Prysmian S.P.A. Ord

Good morning everyone, thank you for joining this call, quarter two result, we are at Prismian, 730 million EBITDA, 15.4% EBITDA margin, 9.4% organic growth. So as you see, it's a great quarter from the The numbers perspective is also great in terms of the achievement of the hyperscalers and wallets deals with a 10 billion incremental revenues in the optical space over the next 10 years. Also on the sustainability side, we exceed our expectation with that 46% of the current revenues lean to sustainable solutions. When you read 46%, you need to read almost 10 billion relics, where we provide customers with low carbon footprint and solutions that help them achieve their own targets. 42% is the amazing reduction of scope 1 and 2 over the baseline of 2019, setting great confidence in achieving the net zero by 2035, well ahead of everybody else. Moving to this quarter two perspective, I think it's important to share these slides. It's important to share this different perspective, which we are very proud of. You see, in quarter two, we created the EBITDA higher than what has taken us more than 12 months in the past, in 2018. We generated 700 million EBITDA over the full year. In 2022, it has taken us six months, one semester, to deliver a similar EBITDA. Now we did this in one court. This is a strong sign of the effectiveness and the good execution of the strategy that we designed years ago. So the strategy is basic. basically set on standing the transmission business, growing leadership in North America thanks to the acquisition, and also shifting our focus from cable manufacturer that was our past driver of growth to solution provider. Entering to the digital solution space with more detail, I think you read the press release, I'd like to give you more color around the deals. So these are test medium revenues that applies to the optical space. So forgive us, there is a time lag in the slide change. You'll see at the bottom on the right that our digital solution business covers three segments of business. One is optical, which accounts for 40% of the revenues in digital. Connectivity, so components to connect cables, and MMS, which is copper cables. Both, the last two, accounted for 30% of the total revenue. You see on the left chart the green bars explain our involvement in data center activities. The horizontal line sets the scene relative to the past situation, where we had in 25 years Green Data Center Exposure, Data Center Exposure in Green, and in Gray, the Fiber to the Own Business, you see that we're adding this 1.1 billion at the run rate, incremental revenue. At the same time, we are relocating the best part of the original Fiber to the Own Business to Data Center to gain even more share. And when you look at the 2031 perspective, you see that 90% of our revenues and even more in terms of BTDA belongs to data center expansion. And we see ourselves as the company enabling the data center expansion better than anybody else because alongside optical, we have the whole range of, a broad range of power cable products. Lastly to mention is the submarine telecom interconnection long haul thanks to the XTERRA acquisition. So this is definitely a transformative opportunity for the digital social space in Prisnia. From a very sacrophobic business into a fast-growing business that is meant to achieve a sizable EBITDA by 2020-31. We'll give you more detail about this at the next Capital Market. Moving to the segment of business, E-Transmission continues their strong journey in terms of EBITDA. Margin at 22%, 21.2%. In terms of organic growth, extremely solid, 14.3% in port 2. And in absolute value, 180 million in port 2. When you compare this to same port last year, you see almost 60 million EBITDA accretion. In power grid, We confirmed what we basically told you last quarter. You see a significant rebound in EBITDA margin from 12.4% to 13.8% sequentially, with 135 million EBITDA, supported by strong demand in the US and also strong demand in Europe. But I would say that there is a kind of solid demand across all the other regions, because the strengthening of the grid is a very common and a learning driver of growth across all segment or market in our geographies. The organic growth was particularly satisfactory at 13% increase in this quarter. Moving to industrial construction, also here we improved significantly, 228 million EBITDA, 20 million sequentially over 2025 quarter two. We have 5 million headwinds coming from Forex, so even better when we excluded the Forex effect. Dividend margin rebounded from the 13% of Q1. We had a very strong Q2, especially in the United States, with a very strong month of June inside this Q2. Grandly growth in the U.S. is higher. The group averages 13.4%, driven by data centers, so not only, also driven by the non-residential market that has shown different signs, new signs of improvement vis-à-vis a kind of a flat situation in 2025. Specialties are still suffering from weak demand in elevators, in oil and gas, and Profitability under pressure in the automotive business that is remaining with us. But we maintain it stable. It's a solid driver of EBITDA in different regions. And it's a nice complement to the industrial construction business because those are sophisticated cables that we couple with industrial construction business to electrify equipment alongside it. So it's an important complement and portion of our portfolio. Digital is the star of the quarter. You'll see the standing EBITDA margin, 24%, coming from 20.6% in quarter one. 24% is not the end of the game. It's not the end of the story. The 24% will go further up in the future. So this is said to be the most profitable from the bid amount perspective inside our portfolio, beating the transmission business at 21% bidder margin in the quarter. You see how sizable is the increase over quarter 2025, 60 million, out of which 30 million are attributed to the perimeter change. Last year, we had a channel including the port only for one month. This year is for the full period, but the rest, From 60 to 90 is channel, from 90 to 122 is DSC's original perimeter. And you see the power of pricing, efficiency, scale, and the shift from farmer to the home to the intercept. Our sustainability and innovation QPIs are also extremely satisfactory. The 25% recycled content in Portal 2 is a sign of a lower reliance on the tight copper market in the United States. We recycle more waste than we used to do in the past, lowering our costs and securing the supply chain and shortening lead time. 46% of revenues are augmented already before. These are 32%. of Vitality PPI is also an important indicator of a crucial and key for this company is to continue innovation. This is telling that one third of our revenue has been achieved through products that we launched to the market in the last three years. And one third of our revenue accounts for seven billion. So we have in this year, seven billion revenues generated by new products. Why is this important? because your product means a higher share of wallet, it means higher profitability, it means a different pricing power, it means a different value provided to our customer to strengthen our relationship. So key parameter for our growth in the future as well in the past. To example of the innovation out there, Holocore Fiber is an innovative solution to convey data through air so a lot faster 30% faster than standard glass technology, allowing the data center to be further spaced out, evolving to create a congestion on existing energy grids, which is the real constraint to data center storage. And also in the transmission business, a very innovative solution to bury cable at a deeper depth, greater depth than the standard methodology, making the network more secure, more resilient, and providing customers an upside in terms of reliability of the connection. Let me now go to Francesco for more details on the financial results of the quarter.

Thank you very much, Massimo, and good morning to everybody. As usual, let me use the profit and loss to recap some of the messages that Massimo has already passed. The organic growth in the first half was in excess of 7% with a very good acceleration. in the second quarter, reaching 9.4% in the second quarter. I have to say that all the segments of the company performed extremely well in terms of organic growth, with a growth of 14% in transmission, 13% in power grid, 9% in ILC, 18% in digital solution, with the only little exception of specialties, which was substantially flat or slightly negative. The performance was very strong in terms of EBDA, as Massimo said, the best yet quarter at 730, with a sequential increasing EBDA margin at standard metal at 15.4%, and with a very substantial growth from the second quarter of last year, plus 125 million, but also sequentially from Q1, plus 130 million, as you see from the right box of this chart. The lion's share of this growth was taken by transmission and digital solution, plus 54 million and plus 65 million, respectively. Of course, with the support also of the great performance of channel that Massimo mentioned. Power grid improved the margin sequential, which is very important. and as you have seen, organic growth in power grid both in Europe and North America was extremely positive. Electrification and particularly ID&C performed the best quarter in the last, I would say, 18 months. So very positive, specifically in North America. Very good note also on the group net profit. that reached 569 million in the first half, by far the highest ever. And this is other than the EBITDA and the operating result supported by a very nice drop in financial charges that you see here. A slight improvement also of the tax rate and this assesses Our group net profit estimate for the full year in excess of the 1.2 billion, which will mean a growth of earning per share, which is significantly beyond the original targets that we had set. Let me now turn to the cash generation, which was solid, close to 1 billion in the last 12 months of June, a bit lower than the one that we had in Q1. The main reason, I would say the only reason, is the very high impact and adverse impact of the rising metal prices. which reached actually the peak in the Q2 and which will progressively decrease in terms of adverse effect in the second half. Massimo will show you the updated guidance on the free cash flow, but we plan an extremely strong second half On the back, of course, of the contract with Molex, which will bring in a very substantial down payment, but even more importantly, on the back of a very strong cash flow coming from the transmission business. This year, the transmission business cash flow is mainly concentrated in the second half, and we are also doing great in terms of improving our working capital performance and efficiencies. All these will contribute to this quite, I would say, strong target that we have set for the year, Massimo will explain in a while. I think I'm over. Back to Massimo.

Francesco, thank you. So, quickly, two main challenges. The EPTDA, we raised these 2.7 billion of the original guidance to 2.850, so a range of 2.8, 2.9. It's We're saying that we have super high confidence to be the 2850 to end up in the top portion of the upper part of the range, 2850-209. You see that 2850 itself is already quite close to the target we set for 2028 at the Capital Market Day 2025, which means that we will certainly in the next period Porta 1, Porta 2, 26, 7, sorry, we will go out for a new capital market day, providing and disclosing the trajectory from 2027 through 2030, 3031, with organic growth and the song driver explanation of where we see this growth in the different geographies. And free cash flow is an amazing number. Now, 1.7 billion is, of course, the highest level free cash flow of the company. It is true that there is a 250 million coming from Molex as a down payment, but equally important to mention that there are significant increase in CapEx, partly to support digital solution capacity expansion, but partly to start showing the growth that we had to underline that we will disclose next year at the Capital Market Day. This is organic across many segment and many geographies in North America. but also Europe, also other regions, and transmission. So the 1.7 is the effect of molex on the one end, some additional capex in 26 that will continue stronger in 27 and beyond, with the efficiency and the additional BTD8 offsetting the metal impact versus the original guidance. And the metal impact is around 250 million euros. With this, I move to the closing remarks. So, great performance. Super satisfied about the change in pace of the company, the company showed this quarter. As I said before, we have this unique opportunity to be the only one serving data center with the whole product range they need for this function. We are going to invest in growth in 26 and beyond 26. And the acceleration, I mean, paves the way for a new capital market day into the start of 27. I would like to end over to you for your question and more details about our success story.

As a reminder, to ask a question now, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. A moment for our first question. We will now take our first question from the line of Danila Custer of Goldman Sachs. Please ask your question, Danila. Your line is open.

Hi, good morning. Thank you so much for taking my questions. I have two questions. I'll ask them one at a time. But first, just wanted to follow up on sort of the going forward, how should we think about fiber margins from here? Should we think about sort of having a linear step up? I think in the past you have commented about mid-20% EBITDA margin, given all that has happened in that segment and your new exposures. Is that still appropriate and sort of how the path is more linear, more back-end loaded? If you could give some color on that and then I'll ask the second one.

Yeah, the path is pretty linear through 2029 because the shortage of market will continue until then. And we have, I mean, accurate targets that will disclose the capital market day. We see as in the upper part of the range, 25% to 30%. So we will be to the 25% mid-2030s. And consider that not only fiber will drive the growth, but also connectivity, especially the channel portion, which is also partly exposed to the center, will support the BTD emerging growth in the coming quarters.

Sorry, 25 to 30, that's kind of like... Well, the 29 period that you've mentioned, or that's sort of throughout the period and then you...

It's linear from 27 to 28 to go as high as between 25 and 30. Sorry, 25 and 30 percent by then. Got it.

Okay, thank you. And then just a second question. I think in the past you had tied up doing an update on the medium-term targets. with sort of your M&A ambitions. I wonder if should we read anything into the timing of the CMD and that if you could update a little bit how you're progressing on sort of your ambitions there.

We are making progress. We analyzed a lot of companies in the last 12 months and it could well be the case that we cannot comment much but could well be the case that before then we'll have a perimeter change so that new ambition will include both organic and Thank you, Daniela. 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. My first question is around the Molex deal. You've highlighted the figure of over $10 billion of cumulative optical data center revenues, of which Molex is $5.5 billion. So within the other portion of that figure, could you maybe give us an indication of how much of that has already been signed? as of today, versus how much you're anticipating in deals to come. Thank you.

Thank you, Vivek. The aquifab is the molex, as you said. The balance is hyperscalers or players in the infrastructure deployment of the center's function. And the balance is not as long in terms of duration as the molex deal, which is a tenuous deal. But for the next half, We are also thinking of making a second wave of capacity expansion because there's still a lot of demand unsatisfied in the market. We keep receiving requests for additional volume delivered to existing customers and new customers and I'm sure pretty confident that over the next two quarters we will sign a New Deals, in addition to the one that we agreed will end in the last two months.

Thank you. Just to follow up, to clarify, is that second wave of deals over and above the $10 billion or is it part of the $10 billion?

It will be over and above the $10 billion agreement. Okay.

Understood. Thank you very much. My second question is on the IMC margin. It's a very strong organic growth, particularly in the U.S. The margin is down year on year. The U.S. is typically margin accretive in that business, or it is margin accretive in this business. So why is the margin not stronger? And maybe could you elaborate on how the margin has developed in both Europe and the U.S.? Thank you.

Yeah, thank you. Yeah, U.S. is accretive. We also have another region that is highly accretive, which is Latam. And so the margins in Latam are not as high as U.S., but close to. And in Latam, we have, I mean, softening margins in a couple of countries. One is Colombia, one is Argentina. And this is the reason why in Europe, the margins are still slightly down. I also mentioned that the quarter two was a strong quarter in U.S., But June was the strongest month ever. April and May were not as strong as last year. And so when you compare the year-over-year, the margin of quarter two, 26 to 25, bring into account that those U.S. did very well in June, but not as well as quarter two last year in April and May. But mainly the major effect is this weakening in the West Ham region.

That's clear. Thank you very much. Thank you.

Thank you.

We will now take our next question. And the next question comes from the line of Akesh Gupta of J.P. Morgan. Please ask your question, Akesh. Your line is open.

Yes. Hi. Good morning. And I got two as well. The first one is a follow-up on these framework agreements that you have signed in optical fiber cable business. Massimo, you previously said margins of channel are higher than your remaining digital solution business because they sell directly to hyperscalers while your products were going through some intermediary companies that buy your products and then sell it to hyperscalers. So the question is that when you find these optical fiber cable framework and you have Molex, you have directly with some hyperscalers, My question is that does the margin in framework agreement directly signed with hyperscalers differs than when you sign with companies like Molex or are they same? So that's the first one to start with.

Yeah, thank you. Interesting perspective. You know, the margins today are even higher than what we have in the long-term deals. The approach was that we wanted to trade... Longer duration and security margin over longer time than the best margin possible in the small business. When it comes to comparison, comparing models to other scalers, the margin across these two different customers is pretty much the same. But of course, new deals or recent deals have better margins than what we signed two months ago. And some of those agreements, Monix was signed three weeks ago, but some of the other episcopal agreements were signed two or three months ago. So there is a close alignment in margin between the two of them. There is a certainty today, and in September, October, November, for sure, better opportunity to enhance margin with New Hills. because they said the capacity is still what it was one year ago and for the next two years will remain unchanged. And what matters is the ability to shift from old or traditional Fibre to their own customers to a data center. But also bear in mind that the market is buoyant within Fibre to their own customers because they are desperate for volume as well. So, margins are similar across the whole customer base, but they will be progressively growing. So, new deals will give us stronger profitability. Channel margins are higher because it's not cable. It's components, it's plastic, metal, frame, and all this stuff. And there are bespoke solutions, partly for data center and partly for fiber-2D.

Thank you. And my follow-up question is on guidance. So today you are raising guidance by 150 million at the midpoint. I'm curious if you can help us split how much of that is because of digital solutions versus the rest of the company. And when we look at the upgrade that is coming from digital solution, how much of that is already secured based on your renegotiation and higher prices from some contracts that are getting rolled over? and is there any scope for renegotiating some of the existing contracts in second half that might bring upside to this 150 million? Thank you.

Thank you. Very pertinent question. The two drivers of growth behind this guidance is solidity in power grid electrification, which is the baseline, but certainly transmission and digital solution are the two main contributors to these 150 million. or to whatever the number would be, that result would be definitely higher than 2,850. Transmission this year will add 200 million EBITDA to last year. Last year, we ended up with 580. You can imagine a number this year, 200 million high. And this is embedded in this guidance, not fully, but in this guidance. This is a solution. It's adding easily 50, 70, 80 million to the previous guidance due to the repricing of the whole business. We see margin improvements in digital solutions every single week. Every single week we continue renegotiating contracts, frame agreements more than contracts with existing fabric to their own customers. But every single week we are telling we are disappointing customers because we have no fiber to give them. So, there will be additional chances to build extra profitability in digital solutions in the coming months. At a certain point, we reach a balance now. The market will be fully saturated by existing capacity. If it is fully saturated by existing capacity, there will be no room for new deals. But new room for new deals will come from the additional capacity expansion that we are thinking of negotiating with other Thank you Massimo You're welcome Thank you

We will now take our next question from the line of Max Yates of Morgan Stanley. Please ask your question, Max. Your line is open.

Thank you. Good morning. So I just want to start off on the hyperscaler agreement. So I think in that press release, you said that you expected your hyperscaler revenues to be around $1.1 billion by 2031. I was just trying to get a feel for how much of your Total Digital Solutions, you were expecting the hyperscalers to be because look where I'm going with this is I was struggling to reckon numbers. You know, I think you previously said hyperscalers would be most of your optical business. Your optical business is typically, you know, 60% of your total business. So it just seems like quite a low number given where consensus revenues are. So maybe just any kind of any color around that, you know, how How much of that business should you be? That number actually doesn't seem that high in the context of where consensus is.

I'd like to reset the scene with, first of all, the breakdown of digital solution revenue between the three segments, optical, connectivity, and MMS. I take 20-25 revenues, digital solution amounted to 1.6 billion, After that 1.6, you should see 600 million more or less optical. The rest is more or less equally split between connectivity and MMS. When I say 1.1 million, 1.1 billion data center is incremental. So the 600 million plus 1.1 will make 1.7 billion in the optical space. The data center piece inside the optical space or 1.7 billion revenue by 2030 will account for 85-90% of the total revenue. Today, in the last year, in 2025, the 600 million revenues in optical, we have more or less 200 million of data center revenues. So from 200 million data center to 1.1 additional, by the same time, if I go to the home business, we are shifting to data center. So overall, I cite the 1.7 billion revenue optical total for 2030, take 90%, that would be the asset. So 1.5.

Is that very clear? Yep, that's very helpful. And maybe just a sort of bigger picture sort of question on tariffs. So we've seen, obviously, a huge amount of moving headlines, but I imagine it's very difficult for you to kind of keep on top of, but Maybe just sort of your latest on-the-ground perspectives of what all of these tariff headlines, maybe split by copper and aluminium, is actually meaning for your business in terms of kind of on-the-ground activity, how it's driving competitive behavior, whether you've seen any noticeable change in that in the last three months, and whether these kind of newer tariff headlines, you expect any change maybe in the next three to six months as a result of any of the developments. Thank you.

I think we confirmed the trend that we noticed in the market in the last two months. As far as the aluminum cables are concerned, when they shifted from 50% times applied to metal to 25% applied to the whole value of the cable, we noticed changes in behavior in the market. Importance became less relevant because it had to be clear, the whole value of cable and pay on top of it, 25%. This brought them... Out of competition in terms of price, they could not offer any longer a better price than the local player. And we noticed aluminum billiard cables benefited from more pricing or more margin in power in the last three months. As far as the rest is concerned, copper, nothing changed. As far as the future target is concerned, I don't have a clue. But I think all those targets will help again local players to strengthen their position in the market to become even more relevant than importers and hopefully to benefit from incremental margins.

That's helpful. Thank you very much.

Thank you, Max.

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

Good morning. Thank you for taking my question. Can I start with PowerGrid? Impressive organic growth and you talk about the positive trajectory continuing. I'm just wondering where you are in terms of your current loading capacity and if we look out over the next 12 months, what is driving that positive trajectory? Is it more capacity coming online? Is it pricing? If you could just maybe flash that out a little bit in more detail, that's the first question.

But the growth that we plan for our perimeter in power grid is coming from additional capacity. We approved one year ago additional medium voltage capacity in the U.S. and in Europe, and two months ago we approved another wave of medium voltage capacity increase in the U.S. Partly all that capacity would serve the INC, Industrial Construction Market, call it EPC or data center expansion. Part of that will be for utilities, because don't forget these poor grids that we have in the US, but also in Europe, needs continuous reshaping and strengthening and hardening because the additional electricity demand increase across the globe. We are also positive about The famous cost increase passed through to the market. You know, there is a time lag effect due to the existing formula. But since the market is buoyant, the level of prices is increasing in the market, we should be able to restore this famous 14.5% or 15% EBITDA margin in the coming quarter, maybe quarter four, maybe quarter one this year, I would say. But the growth opportunity is amazing. currently flat out in terms of capacity in Europe and North America. If you had more, we would sell more at a good price.

Thank you. That's very clear. The second question is back to digital solutions. Just on slide five, to understand firstly the cadence of the incremental revenues which look to be peaking in 28, and then you have a kind of a further pick up in 2031 after the fade. I mean, I guess 28 is related to higher capex in 26 and 27. Just wondering what's happening on the tail. And also the substitution switch of current revenues into optical. Is that, again, should we assume a kind of a linear progression 25 to 31? Or is that switch out going to happen much more quickly?

Thank you. So the steady level of capacity expansion run rate will be achieved by 2030. So in 2030 we'll have additional capacity equivalent to 1.1 billion incremental revenues in the data center space in the optimal segment of business. Until then, We will have a marginal improvement on capacity from 28 onwards, but the full run rate is 2030. But we'll have an important benefit by shifting away from Fava to the home and to the data center. And so I don't know if I answered the question, but imagine today we have, last year we had 600 million in optical business. In 2030, we'll have 1.7 billion in optical business. Today, last year, we had 200 million in data center out of the 600 million revenues. In 2030, we'll have 1.5 billion revenue in data center. I hope that with these basics I answered the question, Sean.

Thank you. Yeah, and I suppose just to follow up on an earlier comment you made about 2029, you're talking about the fiber shortage. You know, continuing up to then. Do you already then assume that by 29 there is more of a supply-demand balance? Or is there likely to be more, let's say, demand upside risk pushing that date further back?

Unfortunately, Sean, I would be unfair to say if I'm able to read the market in 2029. The comments I would like to make is that It will take three years, 27, 20, 29, for the players to build this capacity. And bear in mind that the players I'm talking about is us and Corbyn, because none of the others are in the U.S. And we are talking about U.S. fiber. The fiber, the origin of country, the origin of production of the fiber has to be U.S. to avoid the unbearable tariff if you were producing fiber in China. And... So the volume demand, I think, will continue. I don't think we'll reach the balance in 29. In fact, we have a new opportunity to expand capacity now beyond what we're really committed to doing for Molex and the others because there is additional demand in the market. What else to say? In the end of the day, As far as our context is concerned, what the volume will be in demand of the market will be in 29, 30, 31 is not that relevant because we have security of the margins in absolute value over the next 7 to 10 years, 10 to the context. But personally, I believe that this imbalance will continue beyond 2029.

Very clear. Thank you. You're welcome, Sean.

Thank you.

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.

Hey guys, thanks for taking the time and maybe a few from me as well, one by one perhaps. Starting on digital solutions and thinking about the connectivity piece, obviously you've spoken about Incremental revenue you see coming through fiber directly into data centers. I wonder if there's anything you can give us looking out to 2030 on the connectivity portion, the division, and whether or not that will also benefit from similar tailwinds and how you kind of think the channel business will progress because obviously it's a very high margin.

There is already, Chris, thank you very much, there is already a great uptake in the performance of connectivity in the current months because as the market rebounded in the U.S. across fiber-to-the-home and certain data centers, also these components of connectivity, closures, boxes and boxes, all the stuff that Xiaomi makes benefit from additional demand and better prices. So we have in quarter one and also quarter two, 26, outperformed the result of channeling quarter one and quarter two, 2025 significantly. And we expect this to continue. At the same time, we are developing new products, large boxes that goes underground for data center application. So this will give us the opportunity to add additional similar revenue to the channel business that originally was only in favor to the home. Adding the data center opportunity to channel business. And the margins, you have e-connectivity channel is as high as 35% to be done, that's 37% to be done.

So very accretive to the older division.

Thank you, and staying still on digital. Can you maybe talk about the phasing of the Monarchs contract this year? Are we anticipating a more material step up in revenue here for Q3, Q4? And with that, obviously, higher margins too on the basis of that pricing being captured from the center customers, Monarchs being one of them. And equally, the new contracts, You just pointed to that you could be signed and maybe already have been signed to take you to 10 billion or above. And those also contribute into the back half of this year?

Yes, I mean, the whole market is really demanding more already in 26. And the phasing of models and the other hyperscalers volume growth is consistent with on the one end our speed in expanding capacity. in U.S. and not only in U.S., but certainly in the fiber space, and with our speed in reallocating volume from existing customers. But I tell you, we are proceeding at a very high pace, both on CapEx and on shifting from fiber to the old tool data center. So quarter two is much higher than quarter one in terms of EBITDA and EBITDA margin. Quarter three will be higher and quarter four will be higher. And this will be a journey. that will see our capacity increase immediately released to the market. Also, our ability to renegotiate existing contracts with Faber to the Home, adding profitability, but also our speed in reallocating volume from Faber to the Home to the Centre, adding additional opportunities. The rank rate level, as I said before, will be reached in 2030, when the full capacity will be Dami Von Laine. So.

Well, and that's super helpful and as a follow up to earlier comments of margin expansion being quite linear, sort of 25%, 30% and confident of the upper end of that range. Should we think 25% is achievable for your 26 performance in digital solutions? Is that kind of what you're pointing to today?

As a rate of quarter four for sure, because the full year depends on, you know, in quarter one we are at 20% because we were at the early stage of the pricing improvement. So if you take the first half, we are probably at 22 and a half, 23. Yeah, we will end up slightly higher than 25% in quarter four. Full year average will be probably southern over 25%. But 27 would be, the folio would be at a high level of margins.

Of course, yeah, thank you. And finally, going back to electrification and on the low voltage side and thinking about the margin progression here, as we've seen some evidence the European market is picking up. Is there any comments you can make in terms of what you see in terms of the pricing opportunity in Europe? And if you think there's going to be any sort of tailwinds in the next few years on what you can do there? Thank you.

And, you know, we can't much more on the rebound that we notice in the United States and what we've seen in Europe. Europe is stronger than last year in terms of demand and pricing gap, but still pockets of low margins in Europe and as well in our next country with high margins. So the real upside of what I see is going to come from stable or mild growth in Europe, volume and margins, significant growth in the United States.

That's it from me. Thanks so much.

Thank you.

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

Your line is open.

When I look at the 2027, I'm wondering Thank you. Yeah.

Thank you, Lucas. There are three effects on 2027. There will be some margin of the existing capacity that will come online in 2027, which will bring additional volume. There will be repricing across the board. So we will probably be almost done in terms of repricing everything to the best possible level. And there will be more share of data center business inside our total optical business. Those are the three elements that will composed the EBITDA growth and EBITDA margin announcement in 2017.

Perfect, thank you. And on the 1.1 billion incremental, is that assuming kind of 100% of capacity is used or is that the visibility you already have from the frame agreement and so that could be upside to that 1.1 billion if you deliver on other contracts?

Lucas, it's basically the same. We took commitment at the level to centralize our capacity. Or we raised our capacity to the level of the commitment. So they are the same numbers. 1.1 billion is the additional revenues, 1.1 billion is the additional capacity.

Perfect, thank you. And the last one was just on the free cash flow. It's quite a strong upgrade there as well for the year. Very strong also conversion of EBITDA versus what we usually see. Just can you help us a little bit on the building blocks here? Just many big down payments coming in transmission or are there other things to mention for the higher free cash flow? Thank you.

I'd like to have Francesco giving the main components of this bridge, 1.350, 1.7. Yeah, thank you, Massimo.

Actually, it's quite simple. We have the positive components coming from the additional EVDA, which is plus 150 million versus the prior guidance. Of course, you have to take out some tax effect from that. Then, as I mentioned, we are increasingly improving our performance in terms of working capital, stock receivable, and this will contribute not a very different number compared to the EBITDA incremental effect. and substantially these two elements, these two positive elements will offset the negative metal impact versus what we had already embedded in the guidance that we quantify in the 250 million Then what is left are two elements, partly offsetting each other. One is the big down payment coming from Molex, 550, net of a strong acceleration on the capex that we quantify in the year of approximately 200 million over the level of the capex which was embedded in the guidance. And this is leading to the midpoint of 1.7, the plus 350 million. I don't know if I've been clear on that.

Yeah, all clear.

Thank you. Thank you very much.

Thank you, Lucas.

Thank you.

We will now take our next question from the line of Monica Bosio of Intercell Sao Paulo. Please ask your question, Monica. Your line is open.

Yes, good morning, everyone, and thanks for taking my question. The first is on Power Grid. Margins improved sequentially, but they are still a little bit far to, I think, your target. Can you give us an indication of what do you expect for power grid by year-end? Is it 15% margins already achievable? and my second question is still on the down payments and the structure of the framework agreements. So the company received, we received 550 million of down payment. Should we expect for the down payment payments from Moldex or the next down payments will come from the additional and not yet identified framework agreements? and should we model the same, let's say, the same weight of the payments that you got from Moldex? And in addition to this, as they perform production activities very energy intensive, I was curious about the structure of the cost within your framework agreement. Are you planning a completed pass-through to the final customer, to the hyperscalers? Thank you very much.

Thank you, Monica. A very articulated question. Let me start with Power Grid. The only reason why the margins are slightly behind the record margin achieved one year ago is because we are in a cost inflationary situation and we are allowed to pass all cost increases to the market with a time lag. And as long as the costs continue increasing, we will still suffer from this time lag. Should the cost inflation end one day, we will catch up with the 15% dividend margin immediately. The whole point is that the real question is, is the market stronger? Because even if you had good cost price adjustment clauses, if the market wasn't strong, prices would go backwards. So the market is super strong. There's no pressing pressure in the market. New tenders will be made at a better price. So this is, again, a temporary. Sorry for mentioning this as a temporary situation which lasted longer, but it's due to the inflation. The Iran war has a play into this. Don't be concerned. The market is demanding more voltage, more cables, more capacity, and every price is pretty sustainable. So we will catch up as soon as inflation is in the coming quarters. The down payment structure is such that we receive a down payment and that as we start delivering revenues after a certain number of years, we'll have to return the money that we had in advance. And so in 2030, 31, we'll give back, 32, 33, we'll give back the vast majority of this down payment. The structure of this deal is solid in the sense that I'm trying to address your third question. Not only do we have a formula to pass on the cost, we have guaranteed volume, we take a pay and guaranteed margin because we pass the cost immediately without suffering on the contrary to what I said before in Pargarida from this famous time lag. So in the given quarter, at the end of the quarter, the price will be adjusted based on the cost increase that occurs in that quarter. So the margins in terms of dollars per fiber sold will be guaranteed throughout the whole period.

Thank you very much. Yes, well clarified. Thank you.

Thank you, Monica.

Thank you. And the next question comes from the line of Alexandro Cecchini of Enquital. Please ask your question, Alexandro. Your line is open.

Thank you. Thank you very much for taking my questions. The first one actually is on electrification. So you said that margins were down, or I mean, Yeah, slightly up quarter on quarter, but due to LATAM, could you give us a sort of feeling, what are you seeing in the market now from the first half to the end of the year? So if you are seeing some incremental business or just to give some flavor on these. My second question is secondly on business.

We have lost the line of the questioner.

We'll now move to the next question while waiting for him to reconnect. And our next question comes from the line of Nabil Najib of Deutsche Bank. Please ask your question, Nabil. Your line is open.

Hi, good morning.

Thanks for taking my question. I just had one. Can you give us an update on the secondary listing in New York? Okay. It looks like the plan is back on with work being started on it, according to your comments to the press this morning. Do you have a timeline in mind for the listing?

It's still a crucial point, a valid project for us for value creation. Currently, we are very busy with A lot of stuff. So the deployment of this data center opportunity, the contracts, new waves of capacity increase, M&As. So it will be remaining our priority, top one in the list. At the proper moment, we'll disclose the timing of this operation.

Got it. Thank you. Thank you, Navid.

We will now take our next question from the line of Wuma Samlin of Bank of America. Please ask your question. Wuma, your line is open.

Hi, good morning, everyone. Thank you very much for taking my question. Two for me, please. So first question is on M&A. I guess you mentioned in the interview this morning they're interested in the M&A opportunities in the U.S. Would you be able to give us a bit more insight on what are the ideal type of business you find most exciting? Does the deal with Rolex change your thinking in terms of how interesting and connectivity business for you versus accessories? You know, maybe we can start from there. Thank you.

Thank you, Yuma. Our approach to M&A doesn't change. Molex is a way to organically expand the capacity. It's a fast-growing opportunity for us in terms of incremental EBITDA. We are still open to M&A in spaces adjacent to our cable piece because we want to reinforce the Revenues, the share of revenues in the company that are solutions rather than just pure cables. And so, U.S. remains certainly the best geography for those opportunities given the high profitability in the market, both in power, electrification, and digital social space, but we're also looking at other regions. And I'm confident that in the coming quarter we'll be able to disclose more, of course, at the appropriate timing at the signing of the projects.

That's super clear. Thank you very much. My second question is on your capacity ramp up for the fiber production. So if I'm looking at the slide five from the presentation, it's very helpful, that slide. So it seems like you're already planning to have some significant capacity increase by 2028. Is that ahead of your schedule? And then how should we think about the facing of your capacity expansion? Thank you. Thank you. Yes, we will have...

There are great capacity achieved by 2029, end of 2029. So part of the capacity increase will happen in 2027 in Europe. The rest will happen in the United States, where we are planning to more than doubling the fiber capacity located in the U.S. So by 2029, there will be this more than doubling. In 2028, it will be the first chunk of this more than doubling U.S. capacity, let's say one-third capacity. 40% of the run rate capacity will be already implemented by 2028. If you went for new deals and these will require additional capacity, we are not thinking to go too wide in terms of extra capacity, but the demand from different players and the usual artisans, customers still unsatisfied. and we will for sure sign other deals and this will bring incremental revenues, incrementally over the 1.1 billion yearly revenue added by 2031 or 2030 of the existing deals.

Yeah, that's super helpful. Thank you very much.

Thank you, Yuma. You're welcome.

Thank you. We will now take a next question from the line of Alexandro Totoro of Mediabank Cloud. Please ask your question. Your line is open.

Yes, thanks. Hi, good morning to everybody. I have three questions, if I may. The first one, let's say, relates to the transmission business. If you can, let's say, give us an update on the, let's say, second half outlook in terms of tender or award, if you expect any acceleration on this front. The second question is on, let's say, I understood your comment on free cash flow, if you can help us to reconnect a little bit with the, let's say, outlook on the leverage, the leverage considering also the incremental capex. and all the factors you mentioned before on the upfront payment. And the last one is, let's say, just a small curiosity, you mentioned the yellow core fiber with, let's say, this innovative solution that you are basically under development from a commercial standpoint, can you give us an update on this, if you see, let's say, in a Thank you. Thank you. As far as transmission is concerned, the second half should be a bit more buoyant than the first half. In the first half, we won what was available from the market.

Our backlog is still pretty high, 17 billion. The demand, overall demand in 26, we estimate around 10 billion in new projects awarded to the market. And we expect to see this level be beaten in 27-28 because there are projects in the pipelines that we in 27-28. I'd like to defer to Francesco De Fricas for connection to the levels at the end of the year.

Thank you, Massimo. Based on this update of the free cash flow guidance, we estimate that the year-end net debt will be in the region of 2.3-2.4 billion. which means a quite outstanding improvement versus our original expectation. And actually in terms of leverage, if you take the updated EBDA guidance, it means a leverage of around 0.8 times, so a very low leverage.

Thank you, Francesco. As far as the Holocaust 5 is concerned, we completed, let me say, the industrialization phase. Last week we were in the U.S. and we We handed over this cable, not just the fiber, the fiber in cables to Amazon for an installation trial, an installation test that passed successfully. They tried to break this cable in all possible ways. They could not do it. They could not achieve it. So we passed the test. We are now able to scale production to a different level. The demand is high. The level of margins is extremely interesting. It's all about how fast we can scale this up to a more mass production level. It will never be a solution that accounts for more than 10% of the fiber market demand, but it would be pretty profitable from this perspective.

Understood. And just if I may, a quick follow-up on this. I recall that you have, let's say, this agreement or you invested into the Relativity Networks company. Are you currently a shareholder of this company? Assuming that you're going to start commercializing the solution, do you expect to also step up in terms of ownership into the activity networks?

Good question. We are discussing this as we speak. It's probably to every stage to make a decision. We want to wait and see what happens in the second half. The ball is on us in our field. We have to speed up the industrialization. and additional capacity. You know that currently we are producing this in Europe. The ideal place for the rollout of extra capacity would be Claremont, Southern North Carolina, United States, where this demand is located. And probably towards the end of this year, we will evaluate additional ownership or additional opportunity with a relativity network in terms of stake in the company.

Okay, thanks for taking me. Thank you. Welcome, Alessandro.

Thank you. I'd now like to invite Alessandro Cecchini of Equita for his question. Please ask your question, Alessandro. Your line is open.

Hello? Can you hear me? Yes, Alessandro. Hello? Okay, perfect. Thank you. Thank you for this. I repeat maybe my question. The first question we got.

The first question we got. I'm going to move to the second and we answer both.

My last one was, I don't know because the line was down, about the European opportunities in terms of margins, electrification, so if you can elaborate a little bit more on this, if you have plans to restructure or to improve margins in the region. So I don't know if you answered this question.

Yeah, so the first question was about the market development in other regions. In LATAM, we're going through a normalization. LATAM, we had this spike in margins in the last two years in Argentina due to the country situation, and in Colombia, and now we suffer from normalization, normal things like this. So things like this happen, not in streaming relevant, but of course in LATAM, waited a lot in terms of overall profitability because their profitability is pretty close to that of the United States. Europe, partly answering your second question, is mildly growing in terms of volume growth and in terms of profitability. We have plans to strengthen the growth Thank you very much.

Thank you very much. Thank you. Welcome, Sandra.

Thank you. We have no further questions and I'll turn the conference back to the room for closing comments.

So thank you very much, everyone, for your time. I hope you enjoyed the call and hope you'll be also enjoying your holiday in the coming weeks. Thank you and see you soon.