SOLID H1 2023 PERFORMANCE DRIVING GUIDANCE UPGRADE
PRESS RELEASE _
SOLID H1 2023
PERFORMANCE DRIVING
GUIDANCE UPGRADE
-
Record high
EBITDA and ROCE, pushed by unique value
growth execution model
-
Outstanding performance
despite one-offs
in Generation & Transmission
business
-
Completion of Reka Cables
acquisition in the
Nordics,
deployment of operational and financial synergies
at Centelsa,
significantly ahead of
plan
-
Step-up in Prime offerings
featuring the deployment of
Nexans’ Fire
Safety global
offer; SHIFT
Prime and
Amplify programs
delivering a +36
million euros
EBITDA windfall
-
Record
high adjusted Generation &
Transmission backlog at
5.2
billion euros excluding
1.4 billion euros, just
awarded,
EuroAsia
Interconnector
project
-
Strategic investment in a new
state-of-the-art
cable-laying vessel to address backlog
growth
-
Full-year 2023 Guidance
upgraded:
- EBITDA
in the range of 610-650 million euros (from 570-630 million
euros)
-
Normalized Free Cash Flow between 220 and 300 million euros (from
150-250 million euros)
- Demand
to remain at high levels in Distribution, while anticipated
deceleration in some Usages regions
-
Strengthened Sustainability
commitments and Net
Zero by
2050 submitted
to the
SBTi1
~ ~ ~
Paris, July
26th, 2023 –
Today, Nexans published its financial statements for the first-half
of 2023, as approved by the Board of Directors at its meeting on
July 25th, 2023 chaired by Jean Mouton.
Commenting on the Group’s performance,
Christopher Guérin, Nexans’ Chief Executive Officer, said: “I am
pleased to announce a new record-high EBITDA and strong Free Cash
Flow generation for this first semester, in spite of some
challenges in our Generation & Transmission business. These
results associated to our transformation platform and strong
backlog, reinforce our confidence on Nexans’ 2023 outcome and
support a significant guidance upgrade for the full year.
We will continue to sharpen our focus on
profitability through enhanced offering supported by new
technologies, services, digitalization and sustainability, while
actively managing our portfolio to become an electrification pure
player.”
FIRST-HALF 2023 KEY
FIGURES
(in millions of euros) |
H1 2022 |
H1 2023 |
Sales at current metal prices |
4,342 |
4,009 |
Sales at standard metal
prices2 |
3,401 |
3,322 |
Organic growth |
+5.1% |
-0.6% |
EBITDA3 |
308 |
354 |
EBITDA as a % of standard sales |
9.1% |
10.7% |
Operating margin |
220 |
240 |
Reorganization costs |
(19) |
(23) |
Other operating items |
62 |
(1) |
Operating income |
263 |
217 |
Net financial expense |
(14) |
(38) |
Income taxes |
(51) |
(45) |
Net income |
199 |
134 |
Net debt |
346 |
229 |
Normalized Free Cash Flow |
104 |
281 |
ROCE |
17.4% |
21.2% |
I. H1 2023
HIGHLIGHTS
In the first-half 2023, sales at standard metal
prices reached 3,322 million euros, down -0.6% organically compared
to the first-half 2022 and up +4.1% excluding the Other Activities
segment. In the second quarter, sales remained at high levels in
Distribution and Industry & Solutions segments, while Usages
was affected by a high base of comparison and deceleration in some
geographies. EBITDA reached 354 million euros in the
first-half 2023, up +11.6% on a comparable basis versus the
first-half 2022. EBITDA margin was strong at 10.7% versus 9.1% in
the first-half 2022, illustrating Nexans’ pursued focus on
performance and value-driven growth.
-
Electrification sales were down -2.5% organically.
Accelerated value growth in the Distribution and Usages segments
was partially offset by a lower contribution from the Generation
& Transmission segment due to project mix and one-offs
including the shutdown of the Umbilical activity, and delayed ramp
up of Charleston plant. Excluding the negative impact of the exit
of the Umbilical activity, organic sales growth of the business
would be +3%. EBITDA stood at 250 million euros, thanks to the
strong performance of the Distribution and Usages segments.
-
Non-electrification (Industry & Solutions)
sales were up +20.0% organically, benefitting from strong momentum
in the first-half and SHIFT improvements in Automation, Mobility,
Mining and Automotive Harnesses. Consequently, EBITDA was up +68.8%
versus the first-half of 2022, at 109 million euros.
- Within the
Other
Activities
segment, the Metallurgy business continued to be downsized in
accordance with the Group's strategy to improve profitability of
the business.
ROCE reached a record-high level at 21.2% for
the Group, versus 17.4% in the first-half 2022, and 27.1% for the
Electrification businesses.
Normalized Free Cash Flow came in at 281 million
euros, versus 104 million euros at end of June 2022, boosted by a
strong operating cash flow performance reflecting the profitability
improvement and Generation & Transmission strong cash
collection in the first-half 2023.
Forging the future of Distribution and
Usages
Nexans is continuing to actively pursue its
non-organic growth strategy, coupled with best-in-class integration
deployment, in the Distribution and Usages markets. The Group
completed the acquisition of Reka Cables in Finland in the
first-half of the year, for an equity price of 54 million euros.
With operations in four countries, Reka Cables achieved sales of
172 million euros and EBITDA of 11 million euros in 2022. The Group
expects to generate approximately 7 million euros annual synergies
after ramp-up. Additionally, the integration of Centelsa in South
America is progressing seamlessly, exceeding expectation on
performance and synergies deployment one year ahead of plan.
Nexans' transformation platform continues to
achieve outstanding financial results and is operating at full
speed for all units within the Electrification businesses. In the
first-half of 2023, the SHIFT Prime and Amplify programs generated
a positive EBITDA impact of +36 million euros. The Group has made
significant progress toward the step-up in its prime offerings with
the launch of its Nexans Fire Safety offer. This comprehensive
offer revolves around the safety of people and buildings beyond
cables. The Group offers a diverse range of solutions, including
innovative tools to simplify cable selection and installation, and
post-installation management and monitoring.
Driving sustainability
In April 2023, Nexans made a commitment to
achieve Net Zero emissions by 2050. The Group is steadfast in its
determination to contribute to fighting climate change and has set
ambitious targets. By 2030, it aims to reduce greenhouse gas
emissions by -46% in Scopes 1 and 2 and by -30% in Scope 3 (both in
comparison to 2019 baseline), which surpasses initial target of
-24%. To reach these goals, the Group will leverage its innovative
E3 performance model, across its entire value chain and ecosystem,
ensuring a holistic approach including sustainability.
In May 2023, the Nexans Foundation celebrated
its 10th anniversary. Throughout the past decade, driven by its
mission to bring electricity and sustainable development to
disadvantaged communities worldwide, the foundation’s unwavering
dedication to creating positive change has made an incredible
impact. More than 2.2 million individuals' lives have been
significantly transformed through the support of 145 projects
across five continents.
II. FINANCIAL
PERFORMANCE
a. First-half
2023 financial
performance per
Segment
CONSOLIDATED SALES AT
STANDARD METAL PRICES2 BY
SEGMENT
(in millions of euros) |
H1 20224 |
H1 2023 |
|
Organic growth H1
2023 vs.
H1 2022 |
Organic growth
Q2 2023
vs. Q2
2022 |
Electrification |
1,953 |
1,873 |
|
-2.5% |
-4.7% |
Generation & Transmission |
478 |
384 |
|
-10.3% |
-9.9% |
Distribution |
551 |
599 |
|
+4.3% |
+2.0% |
Usages |
924 |
890 |
|
-2.8% |
-6.8% |
Non-electrification (Industry &
Solutions) |
762 |
908 |
|
+20.0% |
+17.9% |
Total excl. Other
Activities |
2,715 |
2,781 |
|
+4.1% |
+1.9% |
Other Activities |
686 |
541 |
|
-19.2% |
-23.7% |
Group total |
3,401 |
3,322 |
|
-0.6% |
-3.3% |
EBITDA BY SEGMENT
(in millions of euros) |
H1 20224 |
H1 2023 |
H1 2023 vs. H1 2022 |
|
H1 2022EBITDA margin |
H1 2023EBITDA margin |
Electrification |
240 |
250 |
+4.0% |
|
12.3% |
13.3% |
Generation & Transmission |
89 |
30 |
-66.1% |
|
18.5% |
7.8% |
Distribution |
47 |
82 |
+73.6% |
|
8.6% |
13.7% |
Usages |
104 |
137 |
+32.2% |
|
11.2% |
15.4% |
Non-electrification (Industry &
Solutions) |
65 |
109 |
+68.8% |
|
8.5% |
12.0% |
Total excl. Other
Activities |
305 |
359 |
+17.8% |
|
11.2% |
12.9% |
Other Activities |
3 |
(5) |
n.a. |
|
0.5% |
-0.9% |
Group total |
308 |
354 |
+15.1% |
|
9.1% |
10.7% |
ELECTRIFICATION BUSINESSES
| GENERATION &
TRANSMISSION: Addressing one-off
performance
Generation & Transmission
sales came in at 384 million euros in the first-half 2023, down
-10.3% compared to the first-half 2022 reflecting the ongoing exit
from the Umbilicals activity. During the period, the largest
contributors to sales were the Crete-Attica and Tyrrhenian Link
interconnectors and Revolution, Moray West and South Fork offshore
wind projects.
EBITDA amounted to 30 million euros in the
first-half 2023, down -66.1% compared to the first-half 2022. As
anticipated, EBITDA was impacted by a combination of factors,
including project mix and phasing, and one-offs. These one-offs
were related to (i) the gradual ramp-up of Charleston manufacturing
plant which impacted some project progress, (ii) inflation costs on
some contracts and (iii) delays on EuroAsia Interconnector
award.
These headwinds are expected to gradually ease,
thanks to an adjusted backlog 97% subsea driven, up +133% since the
end of June 2022, at 5.2 billion euros at end of June 2023,
excluding the EuroAsia Interconnector awarded in July 2023 for 1.43
billion euros. In the first-half 2023, the Group was awarded its
largest contract ever, worth more than 1.7 billion euros, with
TenneT, which consists in three turnkey 525kV HVDC projects for
offshore wind farms in the German North Sea to be commissioned by
2031.
With this record-high and risk-reward modelled
backlog, the Halden plant in Norway, the Charleston plant in the
United States, together with Nexans’ cable-laying vessels will be
fully loaded until 2025, with strong backlog visibility secured up
to 2028. In order to bolster its installation capabilities, Nexans
has decided to invest in a new ultra-modern, technology advanced,
cable-laying vessel. This advanced vessel will be equipped with a
state-of-the-art logistics and handling system capable of laying
four cables simultaneously and is expected to be operational by
2026.
|
DISTRIBUTION: Secular trends and
transformation
platform driving record
margins
Distribution sales amounted to
599 million euros at standard metal prices in the first-half of
2023 up +4.3% organically, compared to the first-half 2022. The
segment is benefiting from expanding grid investments in Europe and
North America, and demand for Accessories. EBITDA reached 82
million euros, up +73.6% versus the first-half of 2022,
representing a record 13.7% margin. This substantial margin
expansion reflected successful SHIFT programs deployment and high
asset load level, resulting from strong demand.
During the first-half 2023, the Group made
significant progress in the deployment of value-added solutions to
enhance customer experience, with more than 850,000 connected users
(vs 540,000 in 2022) and more than 44,000 connected objects through
its ULTRACKER digital services.
Half-yearly trends by geography were as
follows:
-
Europe was up driven by the execution of new
contracts, consistent demand from utilities to strengthen grid
infrastructure, and a strong operating performance.
-
South America maintained selectivity to drive
performance improvements.
-
Asia Pacific suffered from lower demand in China
and New-Zealand.
-
North America was strongly up propelled by the
enduring momentum.
- Middle
East and Africa demonstrated a notable performance
improvement, supported by solar projects and the resilience of the
Moroccan market.
|
USAGES:
Structurally improving
performance
Usages sales reached 890
million euros at standard metal prices in the first-half of 2023,
down -2.8% organically compared to the first-half 2022 resulting
from selectivity and prioritizing structural performance. As a
result, EBITDA reached a record 137 million euros, with a strong
EBITDA margin of 15.4% (vs 11.2% in the first-half 2022),
reflecting the continued strength in pricing and successful
transformation efforts. Furthermore, the rise in prime offers and
related volumes also contributed to this performance. Nexans made
notable advances in the development of its Fire Safety offering
(before, during and after cable installation solutions), which
forms an essential component of the Group’s strategy to increase
value creation in its low-voltage product range.
Half-year trends by geography were as
follows:
-
Europe benefitted from sustained pricing and
resilient volumes, notably in the Nordics thanks to fire safety and
prime offers.
-
South America was affected by the economic
environment in the region. Centelsa performed well with the
integration progressing ahead of schedule with strong
synergies.
-
Asia Pacific demand was lower on a still weak
market in China.
-
North America moderated from previously high
levels in residential, as expected.
-
Middle East and Africa benefitted
from a rebound in Turkey and resilient demand in Morocco.
NON-ELECTRIFICATION
BUSINESS: ROBUST
PERFORMANCE IN H1
Industry & Solutions sales
were 908 million euros at standard metal prices in the first-half
of 2023, representing an organic year-on-year increase of +20%.
This growth was primarily driven by solid momentum in the
first-half 2023 and performance improvements, notably in the
Automotive Harnesses, Automation and Mining businesses.
Consequently, EBITDA rose to 109 million euros, up +68.8% from the
first-half of 2022, with an EBITDA margin of 12%.
Automotive Harnesses was up +25% in the
first-half of 2023, driven by the ramp-up of projects in the United
States, a strong demand in Europe and an increased share of
electric vehicles.
OTHER ACTIVITIES:
CONTINUED DOWNSIZING OF
THE METALLURGY BUSINESS
The Other
Activities segment reported sales
of 541 million euros at standard metal prices in the first-half of
2023, down -19.2% organically year-on-year, reflecting Metallurgy’s
continued scale-down as part of Nexans’ strategy to prioritize
tolling and reduce external copper sales to improve margins of the
business, and lower sales in Telecom. EBITDA was a negative 5
million euros over the period.
b. Analysis of other
income statement items and net debt
(in millions of euros) |
H1 2022 |
H1 2023 |
EBITDA |
308 |
354 |
Specific operating items |
- |
(27) |
Depreciation and amortization |
(88) |
(87) |
Operating margin |
220 |
240 |
Core exposure effect |
25 |
6 |
Reorganization costs |
(19) |
(23) |
Other operating income and expenses o/w net asset
impairment o/w net gain (loss) on assets
disposals |
38(13)54 |
(6)7(6) |
Share in net income (loss) of associates |
(1) |
(0) |
Operating income |
263 |
217 |
Net financial expense |
(14) |
(38) |
Income taxes |
(51) |
(45) |
Net income from continuing operations |
199 |
134 |
Attributable net income |
197 |
132 |
Starting in 2023, consolidated EBITDA is defined
as operating margin before (i) depreciation and amortization, (ii)
share-based expenses, and (iii) some other specific operating items
which are not representative of the business
performance.
In the first-half 2023,
specific operating
items included an expense of 7 million euros related to
share-based payments, and an expense of 20 million euros related to
additional costs on long-term projects impacted by previous
reorganizations. These additional costs led to losses at completion
that are not representative of the business performance.
Operating margin totaled 240
million euros in the first-half 2023, representing 7.2% of sales at
standard metal prices (versus 6.5% in the first-half 2022).
The Group ended the first-half of 2023 with
operating income of 217 million euros, compared
with 263 million euros in the first-half of 2022. The main
changes were as follows:
-
The core exposure effect was a positive 6 million
euros in the first-half 2023 versus a positive 25 million
euros in the first-half 2022.
-
Reorganization costs amounted to 23 million euros
in the first-half 2023 versus 19 million euros in the first-half
2022. In 2023, this amount mainly included costs for the on-going
termination of Umbilical projects in Norway, costs from the
conversion of the Charleston plant in the United States, as well as
costs related to new transformation actions launched during the
period.
-
Net asset impairment represented a positive 7
million euros in the first-half 2023, versus an expense of
13 million euros in the first-half 2022. In the first-half
2023, the reversal of impairments was related to the US entity
Amercable on the back of the continued strong performance. In the
first-half 2022, the impairment losses were related to tangible
assets in Ukraine.
-
Net loss on asset
disposals amounted to 6 million euros in the first-half
2023 for the disposal of an equity investment. In the first-half of
2022, the net gain of 54 million euros was mainly related to the
sale of the Hanover property in Germany.
-
Other operating income and expenses represented
net loss of 6 million euros in the first-half 2023, to be compared
with a net income of 38 million euros in the first-half 2022. The
main items are the net asset impairment and the net gain on asset
disposals mentioned above.
Net financial expense amounted
to 38 million euros in the first-half 2023, compared with
14 million euros during the same period last year. The
increase is mainly related to the higher cost of net debt for 9
million euros, 6 million euros of negative changes in impairment on
certain financial investments (negative for 1 million euros in
the first-half 2023 versus a positive 5 million euros in the
first-half 2022), as well as the change in the hyperinflation
impact in Turkey, 4 million euros lower in the first six-months
2023 than the same period of 2022.
The Group’s net income came in
at 134 million euros in the first-half 2023, versus net income of
199 million euros for the comparative period. Income
before taxes reached 179 million euros in the first-half 2023,
versus 250 million euros last year. Income tax
expense stood at 45 million euros, down from
51 million euros in the first-half 2022.
The Group ended the period with
attributable net income of 132 million euros
compared with 197 million euros in the first-half 2022.
Net debt increased to 229
million euros at June 30th, 2023, from 182 million euros at
December 31st, 2022, reflecting in particular:
- Cash
from operations of +237 million euros;
-
Reorganization cash outflows of -24 million euros, down 8 million
euros compared to the first-half 2022;
- Capital
expenditure of -148 million euros, a large portion of which was
related to the strategic investments made at the Halden plant;
- Net cash
outflows of -70 million euros for M&A operations, of which
mainly -68 million euros for the acquisition of Reka Cables;
-
Investing flows of -3 million euros;
- A +142
million euros positive change in working capital, partly due to the
positive impact of cash collection in the Generation &
Transmission segment in the first-half 2023;
- Cash
outflows of -130 million euros related to financing and equity
activities, mainly including the Group dividend payment of -92
million euros and interest payments of -33 million euros;
- A -14
million euros negative impact corresponding to new lease
liabilities;
- A
negative impact of -36 million euros for favorable foreign exchange
fluctuations in the first-half 2023.
III. SIGNIFICANT EVENTS
SINCE THE END OF JUNE
On July
19th – Nexans was awarded the
major turnkey contract valued at 1.43 billion euros for the section
of the EuroAsia Interconnector that connects Greece and Cyprus.
On July 24th -
Nexans announced the arrival of Pascal Radue as Executive Vice
President, Generation & Transmission Business Group and member
of the Executive Committee, from September 1st.
IV. 2023
OUTLOOK
Nexans remains confident in its ability to
maintain and enhance its performance momentum, even in an uncertain
geopolitical and economic environment. The Group will continue to
prioritize value growth over volume in its strategy, leveraging its
transformation platform to convert short-term growth into long-term
structural growth, while investing in the expanding Generation
& Transmission markets. Furthermore, Nexans is still in the
early stages of its premiumization journey, as it continues to
develop value-added systems and solutions to cater for the evolving
needs of its end-users.
Nexans is upgrading today its financial outlook
for full-year 2023 and expects, excluding non-closed acquisitions
and divestments, to achieve:
-
EBITDA of between 610 and 650 million euros, versus 570 and 630
million euros previously;
-
Normalized Free Cash Flow of between 220 and 300 million euros,
versus 150 and 250 million euros previously.
The Group anticipates the following trends:
- A persistently
uncertain geopolitical and economic environment
- The continuation
of dynamic market demand, supported by the secular trend of
electrification and backlogs in the Generation & Transmission
and Distribution segments;
- Demand to
moderate from elevated levels in some residential segments and
Automation;
- A focus on
structural transformation and premiumization to support
improvements in Distribution and Usages margins;
- Generation &
Transmission risk-reward backlog reinforced by EuroAsia
Interconnector award while executing legacy contracts with dilutive
margins.
~ ~ ~
A webcast is scheduled today at 9:00 a.m. CET.
Please find below the access details:
Webcast
https://channel.royalcast.com/landingpage/nexans/20230726_2/
Audio dial-in
- International
switchboard: +44 (0) 33 0551 0200
- France: +33 (0)1
70 37 71 66
- United Kingdom:
+44 (0) 33 0551 0200
- United States:
+1 786 697 3501
Confirmation code: Nexans
~ ~ ~
About Nexans
For over a century, Nexans has played a crucial
role in the electrification of the planet and is committed to
electrifying the future. With around 28,000 people in 42 countries,
the Group is leading the charge to the new world of
electrification: safe, sustainable, renewable, decarbonized and
accessible to everyone. In 2022, Nexans generated 6.7 billion euros
in standard sales. The Group is a leader in the design and
manufacturing of cable systems and services across four main
business areas: Generation & Transmission, Distribution,
Usages, and Industry & Solutions. Nexans was the first company
in its industry to create a Foundation supporting sustainable
initiatives bringing access to energy to disadvantaged communities
worldwide. The Group pledged to contribute to carbon neutrality by
2030.
Nexans. Electrify the future.
Nexans is listed on Euronext Paris, compartment
A.For more information, please visit
www.nexans.comwww.nexans.com
Contacts:
Investor relationsElodie
Robbe-Mouillotelodie.robbe-mouillot@nexans.com |
CommunicationEmmanuel
Guinotemmanuel.guinot@nexans.com |
NB: Any discrepancies are due to rounding
This press release contains forward-looking
statements which are subject to various expected or unexpected
risks and uncertainties that could have a material impact on the
Company’s future performance.
Readers are invited to visit the Group’s website
where they can view and download the 2023 half-year report and 2022
Universal Registration Document, which include a description of the
Group’s risk factors.
1 Science Based Targets initiative - The SBTi is a partnership
between CDP, the United Nations Global Compact, World Resources
Institute (WRI) and the World Wide Fund for Nature (WWF).2 Standard
copper and aluminum prices of respectively €5,000/ton and
€1,200/ton.3 Starting 2023, EBITDA is defined as operating margin
before (i) depreciation and amortization, (ii) share-based payment
expenses, and (iii) some other specific operating items which are
not representative of the business performance. In the first-half
2022, EBITDA included 9 million euros of share-based payment
expenses while there were no other recurring operating items that
were not representative of the business performance.4 Pro forma
2022 figures. Impact of changes of allocation are detailed in the
appendix to this press release.
- Nexans_H1 2023 Press release_Final
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