attention to the right-hand side of the page, 30% organic growth, which equates to almost 800 million revenues in one year in terms of capacity expansion and execution of the projects. Second, 582 million EBITDA, 220 million additional to 2024. The step increase is amazing. And third, EBITDA margin, 18.3%, fully at 25%, supported by a 21% in quarter four, explains and gives confidence and actually shows that we are going to beat the target that we set for 2028 that was set at 18-20%. We are already there in 2025 with an exit speed that goes beyond the range that we set for 2028. Amazing also the growth of the backlog, $17 billion, with $2 billion worth of projects being awarded to us They are not in the backlog because they are waiting for the not to proceed. They will come in the next few quarters. By distribution, we continue with a sustained growth. In the quarter was pretty strong, 13%. In the full year, still very strong, 8%. Certainly supported by two large regions, U.S. and North America and Europe. The EBITDA margin for the year is slightly down on 2024 because the quarter four is slightly down on the year over here on quarter four, 2024. Again, the same point that I mentioned last time. There is this Midwest spike in cost due to the tariffs, unfortunately, that we could not pass to customers in the overhead transmission space in the U.S. because this is a fixed-price business. Now we are moving to different, we try to define different solutions, but until we have flashed out the whole backlog, which was set when the Midwest was lower than this, we will suffer some contraction in the overhead transmission line that has a repercussion on the total power grid space. Electrification is showing a sluggish ILC growth overall, but with a, promising growth in quarter four in North America with almost 6% year-over-year growth, which is supported by what we see already in quarter one, 2026. So we saw for a lot in terms of organic growth in 25 in the space in North America, because the whole market, with the exclusion of data center, so the residential and the non-residential market was 6% down in 2024. These are probably number of the spend occurred in U.S. in construction business. The expectation, the outcome for 26 is much more promising in the start of the year, as well as the exit of the last month of 2025 are extremely promising. The EBITDA margin fully grew by 900 basis points over 24, and this is, again, the level and the value of the accretion due to the acquisition of Anchor Y in our perimeter, full perimeter. Specialty is nothing that was not foreseen, but it's still disappointing. We have a full year, 24 reported, $310 million to be done, and now $280 million. There is a $10 million forex and wind, of course, but besides this, there is a weaker demand in automotive, in elevator, U.S., and in oil and gas. So, contraction of margin distribution has caused this decline. let me say, 20 million organic decline. The rest is the Forex effect. The profitability fully remains pretty consistent with the past, and we We have finally disposed the asset that we want to dispose in automotive towards the beginning of this year, January and February. So we should not see any longer the dilution coming from automotive, and we hope to see the rebound of the business in the rest of the verticals that we play in the different regions. This is a solution that speaks for itself. This is a significant growth, organic, 7% full year. supported by the rebounded business in the United States with stability in Europe and other countries. And then there is the perimeter change that decided 268 million equates for more or less 100 million is the channel. You see our creative channel is with a portal impact which brought the EBITDA margin five points higher than what was 24. And overall, the EBITDA margin at 17.3 for the full year. will continue. It will also, as we did in the optical business, benefit from the rebound of the market. And now we can finally work on integration and leverage the bundling of connectivity cables and leverage the services that we'll have to achieve thanks to the cross-selling opportunity. Let me go back to Francesco for more insight into the financial details.

Thank you very much, Massimo, and good morning to everybody. I'll be quick. The profit and loss statement, as Massimo said, EBITDA closed at 2.4 billion exactly in the midpoint. Our guidance with a great margin expansion at standard metal price and expansion of 130 basis points up to 14.2%. uh driven inorganically by the full year inclusion the full year effect of the accretive anchor wire acquisition in terms of margin and also by the inclusion of channel acquisition since june 2025 organically mainly driven by the outstanding margin expansion of the transmission business On a full year base, around 400 basis points, 4 percentage points. Drawing your attention on the right part of this slide, you see the bridge of our 24 to 25 adjusted EBITDA with a total growth of close to 500 million euros, 470 million euros, despite the adverse forest effect worth 75 million euros. Business by business, transmission was the strongest part of this growth, almost 230 million, driven by an almost 30% organic growth and, as I said, an excellent margin expansion. Power grid also performed well, 24 million units. Now, of course, cleaned of the forex effect, performing very well in power distribution and in high voltage AC across all the regions, with only an adverse effect in North America over red line business. But despite this, performed a significant growth. Also, top line organically grew by around 8% on a full year basis. Electrification grew by 176 million, of which INC contributed more than 200 million, whereas specialties dropped, driven by weak oil and gas, elevator and power. As Massimo mentioned, a very promising exit speed and start of the year in the INC business in North America after the challenging first half, the first two quarters with pretty tough market conditions. Digital solution up almost 130 million. Obviously, here we benefit of the inclusion since June of the channel acquisition, but I like to stress that also organically, and mainly in the U.S., EBITDA grew significantly on a light-for-light basis. The little adverse perimeter effect of YFC, we gradually exited in the second and third quarter, and as I said, the force effect. The other outstanding achievement is obviously net income, close to 1.3 billion. Of course, this includes the gains from YSE, net of tax in the region of 345 million, but still taking out this effect, the growth from 2024 is really outstanding. And by the way, the 3.31 euro share of EPS, growing 18% since last year, that Massimo mentioned, Already mentioned, I want to be very clear, is totally cleaned of the YFC gains effect. So it's a normalized growth of our earning for sure. We can move to the cash flow generation and one more outstanding achievement of this 2025, close to 1.2 billion free cash flow generation. This was also benefiting of some extraordinary low level of paid taxes in U.S., benefiting of a couple of positive one-off effects. But as you see, we perform really well in terms of working capital changes down by almost 200 million, mainly in the transmission business, and despite the adverse effect of the rising metal price that unfortunately may be there also. for this year, 2026, impacting our cash flow. You see that we leveraged down to 3.1 billion debt with the acquisition, which is almost entirely or entirely the acquisition of Channel, including the earn-out of $1,000. And 69 million, which is almost fully covered by the issuance of the hybrid bond, close to 1 billion. And you see here, totally taken out from the free cash flow, the effect of the disposals proceedings. 675 million, out of which 565 are related to the YFC disposal. That's it. Back to Massimo for the output.

Thank you, Francesco. The output is pretty straightforward, and it is actually very outstanding in terms of confidence and commitment of the company to make it happen. 2.7 million bit points in the EBITDA guidance, which sets a 300 million EBITDA increase over the ending point of 2025. But in reality, considering There is 80 million perimeter adverse impact between, sorry, there is 80 million forex effect adverse. It is actually a 380 million EBITDA increase if you nephrorize the forex. You see on the right hand chart that the bridge is playing that will be, there is a significant organic growth. On top of it, there is a perimeter effect. It is more or less 80 million, so by coincidence is that size. that needs to be in place to offset the forest impact. I think it's very, I would say, brave, but we are very confident of achieving it. It's much better than what we've seen across the other peers. Not necessarily the cable space, but in general. And we are very, very committed to achieving it. Do you think it's even stronger? Again, 50% conversion rate, 1.3 billion, 1,250,000. Well ahead of what we need to be, where we need to be in 26, 2028 capital market rate target. So confident what should be bought and continue the journey with organic growth and the M&As. These sustainability link revenues will move from 44% 25 to 48 midpoint. One important remark. In our EBITDA, there is not any possible benefit, any, coming from the tariff situation. We haven't seen it yet in the past 10 months. As I told you, it will take a little bit for the importance to change behavior in the market and allow us to gain share. And we didn't want to build any speculative benefit coming from the tariff situation, which has changed in a certain extent, but not much at all. We will see upside, possibly, coming from tariff in the coming months or coming quarters. Having said so, I close saying that we confirm the stronger drive in transmission business also for 2026. The time integration is a successful integration, considering that after concluding the amount payment that we had paid this company with a multiple of less than seven, and the synergy will kick in in 26, adding additional accretion to the digital solution. The outstanding cash generation 22 will be 24, 5, sorry, will be supported in 26 with additional cash flow. the dividend will increase from 0.80 to 0.90. And, of course, this is what we see organically, but you know that we keep working on the M&A. When this will happen, we cannot tell you yet, but there will be something happening in the next short term. Thank you for your attention. I'd like to move on to the Q&A session.

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 answer your question, please press star 1-1 again. Once again, it's star 1-1 for any question, and wait for your name to be announced. Thank you. We are now going to proceed with our first question. And the questions come from the line of Aakash Gupta from JP Morgan. Please ask your question.

Yes, hi. Good morning, and thanks for your time. I have two. The first one is on guidance. At the midpoint, you target roughly 300 million increase year-on-year in EBTA. I guess 140 million of that could be coming from transmission to get to 1 billion by 2028. And I think you said 80 million is coming from perimeter. So maybe if you can talk about how should we think about the remaining 80 million between the three segments, grid electrification and digital solutions, on an organic basis. And same on guidance. Your free cash flow guidance implies 50% FCF conversion at the midpoint, which is higher than what we have seen historically. So any color on that? That's the first one.

Thank you, Rakesh. Yes, you're right. So let's call it $200 million net, but in reality, organically, in terms of your set of the four, because it's $380 million. So it's $150 million. Yeah, more or less, we come from transmission, remaining is 80 million, and so this brings us to 230 a sec, and there is another 150 organically coming from the rest of the business. So there is some organic growth in digital solutions, because we will continue to leverage and strongly demand the United States to which is driven certainly by broadband deployment, but even more by data center expansion. They are desperate for additional volume, additional supply in optical space, likewise in the energy space. And there will be strong growth in power distribution. So despite the blip in habitat margin in quarter four, which was totally anticipated, the market demand in the U.S. for medium voltage and high voltage is extremely strong. We can't cope with this demand. If we had more capacity available, we would sell it. And likely in January 27, we will have the first wave of new million-voltage capacity coming on stream in the Anchor site. This will be a powerful combination, the service level of Anchor with the power of million-voltage cable for INC, industrial construction, and power grid. So our grid will also grow, and electrification, as said, we exit quarter four with a strong rebound in INC North America. not followed by europe europe is pretty weaker in inc currently but north america rebounding quarter four is what also we notice in quarter one i don't think this has nothing to do with the tariff if anything is due to the contraction that the market suffered in 2025 that finally is resulting in a surge in demand in 2026. so to cut a story short there will be organic growth Planned in our 2,700,000 coming for all businesses. Of course, with much lower, much more visibility transmission, but with strong market demand in North America, in digital solution North America, and in power grid Europe and the United States. I defer to Francesco the answer on the 50% conversion.

Yeah, thank you, Massimo. Ciao, Akash. No, definitely, let me say, an ambitious, still totally realistic target on which we are very confident. Let me first of all remark that already 2025 is very close to the 50% conversion rate. This improvement in free cash flow, the midpoint is around $180 million versus the 2025 actual, which comes first of all from the additional EBDA. So if you take the $300 million additional EBDA net of tax, this contributes around $220 million, $230 million. And then we will certainly have higher cash taxes. I mentioned that 2025 was kind of supported by a particularly low level of cash tax in the U.S. This will come back in 2026. And this means that we are committed to further improve our working capital, as I said. In 2025, most of the improvement came still from transmission. This will be a little bit different in 2026. And we should think that in 2026, we have a pretty significant room to recover and to gain efficiency in terms of working capital. And this will be a key in order to deliver the $1.35 billion free cash flow guidance.

And to give you a little bit of more nuance, there is not any reduction in capex that support the free cash flow generation. If anything, 26, we continue with a strong capex deployment across all businesses because this time we continue with transmission We continue with power grid. We need to add digital solution. We are at capacity in fiber and cables. And so we will maintain a level of 800 million copies also for 2026 to support the organic growth across all the three business information.

Let me also add one point that I missed, that the debt with this kind of cash flow generation in 25 and expected for 26, our net debt will be in the region of 2.6, 2.65, including, by the way, the two already announced acquisitions, which are worth, in effect, increasing our debt by 210, 220 million. And this means that year-end 2026, our leverage will be lower than 1%. based on the midpoint of the guidance, and that's really a great situation to be in, and I would say a better situation than we expect.

Much more better than expected. Yes. Thank you.

We are now going to proceed with our next question. And the questions come from the line of Daniel Acosta from Goldman Sachs. Please ask your question.

Hi. Good morning. Thank you. I have two questions. I'll ask them one at a time. The first one just wanted to ask on power grids and on this, what you call the temporary metal headwinds. Should we, maybe can you quantify how much the hit was, and then should we expect that they will no longer be there from 1Q onwards?

Thank you, Daniela. Yes, the temporary, the effect is temporary because it's due to the Midwest spike in the overhead translation where the margin, sorry, where the price is fixed. Yeah, I can't tell you the number. It was for the full year, but basically in part in quarter three and more. Quarter four was at $30-plus million worth of costs or margin contraction. The heat is visible at the group level because, you know, the power grid in North America accounts for, let's say, two-thirds of the total without margin of the group. It will be there also in quarter one, because the Midwest keeps increasing, and we still have significant volume associated to backlog that we landed in quarter one and quarter two, 25, when the Midwest was pretty low prior to this particular time. So, we'll see it in quarter one and in quarter two. Gradually, we will come out, because what we are talking today, the project that we are landing today for execution in quarter three, quarter four, had a fantastic merge. As you can imagine, until we have flushed out the order backlog, we will be in the same situation. That's why we call it temporary.

Got it. Thank you. And then just on, I think you very clearly don't have in your guidance the tariff benefits. We have already seen, I guess, on the market data in copper wire and cable imports into the U.S., like the November data was down. Massively on the imports, we don't see very strong growth in your U.S. electrification business yet in Q4. Can you explain, is it because it's a different mix maybe or more indexed to things which haven't been included in the codes, which haven't been included in the tariff yet? Is this just timing with distribution? Sort of how should we think about that data versus what you are printing in the U.S.? ?

Yeah, to full answer, in the copper space, there are no tariffs at all. The tariffs are applied to metal and not to the derivative products, and this seems not to be the intention of the administration, so the market is still free as it was before. Everyone is bearing the extra cost of the copper. of the cattle premium and the copper comics, and the market is the same as before. So this is the space where we would never expect, where we didn't expect any potential gain from the tariffs. On the contrary, in the aluminum milling wire, we still have this 232 tariff applied to the metal content of cable imported from importers. But for the time being, we haven't seen a real change in behavior. There basically is volume. the costs or the 50% in their margin, their price, the importers, the distributors importing cable from overseas. That was my point. I don't know how long they can continue with this margin contraction. They haven't increased significantly their price. Yes, it is true they have increased a little bit their price, but we still have a significant price gap. like 15, 10, 15% between our price in the U.S. and their price coming in. And so maybe, maybe they will not be able to bear the current marginal pressure for too long, which is what we hope. But as well, we didn't speculate on the possible advances coming from this stage. We've seen, to be honest, in the last two months, a different trend in the aluminum building wire space inside ANCO, whereby we've been able to raise prices, and we didn't lose volume, and we didn't lose share of volume. So this is a first sign of possible advantage, but again, give us two, three, four more months to see if this trend materializes as a strong trend.

Got it. Thank you. And then just on some of the recent M&A you did, it seems like you've been in these two deals, both on submarine telecom cable or submarine fiber cables, which is an area you weren't very present on in the past. Can you talk to us about sort of the synergies you see on that area, the potential for growth there is out there? Maybe give a bit of context of sort of like how relevant this might become in the future in the group?

Interesting question. The space we were in was only the regional connection without repeaters. And the market is, made the market 100, only 10% of the market is confined into regional short-distance connection. So, without repeaters, we cannot play in the big market. So, the long-distance connectors. The market has grown a lot on the back of expansion data center and AI buildup. So, we will, with the repeaters provided by XERA, be able to amplify the optical signal in our cables and be a player also in the longer hole connection. So we have access thanks to this technology to a market that was before forbidden to us. We have all the rest of the know-how, the cable we have, the installation capability we have. This was the piece that we needed to be considered a player in the market. And we will, so today we make a not the number, we make 100 million revenues in this submarine space, telecom space, without repeaters. The additional XTERRA will pass a growth significant with this scale in the submarine telco.

Got it. Thank you very much.

Thank you, Daniela.

You're welcome. We are now going to proceed with our next question, and it comes from the line of Vivek Mida from CT. Please ask your question.

Thank you very much, everyone, and good morning. I have three, and I'll go one at a time. Thanks very much. So the first question is just a follow-up on your comment around the aluminum cable business in the U.S., potential upside there driven by tariffs. Some of the press reporting from the Financial Times had suggested the U.S. government had been considering rolling back some of the metal derivative tariffs given the difficulty of implementation. In your conversations with the administration, do you get any sense that the current situation could change? Thank you.

No, we have no sign of possible changes to the current discipline as far as the 232 tariff is concerned. The only change would be the reciprocal country tariff, as you said, due to the Supreme Court ruling, and by this we'll have a minor impact to our competition or to our situation in the U.S. So I think we're still positive about the fact that being local with a strong asset in terms of capacity and also lead time. And bear in mind, I'm not saying this for the sake of saying it, data center requires significant service with large-scale capacity. If he could take share in the market of the others, it's because we can respond to this demanding data center requirement in terms of volume and service. So we are really not and we don't care much about importance. First of all, the aluminum building water is a small space in the total INC space in the United States. Secondly, the strength that we have in terms of acquisition are unique, that no one inside the United States, any of the players in the United States can copy, nor anyone from outside.

Thank you very much. Very clear. My second question. is around the very healthy demand in the U.S. for fiber, particularly from data centers. Could you give us an indication of what you expect the potential growth in the U.S. could be, and also just a view on where you stand versus your capacity? Are you capacity constrained in the U.S., given that you're investing in capacity right now? Thank you.

Yeah, the demand remains as strong as it was in 2025, so we continue with the same pace. And if anything, we see even more demand from data centers because now they're worried about the ability of customers or suppliers to supply energy cable and optical cables. And we're entering into some deals with those hyperscalers to provide security supply and receive some down payment in return. demand is stronger in cable demand for energy cables is stronger. Cable demand for optical cable is even stronger. We are about to lock investment in fiber capacity and cable, optical cable capacity because we, as everybody else in the United States, are at capacity. If you search, if you wanted fiber in the USA, you don't find it. If you wanted fiber outside the US, you don't find it either. not only from U.S. player, but also from Japan, from China, from anyone. So the market is extremely tight, and this is the best condition for us to leverage on the one hand power, and also technological leadership that we have in the optical space, which is well recognized by the .

Very clear. My final question is on the technology side, again, the data centers. Do you have any more views or color on the potential implications for your business from the transition to 800 VDC architecture? Any sort of views around the impact on the length of cable required, the value of the cable, and so on? Thank you.

Yeah, it's a technology that we developed already. It's under the direct current solution. Yes, it is true. It was shifted from AC to DC. which is kind of a brainer because they will save a lot of losses that occur in AC solution that incur. There will be a reduction in volume, but at the same time, the growth of the center is so large that even if specifically per megawatt we see a reduction, there will be more compensation coming from the additional demand. Anyway, we own this technology. We were one of the first to develop it, so we'll be happy. to see and to participate to this conversion, which will never be deployed at scale, by the way. Okay. That's great. Thank you. Thank you, Vivek.

We are now going to proceed with our next question. And the questions come from the line of Monika Bosio from Intesa San Paolo. Please ask your question.

Good morning, everyone. I hope you can hear me. I have three questions. The first question is on the data center revenues. Massimo, you anticipated that the weight of the data center revenues will achieve 10%. But what is the timeframe you have in mind for this weight? And what kind of margins should we figure out for the data center? This is the first question, and then I will move to the other.

Yes. So, yes, we achieved already in 2025 a level of $1 billion in direct sales and $1 billion in direct sales. We believe that at the current pace we will hit the $2 billion target in 2025. uh six so ten percent of the total revenue yeah the margin is a bit of a complex situation it is very high margin in digital solution with those sophisticated optical cables it's also very high margin in medium voltage so powerful cables to interconnect buildings and connects and represent the campus among them is of course lower margin in uh low voltage cable but this lower In electrification, with assets like ENCO, we supply the voltage cable to the percent, and we make 15, 16, 17 percent of the amount. So, it's a very accruing margin in one word.

Okay. And if I may ask, maybe I didn't get, within the INC USA business, in the fourth quarter, Can you outline the margins in North America? Because the exit speed was strong, but I didn't manage the margins.

I didn't manage the margins in Berlin, but it was as strong as quarter three. Quarter three was particularly strong due to the spike of tariffs that played in our favor when the copper tariffs were removed. But given the strong demand in quarter four, and despite the normalization of the copper price due to the tariff removal, we still had, I mean, when I say high, it means in the high-teen digit numbers.

Perfect. Thank you. And the very last question. It's more qualitative. Let's say that the consensus is closer to the midpoint, even a little bit higher to the midpoint of the new guidance. What are the main assumptions behind the upper part of your guidance range that could move toward the upper part?

There are two strong variables that, in a way or the other, have impacts on our results. One is the Forex. Should it strengthen, we will have, of course, many more chances to beat the midpoint and go beyond even the top of the range. And second, more organic growth, which is what we think is what we see in January and February. I said before, I mean, two months doesn't tell us the whole story, so we have to wait a few months to see. if there is a stronger growth continuing in the coming months. And as I said before, we didn't bank on any tariffs, so if tariffs came in, we would be in a different scenario. If the tariff benefit, as someone imagined, and I think there are some of you imagining hundreds of millions of benefit from tariffs, and I think this is a bit ambitious as a consideration, but if tariffs were to impact the business in the U.S., that would be significant outside beyond the current guidance.

Yes, correct. Very clear. Thank you.

Thank you.

You're welcome, Monica.

We are now going to proceed with our next question. And the question comes from the line of Uma Samling from Bank of America. Please ask your question.

Hi. Good morning, everyone. Thank you very much for taking my question. My first one is a follow-up on the, on your tariff comments earlier. I think if I heard correctly, you said that you haven't seen much of behavioral change from the imports, but you have started to raise prices without losing much market share there. So what's your strategy going forward in terms of the balance between the market share and pricing? And, you know, if you are raising prices without losing market share, then can we expect a margin tailwind here?

We sit today on a very good margin in ISC North America. This margin is split between different segments. The copper business is extremely high regardless of tariff. In the aluminum business, it was not that high in quarter four. As I said before, we raised the prices and the market to follow, and we didn't lose market share. This all depends on the balance between price and market share depends on the market amount. The market has said they're bounded. We foresee talking to our customer and talking also to data center customer a stronger outlook for 2026. So all the conditions are there for us to benefit from a continued strong growth with high margin across the board for all the INC segment of business.

That's super clear. Thank you very much. My second question is on MAA. I guess you're interested in doing a bit more deals in the next year or two, and what are the types of targets you're interested in, and what are the top key markets you have in mind?

We have explored, and we are still assessing different geographies and different opportunities in three main regions, and they start from priority one, the U.S., priority two, Europe, priority three, Latam. Different size of business, different size of opportunity. In which businesses? I mean, we have electrification as, of course, interest in space in the U.S., but equally also power grid. In Europe, there will be also electrification and power grid, and LATAM is pretty much the same. So the businesses that are involved in this M&A are the ones that I mentioned. Then priorities or no priorities, where to find the red one. and proceed with the negotiation and all the rest. But these are the area where we focus on business-wise and geography-wise.

Thank you very much.

You're welcome. We are now going to proceed with our next question. And the question comes from the line of Sean McAflin from HSBC .

Good morning. Thank you for taking my questions. My first is on transmission. The margin trajectory continues to surprise. You're already over 18% in 2025. I mean, what kind of, well, first of all, what is driving this? Is this just execution? Is this just better operational leverage on your increased capacity? What kind of further improvements can we expect in 2026 and how far ahead Could we be coming versus your 2028 target? Thank you. That's the first question.

You mentioned two key factors, certainly the operational leverage and the execution, which is important. The third one is the projects margin that we have in our background is better than what we executed in 25 or 24, 23. And so we will continue leveraging the three factors. And, yeah, where we could be in 2028, I mean, at a certain point, we will go up with a new capital market there, not because we organically want to change 28, but because hopefully there will be a perimeter change. At that point, we can, we will unveil and reveal the expectation for this EBITDA margin in the television business. But of course, as I said, if you achieved already the, let's say, 20-ish level of EBITDA margin in quarter four 2025, the expectation that we go well beyond what we committed to . And by the way, there's another player here that in Europe mentioned a very ambitious margin in transmission by 2030. So we want to be that player just to give you a sense of the ambition.

Fantastic. Thank you. And if I can just continue on transmission. Just if there's any sign of change from your transmission customers, in terms of absorbing the 30% increase in copper prices over the last three months, thinking out over the next years, if there's been any change in terms of CAPEX ambitions, project timelines as a result of that.

But I think the transmission, or TSOs, transmission system operator has to digest the wave of order and the significant surge in order intake orders that they send to the market in 23. So we don't see a slowdown in SAF. We see that for the next five years, we are flat out in terms of capacity, and we are flat out in terms delivery of the backlog, and the level of market we see will remain around these 15 billion euros in the coming years. And, of course, project cost has increased due to the , some projects are in aluminum, don't get me wrong. I think the point is we are all focused on the execution, us and the transmission system operator. And that's why we don't anticipate to see another wave of a 30 billion market intake as the one we've seen in 2023, but the market continue with this 15 billion per year, we will be able to read beyond 2028 with sustainability with a margin, sustainability with a possibility to further expand the capacity for this continued demand in transmission business. You never know. One day we might have more transmission opportunity also in the U.S. I appreciate that the window show is off the table in the U.S., but thanks to the data center, transmission interconnectors are becoming the key priority to spread the electricity capacity across different network and allow the data center expansion to continue. Thank you.

Just lastly on M&A, I saw a press quote earlier where you were quoting saying you're ready for large targets. I guess, you know, higher free cash flows is driving this ambition. Just in terms of is this a change maybe from previous communication you talked about, you know, deferring large M&A out for the next couple of years. So should we infer that you're now a little bit more ambitious on larger targets sooner?

Yeah, good question. To be honest, yeah, for sure it's a change, but we have many factors making us open to this change, like the disposal of waste, it has been particularly successful. Second, the performance in EBITDA in 2024, in 2025, sorry, and performance in free cash flow. So we are leveraging faster than anticipated. And so, as you know, as EBITDA leverages faster, we have more power ammunition to address large M&As. That larger, as you said, as we always say, is something similar to Uncle White. Don't think of something that is like a cost of acquisition. And so we are ready. We are ready then. Also be aware that between being, between starting the M&A and having the opportunity to come and stream, it will take six, eight months. But we are ready to go for that once. Thank you. Hello. Sorry, I said COMSCOPE to say, COMSCOPE is a large MNA that was analyzed one year ago, but it was too large. And so we will not go for 10 billion MNAs, that's to clarify, but the 3, 4 billion MNA is something that is within reach. Brilliant, thank you.

We are not going to question. We're now going to proceed with our next question. And the question comes from the line of Chris Leonard from UBS. Please ask your question.

Yeah, hi there. Two from me as well, please. And starting on the M&A point, I know you said Europe was maybe second in line in terms of geographies as a priority for you. Could you maybe comment if you can see the opportunity for margins to improve and expand across the power grid and electrification business within Europe without M&A, or would you think M&A and the consolidation in the market that M&A could offer would be an important driver for you to improve that European margin? Thanks.

I think your comments are correct. Now, organically, we can do a lot in terms of increasing the EBITDA margin because the demand is so strong that we are working in expanding capacity, so there will be pricing power, more pricing power. It will be more efficient and more operational leveraged. Of course, the M&A remain the main catalyst for a significant step change in profitability because when you combine two companies, there are plenty of synergies, cost synergies and commercial synergies that will help the M&A margins enhance pretty fast.

Thank you. It's really helpful. And just a second one was a follow-up on the fiber market and optical cables in the U.S. Can you speak maybe about – I know you're investing more here, but can you speak about any kind of metric for what your capacity is today in the U.S. and what you're seeing in terms of what the potential increase could be? And secondly, I think historically you said you're in the data center market. You're slightly different to Corning up here in the U.S. And I wonder, because now there's a lot of capacity booked out, is there scope for you to maybe –

wind share to move inside the data center i think previously you said you were more outside the data center on the fiber business but yeah that that any color there would be helpful thanks yeah so we will uh we will not share much about our capacity and the increase but definitely uh the market uh has grown by a factor of uh 30 percent between 25 and 24 and we would like to maintain our share of wallet so you you can you can arrive what would be our capacity effort increase to meet and maintain market share. Data centers, not that we are not in the data center, we are not in the inside building. So we are, we deploy a lot of optical cables to connect to the individual buildings of a campus among them. Inside the building is a lot of, there's a lot of connectivity and less cables. In that space, there is, there are basically two players, Corning and Comscope slash Amphenol and AFL. We have opportunity to grow in this space, but not in upscale, but in enterprise. Excellent.

Thank you.

We are now going to proceed with our next question. And the question comes from the line of Alessandro Tortura from Mediobanca. Please ask your question.

Yes, hi. Good morning to everybody. I have three questions, okay, for me. The first one, if you can come back a little bit to the, let's say, profitability expectation on the digital solution business, considering that in 2026 we will have the full consolidation of China, but also the synergies that you mentioned, also because now you were expecting also some organic improvement into, let's say, the legacy business. The second question is related to your comment on the discussion you're having with the U.S. scalars. So, we also saw in the past, in the recent past, some deals signed by Beretta, you know, with Corning. Is it something, considering your product portfolio, that you could do, in the sense, Do you see, let's say, the same business possibility for you for just signing some multi-year frame of agreement? So this is, let's say, the second question. And the third question is on the perimeter effect. Can you just, let's say, tell me exactly, because if understood well, Kelly, you will have, you know, the advanced consolidation of channel, then ACSM, now the Spanish one, Also, XTERRA should be there. So just understand the perimeter, how the contribution between the acquisition you made. Thanks.

Okay, I take this, the first one on profitability of digital solution for 2026. Well, it's not only channel. Certainly channel is a great acquisition. By the way, channel obviously will impact on a full year base on 2026, adding five months to the seven months of 2025. But we definitely expect a growth organically also, driven by the very strong U.S. market that we are seeing, which is not only volume. We expect also pricing to improve. So we have a dual component of this profitability enhancement that we expect for digital solution. And, of course, the synergy is also coming from the channel deal. which are definitely interesting in terms of cross-selling opportunities. Maybe this is more potential expansion of our top line than margin accretion on the synergy side. The second one on U.S. hyperscaler. U.S. hyperscaler, I think that certainly for the inside data center, we would need to strengthen our processes. product range. The discussions that we are having is more for outside the data center. So driving basically all the fiber connections to transmit data to data center. But this is also the so-called long-haul business. This is also a very strongly growing business. So not only inside, where definitely to improve our product range, we would need maybe also a perimeter. change, but we are organically mainly focused on long-haul growth, also talking directly with the hyperscaler.

Yes, we are having discussion about frame agreements or capacity reservation fees or kind of the staff down payment to provide security supply to these hyperscalers customers. Not necessarily only the optical space that's correlated with the But anyway, it was not nitrosulfur, but also the energy space.

Okay, thanks. And yes, sorry, on the perimeter effect, just if you can let me reconcile the contribution we expect here.

So your question is about the components is, okay, it's, I don't know, the channel is pretty simple. You take the hundred million we mentioned for 25, seven months, and you extrapolate it to full year. You would basically end up with, I'll give you the answer. Since the million additionally be that coming from China, and then there is a kind of, 25 million coming from the combination of the two, ACSM and STERA, but you also take into account another change of perimeter adverse, which is the YOC disposal, which account for 10 million, and so you end up with a number that we mentioned, 80 million, 60 plus from channel, 25 from STERA, SSM, minus the YOC share.

Okay, okay, thanks. Sorry, because I forgot, let's say, one point to ask. Can you help me, let's say, to understand the level of pricing effect, you know, we are going to see this year in, let's say, in the power grid, INC, due to the recent increase in corporate prices, because I see Southwire now mentioning basically every week raising prices. I recall that you are some kind, you know, of price set in the field. So just understand, if you're talking about a high single-digit price, price component a top-line level for you in this division?

The price is difficult to say because it depends on the cost. So, we have a formula in the power grid that El Paso Pass on, power grid power distribution, El Paso Pass on entirely the cost effects to the price. So, we're given, but in terms of the demand, this is strong power grid demand in America as well as in Europe. And so, the level of price would be pretty robust. not only due to the cost pass on, but also due to the demand. INC, as I said, is still weak in the performance of Europe. We see stable in quarter 1, 26, over quarter 4, 25. But in United States, The market is pretty buoyant. As I said before, there is a combination of two factors, the rebound of the non-residential business in the U.S., compounded by the strong demand data center, making the INC and medium-voltage business for INC customers in the U.S. very strong.

Thanks also for the extra question.

Thank you, Alessandro. You're welcome.

Thank you. As a final 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 1-1 again. Once again, it's star 1-1 to register question. We are now going to proceed with our next question. The questions come from the line of Jean-François Grangeot from Udo BHS. Your question.

Yes, thank you. Good morning. Just one question regarding the CapEx. Could you make an update on the CapEx span expected for 2026? You have communicated on the cumulative CapEx until 2028 to 2.6 billion. So, what would be the range on the capex expected for 2026? If, would you expect an average between 6 to 7 million euros or a different amount for the capex expected in 2026?

Thank you. You didn't touch on the question. Is it about 2026 or the future? Sorry. Yeah. 2026. 800 million. Sorry, John, if you want, if you can repeat the question. The number for 26 is 800 million, which is in a slight increase over 2025. 27 number would be pretty much the same. We would probably exceed a little bit given the additional organic growth needs that we see in this three years in capital market day overall cumulative numbers because the demand in transmission is stronger than expected and probably equally and in telecom is definitely much stronger than anticipated in the original CAPEX commitment for the capital market day. If that was the sense of your question, sorry.

Okay. Okay, thank you.

Thank you.

Thank you. We have no further questions at this time, so I'll now hand back to you for closing remarks.

Thank you for attending this call. It was a pleasure to share with you this exciting result in 2024, and more importantly, the outstanding commitment for the 2026 target for our company, which we ensure will honor and we commit to achieving and possibly, let's wait a few months to understand how the market will respond in the United States, especially, and for further update, we'll meet you at the end of quarter one. Thank you.