Nexans S.A. (NEX.PA) Earnings Call Transcript & Summary

Hello, everyone, and thank you for being with us today. The call will last about 30 minutes. With us are Jean Mouton, Chairman of the Board of Nexans; and Christopher Guerin, who will share some remarks following this morning's announcement. After their statements, they will share a few of -- they will take a few of your questions. Mr. Mouton, over to you.

Thank you. Good morning. Good morning, ladies and gentlemen, and thank you for joining us. As you saw in our announcement this morning, the Board of Directors has appointed Julien Hueber as Chief Executive Officer, succeeding Christopher Guerin with immediate effect. Christopher will remain fully engaged until October 31 to ensure a smooth and orderly handover. Over the past 7 years, under his leadership, Nexans has undergone a remarkable transformation, becoming a leader in sustainable electrification with solid financial performance, strong balance sheet and a renewed sense of purpose across the organization. I just want to repeat, this company is in excellent shape. Let me be very clear. This decision has nothing to do with the company's operation, its business performance, its ongoing projects, or any issue of conduct or behavior. Nexans continues to perform in line with its road map. The Board decision is about creating a new momentum to deliver on the road map presented during the last Capital Market Day. We want to go further in sustaining Nexans' long-term success, which means strengthening our operational excellence and competitiveness, fostering a more agile and efficient organization to support profitable growth, and deepening our focus on innovation and the adoption of new technologies, including artificial intelligence. These are some of the areas where we see the greatest opportunity to further improve value creation while staying fully aligned with the strategic course we have already defined. This decision was made following a disciplined and robust governance process, led by the Nomination and Governance Committee, with the support of a leading executive search firm. The Board acted in full clarity and alignment on the leadership profile it believes is the best suited for Nexans' next phase, including by benchmarking against external candidates. We are very pleased that the next CEO comes from within Nexans. Julien Hueber appointment is a testament to the depth and quality of the company's senior leadership bench. He's been with Nexans for 23 years, has been a member of the Executive Committee since 2018, and has successfully led our largest PWR-Grid & Connect Europe, a EUR 2.6 billion activity with 23 industrial sites. Julien combines deep operational expertise, intimate knowledge of our businesses and customers, and a proven ability to accelerate performance. He is fully ready to lead from day 1. On behalf of the Board, I want to thank Chris for his exceptional leadership, his energy, his passion. He leaves behind a transformed, respected and confident company, and brought us back in the pack of the leading companies of our industry. Now before handing over to Chris for his remarks, let me reaffirm a few key messages. First, our strategy on sustainable electrification, presented during our CMD, remains fully intact. Our CMD financial targets and guidance for '26, '28 are confirmed. The management team is strong, experienced and deeply engaged in delivering our strategy. The transition is organized and controlled, ensuring complete continuity. And now, Chris, the floor is yours.

Yes. Thank you, Jean. Hello, everyone. That's my last call. It's a strange moment for me, but I wanted to share with you that, of course, it has been a very true honor and privilege to lead Nexans over the last 7 years. Together with my team, all around the world, we have been able to achieve a profound transformation. First, to restore trust in 2019 to 2021, and after to reposition Nexans as a leader of -- one of the leader of sustainable electrification with a clear purpose and strong financial results. So I'm very -- I would say, I'm very proud with what we have been able to accomplish with my team. We have delivered our strategic commitment. We have refocused the business portfolio. We have improved profitability, almost [ by 3 ] since 2019. The cash generation was about EUR 2 billion. Return capital employed in electrification moved from 9% to close to 30%. But of course, more important for me since 2018, we have been able to restore confidence, both internally and externally. So that was the journey. I'm as well very proud that my successor has been selected within my team, because that's a mark of continuity. We build together a clear work, a strong organization on a very clear mission. So that Julien will continue. So this is for me today, Nexans is a very strong solid and forward-looking company with the right foundation, the right talents, and the financial strength to continue creating long-term value. We need to keep growing organically and inorganically. And I think we -- now, Julien, you have all the means to perform that. So the Board has decided that now is the right moment to open a new phase of development under a new leadership. Of course, I fully respect this decision, and I will work closely with Julien until the end of the month to ensure an orderly and effective transition. Julien is an exceptional leader. I know him for many years. He knows Nexans inside-out. He has a very deep operational experience and bring a very strong track record in terms of execution. So he has my full confidence. Julien, I'm a shareholder as well. So I'm -- full confidence in him and full confidence his management team. So I want to thank every one of our employees, and our customers, and our partners. And of course, our shareholders that are -- many of you are connected today, and thank you for your time, your patience over the -- on your trust over the last 7 years in New York, in Boston, in London and in Paris. I made my best to restore the right condition of Nexans. Nexans now entering in a new phase from a position of great strength, and I'm very proud of the legacy I leave, and I remain, of course, fully confident in the company's future. Well, that's a few words I wanted to say, Jean.

Thank you so much, Chris. And let me conclude this first section by saying that Nexans stands on very solid foundations with clear strategy, strong leadership and a committed Board. This transition reflects our shared ambition to foster value creation responsibly, while maintaining full continuity in our strategic direction through structural performance and disciplined execution. We are confident in the company's future and its ability to deliver sustainable growth under Julien's leadership. You will have the opportunity to meet and hear directly from Julien very soon at the time of our third quarter result publication on October 23. That will be the first opportunity for him to engage with all of you and share his perspective of the next phase of Nexans' journey. We thank you all for your continued confidence and interest in Nexans. And we'll now be happy to take a few questions.

[Operator Instructions] The first question comes from the line of Daniela Costa of Goldman Sachs.

I just wanted to ask a question to Mr. Mouton regarding sort of the immediacy of the transition period, I guess, sort of until the end of October is a fairly short period. Was this something that you were always planning to do this? Revise what was the change of momentum, or pace, as you said, for the company going forward at this point in time, once certain milestones were achieved? And if so, sort of why the transition so quick? Especially when the company is without a CFO at the moment. That's my question. And then all the best for Chris, and thanks for all the past interactions.

Thank you, Daniela. Thank you for your question. So we had many discussions about this specific point of -- about immediate. The very fact that we were -- we are lucky enough to have within our company, a very strong person, Julien, who's been working with Chris for the last 20 years and particularly the last 8 years on the Ex-Com that we all thought that it was not a good idea to have a too long transition between them. So that's why we said, well, we decide and now Julien takes over. As you know, now comes also the times of the budget. And we thought it was also a good time for Julien to really be in charge and put together with the team the budget for the year to come. Now concerning the CFO, you had asked the question. So on the CFO, we have Mrs. [ Christine ] [indiscernible] becoming the interim CFO as of [ November 1. ] Obviously, the hunt for a new CFO is very well advanced, and we'll get back to you with the name of the new CFO very shortly.

So the next question comes from the line of Jean-Francois Granjon of ODDO BHF.

Jean-Francois Granjon from ODDO BHF. Two questions from my side. So I understand that you mentioned a new phase for the company. What do you mean more precisely? And why not this new phase with Christopher Guerin and Jean-Christophe Juillard? So to be honest, I don't understand why there's a change? My second question, you also mentioned the fact that Julien Hueber has a good experience from the Asian countries. So do you expect some more development in this area? And I also wish the best for Christopher.

Okay. Thank you for your questions. So maybe let me rewind a bit. Over the last 7 years, Chris made an outstanding job to bring back this company, as I said earlier, in the pack of the best-performing company of our industry. And he did that I would say, with very, very -- I would say, very complexity reduction, transformation, he explained to you many times, this tool of SHIFT, all these things at the end of the day, created a lot of value for the company. Now at the last CMD in November of '24, what was presented was what to do to amplify after having done the simplify phase, which means how to develop on a more profitable growth? And in doing so, we identify how important it was to improve on industrial excellence and industrial performance. And hence, since we are doing on a regular basis, a CEO succession planning within Nexans, by that, I mean in '22, in '23, in '24. And this, together with Chris, we had identified a few internal candidates regularly. We gave them, I would say, a track to keep developing. And hence, in matching what we feel are the right attribute to take this company moving further, we thought that what Julien Hueber had done in the past, and he is currently doing within this company, and by that, having a very strong background on industrial excellence, made him a perfect fit for this new phase of our company. And that's how we decided to end up with Julien. And we do feel that, Julien, who has been really together with Chris from so many years, is perfect just to ensure also continuity as we said. There is no change of strategy, no change at all. The point is to pursue this continuity and have -- from an internal standpoint, having somebody who will take the whole group further. Now you mentioned Asia. Yes, as you read, Julien spent about half of his time in Asia. I mean, it makes sense now about 25 years, of which more than 10 in Asia. But this does not mean that we have specific plan of Asia. I mean in the various CMD, we explained what is our strategy. But the very fact of appointing of Julien, you should not infer that we have anything in particular for Asia.

So the next question comes from the line of Nabil Najeeb of Deutsche Bank.

You alluded to wanting to create new momentum on the execution of the CMD road map. Could you maybe talk about where you saw momentum lagging? And which specific areas are you now hoping to accelerate progress on? And good luck for you, C.G.

Okay. So on momentum, I mean, let me be clear. As I said, this company is in great shape, but we want to take it to the next level and we want to increase the momentum of what I was referring to, industrial excellence, which is obviously something -- I mean -- and when I say industrial excellence, I'm not at all meaning that we should abandon what we've been doing in the past. It is adding another layer to what has been done so many -- so much successfully by Chris over the last years. So this momentum is on industrial excellence, enhancing our -- I would say, our competitiveness on industrial operations.

The next question comes from the line of Miguel Borrega of BNP. He got disconnected. So we apologize, yes. Yes, he got disconnected. Maybe we can wait for a few seconds.

There is another question, I think from Elias.

Yes. So the next question comes from the line of Elias Cohen of Neuberger Berman.

I just wanted to clarify one thing. You mentioned utilizing an external recruiting service to consult with you guys to compare internal candidates with external. Just when did you -- when was it that you started to engage with them?

Okay. So let me be clear. When we are conducting this CEO succession plan, we always have been working with a headhunter to support us on a regular basis in '22, in '24, because we do think that it is important in like we do think it is good governance to have this CEO succession plan always ready, which means that we have to go through each time an assessment of the person we think are the closest to the CEO position, and also decide what is then the root, the journey for these people to keep developing. So that's why the headhunter is always active with us on this journey of the CEO succession plan. Now it is important also to have this headhunter for the benchmarking. Because obviously, when we thought well, we would like to have these attributes, then the question was, have we got the attributes within our candidates internally? And hence, we did a benchmark with a long list of external possible candidates together with the headhunter. And at the end of the day, when we were matching this list, our internal candidates, and what we wanted to achieve, and I repeat again, we want to convey a sense of continuity of what has been done, and adding a layer to what has been done, we ended up and we conclude with Julien Hueber.

So next question is from Miguel Borrega of BNP Paribas.

I just have one for you, Chris. If you were to continue, what would be the next -- the focus? The balance sheet is in great shape. The high-voltage backlog is full, margins are solid. So if you were to choose one, Chris, what would you advise Julien to be the next leg? Is it to accelerate M&A? Breaking low and medium voltage margins to a new level? Or make your high-voltage business shine again?

Thank you, Miguel. So I would say that first, the main topic is the capital allocation. We have a great balance sheet. We need to speed up on M&A. Because if we don't speed up on M&A, we'll have to talk about share buyback or dividend, which is not a problem, of course. But I think we have a great opportunity ahead to accelerate acquisition, and to keep consolidating the market and our position in some key areas. So I think that will be the key focus. Innovation is, of course, bringing a lot of margin premium in all the business where we have been able to implement. We are getting better and better in the execution of our Transmission business. We need to fix the GSI, but there is some improvement in the last days, but we have other projects in the pipeline that come up. So of course, I think we still have a lot of gain -- potential gain in industrial performance, on cost competitiveness, because we have been so good in terms of transformation through SHIFT that we know that we have this potential of improvement that we have been not untouched, but I would say, preserve in the future, and I'm sure Julien will work on it. But of course, it's not -- I'm not missing any ideas. I have a lot of ideas, but I will let Julien running the show now.

At this point, I will hand it over to Ms. Aurelia Baudey for closing remarks. Please go ahead.

Sorry, I think there is a question coming from Chris Leonard, UBS.

Yes, we will take that.

Just to follow up. Obviously, it was mentioned earlier that there's been no operational issues or any issues with any contracts. And maybe helpful if you could just allude into what you think is so important on the sort of industrial excellence and what you're pushing for there? And what we should hope to see in the future from Julien? And then secondly, in follow-up to Christopher's remarks there, is there any elaboration you can give as to what's improved on the contract for GSI in the last few days? That would be super helpful.

Chris, I think we cannot comment GSI right now because it's not the purpose of the call. But Julien will give you an update on the 23rd of October. But Julien is with me with -- and Jean. So maybe Julien, it's time to...

Yes, hello everyone. So I will have the opportunity to present myself a bit more deep on the 23rd. But clearly, to answer the question regarding industrial excellence, we are in an industry where we have -- electrification is entering in the cycle of increasing volumes. And of course, we will demonstrate this month after month. But the -- our industrial footprint needs to create the maximum output that we have. Of course, we [ do need ] CapEx to increase capacity, but we also have the existing footprint we have. And my priority will be really to generate as much output we have from our plant. That's my one element. And also, the M&As we did in Europe recently shows also a lot of opportunity to create a lot of synergy between the industrial footprint. Meaning that it's not only one plant, one country, but when you start to create the synergies between like mutualization of industrial footprint, you get a maximum of it, and this is really one of the priorities that we are going to target.

We have another question from Jean-Francois.

Okay. So we are taking the next question from Jean-Francois Granjon of ODDO BHF.

Yes. The last question from my side. On the M&A, you have mentioned recently that you probably made some potential acquisition in the coming months, did you or would you expect with the plan? Is there a risk to see some delays to make some acquisitions due to the change on the CEO or not?

Thank you, Jean-Francois. I will take it. It's Chris. No change.

I just want to reinforce what Chris is mentioning. I mean obviously, we had that discussion, and we said we have a strong company. We have a strong team, and there is no reason to postpone anything.

Thank you, Jean-Francois. I think we will finish with that. It's Chris speaking. So just first, I wanted to thank you all sell-side analysts and investors because over the past 7 years, you have believed in Nexans, you believe in me and my team, and Jean-Christophe. Your trust has been the cornerstone of everything we have accomplished, so I want to thank you sincerely for your confidence, your constructive dialogue, your very tough questions. And of course, standing by us through each phase of the journey over the last 7 years. So I'm leaving with this great gratitude and pride and thank you all and see you, maybe in a different, I will say, journey. Thanks a lot.

Thank you again, Chris. Thank you again.

All right. So thank you very much, everybody. You may disconnect now.