Prysmian S.P.A. Ord

Good day and thank you for standing by. Welcome to Brisbane Q1 2026 Integrated Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Massimo Battaglini, Chief Executive Officer of Britain. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to the audience of Quota 126. We're very excited to to share a quarter one result that is well ahead of our expectation. And when I say well ahead, I mean almost 50 million upside over what we budgeted for quarter one, 26. But what is mostly is that the growth in EBITDA between quarter one, 25, 26 is being mainly achieved organically. If you take this 80 million increase and you harmonize and utilize the Forex, This will lead to 120 million growth in EBITDA, out of which Chandler represented only 40 million of these 120. Also outstanding is the EBITDA margin reported, 14.2%, 1.1% a point higher than what we recorded for last year. So with this set of results, we can confirm that we are well on track to achieve the 2028 capital market day target of 3 billion and plus, and also very confident to be able to hit the upper part of our guidance for 2026, namely well above the 2.7 billion of the midpoint. Before moving to the usual by business review, I'd like to share with you some exciting news about the further expansion that we can have in the data center space through starting long-term agreements with hyperscapes. These agreements are going to be finalized in the coming weeks, and instrumental and fundamental to achieving this agreement is our footprint in terms of product and asset that we have in the U.S., We are among the few at fiber plant located in the U.S. with multiple optical fiber plants located in the U.S. We also very satisfied of being the only player worldwide that can offer data solution and power solution to hyperscalers. The demand has grown to the roof in terms of fiber and optical cables. not only coming from a strong defense center structure, but also coming from the famous and well-known case of military fiber utilized for drones application. So we are well positioned to take advantage of the growth of the market in terms of volume, profitability, and long-term supply agreement that will confirm how sizable this opportunity is for opening. Being unique means also that we participate In all the steps of the data and power flows of cables to feed optical solution and electricity data center, you see that all our business, transmission with submarine telecom and submarine power, power grid with medium voltage enhancement to the grid, electrification cables, and finally digital solution cables, are intercepting, will intercept opportunity with data center. And the last one that we want to capture is to be a player, not only with a long-haul connection, connecting data center campus and cluster of campus with other cluster of campus, but to be a player also inside the building, inside where the racks, the servers are, which is where most of the volume of cables and fiber is going to be deployed due to the AI expansion. Let me move to the business review. Supported the quarter one with 23 million upside over quarter one 2025. The organic growth is not that visible. In fact, we had growth, but made of two components. Some growth in the cable space, so the capacity coming online will bring an additional volume. to this business. We had lower installation, third-party installation in quarter one than we, due to the phase of a specific project. And bear in mind that we have also tough comparison to quarter one, 25, where we had a 60% organic growth in that quarter. But, look at the EBITDA margin. We are consolidating for the second quarter in a row, 20% plus EBITDA margin for this business. I confirm that we will see a between 20% and 21% EBITDA margin in 2026 full year, which is well ahead of the target we set for the capital market day, which was a range between 18% and 20%. More importantly, I confirm our commitment to achieving at least 170, 180 million incremental EBITDA in 2026 or 2025. confirming that we are well ahead of our trajectory for achieving the 1 billion goal for 2028. Moving to power grid, we have an exceptionally and extraordinarily high organic growth driven by volume and price. In terms of EBITDA margin, you see what we anticipated last quarter. We still have Midwest premium and cost inflation that we are passing on to the market because we have formula across all the agreements. But bear in mind, those formulas are structured in a way that they give us an upside only after a certain time lag. So there's a time lag for the implementation of the formula. whereby the cost increase today in the market, in our production, is something we can pass on to the market in basically three months. This is preventing us from restoring the 15% of the market that we achieved in the past quarters. But don't worry, the market is buoyant in power grid, U.S. and Europe. There is no price pressure at all. And... And also, should the cost inflation soften coming quarter, you will see the positive benefit of this unlike related to the cost-price adjustment formula. Moving to IMC, here we had a significant performance in terms of VDAT, 196 million in the quarter, which is 20-plus million over last year. If you add the Forex thing, but it is 17, this is a 40 million increase quarter over quarter. North America drives the growth, certainly with the non-residential business, also and mainly, I would say, with the data center expansion. We have been reported as the number one leader, number one player in electrification data center in quarter four last year and quarter one in 2026. And the EBITDA margin, as you see, at 13%, is well ahead of what we had in quarter 1, 2025. Specialties, we see a little rebound in EBITDA and in EBITDA margins. We finally disposed the two factories that we had in Mexico in quarter 1, 2026. There are two more factories to be rid of in the coming quarters. We still suffer this softening of the automotive business for the remaining market. And the data in the U.S. is particularly down due to the, I would say, continued crisis in the residential market. And some oil and gas often is what caused this 10 million reduction over the year. We are considering that 4 million out of 10 came from the forex. Digital solution is our new driver of growth. First of all, we hit a 20.6% of the margin in the quarter. And now we see head-to-head competition between the margin of transmission and the margin of digital solution. And let me remind you that before the channel acquisition, the best margin seen in this space was 14.5%. So we are now running at a different level of profitability. The quarter itself doesn't show yet the opportunity and the upside associated to hyperscalers. It is $88 million versus $42 million of 2025. Forex hit the result by seven. While you see it was in $25 or $45 million, this is not the case for $26. While you see this number growing significantly in the coming quarters on the back of this pricing power that has increased more volume opportunity and the long-term agreements. I'd like to conclude this section of the business review. and the overall company deal with two outstanding breakthroughs in terms of innovation. Yes, you see on the left the social and climate and innovation KPIs. Intensive innovation, what we've done in this world is amazing. We deliver the first cable able to run 20% more power than the standard 525 TV solution. These will give customers unique opportunities. to invest in a connection whose cost is similar to the original 525 technology, but it can allow them to transmit more power. So the cost per megawatt transmitted is enhanced by 20%. Big contribution to make the energy transition financially more sustainable. And also we created, unique in the world, one cable, aluminum cables, aluminum metal cables, whose carbon content is negative. So, vis-a-vis the standard regular cable, the same carbon that we do, we generate with this production always outweighs the carbon included in the production itself. So, we have a negative footprint in the sense that we create negative carbon emission with these cables. Solution that will be certainly well appreciated by those among our customers are more keen in having grain solutions. And those are higher scales by default. Let me now hand over to Francesco for more details in our financial results.

Thank you, Massimo, and good morning to everybody. Let me start from the top line. As Massimo said, very good growth, 5% organic growth with revenues growing up to 5.2 billion, and a very remarkable growth, particularly in power grid, in INC, and in digital functions. These 5%, by the way, have been reached despite, as Massimo commented, a flattish organic growth in the transmission, which is only temporary, is only due to phasing of the installation activities, and in transmission we see a very strong ramp-up both of the top line and even more, I have to say, in the EVDA in the cabins. Adjusted EBDA saw a good expansion of the margins. You see a standard metal up by 110 basis points, from 13.1 to 14.2%. Here, the important drivers are certainly in transmission and certainly in digital solution, including the accretion coming from the inclusion and the consolidation. As Massimo commented, some temporary adverse effect on margins of power grid due to the lagged pass-through of the cost material increase and the Midwest premium increase. We are very confident and we expect to recover starting from the second quarter. So you see the bridge from Q1-25 to Q1-26. As I said, important to remark the good growth, the very good growth of transmission, but this growth is definitely expected to accelerate a lot in the coming quarter. So this plus 23 million will be much more sizable starting from Q2, Q3, Q4, in line with the indications that Massimo gave earlier. for the full year. Power grid is basically flat as a result of strong growth and the temporary margin adverse effect that we have commented. A very good progression of INC in particular and an outstanding result of the digital solutions as a combination of the inclusion of channel but also the very strong organic growth in the business. unfortunately, a quite adverse forex effect for 36 million, say close to 40 million. But even in this case, this forex effect is expected to decrease, to attenuate in the coming quarters, because you remember that last year the dollar was very strong in the first quarter, then started to weaken progressively throughout the quarter, so we will have a much lower effect than these 36 million in the coming quarters. I have to say that it was also an outstanding Q1 in terms of net profit up to almost 250, also in this case definitely above our expectations, and this is an excellent start to achieve our targets also in terms of earning pressure for the full year. We can move to some other topics. pretty outstanding achievement that we had in the first quarter. I'd like to comment once again definitely above our expectation, which is a free cash flow last 12 months very close to $1.2 billion and even above the already outstanding free cash flow that we had achieved in full year 2025, which was $1,170 billion. You see that also the leverage of our net debt is massive. We go from March 25, which was 4.9 billion, down to 3.8 billion, despite having executed acquisition, you see the first bar, for 1.2 billion, obviously mainly funded by the issuance of the hybrid bond for, say, 1.943 billion. massive deleveraging was achieved through the last 12 months free cash flow, but as you see also from the disposal in particular of our YOC stake. We target a net debt by year-end, let me say, between 2.6, 2.7 billion, and that's a very strong message that I want to give because it means that year-end our leverage will be below one, in principle. This is definitely faster than we thought, for instance, when at the Capital Market Day last March in New York. Excellent. Back to us. Thank you, Francesco.

Thank you. We complete the presentation with some important remarks. We have a strong driver of growth coming from digital solution and transmission with the number we mentioned before. Power grid remains solid in volume. We will see the rebound in profitability in the coming quarters as the time lag will allow us to increase price more effectively in the market. Digital solution opportunity is a big one. You cannot imagine many customers which have to ask whether we are available to expand capacity to support long-term deals, and we are working hard to make this happen in the coming weeks. And this will definitely allow us to add another important driver of growth to the North American growth and the transmission growth that we have already exploited and showed in the last few quarters. So, for a time being, we confirmed the guidance. Of course, we have much positive view about where we will end up with in terms of guidance, but we have to wait until July to see the full power of the upside that we have in hand and to confirm for the rest of the opportunity that we see coming in the next quarters. Positive also the thick and slow guidance, and we might see upside also there. Thank you for your time. We can now be... move to the Q&A session.

As a reminder, to ask a question now, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. There may be a short pause while we compile the Q&A roster. We will now take our first question from the line of Danila Costa of Goldman Sachs. Please ask your question. Danila, your line is open.

Hi, good morning all. Thank you so much for taking my question. I have three questions if possible. I will ask them one at a time to make it easier. But first, just wanted to start on fiber and to ask you to detail the dynamics we should expect over the coming quarters because obviously we have seen spot fiber prices raising significantly. You do produce a large quantity of your own fiber and the inflation, I guess, on the inputs is a lot smaller than what we see on the spot, but you have frame agreements. So how long will it take until we kind of start seeing spots reflected on your frame agreement? What is the tailwind by the fact that you produce your own fiber? So how should we think about margin expansion over the rest of the year and into 27?

Thank you, Daniela. We will see the benefit of the long-term agreement over time because we will have capacity to and part of the capacity is not in place. We have to expand the capacity. So the vast majority of volume uptake will happen in 2027 and beyond. But in 2026, you will see certainly significant margins improvement as a result of the fact that the current fiber price in the market is at least $10 per cubic kilometer. Only six months ago, it was half of this, the price in the market. So we are renegotiating all our agreements. We are shifting volume from low profitability customers to higher profitability customers, and only the higher profitability customers are at risk. We already have significant players in the long haul connection between different centers. So we already have relevant partnership in connection with these art scalers, not really related to volume capacity, but really related to our innovation capabilities. They need very high-density fiber for the long-haul districts. So this trend, this strong relationship is what we are leveraging to add volume and commitment there. and pricing improvement across the board of our solution in the telecom space. So we will see some volume of take in quarter two, quarter three, quarter four, as we unlock some of the short-term capacity. We will see certainly pricing benefit in the coming quarters.

Got it. Thank you. And then switching to electrification and to the topic we've been talking since the summer about potentially the copper derivatives on the Section 232, two points, I guess. Do you still think that will eventually come and when? And do you see any shifts in competitive positioning from the recent kind of changes on Section 232?

I think that we don't count much on the copper derivatives. Not because they will never happen. They might happen. But, you know, there is not much import of copper in the U.S. What is happening on the country in the last few months has been a significant change in the 232 tariffs for aluminum cables. Before mid-February, the rule was importers had to apply 50% 232 tariffs on the metal content of those cables. Now, of course, the metal content of the cables were declared by importers. There's been a lot of cheating on this one. So a lot of ways of circumventing this rule by declaring less copper content and pay less tariffs. Now the administration, in light of this, in order to fix this situation, shifted from 50% applied to meta content to 25% applied to the cable value. And the cable value is transparent. It's something that we have to declare customs. So I think now we start, we will see some real benefits come from tariffs. Because those players will be charged with 25% across the whole cable value in full transparency. There will be no way to circumvent the rules. And I think we can say mildly, because this is our first signal coming from the market, that in April we've seen pricing or margin improvement in aluminum building wire space that we haven't seen in the last six months.

Got it. Thank you. And finally, I guess, several things that you have been mentioning for a while, like transmission margins, now the new contracts in digital, that are kind of things that weren't necessarily there in your last CMD. As you're thinking on when it would make sense to revisit the 2028 targets changed versus the last quarter?

In our ideal world, we would like to review the capital material target for 2028 in combination to the next M&A. Of course, should not we lend an M&A for the next two years or one year and a half, we will have to reduce the capital market rate target anyway. But we are pretty confident that the original plan is what we will be able to stick to. So in the next five months, an M&A will give us the opportunity to revisit the 2028 target as well as to provide a long-term target like 2031. So that will be our approach, Daniel, in these regards.

Thank you very much.

You're welcome.

Thank you. We will now take our next question from the line of Chris Leonard of UBS. Please ask your question, Chris. Your line is open.

Yeah, hi, morning all. Thank you for taking the questions. I'll maybe ask two. Could we start on the hyperscaler long-term contracts that you've mentioned, and could you update us in terms of what the sort of time frames these could be over, which you're speaking on currently with your partners. And could you also confirm that this would be across your portfolio of low and medium voltage cables alongside fiber, or should we just expect it to be within fiber optics? And maybe I'll ask him a question after that. Thanks.

Yeah, thank you, Chris. This is an opportunity that will be deployed in Digital Solution. The rest is already covered by agreement and by specific projects in electrification of power and space. So this is specific to Digital Solution as an opportunity. The timeframe could be something between three to six, seven years, the duration of contracts, with conditions that I cannot disclose, of course, until we sign a contract, which are supporting the significant expansion of capacity in our fiber and optical cable footprint in the U.S. So these are the ideal conditions that we had from transmission business. We have down payment to help us fund and finance investment in the expansion of capacity. So this would be the same model applied to optical opportunity within digital solution space.

Okay, sure. That makes a lot of sense. And as a follow-up, could you just confirm currently what your sort of contract duration is in Fiverr, if these contracts are going from three up to seven years, what is the current level? Thanks.

In the current market, we play a role in Fiverr to the home and long-haul connection for data center. We have some two, three years agreement in terms of frame improvement with Fiverr to the home customers. We have no long-term commitment with any of the other scalers in the existing setup. And so it's a significant shift in terms of customer commitment, what we see today, and what we're going to see as an opportunity for the coming years, from a spot business or project-related business to long-term agreement with solid commitment to withdraw the volume when the capacity will be coming online.

That's really helpful. Thank you. And the second question was on INC margins in Q1, you know, coming down off the Q4 levels. And could you maybe comment, in the U.S., you saw good organic growth in the geography. Could you comment if you're seeing any pricing pressure in the low-voltage vertical, and if so, Is there any way you can alleviate that for the rest of the year? And is M&A going to be a key target for you in this segment in the U.S. for this year? Thank you.

Thank you for your question. No, in North America, we've seen the opposite. The margin in quarter one was one percentage point up on the margin that we reported in quarter four. So the market in the U.S. is particularly stronger, continues to remain stronger, and again, driven by this rebound in non-residential, but also supported by these fantastic rate of growth in the epicenter. So don't forget that to be a player in the epicenter space, and we are the number one now in the U.S., you need scale and service. And we have all the conditions in place to benefit from these two important features. We don't intend to expand with M&A our capability in the U.S. in the INC space. We are really the number one. What we will do is organically we'll add more capabilities to this plant in the clinic, You know that we talk about the medium voltage expansion of capacity, which is complementary to the low voltage capacity that we have already in this location. So we will become even more relevant by adding the rest of the portfolio that is needed to electrify data center space.

Thank you, but just as a follow-up on M&As, so in the US it's your key target geography as you've highlighted before, but we shouldn't expect that this will be across the low voltage, and we shouldn't expect potentially across medium voltages. Am I right in understanding that? Thank you.

We can't really tell much about the opportunities. I think the opportunities in the electrification space, but I cannot be more specific in this. But in terms of cable, we have exactly what we need. Maybe there will be something else beyond cable that can help us complement the cable portfolio and sell more solution also in the electrification space. But forgive me if I cannot go beyond this because we are interacting with different targets and I don't want to disclose this to the market yet.

Completely understand. Thank you so much.

Thank you, Chris.

Thank you. Thank you. We will now take our next question from the line of Vivek Mehta of Citi. Please ask your question. Vivek, your line is open.

Thank you very much, everyone. Good morning. Hope you can hear me well. I have a few questions. The first is around digital. Just looking to understand the potential scale of the rampart in cyber capacity you may be considering. Is there any sort of indication you can give us, and is your strategy going to be to fulfill the longer-term supply agreements for data centers, or could you also build some further spare capacity, in particular, just thinking about you've highlighted the potential submarine telco, which is potentially coming for very small volumes, but you're building up your capabilities there. Thank you.

Yeah. the capacity allocation to the percent opportunity will be twofold. In the short term, we redirect existing capacity from low profitability customers to hyperscapers. Because we want to bridge the two-triest time that we need to bring the new capacity online. The new capacity addition will be in the range of 40% increase of what we already have in the cable optical space worldwide. And this probably gives you enough information to appreciate the scale of the project. Sunmarine telco is what we are strengthening with XTERRA. Now we can here provide a long-haul connection, optical submarine connection, and this is another way to interact with upscalers and support the growth of upscalers. You know, now we see the data center market expansion relies a lot on Prismian, thanks to our global and comprehensive portfolio product and solutions.

That's great. Thank you very much. My second question is a follow-up on power grids. You've guided for an improvement in the second quarter. Could you maybe give us a little bit more flavor on how much you expect the margins to improve in the second quarter? Is that already at the 15% or so standard metal price margin? Is it a little bit below that and then improving to that level in the second half? Thank you.

Thank you, Vivek. So there is a catch-up situation due to the formula. Now, these three, four months, two months time lag depending on different contracts allow us to increase the price, but if the cost continues to increase, you will see the benefit of the price increase in the coming quarters. And so we expect, as we stand today, to have at least 100% of the points increase in the margin of quarter two vis-a-vis quarter one. Things can do even better should we see a slowdown in inflation rate or at least this will be the minimum baseline improvement of 100 business points over a quarter of a month. But more importantly than focusing on the specific margin by quarter is that there is no price impression in the market at all. There is no one that is willing to renegotiate existing contracts to reduce the price. There is no softening in demand because both in Europe and North America, these two markets are remaining strong markets that are in demand. Europe in power distribution and high voltage. North America, again, medium voltage and medium voltage power distribution and high voltage. So, we will restore the 17% of the margin, but more importantly, we would like to show continued growth, as we've shown in quarter one, in terms of organic growth.

That's it. And my last is a follow-up on that point, because the comparables for organic growth get stronger as you go through the year. By the second half, you're already growing double-digit in power grid. So for how long will it be likely to sustain these levels of organic growth? How do you see the mid-term growth as you go forward? Thank you.

I think, you know, part of the organic growth is volume-related. Part of the organic growth is price-related. And you're correct. Last year, we had significant organic growth. But we still see this double-digit growth for the remainder of the year, driven by volume and price. Don't forget there will be additional capacity coming on stream. And also look at in quarter 127, there will be a significant impact of additional capacity in the medium water space, partly in INC, partly in power grid. So certainly we see continued growth in the coming quarters as we expand capacity and as the market remains buoyant in terms of prices. Very clear. Thank you very much.

You're welcome.

Thank you. We will now take our next question from the line of Akash Gupta of J.P. Morgan. Please ask your question. Akash, your line is open.

Yes. Hi. Good morning. I've got three as well, and I'll ask one at a time. The first one is also on digital solution. Maybe is there any way to quantify how large these investments are going to be given when we look at some of your competitors? They are spending north of a billion mark. And then could you also talk about the payback period for those investments and how shall we think about the phasing of incremental revenues in the next couple of years? That's the first one.

Thank you, Akash. Very sensitive information. But because we would like to sign the agreement and first and then to disclose the size of the revenues outside and the bidder margin, the bidder outside and all the rest of it, But, yeah, more or less I can tell you the size of the investment is massive. As you also said before, it's north of the 1 billion euros investment. This across the fiber space with a specific investment in the U.S. and the optical cable plants, three of the plants out of four in the U.S. would be affected by this expansion, and one European plant will also be affected by this expansion. Payback varies in dependence on the size of the down payment that is still under negotiation. Could be very short, could be worst case, eight years, but something that will in any way create value for the company in terms of additional EBITDA, in terms of net present value of those investments. We were never committed to expansion that large without having a solid customer commitment and the confidence that the payback and the IRR are in the right place.

And when it comes to funding these investments, is it fair to assume that, like we saw in transmission early on, not just at Prismian but also at competitors, that customer gave nice down payments that act as a funding instrument for those expansions? So could that be possible with hyperscalers this time around?

Yeah, it is possible with our customers. I cannot name the customers, but it is exactly what we are targeting. This is exactly what is being offered. So this is a copy and paste of the model that we applied to the transmission space successfully in the last five years. And the marketing digital solution allows us to achieve the same. Bear one thing in mind, that those customers want to have US fiber. And we have a US plant. So we are unique in this sense, alongside Corning and Surakawa. But we are among the three that can benefit from this opportunity because of our existing footprint.

Thank you. And my second one is for Francesco. When I look at your P&L, non-monetary items in this quarter was just 2 million against 72 million. So there is a significant reduction there. Can you talk about what is driving that and what does that change for full year in terms of what shall we expect?

Since cash, the only driver of that is the fair value of the metal derivatives that we use for the hedging. Last year, due to the dynamic of the metal price was negative. This year is fairly positive. And this is basically, for instance, compensating the other item, the other cost item that we have in this line, which is related to the share-based compensation, for instance.

Thank you.

Thank you, Akash. Thank you, Akash.

Thank you, Akash. Thank you. We will now take our next question from the line of Uma Sandlin of Bank of America. Please ask your question, Uma. Your line is open. Hi.

Good morning, everyone. Thank you very much for taking my question. My first one is on the MBA opportunities. So I see that you have recently given the authorization from the board to potentially raise up to 10% equity. which I guess now equips to almost $4 billion of extra firepower. Does that change the thinking you have for the size of M&A you can do and what will be the focus areas there in terms of the target you're looking for?

Thank you, Uma, for the question. Is it not changing the size of the target that you have in mind or is that giving us more flexibility in terms of how we can manage the financing of the deals? So is time beneficial? It's not really having any impact in our aspiration, ambition, and so many opportunities, which are well-defined and very clear and related to sizable acquisition in geographies and business where organic growth opportunities are stronger and related to assets like extremely unclean assets with good potential to create additional synergies.

That's super clear. Thank you very much. My second one is on the pricing opportunities in the fiber optic cable space. So, I guess you mentioned that the prices have increased massively in the last couple of months. How should we think about you know, the proportion of pricing benefit you can see in the coming quarters, like would you be able to see the full pricing in line with, you know, what you see the market, or is there any difference in terms of the contract structures you have?

You have seen already in quarter one some pricing power because our beta margin in quarter one in digital solution has gained 150%. greatest points over quarter four last year. So there is already signs and tangible signs of this price in power. Of course, the full potential of this price in power will be certainly visible in quarter three, quarter four, but also in quarter three, you will see more benefit coming from the price in power. We are renegotiating across the board. In Sankei, this is an immediate price when we talk about spot business. Where we have a firm agreement, it takes a little bit longer. But most of the business is new business, new order intake. So, we have some backlog. We have two flash-outs in different summits of optical cable geography. But again, this will be steady growing over the next two, three quarters. And the full potential, I believe, will be quarter four, quarter three, twenty-five, twenty-six.

So, let's see.

That's great. Thank you. My last one is on the transmission demand. You know, given the conflict in the Middle East and sort of the need of further electrification in Europe, have you started to see more demand in the transmission space? How should we think about the capacity expansion plans beyond 2028, especially given your backlog remains at a very high level?

We haven't seen yet a real project coming on stream. It takes longer. But we see very active dynamics within our customers in different countries to work on interconnection businesses to create more autonomy and independence in the different countries. And, of course, to shift more businesses. In order to shift this independence and connect us, one important thing that one is to rely more on window show. So those discussions are happening. They are very active, and we count on this for additional opportunity in the coming quarter years in terms of market demand. We will work on capacity expansion and capability expansion. We want to add more capability or more capacity in the 525 space. So we are going to expand the 525 kV capacity in the coming years to be ready to face the full shift from the old technology that was 320 kV to the 525 and also to the 525 90 degrees, which is the brand new technology qualified two months ago, which provides more power to the interconnection network for our customers.

That's super helpful. Thank you very much.

Thank you. You're welcome.

Thank you. We will now take our next question from the line of Sean McLaughlin of HSBC. Please ask your question, Sean. Your line is open.

Good morning and thank you. Just wanted to touch on media comments related to the U.S. listing. Just to understand that would this, I guess, given the pivot increasingly to the US, this is back on, first of all, and remains priority. And secondly, would the timing be actually related or tied with M&A?

Thank you, Sean. This is always a high priority for the company. NERA hasn't been different than this. We had all the time in the past 12 months due to the conflict and clash with other activities of the company. I think your comment about M&A is pertinent. We will certainly take advantage in stores in the right direction of an extra M&A to couple it with the US listing and create additional value for investors.

Thank you. And you've also talked about kind of additional opportunities inside the data center, and I suppose, you know, is this, how could this grow organically, or does this require M&A?

Sorry, is it about the organic versus the M&A? No, this is an organic opportunity, for sure, because we have all the conditions to take advantage of this market growth, expansion, with existing assets in terms of factories, in terms of portfolio products. So we don't need to rely on anyone else. Here it is a matter of finalizing, striking this contract, agreeing the famous down payment that will convince us to invest a massive amount of money to stand capacity by 40-50%. And all of this is organic, which is the beauty of this. We are in full control of the decision and the execution of the growth plan as we had full control in the execution of the growth plans in plan in transmission. So similar model, similar structure of firm agreement, long-lasting benefit, and opportunities that have strengthened the relationship with those customers.

Yeah, very clear. And one last question, if I may. Just thinking about customer behavior in Fiverr, if we look across power equipment suppliers for data centers, I think the integrated suppliers tell us that being able to provide a broad portfolio is something that is well received by the hyperscalers. And I think it sounds like you're making this similar argument that you have a unique offering as a Bumble fiber and power player. I mean, your main fiber here in the U.S. has already announced significantly framework deals. I mean, where would you see yourself or how much of an advantage does this bundle offer give you if you look across the hyperscaler procurement over the next 24 months?

An interesting and very relevant question, Sean. In the past, we thought that in data center, we could only play a role by interconnecting data center with long-distance cables. where we have strengths in terms of innovation, capability of making very compact fiber. Don't forget, we are the first that invented the 160 micron fiber, vis-a-vis the 200 micron that is the standard of the market. Recently, we realized that we can be a player also inside a building, which used to be the space of the likes of Corning, Cosco, and AFL, because they could package optical cables with connectivity. In reality, there is a big room there, opened by the further acceleration and expansion of the center, and we had the opportunity to enter the space without making any M&A move, but simply organically connect with some of those customers. So we had the opportunity there in the optical space to expand the business inside the building, which is where most of the volume will grow, which is where the growth is going to be the highest in the coming years. Alongside these opportunities and solutions, differently from Mr. Corning, Conscope, AFL, and the other, we also play a significant role in electrifying data centers. And, by the way, the size of the revenues in electrification of data centers through IOC business, power grid, and transmission is currently three-fold of that we have in digital solutions due to the value of the cables and the point of the cables needed to bring the that much energy electricity represent. So, in this sense, we are unique. So, the expansion of the center, without arguments, I can say relies on the ability to offer the full portfolio from power cables across the board for the segmental energy cables and the digital solution.

Very clear. Thank you.

Thank you, Sean.

Thank you. We will now take our next question from the line of Lucas Forhani of Jefferies. Please ask your question, Lucas. Your line is open.

Good morning, and thanks for taking the time. So the first question is on transmission. Can you come back on the new capacity that is expected to come online this year? Maybe should we see that over the next quarter? Is it more H2? When do you expect that fading to come through after the flattish organic growth in Q1? Thank you.

Take a look at the new capacity, basically two additional lines came online in quarter one. The effect was not fully visible because, as I said, we had phasing in installation whereby the installation activity was in quarter 126 specifically. lower than what we had in 21, in quarter one, 25. The new capacity, the expansion capacity will continue in quarter four with a new vessel joining our fleet. And there will be one more additional line, then additional cable capacity in 2027. That's why you will see 25% organic growth in 26 over 25 in light of these cable capacity expansion and installation capacity expansion.

And if I increase in the EBDA, the organic growth will be double-digit in the full year.

And the BIDA growth will be 25% in the full year. I think I said this before. $180 million increase in the BIDA is what we commit to achieving in 2026 over 2025. It's a sizable amount. Today some of our competitors are the size of what they make in one year. They should increase. Sorry for the comment.

Perfect. Super clear. And the next one is on power grids, on that margin recovery. Given the tight kind of supply-demand situation, you're saying demand is buoyant. I'm wondering how come you're not maybe able to push those price increases or go back to the customers to kind of ask for the the midway spring them to be to be reflected um there there should be some some bargaining power there and also given the aluminum is still we're still seeing inflation there's a supply risk also with the middle east this is likely to continue so does that bring risk in your ability to get back to to normalize level if inflation continues and there's a slide thank you

Thank you. No, sorry. The topic about the data margin is very simple. It's related to frame agreements. In the past, we didn't have clauses to adjust the cost and reflect the cost increase to the price. We made this a long journey of including those formulas in all agreements across all utilities worldwide. Now we have agreements in place. So in spite of the cost increase, the cost increase happened today, we still have to recognize the value of the formulas. So in some cases, the customer's formula, the contractual formula is that we can pass the average of the last three month cost to the price of the orders. You can appreciate that when you take the formularities, you have at least a two, three month time lag between when you incur the cost of a business that you deliver this month and when you can really reflect the cost increase in the new organs. So it's a pure effect of time lag, which is kind of the pressing of a margin where cost inflates, but on the contrary, when the market veers towards a softening inflation, you see the opposite. You will see us holding the price higher than what the cost would encourage us to do. So this is the effect of the time lag. slightly negative in the growing trend, in the soaring cost situation, super positive when costs take the other direction. This is for the contractualized business with firm agreement. Then, of course, in the high-voltage business, we win projects on a project basis. And so in that sense, in that business, we can be much bolder and direct in passing or setting prices to reflect the current costs. I hope I gave you the proper dynamics of the different businesses inside the private space.

Yes, thank you all here. And just the last one, I think he's coming back on Sean's points. So in digital solutions, there's a, let's say, normal kind of fiber and optical cable business. But in the slide, you talk about these kind of new capabilities and driving that through partnerships. So just coming back on that, who are you looking maybe? And is that partnership more like a JV or reselling somebody else's product? Or is it more kind of M&A to develop those new capabilities? No, no. Those are inside the data centers.

Sorry, I didn't mean to cut across. No, so we are not talking about M&A opportunity in digital solutions. These are simply organic growth opportunity, which we will have full control of, and they are related to long-term agreement with customers. It is cables, of course, with some connectivity, because you also don't forget it after the channel acquisition, or you also play a role in connectivity in fiber to the home, also data center. but we are talking about organic growth of fiber capacity and cable capacity to provide solutions inside the building. Inside the building matters a lot because it's a new space to us and it doesn't require M&A as we thought in the past to enter the space in the current market. Allow me, Lucas, to be really more specific in a few weeks after we after we start contract agreement with those customers.

Yes. All right, thank you. We will now take our next question from the line of Alessandro Cecchini of Equital. Please ask your question, Alessandro. Your line is open.

Hello, can you hear me? Yeah, yeah. Yes, okay, thank you. So I have just one question for you, just considering the tariffs that probably are supporting your business in the next quarters, also due to the change in the regulation, and I mean these kind of agreements, potential agreements with hyperscale, so just to understand the high part of the range that you stated that you are confident to reach this year for the BDA. So how much is, roughly speaking, included or this agreement or I would say the positive part of tariff?

The confidence in hitting the top of the range is behind, is supported by the digital solution upside. This is... As I said before, parking coming from additional volume that we can immediately unlock. Parking coming from the more pricing, the higher pricing power that we have in the current market is also benefiting from what I said at the beginning, 180 million increase, 170, 180 million increase in EBITDA or transmission was not in our original budget or in our original guidance. So there is a combination of this. Certainly, digital and transmission are the two major components to this of the guidance. Tariffs are not included as an off-site. So because we can't on-site, as we see, margin improvement in ANC. So we are not betting on the tariffs off-site at all. Okay. Thank you. Thank you, Alessandro.

Thank you. We will now take a next question from the line of Nabil Najib of Deutsche Bank. Please ask your question. Nabil, your line is open.

Yeah, hi, good morning. Thanks for having me in. I've just got a quick question and I guess sort of a follow-up on Lucas's question on supply chain risks. Just wondering if you have seen any stress on your supply chain from the war in the Middle East, which I guess has gone on for a little while now. Are you really not being impacted at all from any shortages in aluminum or plastics, for example?

Yeah, great question, and thank you for it. There is a lot of stress on the supply chain come from the latest situation because many suppliers in the aluminum space or compound space have their plants there and they suffer logistics distress. Luckily, we are not relying on this supply chain. We had full self-sufficiency in Europe with European players. We used to have, years ago, some flows of aluminum rod from Middle East, which we disconnected years ago, so we see no impact whatsoever coming from the supply chain and logistics disruption that happened in Middle East. There is an overall inflation in the world. due to the additional energy costs, the oil and gas prices, you know, they went through the roof, and this is a reflection, you know, on the raw material costs. But again, in this equation, this is not changing the size of the target that we have in mind, or give us more, it's just giving us more flexibility in terms of how we can manage the financing of the deals. So is time beneficial? It's not really having any impact in our aspiration or ambition in terms of many opportunities, which are well-defined and very clear and related to sizable acquisition in geographies and business where organic growth opportunities are stronger and related to assets like with good potential to create additional synergies.

That's super clear. Thank you very much. My second one is on the pricing opportunities in the fiber optic cable space. So I guess you mentioned that the prices have increased massively in the last couple of months. How should we think about the proportion of pricing benefit you can see in the coming quarters? Would you be able to see the full pricing in line with what you see in the market, or is there any difference in terms in terms of the contract structures you have?

You have seen already in quarter one some price in power because our EBITDA margin in quarter one in digital solution has gained under 50 basis points over quarter four last year. So there is already signs and tangible signs of this price in power. Of course, the full potential of this price in power will be certainly visible in quarter three, quarter four. But also in quarter two, you will see more benefit coming from the pricing power. We are renegotiating across the board. In some cases, it's an immediate price when we talk about spot business. Where we have a firm agreement, it takes a little bit longer. But most of the business is new business, new order intake. So we have some backlog to flesh out in different sematope optical cable geographies. But again, this will be steady growing over the next two, three quarters. And the full potential, I believe, will be quarter four, quarter three, 26. So let's see.

That's great. Thank you. My last one is on the transmission demand. You know, given the conflict in the Middle East and sort of the need of further electrification in Europe, have you started to see more demand in the transmission space, and how should we think about the capacity expansion plans beyond 2028, especially given your backlog remains a very high level?

We haven't seen yet project coming on stream, and it takes longer, but we see very active dynamics within our customers in different countries. to be to work on the interconnection businesses to create more autonomy and independence in the different countries. And of course, to shift more business in order to achieve this independence, interconnect is one important asset opportunity. The other one is to rely more on wind of show. So those discussions are happening, are very active, and we count on this for additional opportunity in the coming quarters years in terms of market demand. We will work on capacity expansion and capability expansion. We want to add more capability or more capacity in the 525 space, so we are going to expand the 525 kV capacity in the coming years to be ready to face the full shift from the old technology that was 320 kV to the 525 and also to the 525 90 degrees, which is the brand new technology qualified two months ago, which provides more power to the interconnection network for our customers.

That's super helpful. Thank you very much.

Thank you. You're more welcome.

Thank you. We will now take our next question from the line of Sean McLaughlin of HSBC. Please ask your question, Sean. Your line is open.

Good morning and thank you. Just wanted to touch on media comments related to the U.S. listing. Just to understand that would this, I guess, given the pivot increasingly to the U.S., this is back on, first of all, and remains priority. And secondly, would the timing be actually related or tied with M&A?

Thank you, Sean. This is always a hyper joy for the company. Never has it been different than this. We had all the timing issues in the past 12 months due to the conflict and clash with other activities of the company. I think your comment about M&A is pertinent. We will certainly take advantage if things go in the right direction, of an extra M&A to couple it with a US listing and create additional value for investors.

Thank you. And you've also talked about kind of additional opportunities inside the data center. And I suppose, you know, is this, how could this grow organically or does this require M&As?

Sorry, is it about the organic versus the M&A? No, this is an organic opportunity for sure because we have all the conditions to take advantage of this market growth expansion with existing assets in terms of factories, in terms of portfolio products. So we don't need to rely on anyone else. Here it is a matter of finalizing, striking this contract, agreeing the famous down payment that will