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

Ladies and gentlemen, good afternoon, good morning. Welcome to Nexans' Virtual Capital Markets Day. I am Aurelia Baudey-Vignaud, Head of Investor Relations at Nexans. We would have loved to see you in person today. But due to the circumstances, we have moved into the virtual world. In today's presentation, we will provide a detailed illustration of Nexans' new strategic plan for the next 3 years and the group's industrial ambition for the next 10 years. We remind participants that some of the comments made today may include forward-looking statements, which are subject to various risks and uncertainties based on our best estimates, with the information we currently have in our possession. Obviously, these outcomes may change and are also subject to the risks detailed in the safe harbor as well as in our 2020 universal registration document. Opening our session today, Christopher Guerin, Nexans' CEO. Chris will provide an overview of how Nexans will electrify the future and detail our new strategic outlook. Jérôme Fournier, Nexans' VP, Director of Innovation, will then unveil our groundbreaking innovations. After a short break, we will deep dive in electrification at Nexans and the group's operational outlook. Ragnhild Katteland will present the outlook for high-voltage Subsea & Land Systems. Vijay Mahadevan will detail electrification in the universe of utilities. And Vincent Dessale will cover the perspective of the building market. We will then have the first Q&A session dedicated to our operations, followed by the final session with Jean-Christophe Juillard, Nexans' CFO, who will provide our financial ambitions. The presentation will close with Christopher Guerin's final remarks and a Q&A session. I am now pleased to hand over to Chris.

Thank you, Aurelia. Welcome. Welcome to Nexans Capital Market Day, here live from Paris, virtually connected with you all around the world due to the pandemic that impacts directly all of us. We are here to introduce our long-term ambition, our purpose on our medium-term strategy. I will describe where we stand in the construction of the new Nexans project with regards to what I introduced to you in July 2018. I was looking for this day since end 2018, a day where we can embark you into our conviction that this is the time of change. But let's start with this quick video. [Presentation]

As you can see, the amplification of risk in the world will amplify the demand. And this conviction that we need to change because all kind of risks are rising, sanitary, global warming, power outage, fires, because those risks will require different models on new solution, because the world will become electric much faster than planned. This is the reason why this is the time of change. As I became CEO in July 2018, you all remember the road map I presented to you. When we look back, what we've done so far to build this new Nexans with the team is just amazing. We have modernized the company. We have strengthened our foundation on our innovation. We have developed our own recipe to transform the company under the program name SHIFT. We turned COVID from adversity to opportunity to reset the generation of free cash flow. And we are moving from a pure volume player to a value player. We have to give this tribute to all the team in Nexans, everywhere in the world. That in spite of challenges on countries lockdown in 2020, they have made that year a tipping point, a tipping point for the company. Nexans has always been part of the history of electricity from its discovery by Edison, Benjamin Franklin, to the future electrify world. Nexans is at the continuous path of this living history. For over a century, Nexans has played a crucial role in the world electrification, and it will continue because electrification is our DNA. And now it's time really to amplify our role by becoming a pure electrification player. The growth momentum in that sector is just exponential. And as you will discover today, we are the best positioned to take the lead in that market. Why are we becoming a pure electrification player? Because Nexans' purpose is to electrify the future. The electrification of the planet is key to a sustainable balanced growth and, above all, equitable growth that benefit all humanity, ignoring the rich and the poor, the North and the South division. All the megatrends converge to the same conclusion. Electrification of the planet is the main energy at stake in the coming decades. Electrification of the planet requires more and more renewable energies. Electrification will require as well a complete electrical grid modernization and protection from hospital to school to smart cities. It will be both difficult and vital to manage the risk of power access. Electrifying the world pose a considerable technological challenge, like the issue of electricity storage that will become in the near future more and more crucial. Knowing that 100% of the world population must have access to electricity by 2030 describe quite well how electrification will play a crucial role for the world. A new resonant for Nexans. A new resonant set our new values. We are pioneers of energy transition. We dedicate ourselves to the highest standard of performance. And we stand united to achieve this ambitious goal to electrify the future. No progress can be done unless it fight climate change. Everything is linked because the climate is changing. The thermofrost is melting. The world destroyed every day, biodiversity and forest. All this combined increase the number of new viruses such as COVID-19. To face this new threat, I believe governmental action alone are not enough. The most efficient level is at corporate level. If and only if, designing their models, their habits, their means on projects, global companies are pushing the climate change issue at the forefront of their top priorities. And parallel, we need to find between us, customers and suppliers, new ways to collaborate, hands to hands. Then we can all together have an impact on carbon emission. There is no global harmonized regulation on that question, just agreements when they are respected. In other words, efficiencies in our hands as global companies. We care for the planet sustainability. We care for our children and their future, and we care for resource scarcity. As already announced, Nexans will become carbon neutral by 2030. But believe me, we will accelerate those efforts in the coming 4 years, thanks to a new company performance model that we call E3. Becoming a pure electrification player in the coming 4 years requires a major shift to simplify our business, to amplify our impact. To do so, we need to make the company more readable for our stakeholders. We need to make the company more focused to amplify its actions. We need to make the company leaner and more agile to answer changes faster. We need to make the company innovative and focus on one ecosystem, one main problem to answer the new customer demand. We will be able to make this turn by simplifying our portfolio. Nexans will reset its portfolio to only serve and focus on strategic customer in order to converge all our solution, time and effort and investment on this electrification ecosystem. All our solution, these times, those efforts will convert on this new value chain. From the production of renewable energy to the transmission of this energy to distribution up to the usage of this energy, this is where, in that chain, that Nexans will amplify its role. In one page summary, after this amazing successful transformation, in less than 24 months, because of business evolutions and customer demand migration, it's time. It's time to change. It's time to amplify our role from our purpose, electrify the future, to our values, our new ambition. The new Nexans strategy is there to simplify its business portfolio, to amplify its impact, supported by innovative solution to serve the entire market of electrification. But we won't do it at any cost. As I told you, Nexans will be carbon neutral by 2030. Moreover, we will develop in coming years, in addition to that objective, new partnerships to amplify our role as we need big firm, important company to join force with us on what we call a mission-based ecosystem around this electrification market. The world needs broader group of effort, that companies to companies align business interest and as well societal needs. Let me describe now what we mean by electrification. From generation of energy, offshore wind turbines, solar power plant, hydropower, nuclear, to the transmission of that energy through countries interconnection. The distribution that require infrastructure modernization to sustain future amount of electricity. And finally, at the end of the chain, the usage which are everywhere. Everywhere, there is a human activity, either construction or powering data centers, infrastructures, hospital, industrial activities or commercial businesses. The COVID crisis reinforced my personal conviction that we need to reset the way, the way we operate the company. I did interview a lot of CEOs and partners over the last 18 months to understand how to better operate a company on the 3 dimensions: financial dimension, environmental dimension and as well social dimension. Hired many, many fantastic stories, an example. And in Nexans, we have decided to operate a bit differently on these 3 angles that what we were doing before. Now we will operate in a very granular way. We know that more volume doesn't mean more profit, but we know that more volume requires more resources, either natural resources or human resources. We know that more volume may generate as well more stress on productivity. We know that more volume may generate as well higher complexity to handle. And in the end, more and more volume of everything generates cost inflation and cash deterioration. This is why we are launching a disruptive company performance model that we call the E3. Every quarter, our activities unit per unit everywhere in the world are challenged through this innovative model to find the right balance of performance between the 3 core elements that are the economics, the environment and the engagement. That we will follow 3 -- through the 3 following KPIs. The first one is the capital employed -- the return on capital employed; the second is the return on carbon employed; and the third is the return on competence engaged. Each unit in order to have the license to operate, to cap their ambition, they will have to go through this unique, virtuous and holistic performance model. Profit, yes, of course, but not at the detriment of the planet or not at the detriment of people engagement. I commit that we will bring you results every year through that unique model. I will ask external expert to challenge it, to improve it, to share it because I am convinced that we have found something quite unique that solves many, many paradox. Winds have changed. As I told you, there is an inherent silent killer that company never announced in their results, that always deteriorate company productivity or profit every day. What is this silent killer? This is what I call complexity. Of course, we can fight against it by constantly reducing cost, but it may at the end jeopardize, yes, clearly jeopardize the company long-term development. This is why that this strategy that we will show you comes into force. The time when you need to make decision on what will be the next battlefield of the company. To become a pure electrification player, we need to simplify our business. We need to move from 8 macro sectors covered, representing 34 subsectors on 30 different market drivers. So we need to move from 8 macro sectors to 4, from 34 subsector to 12. With this unique electrification ecosystem from production of energy, to transmission, to distribution, up to the usage of this energy. And because on the convergence of the world electrification, on the growing demand, it will require on raw material, specifically copper, copper or aluminum. In addition to this simplification, Nexans will enhance its autonomy through metallurgy, as we are the only player in the world to be still vertically integrated from copper rods to cables. When the time of copper shortage may come, the recycling power of Nexans will be fundamental for the secular economy, but as well will be fundamental to avoid supply chain disruption. Like some of our competitor faced during COVID crisis. In the coming hours, we will guide you in our own strategic thinking process. Why change? What do we need concretely to change? Importantly, how to change? And what is our financial commitment for the first chapter of our ambition from now to 2024? I think I don't need to convince you. I don't need to convince you on the exponential growth opportunity of the world electrification. We want the world to be more digital. Great. Great, but you need more power. We do not want countries to be world's polluter, fantastic. But we need to invest in sustainable energy. We want to have electrical cars. Great. But we need to reinforce the energy grid. We want to stop having a fire in building every 2 minutes in the world. Sure. But we need to renovate the entire electrical architecture with safer product. All these megatrends are supporting our conviction that electricity landscape is only at the beginning of a new revolution. This conviction is supported by all recent announcement from U.S. to Europe, to China. Trillions dollars, euros, RMB will be invested massively to electrify the world. Because this is the only way, yes, this is the only way for carbon neutrality. This is the only way for digitalization. This is the only way to modernize electricity landscape. And this is the only way for electricity system decentralization. We always talk a lot about megatrends. But let me reinforce what I call the mega risk. Yes, mega risk, amplification. And it's of views that COVID-19 is a wake-up call for the entire world. The fight for global warming require massive investment, for the green new deal, like the one announced in Europe, in U.S. and in China. To avoid the risk of power outage, blackout in the cities, all countries' utilities are accelerating grid modernization and building energy highway transmission between countries in order to exchange green energy. Last but not least, electrical safety is a major concern. Specifically, for buildings built in the '70s or '80s, full of plastic PVC cables that are propagating fire and toxic smokes, each requires major renovation investment. If I go to the customer demand migration, our sector cannot avoid it. This customer demand migration like it happens in the automotive sector, where equipment manufacturers 10 years ago were selling pieces and components. And now they are selling, providing full on turnkey solutions. Same in the telecom world, or consumer electronics. All companies one day had to reinvent themselves in order not to disappear. We take the year of 2020, once again, to conduct hundred interviews. Confirming what? Confirming that this is now the time of the cable and wire sectors to evolve because our customers are moving up, moving up into the value chain. And they need suppliers to follow them by providing not just cable or accessories, but smart interconnected solutions, systems and subsystems. One customer told me recently, I have to share that. "Chris, if you don't want Nexans to become the Kodak of the industry, you better to move your company right now." Imagine that, the Kodak of the industry. And he told me, "You need to accelerate this shift into interconnected solutions. Forget to sell just more tonnes of cables or more kilometers of cable in all sectors of the world. We need you, Nexans, to solve our constraints, our problems, and we need you to better understand our future needs." Very strong statement, but we are working on it. We are working on it in parallel to our transformation since the last 2 years. And we will give you access to some customers' interviews, abstracts for each electrification subsectors. I don't want to be too arrogant on this topic because we are only at the beginning. But believe me, Nexans is on the right path. So why this customer told me that if we do not move the company, specifically in the wire and cable industry, it may disappear or at least disintermediate, simply because we are today just satisfying their very, very, very basic needs, not the complex one. Customer today wants 1 or 2 innovative product every semester, believe me, yes. Generalist has not the fire power to innovate at the same speed to all subsectors it covers. Customer wants new system solution with digitalization. A generalist focus on having a very, very large product component portfolio, but is lacking resources to focus on the system, lacking resources to focus on digital offers. Now each individual sectors become increasingly complex to understand and require specific know-how, which are missing or will miss soon to a generalist. And when you cover x sector, 34 subsectors, you are spreading investment every year. And one day, you will wake up 10-year later where you will have jeopardized the development of some sectors. You will have jeopardized their future competitiveness. A generalist do not have the means, cannot have the arrogance neither that we can follow all customer demand migration on all fronts at the same time with the same impact and with the same quality. To follow customer demand migration, first, we need to have a deeper understanding of final markets evolution. We need as well to bring all our resources to build high added value solution. And we need to scale. Yes, we need to scale beyond pure cable to build new interconnected solution with the support of partners' networks. This is why -- why we will move from a pure volume growth in multiple sectors to value scale focused growth in order to amplify our impact. It's always the habit to position the company, I know that, into a box, yes. What is the box of Nexans? A few would ask me. If Nexans is not anymore generalist means the company is a specialist. Let me say that the answer is different. Because in our markets, we will become the only company focused on one unique ecosystem, which is the biggest market demand of all this sector on interacting in multi regions with a very strong simplification of product range, and as well industrial assets. And keeping metallurgy as a vertical integration. But last but not least, 100% of our R&D, sales, marketing, top management will focus on electrification only. Following the statement, we cannot be the best owner for some sectors. This is why we are amplifying our investment firepower into electrification. More than EUR 200 million of additional CapEx will be injected in high-voltage businesses, EUR 200 million additional CapEx to support, win offshore development everywhere in the world. And as well, HVDC transmission demand in U.S. or in Europe. 100% of our R&D and services team will focus on electrification demand and, as you will see, the focus on high voltage, utilities, construction sectors that are the key components of this electrification ecosystem. We simplify our way to operate the company. We will, of course, operate in all the main region of the world to support the customer everywhere they need us. It's not just an additional equity story. I hope you understand that. We are reengineering the complete model to become the electrification pure player, to serve on this wave of new electricity revolution that will be a fantastic tailwind for the company. In parallel, we are building an ecosystem of strategic partners that will help us to scale faster. In this chapter, let me guide you on how -- yes, the how we will simplify our business, on how we will amplify our impact. Electrification today in Nexans representing 2020 already 55% of our sales, whereas industrial sectors analysis and telecom, respectively, 17% and 7%. Industrial and telecom are fantastic business, of course, with great potential as well, as you know. But they require massive investment to keep following the demand and as well to build a new economic model around solution like the one we will do on electrification. That's the reason we believe that we will not be the best owner anymore for those fantastic sectors. We are not the best owner for their future development. We will take the next years to come, the right partners, the right owner that will support their development, that will scale them, that will modernize their assets, that will just reproduce what we will do ourselves into electrification, in terms of innovation and M&A consolidation on those sectors that are industrial and telecom. The 3 main reason to simplify our business and to focus on electrification are pretty obvious. Number one, already today, electrification market represent more than 65% of world cable demand. The growth per annum for electrification is about 4.3% for the next 10 years, higher than all the others. Number three, as you can see, the market are still very fragmented and give us room -- it give us room for M&A consolidation. Now I take the time to reflect how we will amplify our impact. You will see from everything we have said since 2 years, on everything we are doing as a logic, a rational, a robust storyline that support it. We have not wake up 2 months ago, say, hey, let's go into electrification. No. Not at all. Everything has been elaborated since 2018. But of course, we had to respect a specific agenda, specific agenda on a specific sequence in order to gain back all stakeholder credibility, but as well to forge our own conviction that this is the way. I think we make a pretty good job. We make a pretty good job, and it's clear that, in the last 2 years, we're getting back all the main stakeholders' credibility. The company has been rerated. The branding of the company has been modernized and become now more visible and, more importantly, customers are more and more positively vocal on our new way of doing. The road is still long, but we have made significant progress. Once again, everything is a question of sequence. The last 2 years, we have to focus on our own transformation across all activities, launching important cost reduction initiative, deploying SHIFT program to reduce complexity and as well turning around value burners activities. Last but not least, improving our cash conversion to build this firepower for this new chapter to come. Now we will amplify. Yes, we will amplify our electrification value growth through 3 main pillars. The first one is we will rotate company activities through divestment on one hand, on acquisition in other hands, in order to scale our leadership positioning on electrification. SHIFT PRIME, a brand-new announced process on methodology to increase value through innovation. But as well, third pillar, new innovation, ecosystem partnership that we just signed, and we carry on to sign in the future to accelerate our unique value proposition. Of course, we will have to scale through acquisition, rotate our business portfolio. I am convinced that we still have a lot to improve in our today's portfolio. Let's have a look. First of all, as you can see, we are evolving our financial metrics. But you know this is where we are positioned in 2019, all our activities. But now it's time to raise the bar for this new sequence of 2022 to 2024, can see that we keep the EBITDA percentage quite higher, but we have replaced the working capital ratio by the cash conversion ratio in order to take into account the CapEx that we will have to inject in some unit. Finally, we are creating a new category. You can see on the top corner, green part, that we call innovation driver. In that part, you will find units that are delivering an EBITDA above 10% and a cash conversion ratio above 70%, 7-0. But last but not least, those unit, beyond pure financial result, must demonstrate a strong innovation delivery process. Like you may find in other capital goods company -- I will not bring you the name. You know them by heart. Those companies that are delivering significant value, thanks to every quarter, every semester constant innovation. I know you will tell me, "It's nice on paper, Chris. But concretely, how will you do it? What is the method behind? What is the how to?" As we said in the last months and years, we have our own recipe of success, our own recipe, supported by strong analytics and as well big data management. But more importantly, this recipe follow a logical sequence. When an activity is burning cash, I'm not magician, they are losing money. First priority is not growth. Now it cannot be growth generation. The first priority is fixing the problem, fixing the problem through restructuration and lean management methods. Once you have done it, here SHIFT transformation model is coming into force. Through 20 levers, highly analytical in order to move an activity, which is in difficulties to profit drivers and as well cash contributors. Me -- today, after 2 years, many of our units are underway to this category profit driver, not all, but a majority. This is why of SHIFT PRIME. SHIFT PRIME is coming into the loop. We are building now this third category, as you can see before, innovative drivers, to explain our managers that our value creation journey is not over. We still have a lot to improve. It's not only a pure financial demonstration. We need to become innovative, much more innovative than before. We need to become disruptive to satisfy new customer demands, while improving our financial metrics. You can see on the slide our 2024 ambition in terms of categories evolution per percentage of revenue. I have Vincent Dessale a bit later in the presentation to color a bit more this part in his section. But you can notice that we have units today, in 2021, already in this innovative driver box. Let me color now the 3 new pillars, the 3 new pillars that will guide our performance from 2022 to 2024. Once again, what is SHIFT PRIME? It's a new methodology, a new process, design my Nexans to make things happen, to shift company performance. SHIFT PRIME is -- in a nutshell is a method to convert innovation into free cash flow. We have done recently a lot of benchmark of capital goods companies that are generating this great value. We learn a lot. We have built this recipe of success to really go beyond pure transformation and really to scale innovation, in order to increase the value generation for customers on our gross margin perspective by minimum 200 basis points. So I will not go into too much detail, but we are following 5 main levers from digital supply chain implementation, end-to-end supply chain with customer, to brand prime, to bundle of subsystems offers, smart innovation with the integration of sensors and Internet of Things into our product and into our systems. Let me conclude my part on M&A, on how we will amplify our role into electrification market, by making acquisition by 2024. There will be 2 types of M&A, consolidation and bolt-on innovation. In regards to our competition, we have screened in the last 12 months around 130 candidates that are playing a strong role into electrification market. We have shortlisted 20 of them, 20 candidates right now to ensure that they are the best fit with our new ambition. We will get as well a similar screening on -- for the bolt-on acquisition to support our new services and solution model, like our design and engineering services, but as well data collection, data exploitation and as well our digitalization offer. But now let me turn the floor to Jérôme. Jérôme will bring you concrete example on our innovation dynamic. Thank you, Jérôme.

Thank you, Chris. Hi. I'm Jérôme Fournier, Vice President of Nexans, in-charge of Innovation. Energy transition, the increase of electricity needs, the rise of electric mobility are driving innovation. At the same time, solutions are needed to compensate the aging of the grid, to reduce the risk of power outage, and, ultimately, to guarantee the climate trajectory below 2 degrees. What does this mean for Nexans? We have decided to allocate 100% of our R&D and innovation to this purpose alone. Today, that means EUR 100 million R&D expenses, 800 experts, more than 50 innovation per year. We are committed to amplify customer experience as the principal value of innovation. Digitalization is a deep flavor of innovation, bringing instant information, reliability and sources of efficiency. Our purpose is to amplify sustainable solution, to better optimize the total cost of ownership of electrical assets. Innovation is making the electrical grid smarter. Superconductivity is a great example of a smart technology. A single cable with Nexans superconductivity technology can convey the equivalent power of 3 nuclear reactors in several seconds anywhere, at any time. The main advantage is not only this outstanding power, but the ease of installation with nearly no civil engineering required, no thermal effect and zero electromagnetic signature. 2/3 of the world population will live in cities and mega cities, where the density of buildings and infrastructure does not allow traditional power line. Superconductive cable will bring the power downtown in Chicago today, in many other cities tomorrow. The magical powers of superconductivity don't stop there. We have developed a superconductive fault current limiter, which reduces significantly the level of fault. It provides a total protection of the grid in case of an overcurrent, allowing the integration of distributed energy. Electrical network management has become extremely complex. In one hand, there are hundreds of parameters to be taken into account to optimize the electricity supply, maintenance, investment. In the other hand, there could be serious consequences in case of a poor decision. Can you imagine that half of the surface burned in California in 2017 was due to fires of electrical power origin. Electrical digital twin is a unique virtual model of a real grid, a simulation tool that take into account both physics of interaction and real-time data-driven models. Let's keep in mind 2 figures. The lines, cable, support conductors represent 50% of the electrical grid in value. At the same time, 58% of network faults are due to those lines. We, Nexans, we are the worldwide leadership in those lines and cable aging. Cosmo Tech is one of the smartest companies developing digital twin software. Our solution, electrical asset management, provide us visualization, analysis, prediction, optimization of all possible scenarios, and it allows 20% of operation efficiency and CapEx avoidance. The IoT, Internet of Things, is a very well-known technology. However, its field of application remains immense. IoT is enabling an holistic approach of the grid risks and challenges. Nexans has developed connected cable solutions, connected accessory in order to improve the reliability, efficiency, safety of all types of operations in electrical industries, using real-time data. The first application is tracking assets. Major industrial customer are delighted to subscribe to Nexans connected solution. They can monitor at any time the localization and the quantity of cable they require for installation. They can reduce loss, avoid theft, optimize CapEx and reduce maintenance costs. The second application consists in monitoring the electrical assets during their lifetime to predict failure, maintenance, increase global reliability. Nexans has developed connected street cabinet called INFRABIRD. This is an intelligent keyless access on cloud connected assets that can be deployed in just few minutes. The third application allows to manage electrical assets and optimize operation and decision-making. We expect 25% of Nexans' project to be connected by 2024. The main lever for innovation is a better understanding of usages, better seeking all needs. We have created a network of customer-centric design apps, so-called amplify by Nexans in order to enhance our innovation ecosystem, to enrich, to accelerate our offers in 3 main fields: customer experience, digital solutions, sustainable development. One of the most powerful factor to accelerate innovation is partnerships. We are signing major partnerships, long-term collaboration with leaders in their fields. Nexans will leverage on Microsoft cloud, data, artificial intelligence solution and technologies to design an ecosystem of digital solution and reaching its offer to customers. Orange becomes the preferred connectivity partner of Nexans for the worldwide deployments of its IoT solutions. Vincent Dessale will present in a few minutes our partnership with Schneider Electric supporting the integration of digital solution in the industrial process. But the best is to listen to some of those partner. [Presentation]

Remember the value chain that was shown earlier, generation and transmission, distribution and usages. Now we are at the very beginning, and our journey begins with generation and transmission. We do everything from front-end engineering, design, manufacturing, installation and protection. And when generation is running, we provide our clients aftermarket services for the high-voltage generation and transmission cable solutions. Our clients are offshore wind developers, national transmission system owners, grid owners and more and more infrastructure investors. There is no longer any doubt that world needs to address climate change, and renewable energies are a key stone of the sustainable energy transition. What we see in the offshore wind market is an incredible annual growth. We are talking about 200 gigawatts to be installed worldwide in the next decade. While Europe will remain the main market, Asia and U.S. are to follow closely. We are talking about an 11.5% annual growth of our cable and installation market, reaching 8 billion annual market size in 2030. We, at Nexans, are already very well positioned and engaged in this booming market. We are currently working on a wind farm of up to 1.5 gigawatts, the Seagreen offshore wind farm outside Scotland for our client SSE. This unique offshore wind farm will supply more than 600,000 Scottish households with clean energy alone. One of the main drivers for this growth is the reduction of levelized cost of energy. The cost has been divided by more than 5x in the last 10 years. Offshore wind is now increasingly profitable compared to other renewable technologies. Our industry will be the major enabler of the sustainable energy transition needed to achieve Paris Agreement goals. The offshore wind farm cannot, by nature, always be placed close to the consumption areas. This is why we are linking renewable energy sources to every electricity grid by installing energy highways. The interconnect market, subsea and land high-voltage corridors, will have an annual growth of 14.3%. We are talking about more than 70,000 kilometers of cables to be installed. In the U.S., we expect investments of more than EUR 25 billion in HVDC corridors to integrate its grid and allow higher penetration of renewable sources. Nexans has a unique high-voltage cable facility based in the U.S. in Charleston, South Carolina. Nexans is the only local supplier able to answer to the future U.S. sustainable energy needs. The interconnected cables play an important part in EU's ambition of an efficient and sustainable renewable grid. The interconnected cables will secure supply of energy between countries and connect renewable generation sources to the consumption areas. Nexans is a key enabler of EU's ambition of carbon neutrality by 2050. In the early '70s, we installed the first interconnecting cable between Norway and Denmark. Our Holland subsea plan was built for this purpose only. Today, we have installed several thousands of high-voltage subsea interconnected cables around the world. Currently, we are installing the North Sea Link interconnector between Norway and U.K. and as well the interconnection between Mindanao and Visayas in the Philippines. With this increasing amount of renewable energy sources to be connected, the energy highways will increase in size, power and distance. Let's listen to [indiscernible] from Ørsted and John Hill from SSE. [Presentation]

So how will Nexans capture the strong growth of this sector? How will Nexans lead the energy transition? How will we support our clients? In 2021, our Charleston high-voltage cable plant in the U.S. will be fully converted to a subsea high-voltage cable plant, the only one in the U.S., perfectly placed to support the offshore wind development and the sustainable energy transition in U.S. We will support U.S. clients' growing renewable energy needs. We already own one purpose-built cable-laying vessel, Nexans Skagerrak. As our market is growing in volume and complexity, we must bring our capabilities and capacities one step further. This summer, we are excited and looking forward to taking delivery of our new cable-laying vessel, Nexans Aurora. This unique lady is equipped with a 10,000 tonnes dual turntable and high-tech cable installation equipment. With these 2 investments, we are doubling our manufacturing capacity. We have enlarged our laying capacities and capabilities, enabling us to take onboard the most complex and challenging projects ahead. We are already utilizing these new capacities for the Seagreen project this year. However, this is not enough. We have decided to scale up even further to support electrification through our trusted partners and clients. I'm very proud to announce that we will increase our capacity further by more than 30% by 2024. Two new extrusion lines will be installed in our Halden plant in Norway, in addition to further upgrade of our Charleston plant in U.S. These new investments will increase our capacity and efficiency in response to the expected growth in HVDC, both for offshore wind farm and for the energy highways to come. And we have the possibility to even further raise capacity quickly in our Charleston plant at customer need. We do not only invest in capacity and capability. We continuously invest in our skills. In the past years, Nexans has used a purpose-built in-house program called SHIFT to reshape its backlog, decrease risk, while increase asset yield and generate value. This has been a true success in all areas implemented. We are now amplifying this unique model by deploying it in for our project business, bringing our portfolio's risk and return equation one step further. Firstly, for each project, we are modeling the overall risk by combining the technical risk with historical data and knowledge and with in-depth reviews of project's terms and conditions. Secondly, we optimize the asset yield, both in manufacturing and in installation, to best fit our assets and capabilities. By combining project risk and yield and by adding the financial return, we have an accurate risk-and-return indicator for each project. This indicator is being used to steer the portfolio to the targeted upper-right corner, lowest risk with the highest return. In a nutshell, a healthy backlog for our future that will not jeopardize the company development, neither our customers' projects. The key to success for any project is how it is managed and most importantly, how all the risks related are managed. Cables remain the main driver of project claims and account for more than 80% of claimed values in offshore wind farm projects. The growing size of wind farms make the risk more and more material for insurers. Our EPCI end-to-end approach combines analytics of historical data and proactive engineering and assessment with our experience, our risk and project execution. We have a very sound risk management track record. We have experienced no internal failures of our expert cables neither for offshore wind nor subsea cables for interconnectors. We are also assessing the environmental impact to reduce our carbon footprint. Increasing complexity for the project requires in-depth knowledge and expertise. And I'm happy to announce that, today, we have entered into a long-term partnership with Bureau Veritas. Together, we will certify the Nexans way of managing EPCI projects and risks, develop new standards for the offshore wind farm and interconnection industry, reduce risk profile of such projects and reduce Nexans' time to market. Energy supply is more and more dependent on offshore wind farms generating power and the interconnected energy highways. It is imperative that there are business continuity plans to secure the energy supply. If a cable fault occurs, like the one on the picture here, where there has been an anchor grabbing the cable on the seabed, if no preparation, no planning are in place, it can take up to a year to repair the cable link and put it back into operation. With a Nexans service contract, the downtime or energy loss can be reduced by 70%. We are talking about massive savings. Our solutions enables to anticipate risks through monitoring and maintenance, to build up sound mitigation plans and to intervene rapidly if an emergency occurs. Improving technology to support our clients and to broaden the scope of their possibilities is part of our DNA. We have, today, cutting-edge technology, both for the cable material choices, long distances, deepwater and dynamic application. Back in the '70s, we delivered the first interconnected cable between Denmark and Norway. In 2018, we completed the interconnector between Italy and Montenegro, installed at 1,500 meters of water depth. We have fully qualified 525 kV DC extruded subsea and land cable systems. We delivered the first high-voltage cable, dynamic cable, for the first commercial floating offshore wind farm highway in 2017, and this, after a successful highway demo completed in 2009. To amplify our technical leadership, we invest massive efforts in R&D. The power transfer will increase, the interconnected Eurasia will be installed down to 3,000 meters water depth. To enable the offshore wind also where the water depth is not allowing for conventional offshore turbines, floating offshore wind farms will be needed. And with this, more dynamic cables. Our proprietary solution for thermoplastic cables POWERBOOST will amplify the cleaner, more cost-efficient and faster cable manufacturing. By using our in-house technical experts and know-how and working closely with universities and clients, we are broadening the scope of possibilities for our clients, both for offshore wind and for interconnectors, making us a proud contributor of a sustainable energy transition. Let me turn the floor to my colleague, Vijay, that will expose our ambition in the distribution of energy.

Thank you, Ragnhild. Hello, everyone. I am Vijay Mahadevan, Executive Vice President of Nexans for Distribution. It is a great pleasure to be here with you today to introduce Nexans' ambition in distribution. I will share with you the excellent opportunities ahead of us and how, as Nexans, we are positioned to lead in energy distribution. So what is distribution? It is the next step in electrification process, a fundamental link between generation, transmission on one end and the usage on the other end. Network grid is the backbone of energy distribution. It includes utility-scale renewable generation and its associated network. We are talking about medium-voltage hardware and Nexans' turnkey solutions. During the next decade, growing population and ever-increasing needs will create a booming demand for electricity. To support the increased demand, localized renewable generation are mushrooming in all regions. These renewable units are also moving closer to the consumption point for easy access and cost efficiency. I would like to highlight 3 significant trends for the coming decade. First, 1.8 billion inhabitants on this planet will have to be given access to electricity. Can you imagine that? Second, 17% additional power generation expected. That's huge. Third, exponential growth in the renewables area. It's, in fact, increasing demand for electrification, for sure. But we have an aging network today. Europe and U.S. grids are one of the oldest. They have far exceeded the average life expectancy of network cables. This increases grid vulnerability and risk of blackouts. This is our challenge industrial nations are facing today. We have a good news. This dilemma has caught the attention of decision-makers. So EUR 4.4 trillion, yes, EUR 4.4 trillion will be spent in distribution, modernizing aging networks and building new grids. What does this mean to Nexans? Estimated forecast, just in cables alone, a 4.2% CAGR, additional EUR 20 billion potential market. That's a big number. All these investments require not only cables and accessories, also innovative ideas, smart solutions and timely execution. Nexans is very well positioned to amplify in distribution area from a cable supplier to solutions provider. Today, we provide several solutions for electrification. You already heard from Jérôme about superconductivity, grid assessment, IoT, smart cables, asset management, to name a few. I will touch upon 2 more tested turnkey solutions of Nexans: one, to connect renewable farms to the grid; second, NEOGRID, a rural electrification program. We have 80 engineers so dedicated working on these solutions. Let me give you more granularity to these 2 turnkey solutions. First, Nexans solution to connect utility-scale renewable farms. We have developed a unique know-how, thanks to the advanced simulation in grid connectivity. Based our experience and knowledge, we balance the CapEx-OpEx spend to reduce total cost of ownership. This makes green energy more competitive and accessible. As an example, in Stockyard Hill, Australia, our turnkey solution delivered a 9% reduction in total cost of ownership through design change, layout optimization, architecture planning. It also lowered CapEx for our customer. The second solution I would like to highlight is the NEOGRID. This provides end-to-end connectivity from arranging cost-effective financing to electrifying the villages, even in remote areas. For example, we successfully electrified 35 villages in Ivory Coast, participating in rural electrification program. 15 more villages will be added soon as they are in their last-mile stage, awaiting just power on. We are on track on this project. We went beyond cables using our expertise, securing effective financing, design, supply, manufacturing and installation, finally reaching electricity to rural users, a complete end-to-end solution for electrification. It is an emotion when we saw glow in the eyes of some people who saw light after sunset for their first time in their life. Nexans is committed to life-changing projects across the globe, a significant step forward in electrification, our purpose. We take pride in such accomplishments for the benefit of our stakeholders. Let me now share with you some of our customers' experiences with our turnkey solutions. [Presentation]

The blueprint of all this, Nexans' unique position and fantastic growth in distribution segment, supported by a growing need for a safe, sustainable access to all, reliable electrification. We will amplify our role with turnkey offers for electrifying the future. We will continue our journey in electrification. Vincent will now take you through the final step in electrification chain, usage.

I am Vincent Dessale. I'm Chief Operating Officer, leading industrial and purchasing function and Head of Building business group. Let's continue together our journey on the energy highway. After generation and transmission following the distribution, let's talk about the usage. Well, it's very simple. Usage of electricity is everywhere around us. When you have a human activity, you have usage of electricity. In all buildings; residential, commercial, industrial; infrastructure such as schools, hospital; in all means of transportation, such as highway station, terminal airport, e-mobility and data center, for which the electricity supply is as critical as data connectivity. And this market is full of dynamism with a significant growth over demand, plus 50%, 50% in the next 10 years, which represents EUR 26 million increase. This major growth is driven by mega trends all over the world: growing population and urbanization, increased access to electrification in rural area, implementing new regulation, modernizing existing infrastructure and rising technical revolution. Indeed, the building of tomorrow will become smart distribution network. They will produce energy, they will stock energy, they will integrate photovoltaics in their structure, they will be equipped with electrical vehicle charging station. Consequently, building of tomorrow will be more and more sophisticated. They will need higher power. And you can say that they will be a kind of electricity hub. And these mega trends and technological evolution will have one common and critical requirement, safety. Do you know that 80% of building fires are due to counterfeit cables in emerging countries. And in Europe, 1 fire happens every 2 minutes due to electrical failures. Safe electrical power usage is, and will be, at the heart of our life places. But I heard already some comments. Great demand, useful cable, for sure, but this market is a commodity market with low return? The answer to this question is no, and here is why. For several years now, we have in Nexans, 5 business units in our building segment with excellent returns. EBITDA close to 20%. ROCE up to 50%. You have 2 examples on the screen, one in Europe, one in South America. We call them innovation drivers. The key is marketing, branding, innovation, and we have formalized and deployed business model of these units, enhancing further our SHIFT program to scaleup. This model is named SHIFT PRIME, [indiscernible] program with a set of tools, analytics and methods. And we have currently a team of 20 experts deploying the method in all our units with [indiscernible]. Building, if managed properly, is a very contributive business. But we should not limit ourselves to speak only about cable market. It's behind us. We are and we will speak more and more about system and subsystem, service and solution. We, at Nexans, are addressing our clients' pain points, providing and helping them to improve their productivity at each step of their consumer journey, from procurement to commission. We develop dedicated solution for our customers. We've set cable and accessory system, easy to transport, easy to install. We simplify their day-to-day activity with the Nexans apps, improving the design and optimization of electrical network, supporting the preparation work and installation, allowing traceability of products and deliveries. And Nexans brand are recognized by the end user for their added value. Let's take the example of MOBIWAY, one of our latest innovation. 50%, 50% of the customers if they don't find MOBIWAY in one branch, they would go extra miles to find it in another location. But, of course, leading innovation is not an easy task. This requires structured process and organization. We have 80, 8-0, dedicated resources all around the world with 6 regional design labs and 3 specialized design labs, focusing on the IoT, Internet of Things; end-to-end supply chain; digital solution on a unique Microsoft platform. These teams are working closely with our operations, sales and marketing team, but of course, with our customers and our partners. Nexans already has a robust pipeline of innovation for the coming years. And moving to solution is not a slogan. This is a fact for Nexans. Let me give you concrete examples. 30 million of electrical vehicle charging station will be installed in Europe by 2030. With AGICITY, Nexans is at the heart of the usage of electrification, with high-technical solutions, product and software. And this is fully digital supervision, full detection and asset management and supporting the e-mobility development. We are far beyond the pure cable. We are a pure electrification player. Another pillar of Nexans' unique value proposition is the end-to-end supply chain with 3 key pillars. First one, of course, optimal availability of products for the end user. By the integration of the different players, Nexans and its suppliers, Nexans and its customers and also the customer of our customers, the supply chain becomes agile, connected and real-time. Nexans, therefore, reduce capital employed. Second pillar, be vertically integrated. This is a strategic decision of Nexans. The security of copper sourcing has been a major advantage for Nexans during the first wave of the COVID crisis last year. 0 factory stop due to shortage of copper. And the copper consumption is expected to increase from 20 million tons to 45 million tons by 2040. Mastering the copper supply chain is a guarantee for all our customers. And the third pillar is what we call ROCE2, the return on capital employed versus the return on carbon employed. In other words, we will integrate, in our customer portfolio management, the margin versus the distance of delivery and its corresponding carbon emission. End-to-end supply chain, properly managed, will reduce the energy consumption by 25%, 25% in transport and logistic areas by 2040. We, at Nexans, want to do business but not at the expense of the planet. And being a local player, like Nexans, is a key enabler to reduce carbon emission. And I can tell you that environment impact and digitalization capabilities are becoming the criteria of choice by our customers. And speaking about the planet, the electrification is clearly a prerequisite to reach the 2 degrees temperature Celsius target. The building of the future will be electrical, no doubt, more and more cables, more connectors, more system, subsystem. This network in buildings and also the network in your house must be safe. Energy usage must be safe. Do you know that the electrical fires have increased by 10% in the last 10 years? 30% of fires in buildings are due to electrical fires, just in Europe, per year, to give you some figures. It represents 273,000 fires, more than 1,000 fatalities, EUR 6.25 billion of property damage. Nexans has a long, robust and demonstrated expertise in understanding fire behavior. We master technologies for safer electrification. In many countries, we have been able to launch on the market, the halogen-free flame retardant technology, so-called HFFR, replacing the old-fashioned PVC technology. Do you know that Nexans HFFR cable can withstand 1,000 degrees Celsius, more than 2 hours, while still transmitting electrical power, which allows, of course, the people to exit the building in case of emergency in safer conditions. And the low smoke emission characteristic of Nexans HFFR system, long distance in terms of view in case of fire of 50 meters, when the traditional PVC is only 5 meter. Safety matters to us. And Nexans is dedicated to develop new technologies to continue to protect lives. But obviously, marketing, innovation, supply chain, technology needs to rely on competitive industrial footprint. Therefore, Nexans has embarked the Industry 4.0 revolution by integrating the digital revolution in the industrial process. Our factories are becoming more and more data-driven. And to ensure the success of this digital revolution, I'm very happy to announce that Nexans has made a worldwide partnership with Schneider Electric. Schneider Electric expertise will accelerate the digitalization of our factories. Their proven and advanced methodology will further improve the efficiency of our line of production, improve predictive maintenance, improve the reduction of carbon emission. Nexans is building the factory of the future. And now before concluding, let's listen together to Nexans' customers. [Presentation]

Reliability, data-driven, fact-based, integrated supply chain, efficiency, innovation, collaborative and global development are the words of our customers. Being a pure electrification player is the choice of Nexans. To answer to their needs and collaborate with them locally, to identify and implement appropriate solution, globally, to scaleup. Nexans' DNA and future engagement is electrify the future. Thank you. And we will continue with the Q&A session. But before that, let's watch together a short movie on the mega trend. [Presentation]

Thank you, Vincent. So now we are ready to take some questions.

We received a lot of questions already by writing. Just for sake of clarity, I will not take any question regarding the financial commitment of the company in 2024 because just after the Q&A session, Jean-Christophe will drive you in that process. And we will have another Q&A session that will include the financial part. We will start with some questions that we have on audio, Daniela, and we have a lot of question as well by writing. We aim to have this session to stand for 20 minutes. I think it's Daniela. Daniela is on the phone? Daniela Costa from Goldman. Daniela?

[Operator Instructions] Daniela, you are now unmuted.

I hope you can hear me well. [indiscernible] 3 questions on the operational side of the presentation, actually, mainly directed towards the high-voltage [indiscernible]. First, can you elaborate, I think you've mentioned the scaling in the U.S. Charleston plant further as you [indiscernible] Halden. Can you link that with growth vision and how much those capacity expansion would give you in terms of opportunities to further scale up and build size of that business than maybe [indiscernible] that equates to. And then the 2 other topics, more broader question. I was wondering if you could give us some thoughts on what you think the move towards hydrogen and producing centrally hydrogen leveraging wind offshore. What can that do to the market size opportunity on submarine cables for Nexans? And the third one regarding how you're positioning for wind offshore closing? What that means in terms any changes on the way you produce? And when do you think that's coming for real? And I'll keep it here. I'll go back to the queue. I have 2 other ones on the operations, but I'm not sure [indiscernible]

Thank you, Daniela. So all the questions regarding, Ragnhild. So the first one is that we need to elaborate a bit on what is exactly this high-voltage CapEx about this new CapEx of EUR 200 million. The third is on hydrogen and wind offshore development.

So first of all, thank you for the question. For the CapEx that we have already done or about to finish this year, that is really doubling the size versus what we have in Halden for these type of products. What we have actually now decided is to even double that more, so we will add the same size of the -- what we're doing in Charleston in Halden. And as well, we will also add some more CapEx in Charleston to make this plant even more efficient to really to grow this capacity in this market.

So that would be more about XLP CapEx expansion in Europe to cope with all the demand that we will have for interconnection and wind offshore in Europe, but in Halden, it's serving the world. And we will keep upgrading as well in addition to Charleston because we are pretty convinced that HVDC transmission corridors will have to be installed in U.S. like you hear recently in Germany, certainly at big scale in order to connect the East Coast with the West Coast, with the wind offshore farm and the solar farm. And this is certainly something where Nexans will have to get ready. So get ready, of course, to keep developing the wind offshore on the East Coast of U.S. with the contract we have signed with Ørsted, and there is more to come with other customers that we hope to be able to convert, and that should be awarded this year. But there is, as well, all the development of solar farm in the West part of U.S., and this certainly corridor HVDC transmission line that will have to be installed in the coming 5 to 10 years in U.S. So this is what this CapEx will support: wind offshore, interconnection and transmission in U.S.

And also to add on the CapEx side. Definitely, Aurora, with the new vessel that will be launched this summer will even more increase the capacity to do turnkey projects. With DC cables that we have fully -- as you have seen on the presentation, that we have fully qualified.

And we will keep Skagerrak.

And we will keep Skagerrak, clearly.

Yes. Hydrogen is pretty recent, and there is a big buzz regarding hydrogen, and we received, as well, with just some question regarding energy storage. That will be -- certainly, it would come into force beyond, certainly, 2025. But can you elaborate some discussion we may have already in that sector in that field?

So of course, for the hydrogen, it's another renewable source. And we need, of course, and we are following together with Jérôme's team, we are following this development and also together with our clients, we do -- we are working on how we can support in this sector. Of course, hydrogen will not replace electricity, but it can be at storage possibility for the future. So we are following, but still very early phase.

Regarding floating farm, on wind offshore development?

Yes. So of course, today, what we see within the offshore wind is that we do get more and more complex projects. You can have offshore wind projects further out from the coast. And then what we see, of course, is that we will have also offshore wind farm at deeper sea, and you need to have them floating. We were the first one to deliver this high win that we've talked about in the presentation, so we have all the capabilities and the technology to do so. I think that we will, as we go forward, we will see more and more floats are coming in and because those floating wind farms, they will be put in places where you cannot have fixed bottom type of wind farms. So clearly, in the future, you will see more coming in.

Yes. And this is, as well, linked with the agreement that we have signed with Bureau Veritas that you just mentioned just a few minutes ago because as what you say, 83% of claims is linked to bad cables installation of -- to -- of wind offshore farm. We have a pretty intense discussion prior to sign this partnership with Bureau Veritas with insurers to really understand what is the issue. It's -- there is no claim once it's installed by Nexans.

No claim.

But I think it's important to reduce the risk for our customers and to amplify as well our actions to ensure the right installation for all these mega projects that have to come. I hope we understood your question, Daniela. We have other questions on the line. I think it's David from Bank of America.

I'll try and ask across the portfolio. Just a follow-up on high voltage, on 1 of your slides, you talked about EUR 25 billion of potential land cable growth in the U.S. I think in the past, you've pulled back some land because of weak margins and cash execution. What gives you confidence that you can generate better returns in land in the U.S.? That would be my first question.

So whether it's land or if it subsea, we will always use our methodology to -- really to look into our risk profile of the project, both technology-wise, Ts and Cs, compliance, all those things. We will look into how we can yield our assets, both manufacturing and also refis offshore with our vessels. And then what we will do and we are doing today, we are looking at the risk of return as equation, as we also discussed earlier today. Whether or not it's subsea or land, we will use the same type of assessment. The investments that we're doing both in Halden and in Charleston will allow for both, so both onshore and as well subsea for DC. So as such, we are there if the projects and when the projects are coming.

Yes, and we have to recon as well, David, is that we were losing money in the land business because of bad equation of project versus the capabilities of our plant in Germany and Belgium that we have fixed from now, but it doesn't mean that this market is not profitable. We believe as well there will be a very strong convergence of demand, both for wind offshore on HVDC transmission in -- everywhere in the world. And you know that most of the time, the demand, either for land and subsea, are using the same production capabilities, the same production capabilities. So we will always use this unique method that we have to yield the risk and return, whatever it is, a wind offshore business or a land HVDC business. Does that answer your question, David?

A quick follow-up, if I may, just on the high-voltage side. Following on from Daniela, I mean clearly, as we know, the high-voltage business can be quite lumpy, especially the size of the interconnection orders. What makes you confident that you can maintain that saturation and also pricing level as we start to invest more. Is there any risk that we have a similar pricing situation to what we've seen in optical fibers?

I think what we're looking at here is, again, how we are choosing our project. And we're not only choosing our project, we are also investing a lot in our clients, that's why we're here. And what we're trying to do is to build long-term relationships with our clients, with the way we are working, and as such, we will have their project coming forward, so this is what we are doing. So we both look at the risk, the yield, et cetera, as well as the client relationship and where we should go.

And David, I think it's an excellent question because to compare the telecom market with high-voltage market, but the entry barriers are not the same. The capabilities and the know-how are not the same. Customers, as well, doesn't want to take risk with new emerging players that they don't know. Even some customers that we know very well since [ long-ly ] years, "Hey, I show that your Charleston factory is -- has the right setup?" Yes, of course, it has the right setup, but they like to be reassured. So I think emerging competition will come, but certainly not at all at the same speed on scale that what happened in the fiber optic. The Chinese will announce massive investment on wind offshore as well. I'm talking about -- you were there this morning, I was talking about 50 gigawatts to be installed just in China. So a player like ZTT, Orion Cables will be fully converging on this national demand. Xi Jinping will announce a mega -- certainly, mega investments in China for the next 10 years. I think this question is certainly relevant, maybe in 2027, but there is also exponential growth in that sectors. And we now -- we are taking a lot of, I will say, time to decide which project to follow on the financial terms, on the technological risk on the terms and conditions on the contract aspect for each project. So our aim is not to increase capacity to dilute the value. And of course, that will be our commitment by 2024. That will be reinforced, David, in -- certainly in the total presentation package that you will see with the financial elements that GEC will provide you. We have other question -- we have a follow-up question...

We have lot of questions that came through in written -- in writing. So we'll first start with Max Yates. This question is for you, Chris. He thanks you first for the presentation. And his question, is the subsea cable market is relatively consolidated, so I assume it is difficult to acquire here. So what part of electrification do you see as the most likely area for acquisitions?

Good question. I think you've seen, Max, that we've tried recently with some European players to find a way that had not been successful. That's why it's a bit less crowded in the high-voltage world. I will not answer these questions because I'm sure we have 1,500 people listening, but certainly, 5% of them are our competitors. So I will not elaborate more on what target we have. We have 20 candidates on the screening we've done in multiple sectors, means multiple sectors into the electrification, so it's already a straight answer. We will not invest in industry. We will not invest in telecom. We will not invest in all the sectors in that except electrification. So you have seen what I have introduced to you. The electrification ecosystem is still relatively very fragmented and give us a lot of room to consolidate. Maybe a bit less in high voltage. I agree with you, Max, but we will elaborate a bit more later in the year about what acquisition will have to do.

Then we have a question coming from Akash Gupta. Is this R&D figure of above EUR 100 million, for the whole company, is it funded by R&D? Or is this -- does this also include third-party funded research, including government grants for certain specific projects? How has this R&D figure moved in the recent years, and have any set target? Or how much -- sorry, on how much R&D should be as a percentage of sales in the coming years?

Jérôme?

Sure. Those EUR 100 million R&D budgets includes some funding in the range of 15%. It has been very stable during the last 3 years, except this year for COVID reason. We have reacted very fast in April to -- with our operation, but also with our R&D to adapt our project portfolio. We have reduced some material projects, and we have increased system and services R&D project. Now what should be the ratio R&D versus sales? As Chief Innovation Officer, I believe that's a high leverage innovator distinguish themselves, not by the money they spent, but by the capabilities they have to demonstrate in ideation, project selection, development and commercialization, their potential of innovation. So by focusing our resources on only 3 macro segment, there is a first leverage effect by factor 2 or factor 3.

We have another question from Akash, which is, on the EUR 250 million, EUR 400 million range of CAGR per gigawatt in offshore, is this figure based on pipeline of projects or historic projects? Some of the recent orders in industry has been towards the lower end of -- or even below the lower end of this range.

As the value of cable spare gigawatt in wind offshore.

So thank you for this question, Akash. As you say, you see, it's quite a wide range, and this is because in this offshore wind industry now, we do see very different projects. Some are more complex, some are bigger, some are smaller. So of course, you will have a wide range as well as you have AC versus DC type of projects. This is based on -- these figures, it's based on what we have seen in our pipeline going both historic and going forward. So that's really the answer to that question.

We have another question from Max Yates. For the high-voltage investments in Halden, U.S., this appears to focus on cable lines rather than ships. To avoid vessel bottlenecks, are further investments in new installation capacity not required?

For the installation part, he means, yes.

So again, thanks. So what we will have now after this summer, we will have 2 vessels in operation, that meaning doubling our capacity. Skagerrak is an old lady, but she's fully functional. And of course, with Aurora, with the capacity that she has, we will -- it's more than doubling actually, what we are able to do. What you've seen in the past, if you go into our history, is that when we have any type of need for even more vessels, what we do is to go do some charter of a third-party vessel. So I don't see this today as a bottleneck with the project going forward and with the capacity that we now have decided to invest in.

We have 2 other people that are connected to the audio, so we'll move back to audio. I think we have first Sean from HSBC.

Sean? Yes.

Can I just come back to AC versus DC and just make sure I've understood, you're putting in 2 new DC lines. And is your AC capacity staying flat? I mean I saw that in the pipeline, you're looking at the majority of interconnectors which I guess would be more on the DC side, but there's a lot of offshore wind that is AC, so just wondering how you're thinking about that.

Thank you. That's a good clarifying question. The lines that we are putting in, both in Charleston as well in Halden, are the same lines for both DC and AC, when you talk about extruded cables. So we can do both. So again, what we will do is to decide the project, whether it's offshore wind or interconnectors, really going back to this ratio, risk versus return, looking at our yield, our capability, capacity, et cetera. So again, it's the same lines being used. So again, it's back to really making sure that we have a sound and good portfolio going forward.

Thank you. Another question on the divestment process. I mean it's quite a lot that you're looking at carving out of this business to become an electrification pure-play. So I'm just wondering how -- will -- would you be doing this in several small-sized chunks? Will accretive M&A depend on how much you divest first, i.e. will you need to fund the process via divestment and any parts that you're prioritizing for disposal?

Okay, Sean, I will not talk about the logic of priority, but it will not be by small part because we care a lot for our industry business and telecom business. I was, prior to being CEO, I was in charge of this business, and they are fantastic business. And they see the same migration sector by sector that what we see in electrification. So the problem is that 80% almost, 77% is what DC will elaborate of our CapEx already are going through electrification sectors. So if we stay like that, keeping investing in the electrification sectors and giving a very small portion of investment to industry and telecom business, we jeopardize their future. Because they need to modernize their asset, like all the others, they need to invest in service and solution, they need to scale up in the value chain. So we will -- it's not -- will not be piece by piece, but we try to give a current format of divestments and to find the most important thing for us is to find the right partner. The partner that will do the same thing, that what Nexans will do on electrification, consolidating, making acquisitions, increasing the value chain offer, really, to find the partner that will do what Nexans is not able to do. So if it has to take time, it will take time because we are not in a rush. Those businesses are delivering fantastic profitability. But once again, we want to make sure that they will be in good hands. And if we have to find some joint venture to find core partners, we will -- if we have to think about it, we will think about it. But we'll do it in the right sequence. And after, of course, the objective, talking about sequence, is not to move the growth from EUR 6 billion to EUR 3 billion and to make compromise to go to back to EUR 6 billion now. We'll have to find the right sequence between divestments and acquisition in a given 18 months frame. So that's the reason that we are, as well, extremely bullish right now on finding the right acquisition for the next months or years to come. There is no logic of priority because there is no specific urgency. I heard a question, I think it was 6 months ago, "Will you get out -- give up all your value burners?" No, it's not the topic. The topic is to fix our problem first. And as soon as we have transformed the company, we raise the question, "What is the strategy for the company in the next 10 years? What is the next commitment in the next 4 years?" So this is what we aim to present to you and to introduce to you today. It's what we are doing. And now we fix a lot of things in telecom business in the industry. There's still more to do but once again, we have to find the right partner for the future.

We have now Joffrey from Societe General, who's also on the line. Joffrey?

Joffrey, hello?

Yes. During your presentation, Chris, you mentioned gross margin improvement as a target. When we're looking at the SHIFT technology, I remember in 2018, you mentioned that you had more less 16,000 customers, of which 10% represented 90% of your gross margin. I was wondering where you were standing now on this target and has -- if you've reduced the number of customers significantly? And if you have a target for your new plan? And secondly, looking again at SHIFT, but more on product selectivity this time, have you been able to reduce your SKUs over the past 2 years? And can you go further?

Yes. Thanks, Joffrey, for the question. Yes, we've used, really, 2020 crisis situation to turn it into opportunities. So we have accelerated our portfolio pruning to really determine what is the good fat and what is the bad fat in our product and customer portfolio. And we have significantly reduced the number of customers that we have followed. I know it's counterintuitive, but what we want to do is to move, from a pure transactional sales mode, selling more cables to more customers, to giving more product to them, to scale intelligently, smartly with the customer that we care. The customer that will make our future, so we know that already, we have 4,000 customers across the company that make 90%, 9-0, 90% of our revenue, we want to scale with them. And today, that's right, we need 15,000 accounts to make 100% of the revenue. That was the case in 2019. This is not the case anymore in 2020 because we privilege our capacity, we privilege our time, resources, management bandwidth, innovation team for those top strategic accounts. And we have already have a lot of discussions with all those customers, all around the globe, since the year, on how can we scale through more services, reducing risk, what Ragnhild have said, and as well, developing new offer on utilities, on construction market to better perform together. And the feedback from the customers is exceptionally good from the last 6 months, and we will carry on to develop this methodology. Once again, this is our own methodology. It's extremely granular. Now we are scaling up the methodology because we are calculating the return on capital employed per customers on per product everywhere in the world per unit, but now we're calculating as well the return on capital employed, means we are calculating by units. We are drawing a circle around each unit to determine what is our total revenue in the circle of 500 kilometers of the unit. From 500 to 1,000 kilometers on the above 1,000 kilometers. And we raise the question, "What is the rationale of this unit to supply beyond 500 kilometers?" So to mix is what [ Vestas ] introduced, to mix the return on capital employed, the financial perspective, with the cost of carbon, so return on carbon employed. And this is this new method that we will, as well, emphasize in order to keep improving our customer and product portfolio during the year. Sorry to be long, passionated about it. Other questions?

Yes. I think we'll move back to the written questions. We have a question from Benjamin from Kepler Cheuvreux. Does your move from a cable player to an electrification player come with new competitors? How will you differentiate from them?

I'm not sure that we have, really, competitors. There is some actors that are playing already in those 3 main fields, but in general, in 1 region. So we believe that we will be the first one to become a pure electrification player worldwide. Worldwide, present in Asia, present in North and South America and present in Europe. I'm sure that it will create a lot of momentum for others, but most importantly, beyond pure competition is what I told you just before. Is staying as a generalist is a major risk. And like I say, I don't want Nexans to become the Kodak of the industry because we have not taken the right path at a certain time to shift strategy, to amplify this action on some critical strategic sectors, and this is what we are doing. We will see what -- how the competition will react.

We have several questions from Lucie from Morgan Stanley. We'll take 2. We'll start with, can you comment on your metallurgy business, please? Could that make you completely self-sufficient? And is your house sourcing also involve the plain raw materials? Or could you see issues there?

I will talk about the evolution of copper and aluminum demand, but regarding our facilities, Vincent?

I think -- you see the answer is relatively simple, to make it -- to give a picture, we have, basically, 50% of our capacity which is used, today, internally and 50% which is external sales. So indeed, we have the full possibility to turn these external sales into internal needs and to cover our units all over the world because we have this metallurgy possibility in Europe, in North America, in South America.

Yes. There is -- we will not cover 100% of the need of Nexans because we need some partners in Australia, for example, and in China. But why will we keep our metallurgy business? Why are we the unique actors in the wire and cable sectors to keep the vertical integration? The disintegration that I rejected in the fiber optic because it requires massive investment, and we consider that there was no advantage for Nexans, at least. But the copper vertical integration, for me, coming from the metallurgy world, will become a real, real asset. Because when you look the demand of copper, which is today more or less, Vincent, it's 20 million tonnes?

Yes. We have around 20 million tonnes, and we know that indeed, we expect that, thanks to evolution of the renewable electrification, the amount could reach around 35 million of tonnes by 2040. So indeed, by definition, mastering and controlling the sourcing and the process is important for us, but it's super important for our customer to guarantee the [ availability ] of the product.

Exactly. So this move from 20 million to 30 million is what Vincent just told you is the convergence on all investment worldwide regarding green energy, regarding utilities, grid modernization, regarding building. It's all about copper and aluminum. It's all about copper and aluminum, but it's not only our sectors, which is using copper. If you want to turn all the automotive world, I would say, consumptions, new cars, productions into electric, you need twice more volume of copper. I think it's about 8 million tonnes in addition. So on -- for our sectors, it requires Grade A cathode, top category of copper to make our product. So we believe that metallurgy will become a strong, a very strong asset in the coming years because we may face a risk of shortage, maybe just few days, sometimes, some few weeks, but we need as well this metallurgy to be strongly invested into circular economy because today, we take all our copper West and that we recycle with our partners, and we bring them back in our road facility in order to make it purely 100% circular. So recycling of the copper would become as well a very strong asset that Nexans will keep in the coming years.

Another question from Lucie. Are the partnerships you announced exclusive?

Jérôme?

Most of them are exclusive, yes.

Exactly, yes. We are working with these partners since -- discussions since a long time. We've spent a lot of time with the team of Chris and NEMA in Schneider Hydraulic, [ Tricoire's ] France . We have done already some pilots. It's the same for cosmetics. It's the same as well with Microsoft that is announced today. So we have developed the offer beyond just the press release. It's concrete offers, concrete actions, concrete work stream, and my colleagues will come back to -- in a different time of presentation, announcement of the company, to show the concrete results, thanks to this partnership. We need those companies. We need those top leading companies to help us to scale.

So I think we're -- there are still a lot of questions, but we'll move on to the rest of the presentation. So we'll leave the floor to Jean-Christophe. But before, there'll be a short break so we can clear the set. Thank you.

Thank you.

And there will be a second Q&A session after Christopher Guerin's closing remarks. Thank you.

Thank you.

Good morning, good afternoon, ladies and gentlemen. My name is Jean-Christophe Juillard. I am Nexans' Chief Financial Officer. After this presentation on the need to change and the previous one from my colleagues on what and how to change, I would like now to share with you the financial impact of this strategy and detail our new financial trajectory. Here starts the journey. I will first spend a minute or 2 on where we stand, 2 years into our 2019-2021 plan. I will also give you an overview of our 2024 ambitions. Then I will explain why amplifying our electrification portfolio makes a lot of sense financially for Nexans. And I will show you how we intend to create more value. As M&A will be a key aspect of our new financial trajectory, I will go over our process and what we will be focusing on. Finally, I will explain our path to our 2024 financial commitments and explain our cash flow allocation. But before moving to 2024, let's spend a minute on where we stand against our commitment taken 2 years ago. Well, we can say that without the terrible impact of the COVID-19 pandemic, our 2021 target would have been achieved. But again, because of the global recession due to COVID, our plan is now pushed by 1 year. If you recall, late 2018, we committed on 3 financial metrics: EBITDA, return on capital employed and free cash flow. Let's take them one by one. First, EBITDA. Our target was to achieve EUR 530 million in 2021. I announced this morning a range from EUR 410 million to EUR 450 million for this year, considering, of course, scope changes and the fact all businesses of Nexans have not yet fully recovered from COVID. Now I confirm that the 2018 EBITDA commitment will be delivered in 2022. Second, importantly, we committed on achieving 15% return on capital employed. With a target range of 12.5% to 14.5%, as I announced this morning, we will be very close this year. I am now confident we will exceed the 2022 ROCE target. Finally, we said 2 things on free cash flow. First, that we would reach EUR 200 million cash generation by 2021. As I said, with COVID impacting our revenues, this is postponed by 1 year. We also said that we would deliver EUR 200 million of free cash flow over the 3 years of the plan. Thanks to SHIFT, disciplined execution and despite COVID, we are very close from achieving our objectives in 2020. So I am highly confident we will exceed the target of EUR 200 million cumulative free cash flow in 2021. My main message here is that 2 years ago, we committed to a deep transformation of the company with strong financial commitments. I am happily reporting today that we are well on track to achieve what we say we would achieve. Now let's move to our financial commitments for the next strategic phase of Nexans, meaning the period from 2022 to 2024. As Chris and my colleagues have explained this afternoon, we will move the company to pure electrification. The big question is, of course, what does this mean in terms of financial? Well, it means, first, as you can see, we will not target sales growth. Nexans sales will only moderately grow from roughly EUR 6 billion today to something between EUR 6 billion to EUR 7 billion by 2024. However, the structure of our revenues will drastically change. Today, the electrification part of the business amounts to about EUR 3 billion. We will grow that part organically to about EUR 3.5 billion by 2024. Then our businesses in Industry & Solutions and telecom will be replaced by about EUR 2 billion to EUR 3 billion of new electrification businesses by 2024. This is what you see in yellow in the graph. During the same period, we will reduce the sales of the metallurgy business from EUR 1 billion to roughly EUR 0.5 billion. Why? Because if we see metallurgy as a critical business, it is dilutive in terms of margin for the group. So we will make sure that we serve Nexans' needs first and then reduce, significantly, external sales to cap the dilutive effect. What does this rotation of assets imply? It means we will simplify the portfolio, focus our resources and scale up in value. In terms of financial performance, we will take 2 separate commitments, first, improve our ratios on our existing electrification business. We are committed, at Nexans, to grow EBITDA as a percentage of sales from a range of 8% to 10% to a range of 11% to 13% by 2024. This is a 3-point increase. Further in the presentation, I will demonstrate how we'll get there. In terms of cash conversion, we will move from a 30% normalized cash conversion rate in 2021 to a ratio above 40% in 2024. Return on capital employed will also increase significantly from about 15% in 2021 to above 20% in 2024. These are the commitments of Nexans for 2024 based on what we own today, meaning our existing electrification portfolio. As we've done in the past, we will put in place strict, but sustainable management measures to monitor and report the progress on each indicator. Additionally, we said we will rotate the portfolio towards full electrification, replacing industry solution and telecom businesses by EUR 2 billion to EUR 3 billion of new electrification sales. This is what we call inorganic transformation. It will be accretive for Nexans, thanks to SHIFT and the expected synergies. You see here the ratio for the group in 2024. They will improve as follow, EBITDA margin will expand from a range from 6.5% to 8% in 2021 to a range between 10% to 12% by 2024. Again, later in the presentation, I will explain how we will achieve that. At the same time, we will roughly double the normalized cash conversion rate, and exceed 40%. We will not commit at that stage and the return on capital employed for the group in 2024, as it will depend on acquisition multiple. While we're committing to the growth, to the M&A and to the swap of assets, we must also ensure that Nexans will not grow and transform itself at any cost. As you can see here, we will remain disciplined, and we will maintain several strict ratios to protect our balance sheet: first, operating working capital will not exceed 6% of current sales; second, maintenance CapEx and standard sales will not exceed 2.5%; and finally, our net leverage will never exceed 2.5x EBITDA. These are our Nexans' financial commitments for 2024. Today, as Chris said before, all Nexans businesses are good businesses, so why choose full electrification? First, as you can see, in 2020, electrification is a significant part of Nexans. It represents roughly 55% of our sales, but 66% of the EBITDA. And with 77% of the CapEx for the last 3 years, electrification is where Nexans has been highly investing. Also, as you can see, on all our key financial metrics, electrification is always more attractive. ROCE in electrification is 200 basis points above other cable businesses. Cash conversion is 500 basis points better for electrification, mainly thanks to lower working capital needs. Finally, EBITDA margin is also accretive, and we intend to further improve this margin with the deployment of SHIFT Prime. If you recall the summary page at the beginning of the presentation, we made a commitment on the existing electrification to increase EBITDA margin by 300 basis points from 8% to 10% today to 11% to 13% by 2024. Let me now explain how we will achieve that. As you can see, we intend to boost EBITDA by EUR 150 million over the 3 years of the plan. We have 4 main actions on how to achieve that. First, we will continue to streamline our cost base and improve our industrial performance to cope with inflation. We expect EUR 15 million from these actions. Second, EBITDA growth will come through additional volume from the building and utilities businesses and also the ramp-up of Charleston and Aurora in the subsea business, we expect EUR 50 million from this. Third, SHIFT with pricing improvement through innovation, as well as better selectivity of our customers and also reduced complexity, EUR 40 million will be achieved with SHIFT. Fourth and final, we will invest strategic CapEx in our subsea business to increase capacity by 2 additional lines of production. Those 2 lines will contribute EUR 45 million EBITDA by 2024. This is how we will improve Nexans' EBITDA margin to reach between 11% to 13% by 2024. As we did in our previous equity story, we will also commit to deliver our achievement on a year-by-year basis. As you can see, for each of the first 3 pillars, the growth is quite linear. We are getting in about 1/3 of the target every year. The exception is a strategic CapEx where, obviously, due to the construction time line, capacity will not be available before the last year of the plan, 2024. That's the phasing we are committing on. From 2022, I will be reporting to you every 6 months during our financial communication on how we are progressing on our action plan. After the road map on how to improve, how to improve our current electrification business, let's now turn to the next big part of our equity story, the rotation of our businesses for Nexans to become a pure electrification player and where this will take us by 2024. As explained earlier, a critical part of our plan is to rotate our portfolio to pure electrification. By 2024, we will have divested roughly EUR 2 billion of sales. They will be replaced by M&A for EUR 2 billion to EUR 3 billion of new electrification sales. The way we approach M&A is critical. Our M&A strategy is focusing on: first, transformative consolidation, meaning large assets that will generate scale effects and synergies, but also bolt-on innovation that will complete our electrification offer and enable Nexans to scale up with a new value proposition. Our aim is, of course, to seek incremental growth with higher-margin for the bolt-on acquisition and accretive cash flows for the large consolidation. Let's have a look now at Nexans financial trajectory, 2021 to 2024, and how we intend to amplify value creation. The key commitment we are making today is to expand Nexans' EBITDA margin by 3 to 4 points by 2024. I explained previously how we will reach the first step to scale up on our existing electrification business, which is the EUR 150 million explained in the previous bridge. I also talked earlier in the presentation about the reduction of the sales of the metallurgy portfolio and how this will improve the margin percentage of Nexans. We estimate this improvement to represent about 50 basis points. The rest of the equity story is based on asset swap, divesting the non-electrification businesses and replacing them by new electrification asset. We expect that this rotation will improve margin by about 100 basis points. With a disciplined and focused execution of our plan, we are confident Nexans will achieve the global target of 10% to 12% EBITDA margin by 2024. Finally, the key remaining question is, how are we going to allocate the cash flow generated during the period? Let me take you through that. Our equity story, the way it is built, the commitments we are taking will generate about EUR 500 million to EUR 600 million of cash over the 3 years of the plan. Before M&A, we propose to allocate the cash flow according to 3 main buckets. The first bucket is a strategic CapEx investment discussed earlier, which will represent about 40% to 50% of the total cash flow of the company. The strategic CapEx is mainly the new capacity in the high-voltage subsea business, as explained by Ragnhild earlier. Next, we plan to allocate a fair part of the cash flow generation to shareholders through dividend payments. Nexans has not been consistent in paying dividends to shareholders in the past. This period is over. We are committed to allocate between EUR 150 million to EUR 170 million of the cash flow generation to dividends, with a minimum payout ratio of 20% each year. Finally, the remaining part of the cash flow will be used to further reduce the company's debt. And pre-M&A, we are targeting that by 2024, Nexans will be debt-free. So with a debt-free balance sheet and without hitting a leverage of 2.5x EBITDA, the estimated firepower for M&A of Nexans goes up to EUR 2 billion. And on top of this already significant liquidity, we will have the cash coming from the divestments. Altogether, cash available will be between EUR 2.5 billion to EUR 3 billion. I hope I have clearly demonstrated how we intend to grow the financial performance of our company and showed you the key financial target that we aim to achieve over the next 3 years. To conclude, the 3 key messages are: one, we will rotate our assets to become a pure electrification player, while at the same time, we are committed to materially improve our existing electrification assets, improving our existing electrification asset by delivering EUR 150 million of additional EBITDA over the 3 years of the plan. And again, this is before M&A. Two, we will scale up and improve our EBITDA margin by 400 basis points. We'll do that while reaching a cash conversion rate above 40%. Three, we will preserve our balance sheet with a strict and disciplined approach, while at the same time, financing CapEx and M&A and ensuring a fair return to our shareholders. I will conclude my presentation by saying the following: the return of your trust and support over the past 2 years has been a critical step for Nexans. We achieved this by delivering on our commitments. We will continue to do so. I will now hand over to Chris for the conclusion. Thank you.

Thank you, Jean-Christophe. Just a word of conclusion. By 2024, Nexans will simplify its model to amplify the impact. By 2024, we will become the operational link from production of energy to transmission to distribution to usage of this energy. Nexans will become the first electrification pure player of its industry. By 2024, Nexans will support strategic customer in multi-region while scaling innovation and digital services. By 2024, 25% of our product will be connected. All our offers will be amplified, thanks to our partnered networks on the new mission-based ecosystem on electrification. By 2024, Nexans will amplify its carbon neutrality milestone. On our E3 license to operate, new performance model will be deployed everywhere in the world. We thank you for your attention. Now let's open for the second Q&A session. Thank you.

Welcome back. Just give us a few seconds before Chris comes back from the second studio, and then we will kick off for your questions. [Operator Instructions] We'll start with questions from Daniela from Goldman Sachs. Will the divestments and M&A likely take place at the same time? Or will divestments come first and then the cash generated be redeployed in the later part of the plan to acquisitions?