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

Ladies and gentlemen, good morning, and welcome to Nexans Half Year 2022 Earnings Conference Call. As a reminder, this conference call is being recorded. [Operator Instructions] I would now like to turn the call over to your host for today's conference call, Mr. Christopher Guerin, Nexans CEO. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for participating to this Nexans conference call. I'm Chris Guerin of Nexans. With me J-C Juillard, Deputy CEO and CFO; Jérôme Fournier, Corporate VP innovation; and we have as well Ragnhild Katteland, EVP of Generation and Transmission business; as well Élodie Robbe-Mouillot, Nexans' IR. I will turn over now to Élodie, that will go over the conference call rules.

Thank you, Chris. I would like to remind participants that statements made during the conference call, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers and listeners are strongly encouraged to refer to the disclaimers, which are an integral part of our URD, along with the audio replay of today's call that will be posted on our website, nexans.com. I'll now turn it over to Chris, who will go over the first half 2022 highlights.

Thank you, Élodie. So as you can see, Nexans keep raising the voltage. If I may say, H1 was a strongest labor semester for Nexans in -- for the last 20 years. And as you have seen already, Q1 was already ahead of our expectation. And Q2 continued to be extremely positive on following that trend. Our transformation is as well running full speed for many units into electrification business as well of industry. But what is important for us is that the third energy revolution has started with the acceleration in the development of renewable energies. The urgent renewal of electrical grid and the electrification of the daily usage. So this secular trend towards decarbonization and digitalization will benefit us as a pure player of electrification. I know that you will have a lot of questions in regards to 2023 on the risk of recession. What is important for us is not to -- in order not to be dependent on growth only on economical cyclical -- cycle, sorry, our transformation platform enabled us to deliver sustainable results combined with favorable or conjunctural effect, like you will see, but more importantly, structural and outstanding financial output. This first semester result leads us to 2022 guidance upgrade that J-C will comment later on. So among the highlights that you can see on Page 5 of the first half are the, of course, the closing of Centelsa acquisition. I'll remind you, the EUR 300 million revenue. We have been as well announced as a preferred bidder on the jumbo project, EuroAsia that when it will be awarded, will secure a very high level of activity for the years to come. Another important pillar is, of course, sustainability on our responsibility towards the planet. So we are very proud to announce our carbon neutrality commitment have been validated by SBTi. Some highlight as well. We have launched our 10th employee shareholding plan, which more than 4,500 substitution among our employees across 25 countries. It's a big uplift versus all the others that bring as well the confirmation that not only investors are confident on Nexans, but of course, as our employees. Let me remind as well some key events before I forget. Nexans will hold a climate Day event on the 21st September in New York with key American leaders and experts regarding world decarbonation. Nexans will be as well in the course of that same week, platinum sponsor of the New York Climate Week. On the 22nd of investor, we will have -- we are organizing an investor event in our unit in Charleston, South Carolina. Let's move to Page 6. So you can see that in this slide, EBITDA reached a record EUR 308 million. Electrification businesses contribute at 90% -- 97% of this EBITDA performance year-on-year with a comparable breakdown between structural and conjunctural effect and as well the addition of the Centelsa result. When you -- if I can say a little remark. When you start to do in 6 months in margin, what you did in 1 year almost in 2018, it's already, of course, a good sign of progression. So let me outline again that our EBITDA margin grew by 200 basis points, thanks to the deployment of SHIFT, Amplify in usages business. Our new capacity in generation and transmission provided by our Charleston plant and as well Aurora vessel. Normalized free cash flow, if you remember, is our new KPI. We decided to neutralize the effect of strategic CapEx. And as you can see, our level of cash flow is very healthy. We will enter, of course, in more details with J-C. ROCE, return on capital employed, continued to improve, thanks to the improvement of our EBITDA and as well a very tight working capital management. So you can see, once again, a record in terms of return on capital employed. We reached 17.4%. If we move on Page 7, we have to be fully transparent as well that there is, of course, the structural effect that we are working on for the last 3 years that are raising the level of performance of Nexans. But there is as well some conjunctural effect. So we wanted to split the result. So I would say that if we take the H1 2021 result at EUR 222 million, you need to add up EUR 43 million that come from structural initiative, and I will comment them. But we benefited as well in some areas, specifically usage in North America mainly a good on uplift conjunctural effect of EUR 42 million. So the main topic will be to transform this conjunctural effect into structural. So let me comment the structural, of course, Amplify. We are committed to amplifying our -- the customers' experience and bring more innovation, and this is why Jérôme is with us today. What is important is we have more and more digitalization inside our offer. We are very proud to announce that we have now connected more than 35,000 objects on our product for our business. And of course, this number will keep increasing and it will bring today and in the future recurring revenue, thanks to a subscription model mode. SHIFT PRIME, this is the add-on of SHIFT performance for those of you that are not yet familiar with the program. It's a methodology designed by us to convert innovation marketing services into free cash flow. So no blah, blah. It's not only doing very fancy things that have no results. So everything is a process in order to monetize everything we offer to turn it into free cash flow. So we have benchmarked ourselves with other capital goods companies that are much ahead than us on this topic, and we've learned a lot from them. We have bid through SHIFT PRIME this recipe to scale innovation and to move to this empirical commodity business into a premium market, mainly in usages. This is where SHIFT PRIME is running fully. Net cost improvement from fixed costs and industrial performance, we will continue to streamline our cost base and improve our initial performance to cope with salary and energy inflation. Now if we turn to Page 8, I will not comment so much because Ragnhild is there. She will answer all of your questions. But of course, we run our program called SHIFT project modeling to make sure that we are converting business that are healthy in terms of margin yield, healthy in terms of contractual term exposure that will not jeopardize Nexans' future and as well that fit projects that fit perfectly between our technological production and installation capabilities. So on these 3 pillars, we have determined a list of platinum project to be awarded and this is what we are following. And of course, EuroAsia is part of it. We will comment about it. We have been announced as preferred bidder for the entire project, and that's great news to be converted in the coming weeks. BorWin 6 offshore wind farm, it's off the coast of Germany, an amount of EUR 360 million revenue. And as well, we have converted the installation of the Revolution project in -- for Ørsted in U.S. We had in the past only production supply only. Now we have production on installation. I propose that to turn on to Jérôme to explain as well the third pillar of our announcement in terms of electrification initiatives. I remind you that we have made the opening of our Charleston U.S. plant last year, the unique subsea plant right now in U.S. for offshore wind farm. We have had the christening of our Aurora vessel. And now we have as well make a major opening and Jérôme will comment. Thank you, Jérôme.

Yes. Indeed, a few weeks ago, we were pleased -- very pleased to inaugurate our new international innovation center. It is called AmpaCity based in Lyon in France. It does represent a EUR 20 million investment for a 6,000 square meters, 20 laboratories dedicated -- 100% dedicated to decarbonize electricity. Like our techno center for high voltage solution in Norway, this is an important pillar for our innovation portfolio with 100 permanent people. It will be an open structure to welcome our customers and our partners. I'd like to remind you that the group -- the global group R&D expenditure is in the order of EUR 80 million. We have 1,800 patents, and the global R&D innovation community is made up of around 800 people. In AmpaCity, we will innovate to address tomorrow's challenge. Challenge number one is to increase the power. And we are very proud of this key achievements this year, the qualification of the 525 kV cable at 3,000 water depth. This is a world first. The second challenge is the sustainability and to reduce CO2 emission. SF6 is well known to provide excellent electrical insulation, but it is an extremely potent greenhouse gas equivalent of 20,000x the effect of CO2. We have been successful this year in the replacement of this gas by G3 gas in partnerships with General Electric. This is a world first. The third challenge is a more reliable power, and superconductivity is a key technology. I will come back later on superconductivity. But digital solutions, as mentioned by Chris, also does help. They help to increase the efficiency and reliability of installation, and we are reaching 3,000 connected products that include geolocalization and inventory management like our solution tracker. Obviously, we also will work on easier installation. It's not rocket science, but it's very, very useful for the installation like MOBIWAY solution or ink stack. Now let's focus in the next slide on superconductivity cable. That is a breakthrough technology. The main performance is a huge quantity of power, 3 gigawatts, which is 3 nuclear reactor in a 20-centimeter diameter space-saving cable. So it does allow minus 90% of civil works and minus 70% of energy loss. We have a mature and successful track record on developing and installing this technology in power system. It started 20 years ago with R&D. Then we set up the first worldwide installation in New York LIPA, that was 2003. Then in 2014, it was the first superconductive cable in the real grid in Germany, Essen. We improved the performance, thanks to the Best Paths project reaching those 3 gigawatts. Last year, we've been very pleased to install 1 superconductive cable in Chicago, connecting 2 substations in real life. And this year, we are very proud of this worldwide superconductive cable in Paris Montana's train station. Once again, this innovation makes the electrical grid more reliable connecting train station to different substation. So we believe that this technology will play a key role in the modernization and the power supply of very dense and urbanized areas like big cities, railway station or ports.

Thank you, Jérôme. Let's move now to business overview, Page 12. So you can see that the organic growth of the group is 5.1%. Without -- excluding metallurgy, it's about 13%. I think the most noticeable information is our electrification business is up 16.2%. The majority of this organic growth is made of value more than volume. I will comment on that. And that's why you see a very strong uplift in the EBITDA ratio. We moved from 8.8% to 12.1%. Let me comment already, starting right now the Page 13 on generation and transmission. So generation and transmission, former SLS high voltage, you can see an upswing in terms of sales of about 24%. But of course, the margin, as you can see, are plus 51%. We are continuing to be on the ratio of 18% EBITDA on sales. And once again, I don't say this is by luck. This is by big work of the team, and we will continue to be in the range in the coming years between 17% up to 24% of EBITDA. So first of all, the upstreams come from the new capacity that we have been -- we launched, plant in U.S., new vessel. The additional sales of our plant in Charleston, J-C will comment. The second impact, which is important in terms of margin generation is the quality of our backlog, both in terms of mix, much more interconnection project subsea than land with a great margin on the limited contractual order. So that's the reason that we are extremely confident in the margin trend in '23 and '24 for these sectors, and that will not suffer from any recession because the backlog is very impressing. We have almost 2.5 years of visibility. This backlog does not include EuroAsia project that, when it will be awarded, will reach 4 years of visibility with an extremely good mix of -- in terms of profitability and margin yield. So as you -- we are extremely confident now. It's just a matter of execution for the generation and transmission business from now on up to 2024, even if there is a recession. Page 14. Distribution, former territories business. This is mainly medium voltage cable. Growth here of 14% is explained by the urgent renewable -- renewal of the grid on our successfully conversion of framework agreement with large DSO like ENEDIS [indiscernible]. So we are -- we have a very, very high demand on certainly lacking capacity to cope with all the demand. In that sector, 70% of this organic growth come from value only and 30% from volume because we really want not to play volume, but to improve the margin generation of these sectors. And you see already that with a 14% growth in sales, we have been able to generate an upswing of EBITDA of close to 70%, 9% EBITDA versus 6%. It's this EBITDA improvement illustrates the benefit of offering of bundled cable solution between cable and accessories and as well as the successful launch of ULTRACKER that Jérôme mentioned part of the connected project. A word on Page 15 on the usage. So of course, this is the sector that can suffer from a recession if any next year. So that's the reason that our strategy is profit first before volume. We are extremely focused on giving the -- our capacity -- our free capacity to the best part of the portfolio. It means in terms of customer and product profile. So what is important is that you see that we have an increase of sales of 14%, upstream in EBITDA of 75%, moving from 7% to 11%. What is important is we did a major work on complexity reduction in many, many units that generate structural performance, but we have as well some positive contractual effect that we need to transform or to convert into structural next year. So we are working in second semester for us. We have a pretty clear visibility on the second semester. So this is why the guidance increased, but we are working with all you need to equip them in terms of recession to keep their level of financial performance. Vala, what we can say on Page 16 is on the industry. So we are still a very strong demand in automation. I believe that we will see some slowdown starting Q4, depending on the economical trend. Transport is recovering. What we have to say is that running stock is still very weak in China because of the economical situation in China and as well because rolling stock is not back on track. Aerospace is improving but remains below pre-pandemic level. So we believe that those 2 sectors, aerospace and rolling stock, should improve significantly in 2023. We need to give a tribute to our team in automotive harnesses because I was not as confident as you can believe in the first quarter with invasion of Ukraine by Russian, but they have made an outstanding performance, both in terms of financial performance management business, but the way they manage the crisis with their team in Ukrainian. Our units are running fully. They have an improvement of mix because 54% of their sales improvement is coming from electromobility. So shift to electrical vehicle. And our customers recognize highly all our effort in terms of crisis management. And this is why we will announce new awards to come for automotive harnesses in the coming months. So very impressive crisis management from our team. The Telecom is, I would say, okay. It's not as shining at electrification. Land cable has pretty good momentum all over Asia and Europe. European activities in telecom infrastructure is as a sound business with a great momentum in U.K., offsetting a pretty soft start in France, which is start to be equipped in terms of fiber optic. On special telecom subsidiaries, where we have reduced amount of backlog because we are consuming this extraordinary backlog that we had a year ago, and we try to normalize now the load because we run at more than 100% of our capacity in the last month. So now we -- it's just a matter of normalization, but the business is still very healthy and very promising for the year to come. Now J-C, I'll let you comment on the financials.

Thank you, Chris. So I will start with Page 18 with the profit and loss statement. So you -- as Chris explained, I mean we've had a fantastic first half of the year. You can see on the main figures, organic growth. I will not repeat what was said, but strong organic growth, even stronger if you remove metallurgy that you know is our strategy to decrease and have a positive mix effect on our margin. And also the organic growth of electrification is really strong. So EBITDA at EUR 308 million. Margin on EBITDA at 9.1%, 200 basis points increase versus same period of last year, mainly through the 2 impact, the real impact of the transformation as well as, I would say, a very good momentum in our businesses, mainly usages but also the addition of new capacity in SLS, in high voltage. Operating margin following the same kind of increases. What I would comment is we still -- we had an impact below EBITDA, a positive impact due to [indiscernible] because the copper price in the first half average price continued to increase, about EUR 600 per tonne in the first half of the year '22. We generated for us a positive EUR 25 million impact. The start of the decrease of the copper price started really at the end of the semester in June, so it did not impact really the semester. One, I would say, one-off in our P&L also and in our cash flow is a divestment, the sale of one land we had in Germany in Hanover where basically we dismantled a plant a few years ago, part of our restructuring. We still had the land that we had to clean up. And we sold that land, and there is a gain on the P&L and also a proceed in our cash flow of about EUR 55 million on the period. And I will conclude on the P&L thing that our income tax remains quite flat versus last year despite the increase of our earnings or profit before tax. This is mainly due to the fact that some of the profits are now generated in countries where we have deferred losses. And therefore, we did not pay taxes on the profit, and therefore, basically show that a similar tax income level versus last year. And that all of that concluded to a record high, I would say, net income level of almost EUR 200 million, EUR 199 million, significantly higher than last year first semester and even higher than last year full year. If you look at the waterfall on the Page 18, you see that the contribution, of course, of the electrification businesses in the increase in EBITDA is extremely significant. I mean it represent, I would say, all of the increase in EBITDA for the period year. I will now move to the next slide, on Page 19. And you remember in our equity story, we explained how we will grow value and how we will expand EBITDA over the 3 years of our new strategic plan. We explained each of the levers of that growth, and we committed that every 6 months when we present our results, we will show progress on each of those levels. So this is what you see on this Page 19. You see that basically the contribution of all of our transformation is EUR 48 million, basically. This EUR 48 million can be broken down between AMPLIFY, EUR 17 million; SHIFT PRIME, everything which is again driven through innovation, new launch of innovation; a strong phasing in generation and transmission, high voltage with a good mix and a stronger, I would say, project savings, EUR 23 million incremental EBITDA from that. Of course, the scope effect, which is mainly Centelsa acquisition that we closed April 1. Globally speaking, inflation for the semester was higher than before expected, about EUR 60 million -- EUR 63 million impact on inflation on the semester, EUR 40 million of that is pass-through through the mechanism we have mainly with raw material. Most of the inflation that was not passed through was on salaries, but we were able to basically mitigate most of that through industrial savings. And you see that the net impact is the EUR 7 million that you see on the beginning of the bridge here. So a limit -- quite limited impact, I would say, globally speaking, from inflation in our financials. And I will conclude on that bridge, importantly to say what Chris explained, we have a, what we say, conjunctural impact of EUR 42 million, which is a situation where we had market that we are extremely booming in the first half of the year, definitely booming at level never seen before. And we want to be -- remain quite precautious and cautious and make sure that we isolate that, I would say, from our transformation initiative, and we call that conjunctural impact to -- obviously, to monitor if this impact would continue in the future. So again, a very strong performance, and all of the levers of our transformation has been easily contributing to the increase in value of our company. If I move now to the next slide, on Page 20, and we look at our cash flow generation. We had a slight increase of our net debt. We moved from 0.2 net debt on EBITDA leverage at the end of December last year to 0.4. This is mainly due -- and you see that on the bridge here on this slide, it's mainly due to the M&A and the acquisition, obviously, of our Centelsa Colombia asset, EUR 259 million. If you put that aside, which is obviously onetime effect and you look at the other pluses and minuses, I would say that our net debt would have remained stable over the period, thanks to the strong contribution of our cash from operation that we have big -- significant enough, I would say, to pay for the high level of CapEx, EUR 126 million. I'll remind you that we continue to have strategic CapEx, which are quite high, EUR 82 million out of the EUR 126 million CapEx for the period are linked to a strategic initiative as part of our equity story. And also we -- the dividend and, I would say, share buyback transaction operation, we did EUR 96 million. So those 2 high elements were, I would say, offset by a good cash from operation. And globally, you can say that if you put up another side, leverage remains flat and remains anyway quite low for the group. So a very low leverage situation from balance sheet. If I move now to the slide -- on the next page, just a quick word on our operating working capital. You know that we are focusing a lot of diligence from company management and making sure that we monitor very tightly working capital. We had a slight increase in working capital and a slight negative change, I would say, in working capital from December 31 to end of June. This is 2 impact to that, I would say. First of all, it remains quite low because we are at 6%. And we always said -- I always said in the past that 4% of the past semesters were quite, I would say, abnormally low in terms of ratio of working capital on sales. 6% is what I think is a normalized level for our company, and we are not targeting to have this ratio getting worsening in the future but remains probably around 6%. The slight increase you see from the 4% to the 6% of the past semester is mainly due to 2 things: the copper price increase I mentioned earlier that impacted a little bit working capital. And the second thing, we had a little bit of delays in the phasing of the down payment on high voltage that will come in the second half based on the contract that Chris explained where we are preferred bidder. And one was awarded only in July, so it's not part of the June financials. But despite that, I mean working capital remains very much under control and continues to be the key focus of the company management. I move to balance sheet on the next slide, very quickly. Not much to sell the balance sheet. It remains quite healthy balance sheet. You have the growth of the different lines of the balance sheet. It's also impacted by Centelsa acquisition, obviously, that contributes to grow the balance sheet figures. Working capital, I explained. Net financial debt, I explained as well. Reserves are decreasing a little bit due to pensions. Reduction due to increase of discount rates. And that's about it. I would say equities increasing, thanks to the very strong net income performance of the semester. And our 2 key ratios for our covenants, obviously, are slightly increasing due to the net debt increase, but remains quite way below the threshold of the commitment, and we have a lot of headroom, I would say, on those covenants to continue the strategy of the group. I will conclude on the financial presentation with a live slide on Page 23. With liquidity, we continue to have a very healthy liquidity of the group. We have EUR 1.1 billion almost of cash on the balance sheet at the end of June, which is, I would say, an improvement versus December -- last December. If I add to that, the untapped revolving credit facility, total liquidity of the company is at EUR 1.7 billion. You have the maturity for different debt levels, mainly bond levels. Nothing to declare for '22. The first one to be refinanced will be '23 with, yes, with a EUR 325 million bond maturity in August '22. So a very strong liquidation level -- liquidity level, a very strong balance sheet, I would say, for Nexans. And I will conclude with the outlook on Page 25. So based on the very strong performance of our results in H1, we have decided to raise our guidance on our 2 KPIs on which we guided in February. First one, EBITDA. We increased EBITDA from EUR 500 million to EUR 540 million to a new range of EUR 560 million to EUR 590 million. This includes, obviously, Centelsa in -- I would say Centelsa in the second half of the year, 2 quarters of Centelsa in the second half of the year. And we also upgrade our normalized free cash flow generation from EUR 150 million to EUR 200 million to a new range of EUR 200 million to EUR 250 million. Needless to say that we are extremely confident in our ability to achieve those targets. That will conclude my financial presentation.

Thank you, J-C. That concludes the presentation. We can open for your questions.

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

First, I wanted to start just a very quick clarification to make sure we understood something right in the beginning. I think you -- when you were talking about the generation and transmission business and you were mentioning the continuation of good margins, did we hear you correctly on saying 17% to 24% margin? I mean if you can comment there on whether that's what we heard the right thing or the wrong thing. And anyway, what is the long-term margin potential that you see in that business? And then number two, I wanted to check on the change in guidance, just to also clarify the changing guidance in free cash flow now that copper prices have been declining. How much of a tailwind for working capital -- of that increase in free cash flow? How much is just the potential tailwind in the second half from copper or maybe less bad situation on copper than you've foreseen earlier in the year? And then just, yes, as per an update on the portfolio actions and like where do you stand on telecom industrial harnesses, et cetera, if we could get a bit more color there.

Let me take the question number 1 and the question number 3. Question number 1, no, it's exactly what I said. We have modelized all our backlog up to free cash flow generation. I told you it's very, very healthy. So it's -- the lower range of our EBITDA is 17% and the higher range is 24% on the generation of transmission. It's just to confirm because some offshore colleagues believe that our 18% was reached by luck and by a good mix last year, and this is not what we said. We said the structural margin on the sectors is very different between interconnection project subsea offshore wind farm on interconnection land. The mix of our backlog is mainly subsea. So that's trigger higher margin. On the way we modelize and we select duly each project in terms of margin yield, contractual term exposure and our capability to execute it properly because as well, this is part of the margin, give us the confidence to be in that range between 17% to 24% up to 2024. Regarding the second question regarding copper.

Copper. Yes, definitely on copper, if prices of copper continued to decrease as they started at the end of the previous semester end of May, June, there will be a positive impact on our cash flow by a reduction of our working capital. While we've seen part of the degradation of the working capital in the first half, part of that is due to increase of copper. Basically, about EUR 25 million to EUR 30 million is due to copper. If this basically increase of the first semester, reverse itself in the second semester, we'll regain basically this impact of EUR 30 million. So I would say that basically, you can -- we can count on depending on the level of reduction between, I would say, EUR 20 million to EUR 30 million of cash flow improvement if copper oil prices continued to decline in the second half.

Regarding the third question, Daniela, on the divestments, we are making some progress on divestments. Certainly, we should announce something before the end of the year. Auto harnesses was very, very well advanced, but we put everything on hold because of the invasion in Ukraine. But given the outstanding performance of the business, I'm sure that the partner we discussed with are back on the table. We need to see what will be the evolution, of course, in Ukraine in the coming months before to start back our discussion. Regarding acquisition, I would say that we are a bit holding the topic for the moment because if recession is confirmed, that can give us better opportunities in 2023. But what is important, Daniela, is that whatever the perimeter of Nexans by 2024, Nexans is confirming its ability to reach its financial ratio, as mentioned in the Capital Market Day, even at constant parameter.

Can I squeeze in a very quick one, actually? On the situation around like chemicals and PVC, obviously, you use a lot of PVC. I guess you don't have like massive operations in Germany and you're not on the German corridors or anything, but a lot of like chemicals, I guess, in Europe come from Germany. So how do you mitigating for those potential risks with the gas situation around chemicals in Europe?

We are not exposed on German supply. And we had a lot of suasion issue last year, now it's very, very smooth. We have diversified our suppliers not to be, I would say, constrained by a monopolistic situation. So it's a big work that we have done over the last 2 years. So we don't see any specific issue on the supply chain signed in second semester.

Our next question comes from Miguel Borrega from BNP Paribas.

Just have 2 questions. One on Slide 7 for the additional EBITDA contribution from structural initiatives. I just want to make sure I got that slide right. So you've got EUR 150 million total EBITDA contribution, and there's still EUR 110 million to EUR 120 million to be delivered in 2023 to 2024. So those percentages apply to 2022, right, and then the rest to be delivered within the next 2 years?

That's right. That's right. With the exception of shift performance, you can see a TBA. Here is our buffer in case of recession. We have still EUR 2 billion revenue in the usages and the distribution market that have not been through our SHIFT performance program. So this EUR 2 billion revenue remains today roughly at 5% EBITDA, so very below average. We are working on them right now to bring them back to a higher number, closer to our average. And that will be a big, big buffer that we are activating in case of recession in 2023 to keep bringing a significant financial performance in 2023.

And then just on the 17% to 24% margin that you mentioned. Obviously, there's the issue of cost inflation. And typically, these contracts are not -- they don't have any escalation clauses. Can you just comment on your confidence to insulate yourself from cost inflation in the high-voltage market?

That's a good question. Let me pass on to Ragnhild.

And thanks for the question. So what we're doing in -- at our tender stage when we are reviewing the contracts, we are, of course, reviewing all the terms and conditions, including also potential risk for cost increases, et cetera. And we are making sure to put in measures so that we are able to index those cost increases in case of that happening. So we are very sure of the figures that Chris mentioned. So the 17% to 24% in the next years to come for the [ portfolio ] that we now see in our backlog and that we are now targeting with through the shift modeling and through the shift execution.

So it's under control.

That's great. And then just on M&A, what are you seeing? How do you see scope for opportunistic M&A? Or given the recession risks, you preferred to stay put for the moment.

Well, we are advancing discussion with some players. But I think it -- we had the Board yesterday, and it's not the right time to take over any company at the peak of revenue, peak of margin, peak of multiple. So we have to remain prudent. What is important is the message that we keep bringing to the Board of Directors. Even if we have to delay acquisition by a few months because of recession, that will not jeopardize our financial target for 2024. So we will do it at constant perimeter. So that's the main message. And we don't want to make acquisition at any cost, just because we want to make acquisitions. But we are making some great progress for the moment, but we remain vigilant.

Our next question is from Akash Gupta from JPMorgan.

I have a few questions as well, and I'll ask one at a time. The first one I have is on your margin rebound in usages and maybe if you can provide some more color on what is really driving it. Is there any shortages of copper or something that might be -- or maybe if you can also provide a split of revenue growth between volume and net price. And maybe if you -- how do you see sustainability of these high margins given, I. think, double-digit margin in usage is something that we have not seen for the old segment in the past. So maybe if you can also comment on sustainability of these high margins? That's question number one.

Yes, it's an important question, Akash, on usages because we know that in case of economical downturn, this is certainly the sector to be impacted. Generation and transmission will not be impacted. Distribution is so late in the renewal of the electrical grid that I don't see that being impacted in 2026. So of course, all the focus is on usages. So first of all, first answer, 100% of organic growth is made of value. First time ever in Nexans, whereas in the past, 100% were made of volume. So that's an important message. The second message is, how is it divided or spread this value between structural and conjunctural? It's more or less what you have on Page 7. It's 50% structural. It means it's our new offering supported by digitalization that for us here, it's just at the beginning of its penetration. We have launched -- you've seen in the last quarter it's just the result of our innovation launch in the last quarter with MOBIWAY, ULTRACKER, VIGISHIELD. This is -- those innovation are not for free. So -- and they have a very well reception from the customer because it's a really distinctive offer. And we know that everything we do digital is we are alone. So we have a very strong appetite from our customers to keep deploying those offer on that structural recurring revenue. So even in recession, it will be there, and we are continuing our penetration ratio of this offer. The other part is conjunctural and more focus in North America, I would say, more than Europe. Conjunctural effect due to hyperinflation in U.S. that all sectors and all our competitor benefits from -- in the last months. And it's still very strong in Q3. We will see what happen in Q4. So I will say that the usages performance conjunctural effect is really, really focused on North America, not in Europe. Europe is very structural effect. And our team is incentivized on the structural effect, not the conjunctural effect.

And my second one is on high voltage, where you are 90% sold out on capacity through 2024 and the demand is still accelerating. The question I have is, are you already having dialogue with customers to further raise capacity as process to gain -- to decarbonize these gaining momentum in Europe in light of Russia-Ukraine? And you also said in your remarks that's the reason of the major headwind for renewable deployment or accelerating renewable deployments. So are you...

Sorry, Akash. Can you repeat, we had a cut of the line. Can you repeat your question? I'm sorry about it.

Yes, sorry. No problems. And the question is on high voltage, where you are 90% sold out on capacity through 2024, and you said demand is still rising here. Are you having dialogue already with your customers to further raise capacity given now we are seeing in light of Russia, Ukraine momentum to decarbonize in Europe is gaining and [indiscernible] is like one of the major headwind. So any comment on capacity that when you might come out with next leg of capacity increase given the accelerated decarbonization in Europe?

Thanks for the question. As you know, we are already investing in Halden. We did 2 additional extrusion lines. So we are adding capacity from 24, actually doubling our capacity for XSP cables from Halden, and we're as well adding some smaller adjustments in Charleston and also adding capacity in Charleston. So as such, we are answering to the market of this more needed capacity.

But what is important is we have some questions from investor, Akash, that say, why don't you keep doubling your capacity every year? I say we have to be careful because, first of all, we have a EUR 25 billion pipeline in front of us, but thanks to our modernization, we know that not projects are all equal in terms of margin yield, technological fit or contractual term exposure. So we have to be careful. It's not all good. I will say that 1/3 of this EUR 25 billion is for us considered as platinum projects, so top-notch project, but you have another 1/3 that we don't want to touch because of their risk exposure. That's the first element. And we know that the demand is accelerating. We know that the demand is secular because it's a third electric revolution. But what we have to take care is not the demand, but the offer on the scarcity of raw materials. So what we aim to do is to make sure that we manage our capacity in front of raw material access.

And my final one is on superconducting cable that you touched on earlier in the presentation. Can you give us a bit more detail on how big the market opportunity here? And how does the margin look like in this part of the business compared to the group average or your 10% to 12% target for electrification in 2024?

I think that Jerome can answer this question because Jerome and me now entering in competition with Halden in terms of new market development.

Yes, I'll start with the margin because the superconductive technology projects are very similar to high-voltage submarine project. I mean there is a lot of engineering the installation is like unique projects. So we are targeting the same level of margin as high-voltage submarine and the same way to manage those projects. In terms of markets, we believe -- I mean, we'll start like -- if we consider 2 big cities with a project of EUR 10 billion, that's the next few years is EUR 200 million as a BU. But we guess that total market will be in between EUR 3 billion and EUR 5 billion, and we expect after 2030 to reach EUR 1 billion per year.

And this is due to the fact that gas acquisition of the building, you need more and more power on square feet, and you can maybe reprecise the advantages of superconductivity versus HVDC cables in a very dense urban environment, Jerome?

Yes, absolutely. I mean today, when we come to superconductive, there is no other solution. There is no way that you can have civil works downtown in New York, Paris or Singapore, Hong Kong. So the only way to bring a lot of power with the tiny places or civil work is superconductive cable. And that's going to be the case with train station, with big areas and cities. We really believe, and it's dramatically increasing with the global warming, but there's going to be a lot of local lockouts, blackouts in cities and maybe some big blackouts. And that will accelerate the modernization of the grid in megacities.

Our next question comes from Sean McLoughlin from HSBC.

Firstly, just to understand a little bit better the EUR 42 million of conjunctural and one-off. First of all, does this include the gain on -- the EUR 25 million gain on the German plant? Secondly, is this mostly usages in North America from what I've understood, or is this broader? Could you maybe just dig into a little bit where -- which markets were booming and you don't expect to be booming any more in the second half?

Yes. I'll take the question, Sean. So no, the sale of our land in Germany is definitely not in the EBITDA, it's below. So it's not part of the EUR 42 million. Really, what we call [indiscernible] is when we have analyzed, it's only coming from usages, building. And when we have analyzed basically the performance of our transformation, the past volume over the years, the demand and the supply and so on, and we see like extraordinary situation where volume and prices have been going to the roof since now a few months. We call that conjunctural. Because by definition, when you look on history and a long period of time, this never happened before, and we believe that it will one day or the other, whether it's in 1 month, 2 months, 6 months, who knows, but likely go away. So it's usages. It's unique. It's made of pricing and volume, a combination of both. It's fueled by inflation, for sure. And it's really related to North America. So that's what I can tell you about this piece here.

Understood. So just thinking about then kind of margin progression in the second half for usages, I mean if I were to take out the EUR 42 million, I mean should I be looking at -- I mean, presumably much lower organic growth and kind of margin compression in the second half?

So it's a very valid question. What we've -- guidance in the new cost of this conjunctional onetime effect, we call onetime effect will vanish, go away. So basically, to answer your question, yes, in that usage part. If this is the case, organic growth will be lower than what it was in H1. Now what I can tell you is we are ready in July, and we start to have visibility on Q3, and Q3 seems to be still very strong. So it's extremely difficult, obviously, to predict what will be the end of Q3, what will be Q4. We took one assumption in the range. We might be a little bit conservative. We'll see in the coming weeks. But to answer your question, yes, if there is a recession or if there is a strong turn -- slowdown in usage and building activity. It can have a very quick impact in our financial results, and organic growth and margin will obviously reduce because of this conjunctural. One of that will not repeat itself. But again, what we see in Q3 right now being at the end of July, is it looks still very strong.

And we are working hardly to equip all our units to shift this conjunctural into structural in next year to come, specifically next year.

Understood. I just wanted also to understand -- go back to the 17% to 24% margin range. Does this also include land, high voltage that you have in backlog? Or is this just a subsea range?

No, it's all the business -- everything altogether included.

Which is remarkable considering that your land business was loss-making when you became CEO. So I'm wondering how much, again, is this fundamental improvement of industry conditions? And how much has this been kind of Nexans internal driven?

I'd say is that we have significantly -- yes, that's right, the 2 answers. The first sequence, we have turned heavily negative of high voltage to positive in the last years. That was the first sequence of structuration, the closure of Hanover, the improvement of the operational performance, but as well, we -- the margin split over the sectors between interconnection subsea offshore wind farm and land is very high spread. And I will say that 85% to 90% of our backlog is made of subsea projects.

Yes, the long portion really reduced significantly between 18 and 25. And even today, the dilutive impact is much lesser than it was before.

Next question?

Our next question comes from George Featherstone from Bank of America.

I just wanted to follow up a little bit on the margins for the electrification businesses in aggregate. Clearly, you've made some very strong improvements. So I just wanted to see what the potential progression or how we should think about the pace of margin improvement progression from here? And perhaps if you could maybe discuss in this the margin at aggregate level in the backlog compared to current levels?

Good question. At least for -- I will let J-C comment, but at least for generation and transmission, we have answered. I give you -- I think we cannot do better to say that the margin between now and 2024 will be between 17% to 24%. We keep improving on distributions for many utilities by keep bringing more complexity reduction, simplification of our portfolio and more bundling innovations. But J-C, can you give us some perspective regarding the result -- overall of the electrification?

Yes. So globally, what we see in electrification, it's -- we are today at the -- we are seeing '22 where the EBITDA margin and electrification will be around 12%, so very accretive for the group when the average is -- the average of Nexans, we see it at about 9%. So very accretive and much more accretive than the rest of the non-electrification businesses. And what we see is, basically, we are getting every year about 0.5 point of margin -- additional margin on electrification total every year. So by 2024, we will -- this electrification -- our electrification business will be about close to 13.5% EBITDA. So there's 2 reasons for that, the ones that we discussed about generation and transmission, mainly the phasing of the project -- not the phasing, sorry, the mix of the project with a very significant interconnector project coming into the backlog with higher margin than the average. I'm talking about EuroAsia for instance, Crete-Attica today, and there are other ones in the pipeline, that's one thing. The additional capacity, which brings the generation transmission business move basically from a business -- that was a business of less than EUR 1 billion of sales, about EUR 900 million of sales to a business, by 2025, that would be EUR 1.4 billion of sales. So very, I would say, bigger business, thanks to full Charleston, Aurora plus the additional CapEx. So overall, this business running at 24%, like we said, with the bigger size, improved the total margin of electrification as well. And then we continue the transformation of our SHIFT program, SHIFT Prime and so on, with usages gaining 1 point or 0.5 point to 1 point per year. So really, the momentum on the 2 electrification business is very strong, driving the electrification business profitability significantly up over the next couple of years.

And why we are confident on those numbers or these days because part of the EUR 2 billion revenue that I mentioned that are still at 5% EBITDA, a big part is still in the electrification field in usage. So we are running shift now in those units as well in some others. And that will bring a continuous improvement of our EBITDA over the year.

Okay. Maybe one more, just turning to usages. You've mentioned already on the call that this would perhaps be the area of the business that will be most sensitive to any short-term downtrends. But so far, it doesn't sound like in Q3, you see anything like that. I just wondered in the guidance now, do you expect that you would start to perhaps consume the backlog in usages as you get towards the end of the year rather than the adding to it?

So the order intake is still very solid right now versus the backlog. So our backlog is not reducing. We are -- we have -- we know you don't have a long visibility on the usages, but we have called all our customers, our platinum customers, they consider that Q3 is there in their backlog. So we don't see any downturn in that regard. We -- on that part of the guidance, we remain vigilant on what could happen economically in terms of economical trend in Q4, that's all. But I would say that if everything stays like that, the guidance, we are more on the upper part of the guidance than on the lower part of the guidance.

Yes. And our backlog for usages, for instance, is almost EUR 260 million. It's significantly up versus June last year and even versus December. So like we said, it can change quickly because it's short term, but at least we ended the semester with a very strong backlog higher than the past closing. Thank you, George. Next question.

Our next question is from Massimiliano Severi from Credit Suisse.

I just had a couple of questions, quite quick ones. The first one would be on the capacity that you have in the high-voltage space, clearly, EuroAsia is an MI project. I was wondering, right now, what is the split between MI and XLP? And what will be the split once you complete your capacity expansion plans? And if maybe you could comment whether you see any margin difference between XLP and MI projects, generally speaking?

No, we don't give the split between our capacity between MI and XLP. Everything I can tell you is that all investments we are doing right now is to expand our XLP capacity. There is no main difference between the 2 technology in terms of margin. The difference comes by the nature of the project by the nature of the project, is it an interconnection subsea offshore farm or interconnection? So right now, we are -- with today's capacity where -- when awards will be confirmed in coming weeks from EuroAsia, we will be fully loaded, but we still have room because we have the expansion of Halden running right now to be ready for 2024, and we still need to sign contracts under negotiation right now to fill in this additional capacity in XLP.

And in terms of the capacity that you have in your vessels. If you keep winning the installation projects for Orsted in the U.S., would the current 2 vessels that you have been enough to meet the demand? Or would you perhaps need a third vessel on top of Aurora and Skagerrak?

That's a good question. Ragnhild will answer. But that's why we have decided they want to keep Skagerrak and because we knew, given the very huge momentum on this sector, that we will need 2 vessels. But Ragnhild.

For the vessel part, it's slightly easier than for the manufacturing when it comes to capacity. So for the vessel part, what we are doing is that if we do need additional vessels, we will do subcontracting, as we have done in the past, and that will also be done in the future to take the kind of the hits, if I may use that word, if we have more need than 2 vessels. So for us, it's really just to optimize the use of these 2 vessels plus adding third-party vessels when needed.

And maybe if I could squeeze in a very final one. For H2 in the high-voltage division, clearly, H2 2021 was a great quarter. Should -- would you expect to be somewhere close to that level of margins or perhaps due to phasing, we could see margins slightly down year-on-year in H2 and then improving over the next years in the 17% to 24% range that you mentioned?

No, margin will be similar. There's not much difference between H1 and H2 in terms of margin this year.

Next question?

Our next question is from Luigi De Bellis from Equita.

I have 2 question -- some questions, sorry. The first one is on the high voltage. Can you elaborate on the main projects in execution in 2023 the voltage and the additional sales expected for the division for 2023 compared to 2022 in light of your backlog? And if you may, can you give us more color about the timetable of delivery of EuroAsia and Tyrrhenian Link quantify the impact that you expect in 2023 in particular? And always on the high voltage related to the EuroAsia, can you help us to understand how much is the complexity of the projects, considering the 525 kilowatts MI technology that you have to use if I understood correctly.

Well, I think I will let Ragnhild answer, but regarding the financial statement of 2023, I don't want to give any number right now because this is not the purpose of the call. But I think there is a legitimate question regarding complexity of EuroAsia. And as well, what are the main projects into execution in the -- from second semester on 2023, Ragnhild.

Yes. So to start with the mass-impregnated MI correctly, yes, the Tyrrhenian Link is coming into play. We have Attica-Crete ongoing as we speak. So that will be, of course, continue to be a good contributor for H2, then we are following with Tyrrhenian Link and as well EuroAsia. EuroAsia will last until '27, assuming with the preferred supplier for both the lots, so this will really fill our capacity. For EuroAsia and Tyrrhenian and also Crete-Attica, we are using the MI technology. It's a well-proven technology that we have used for since the '70s for all interconnected projects. There is no added when it comes to the cable itself. It's a proven technology. The new thing with EuroAsia is, of course, the water depth, 3,000 meter water depth. And here, we have already proven that we are managing this with this type of cable and the technology that we have on deepwaters. It's a long length -- but long length interconnectors, 5 25, that's also something that we have proven with the North Sea Link project that we installed and completed on time 2 years ago. So for EuroAsia, yes, it is a complex project. It's a very, very large project, the technologies that we're using, which is a proven technology with all the proven technology also on the installation reducing our new state-of-the-art Aurora, which is also made for laying in very deep waters, we are 100% certain that EuroAsia is a very, very good fit project for us as well as Tyrrhenian link. And the other question was related to the backlog, what type of projects we have. So I mentioned now MI. We are, of course, completing this year the Seagreen project, as you probably know, we have already also the Moray West project in our pipeline that we will work on. Attica-Crete, we have mentioned. We have mentioned also earlier that we are working on like Empire Wind, like the Revolution, like South Fork. So we have quite a strong backlog -- not quite a strong, a very strong backlog, full backlog, with ongoing projects in execution today and that will continue through next year.

If I may, on the full year 2022 guidance, 2 quick questions. The first one is on considering the strategic CapEx, how much is the net debt expected by the end of 2022. And the second one, always on the guidance, can you elaborate on the implied EBITDA for telecom industry division in the second half compared to the first half, or your indication of margins for this division for the second half compared to first half?

Industry -- I will take the last part of the question. Industry, I would say still a big question mark on China, because we had a very, very high deficit of demand in industry in China for rolling stock. So we know that some sectors are pumping up in China, like the automotive, but not yet the rolling stock. So either we remain stable. Either we see an uplift. Definitively, on automotive harnesses, with the big hit that we have in January and February, specifically February and March in Ukraine, very, very strong demand in automotive harnesses in second semester is foreseen. Rolling Telecom, there was a slow start in some countries like in France and that should improve in second semester. So I would say that the industry and telecom dynamics would improve in second semester. Regarding the net debt.

The net debt, yes, net debt. So basically on the strategic CapEx, we have about, I would say, balanced first semester versus second semester, how we spent Out of the EUR 126 million of CapEx in H1, we spent EUR 82 million for the strategic CapEx, expansion in Halden. The figure for the second half will be about the same EUR 80 million. So the bulk of the spending of the CapEx will be in 2022. However, with the significant downpayment, we are aiming to receive, with the contract we mentioned of the awards in the second semester, our backlog in high voltages should be growing quite significantly. If you add those 2 projects that are not in the backlog in June and down payment coming through. Our, net debt will significantly reduce versus what it is at the end of H1. So I'm more targeting a net debt close to EUR 200 million versus EUR 340 million I presented to you for H1. That's the way I see net debt evolution in the next semester.

Thank you very much. Very clear.

Next question please.

Our next question is from Jean-Francois Granjon from Oddo.

You have already answered a lot of my question, but nevertheless, 2 quick questions, please. The first one, to be clear regarding the guidance. The new guidance includes the continuation of Centelsa. That's right. It was not the case for the previous guidance. So previous guidance does not integrate Centelsa. So do you confirm that for the new guidance, this includes the contribution of Centelsa second half. And my second question concerns the high voltage or generation and transmission division. Could you give us the mix between production and installation for the first half? And what do you expect for the full year and for next year.

So I will take the first question. So on the first question, you're right, completely right. The first guidance did not because we specifically said at the time that we will not include M&A into our guidance, an M&A divestment. So when we announce -- when I announced the guidance at the beginning of February, we didn't have any -- I mean, we were in progress of closing the Centelsa, but it was not closed. So it was not included. We closed the acquisition April 1. So now it's an asset of Nexans, fully asset of Nexans. So it's included in our new guidance. So I confirmed just to give you some financial information, contribution of Centelsa in the first half is EUR 7 million. The second half should be around EUR 15 million. So total, I would say, I would say, controlled contribution, about EUR 20 million for the full year, the new guidance of the range of EBITDA. And for cash flow, you should take about the same policy.

And for this split, if I understood your question correctly, for the split installation manufacturing, we don't really do that split as such. We are -- what we are doing is to ensuring that we are fulfilling all our capacities, both manufacturing and installation. And please remember that our approach is full turnkey project. That means also including engineering, manufacturing, installation, protection, after-works, et cetera. So also all our margin is coming from the turnkey project whether or not it's manufacturing, engineering, or if it's [indiscernible].

Yes, this is the trend that we see, Jean-Francois in the subsea sector is all projects turning more and more turnkey, because of their risk and complexity. And that means that the entry barriers for competition is raising. And that's good for us. For a big project of interconnection, you see only 2 main players because of the unit as well a very solid balance sheet. It's only Nexans on our Italian colleagues mainly. Thank you, Jean-Francois. Next question?

The next question is from Eric Lemarie from CIC.

Yes. Just 2 or 3. First one, to check a number. Could you share with us the value and volume impact on sales in generation and transmission? I think you gave us the figure for distribution usage, not for GMT, unless I missed it. And I got a second and naive question actually. You explained to us that you can reach your financial midterm guidance without any further acquisition of disposals at constant perimeter, as you said. And I was wondering, is it really necessary to implement this asset retention policy? Or is it really necessary to become a pure player in electrification? Because after all, you are already performing very well anyway today with the current perimeter.

Thank you, Eric. So we don't -- regarding your first question, we don't split this logic of value or volume for the generation and transmission business because it's a project-driven business and the -- our interest for us is to make them turnkey, and that's the most important, and to execute it rightly. Regarding your question on why becoming pure players, it's because it's not only a financial strategy. It's not only a financial strategy. We believe that if we remain a generalist covering 34 subsectors, diluting our capital allocation to 34 subsectors on 70 factories, asking Jerome's team, 8 engineers to work on 34 subsectors you are diluting your report. You are diluting your impact. We believe the world of tomorrow is much more complex, facing now big risk on the higher level of crisis that are, I will say, getting in additional together, either climatic either -- around climate, around geopolitical or sanitary or whatever. That means that the winner of tomorrow are the pure players. The one that will allocate all their resources, management bandwidth, R&D effort in one single direction to create distinctive offer. So if you want Nexans to be strong even in down-down times, if we want Nexans to be a great leader in the electrification play field, we have to be focused, and we have to -- to quote a very well-known guru in U.S., we have to get the profit from the core business. So focus on your core business and reallocate all your effort on that direction. This is what we are doing. And the advantage that we are doing that in the electrification playfield is that we are entering the third electrical revolution that will imply massive investment. And this is why that we need to put all our effort in one direction. We don't say that automotive is a bad business. We don't say that telecom is a bad business. But you cannot be everywhere. If you are everywhere, at the end, you are nowhere, and you will see your market share sector by sector reducing every year. Because in each sector, you have pure player. Give you an example to make it short, in telecom, we are small players, and we are facing a company that we are not talking about doing our call, Corning. This company is a pure player, entirely focused on telecom. The chance for Corning according to win in the future versus Nexans is much higher because they put all their, I will say, means in the same direction. So this is what we are doing in the electrification play field. The generalist model is over from what we see in terms of market trends. It's not an [indiscernible] question. It's a strategic question.

Can I follow-up one?

Sure.

Yes, on distribution and usages, so you mentioned you had very, very strong growth in North America for both divisions, 77% in North America in distribution, and I think 57% in North American usages. Could you tell us if it's -- I suspect it's all due to contractual reasons. But could you give us maybe an idea of the value effect in North America for this division? And maybe share with us the level of revenues you generated in North America in distribution and usages?

We don't go in much better than what you have. Sorry for that. We have our own model, you have yours. I think you have enough details to compute your model. Thank you, Eric. Next -- last and last question because we have to run into road show, I'm sorry about that. Next question.

So our final question comes from the line of Rajesh Singla from Societe Generale.

Just 1 question, maybe a bit technical in nature. So on the one hand, we are seeing very strong demand from -- for high-voltage cable going forward, and it might accelerate even further. And on the other hand, we have a little bit of this macroeconomic issues, which we might be facing for the low voltage or medium voltage cable. So my question is how flexible are our manufacturing facilities, specifically the medium voltage cable? Can we convert them to feed the demand which we are seeing in the high-voltage segment? Basically make the manufacturing facility more flexible to basically feed whatever demand is strong at that particular point of time. So is it easy? Or is it technically difficult?

No, the answer is negative. I know that cable looks, I will say, same cable for each business. Now it's -- there are level of complexity from high voltage to low voltage is nothing to compare. If you want to enter in the high-voltage field, you need minimum 2 years of qualification and pretty massive investment. This is what you see in Charleston, for example. So on the -- I think -- I cannot comment more, Rajesh. I invite you to come in Charleston unit in September 2022 to understand the complexity of manufacturing high voltage cable.

And even last question would be on -- if I heard you correctly, you said your targets are on track. The 2024 targets are on track, and you will be able to meet them despite any weak demand challenges, which might come on our feed during the next, say, 6 to 12 months?

Yes. It depends, of course, how deep will be a recession if it comes, because it's like COVID, I cannot predict the world economy in 2023. But if there is a downturn, a slight downturn, we are very confident in achieving our results. For what I say, and I think this is the major information because we had a lot of discussion with the Board and with our investors. No one wants to see us making acquisitions just for the sake to make acquisition. So we don't want to make a dilutive acquisition just because we commit to make acquisitions. So what is important is that we are unleashing the full potential of the group to make sure that we will not disappoint the market and we will be at the rendezvous of our 2024 target whatever is the portfolio at this time. And I think it's important for all your model as well. I know that you're working on a 10-year basis, but there is a, beginning 2019, big swing in terms of management teams, a new completely new spirit, very innovative methodology in terms of company transformation. And we are making a very bold strategic move. So the next sense that we are talking about now and in the future does not compare at all with what you've seen between 2009 and 2018. And believe me, I was in the company. Here, it's a completely new phase that you have in front of you. By now, do you have another question, Rajesh?

No, that's pretty much from my side.

Perfect. Thank you. Thanks a lot. As always, we have a very high level of audience this morning. So thanks a lot to be connected, looking forward to meet you all physically if we can for the one that we'll enjoy some great summer break. Enjoy your break. Thank you very much.

Thank you for joining today's call. You may now disconnect your lines.