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

Ladies and gentlemen, good morning, and welcome to Nexans' Full Year 2023 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.

Yes. Thank you. Good morning, ladies and gentlemen, and thank you for participating in Nexans' conference call. I'm Chris Guerin, CEO of Nexans. We are here with Jean-Christophe Juillard, Deputy CEO and CFO; and Élodie Robbe-Mouillot, VP Investor Relations. I will turn you over to Élodie, who 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 now turn you back over to Chris, who will go over the 2023 highlights.

Thank you, Élodie. So as you can see, Nexans' robust performance in 2023 were once again demonstrated -- demonstrating once again, sorry, the scale of our transformation since 2019, and we delivered a record adjusted EBITDA margin, exceeded our normalized free cash flow generation expectation. All this was done despite our difficult start, as you know, in Generation & Transmission due to the ramp-up cost of -- associated with our unit in U.S. and the termination of contract with a low margin. This G&T business is still transforming under the new leadership of Pascal Radue, and we look forward to its future success with a strong improvement already associated with the H2 result. Overall, the '23 performance also confirmed the transformation of Nexans year-over-year into a more profit-oriented innovative and customer-centric group, thanks to our transformation platform, in parallel, and as well we are very proud about it. In parallel to this profit generation, we have made considerable progress on our sustainability goals with a significant reduction of CO2 emission across the group. I'll come back to that. Let's shift to Page 3. To start this presentation with the -- I cannot avoid it, the recent announcement linked to the signing of a landmark agreement to acquire the iconic company called La Triveneta Cavi, an organization recognized for their excellence within the European medium and low-voltage sectors. Based in Italy, La Triveneta Cavi primarily manufacture low-voltage cable for building application and infrastructure as well fire-retardant cable system and medium voltage cable for renewable application across 30 countries. The company is about 700 talented people and generate current revenue of more than EUR 800 million over the last 12 months. So 4 main units and we mentioned as well the transactional terms. It's a 5.6 multiple based on 2023 EBITDA pre-synergy and 4.6 level of multiple post-synergy. Moving to Slide 5 with 2023 main highlight. As we mentioned, July, we have made significantly upgrade of our guidance in '23 for midpoints from -- to reach a midpoint from EUR 600 million to a midpoint of EUR 630 million. So despite the difficulties as mentioned on G&T, the action we took to keep improving our profitability overall on cash flow generation through the year 2023 are here showing the evidence of the robustness to reach this financial performance. So we have been able, as you can see, to reach the high end of the range at EUR 652 million EBITDA, including share-based compensation expenses. But as we mentioned last July, to be comparable with peers, we have adjusted for those elements and we are then concluding the year at EUR 665 million adjusted EBITDA. In terms of normalized free cash flow, our profitability, productivity improvement led to significantly improve our free cash flow conversion in all businesses. It's not only a topic of down payment as well a significant improvement on the working capital aspect in all sectors. But on top of that, we had a down payment collection for some important project that exceed our expectations. So as a result, as you can see, we will reach a free cash flow of EUR 454 million for guidance that were around, I would say, EUR 250 million. So as I mentioned, very proud about it in parallel to this profitability increase on free cash flow conversion, we have continued to reduce our CO2 emission at minus 36%, supported by our E3 performance model, that now systematically measure the efficiency of each individual businesses in terms of economics, environment and engagements and making sure that everything converts to the same direction. Moving to Slide 6. Let's take a deeper look at the key highlights of the year in a broader perspective. As you can see, we are very -- making solid progress advancing in our market leadership, strengthening our profitability, improving cash flow generation, even if sometimes we are facing lower demand environment in some regions. So as you can see, we reached a double-digit EBITDA 10.2%. Very, very strong results compared to the legacy of the group, superior cash generation reflecting very strict working capital management. So we have reached 68% normalized cash conversion. Return on capital employed at 20.7% and I will come back to it. We will propose to the General Assembly a dividend of EUR 2.3 per share and we -- JC will comment. We have a very, very solid balance sheet, which is maintained. We -- in terms of M&A for the highlight of '23. So of course, with the acquisition of Reka at EUR 160 million revenue, very solid backlog, EUR 6.1 billion, with all projects that have been confirmed, and we received in the last weeks, the recognition to be on the A list of CDP Climate. Let's go to the numbers on Page 7. So as you can see, we reached an EBITDA of EUR 665 million, adjusted EBITDA 10% profit, free cash flow of EUR 454 million and return capital employed at 20.7%, taking into account that Electrification reached a level of 26%. Page 8. So as I mentioned, this E3 unique performance model on power, our manager [indiscernible] and we were to keep improving our financial and environmental indicators. This is why we are now calculating both, of course, the return on capital employed for each individual unit per customer on product, but to ensure that the growth is not on -- the growth of our businesses and revenue and profit are not detrimental to our carbon footprint. In addition, we calculate the return on carbon employee for each individual business plus, of course, reduce transportation, more and more local for local and reduce the carbon content of our product. This is the recent announcement of our partnership with TenneT or Alcoa that we just published with a low carbon aluminum. So as you can see, very great, I will say, success in the CO2 emission because we are at minus 37% Scope 1 and 2 and minus 36% for Scope 3. A word on Slide 9. The key levers of supporting the transformation of the group. It's about -- that we established in 2021 for -- during our Capital Market Day. All our strategic initiatives are outperforming, thanks to the deployment of repeatable offer in the renewable energy on Amplify reach already EUR 80 million, where the target was EUR 50 million at the end of 2024. So above the target, obviously, overall, but as well a year ahead. The same for the premiumization of our offer that -- which really represent for us a structural effect on our margin improvement, we reach SHIFT prime at EUR 47 million incremental margin, where the targets were at EUR 40 million in 2024. This is linked to the fact that customers are really happy and satisfied with our new offer. On Page 10, the evolution of our SHIFT platform, both performance and prime keep raising the bar on the threshold of EBITDA on free cash -- on cash flow conversion. Sometimes we say value burner for 1 day, could be a value burner forever because we keep raising the bar every year. But what you can see is that we made a significantly improvement on converting our low-margin unit into profit driver as 20% of our Electrification revenue have been converted into profit drivers, thanks to our unique transformation platform. On Page 11, a word regarding our asset rotation. So I will not come back. We have made the disposal of our telecom system in 2023. So Nexans has no connection at all or linked with the telecom business, at least on the long part. We have acquired Reka, EUR 160 million. And of course on this, I will not comment on what you know, but let me announce as well the level of synergy that have been incremental. We are at plus 20% run-rate synergy at Centelsa, plus 50% run-rate synergy at Reka. As you can see, twice bigger, twice faster because we reach in both case, in the first year of integration the total amount of synergy that was planned for the third year of post integration. So of course, this M&A blueprint integration that we have make very well structure, give us a very high level of confidence for the new integration to come. Let's move on the next page. So Page 12, just a reminder that we have made a significant investment Halden plant expansion in Norway, that has been completed. We have started -- we have qualified and started the first production of cable in this expansion. Everything is running perfectly well. We have announced as well a third cable-laying vessel that will benefit us in terms of new revenues in 2026. I've signed an MoU with the American government last December for an opening of a new -- of a greenfield unit in Morocco in the south of Casablanca, that will open in 2026 to support all the electrical grid of the Moroccan territory but as well African. And we keep investing in our usage business in terms of technology for more fireproof product and as well implementing Industry 4.0 everywhere in all our units in the world, supported by our key partner, Schneider Electric. In terms of shareholders' returns, let's go to Page 13. So we will propose a dividend of EUR 2.3 per share, which is a growth of 92% versus 2021. And you see that constantly, we keep improving, which is give us a dividend payout ratio of 40%. But we need to notice as well that on what the feedback that we received from investors that in terms of total shareholder returns at the end of 2023. We are in the 3-year base, we will reach plus 48%. But on a 5-year base, and that's the start of the management team, we reach 270% growth of our TSR. Let me turn now to Jean-Christophe that will guide you to the business overview and the financial items.

Thank you, Chris. So now I'm moving to Page 15. And if we look at the evolution of the top line and the organic growth of Nexans, you see that at group level, organic growth of 2023 is at minus 0.9%. But again, it's always what we communicate. You know that part of that, and you see that on the other segment, we have the strategy, the aim of reducing the metallurgy business, sales -- external sales on the metallurgy business that was announced in 2021. So if you exclude this, I would say, objective of reducing those sales, which are down almost 18% in 2023, the group organic growth stands at plus 3%. When we look at the margin, group adjusted EBITDA margin, it improved by 1 point versus last year to reach plus 10.2%. It's an important step for Nexans because it's the first time Nexans is reaching double-digit adjusted EBITDA margin on sales, number one. Number two, if you remember, 2024, we had the commitment to reach EBITDA margin percentage between 10% to 12% by the end of '24. So we are seeing already within the objective a year ahead. Now if we look at the different segment of business, I will start with Electrification. So Electrification organic growth is minus 1.5%. I will comment in the coming slides, basically each businesses of Electrification. Again, here, we have announced that we would terminate the umbilical business, oil and gas, offshore cables. So this is explaining part of the negative organic growth of the Electrification and G&T. If you exclude basically this also strategic decision to get out of oil and gas, the Electrification organic growth is plus 2.4%. In terms of margin, you see that despite the issue we've had with high-voltage G&T in 2023, the overall adjusted EBITDA margin of Electrification is improving in 2023 by 0.5 points, 12.5% adjusted EBITDA margin on sales, which is also a record for Electrification, and I will detail where this is coming from. Non-Electrification had very strong positive organic growth at 13.7%, mainly explained by twofold: number one, the harnesses business that continued to grow plus 18% growth -- organic growth on harnesses and 10% growth on the other industry segment ISP business. So quite strong, I would say, organic growth of non-Electrification. And you see also that the margin on non-Electrification is growing by 2 points to reach a record of 10.6%. And that's driven by different factors, but one to notice is the tremendous, I would say, profitability improvement of the mining business in the U.S. And finally, I commented that other activity, minus 18%. This is mainly driven by the sales of metallurgy that we purposely decrease as per our strategy. Now let me detail a little bit the evolution of the businesses, and I move to the next slide on Page 16, and we look at Generation & Transmission. You know that Generation & Transmission has been -- it has been a difficult year in 2023. We announced in the first half of '23, a low point in terms of margin of that business despite a record backlog. We said that it would be a low point in H1 in the first semester, then we will gradually recover. This is what happened in the second half of 2023. You see on the graph that the margin improved by 3 points to 10.8%, which give us a 9.5% EBITDA -- adjusted EBITDA on sales margin for the entire year. We will continue the improvement of the margin gradually in 2024 first half and then higher level in the second half of 2024 when we will start recognizing revenue on the recent award of the EuroAsia contract. When we look at the organic growth, it's plus 1%. But again, if you exclude the umbilical termination of the business, the growth of G&T top line is plus -- organic growth is plus 17%. Then one word on the record backlog. We moved from EUR 3.5 billion at the end of December to EUR 6.1 billion at the end of 2023. This is a 74% growth of our backlog. Obviously, the 2 major projects we've -- that was awarded to Nexans in 2023 are the EuroAsia EUR 1.5 billion and TenneT same for EUR 1.7 billion. If I move now to the next slide on Page 17, and we have a look at Distribution. Distribution is -- it has definitely been a record year for Nexans in Distribution. Both the top line increased by 5% organic growth, plus 5% and the margin improved by 78% with a record adjusted EBITDA margin of 13%. Definitely, this business has been performing extremely well in all of the region of the world, where now we are in a situation where basically all utilities are realizing that grid replacement and investment are now a must. The -- I would say that the margin expansion is mainly linked to this high demand and the price power that we're having, but also the successful development of our SHIFT transformation. I move now to usages on Page 18. You see that on usages, we've had a negative organic growth of 6%, which we explained by the normalization of the volume. We've said that in 2022, we had abnormal level of volume in sales, mainly in North America. This has come to a normalization in the second quarter of '23 and third quarter of '23. Explaining the minus 6%, again, mainly in North America, it's not completely in North America. But what is interesting to notice is despite this lower revenue level in '23, we continued to improve the margin of the business. Adjusted EBITDA reached a record level of 14% -- 13.5% to be precise. Adjusted EBITDA on sales, which is a growth of 4% and this is coming again from what Chris explained on our SHIFT transformation, stronger pricing and our amplify solar tracker offer. So we are continuing to be very positive about the future of usages even in 2024. Now I would like to take you through the main financials for the year 2023. I will start on Page 20 with the profit and loss. So again, a record adjusted EBITDA of EUR 665 million at 10.2%, as I said, within the objective of 2024. I remind you that adjusted EBITDA since June '23, exclude the IFRS 2 charge, which is our share plan basically. This amount was EUR 30 million for '23 and EUR 16 million for 2022. For -- this table for comparison purposes, we updated 2022 adjusted EBITDA, reflecting that. You see from the bridge that the increase of adjusted EBITDA of plus 8% versus '22 is coming from the Electrification business for EUR 25 million, despite, again, the Generation & Transmission issues we've had, plus EUR 25 million. And then from Industry & Solutions that outperformed and generated incremental EBITDA of EUR 53 million. In 2022, we had a one-off gain of EUR 55 million for the sale of land in Europe. That was in the line, other operating items explaining in 2022, the higher operating income. A word on net financial results that increase significantly due to the higher cost of debt, obviously, and some refinancing we've done at the beginning of 2023 on the matured bond. And we had also some adverse ForEx impacts. Income tax is lower in 2023, mainly due to a lower tax base and also to the reversal of deferred tax assets for 2022 in some countries since the business plan of Nexans is improving and the visibility is better. Net income from operations stands at EUR 223 million. I will now move to the next page, Page 21, and we look at the net debt and the net debt evolution of Nexans. You see that the balance sheet of the company remains very strong. The leverage ratio remained flat at 0.4x net debt to EBITDA, and we have significant headrooms on our covenant despite the acquisition of the Reka asset in Finland. Cash flow from operations stands at EUR 511 million, and we continue to have a working capital improvement of -- very significant of EUR 287 million, mainly explained by the high down payments received from G&T, which is a consequence of the big award of 2023. But also continuous improvement, thanks to SHIFT and our transformation on the other cable business segment that improved working capital by EUR 70 million. CapEx stands at EUR 377 million, including almost EUR 200 million of strategic CapEx, with the extension for EUR 150 million of the Halden new lines of production, which are now in operation since the beginning of 2024, and also the first spending on the new third vessel of Nexans for EUR 50 million in 2023. After a financial interest paid, dividend payment and cash out from the acquisition of Reka, net debt amounts to EUR 214 million at the end of 2024, which is again a flat net debt despite the acquisition of Reka and massive investment in our high-voltage business. I move now on Page 22, and we have a look at our liquidity, so very strong liquidity, strong balance sheet, cash on the balance sheet flat versus last year, in excess -- above EUR 1.1 billion of cash, which give us obviously tremendous maneuver to develop our expansion plans. Total liquidity of EUR 1.9 billion, including EUR 800 million undrawn revolver product facility. And you see here the maturity of our gross debt. Total gross debt of EUR 1.3 billion and different maturities. We refinanced 1 bond at the beginning of '23. The next one is the 2024 bond, EUR 200 million, you see on the bridge that will be refinanced in the coming weeks. Now I move to the Page 23, and I just want to maybe spend a few seconds on having a look of where we stand. We are 1 year before the end of our equity story. So it's a good time to start to have a look of where we stand on the different commitments we took in Summary '21. You see that for each of the commitments we are whether in line or we exceeded the target. Obviously, we are already within the commitment for EBITDA. At the group level, we are at the beginning of the range, but Electrification activity, we committed 11% to 13%. We are almost at 13% a year ahead. And again, despite the issues on G&T, cash conversion has been outstanding at 70%, return on capital employed 26% were above the target. And operating working capital, again, is at a record level, almost 0.3%, so a very strong performance. And leverage, as I explained before, remains very low. Now moving to Page 25 and have a look at what we will be guiding for this year 2024. So we will continue to improve. We will continue to deliver and we propose -- we will -- we are committing to an adjusted EBITDA guidance range between EUR 670 million to EUR 730 million. This does not include the announcement of La Triveneta acquisition, since by definition, it's not closed and it's not part of the guidance. And normalized free cash flow between EUR 200 million to EUR 300 million, obviously, taking into account the very strong level of down payment received at the end of 2023 and therefore, explaining the big part of the big achievement of cash flow in the year '23. This being done, I will now turn to the next page, please.

Yes. Yes, just -- so we -- as you can see, we have a very solid guidance for 2024, but we know as well that we need -- for our main investors, more catalysts with long-term projections, so this is why we confirm our next Capital Market Day, that we'll be holding on November 13 in London. Now let's open for questions. Thank you very much.

[Operator Instructions] And our first question comes from Daniela Costa from Goldman Sachs.

I mean, we wanted to focus on 2 things. Regarding the guidance for this year, can you give us a bit of a color in terms of like the expected improvements in -- on a divisional basis, particularly how much of it is just G&T recovering from some of the issues last year versus the more cyclical parts of the business? And the second point is related to that, and it's just regarding G&T and the situation in the U.S., with some of the contracts still being retendered. EuroAsia coming in the back end of last year. What's the sort of utilization that you model into this guidance for the first half and the second half? And sort of what are the puts and takes on that given the situation with some of the contracts?

Okay. Daniela, I will take the first question or the first part of the question, which is basically giving some meat around the guidance for 2024. So definitely, we -- as we always do, we are not betting or we are not putting our numbers on our guidance on more volume and growth in Distribution [ and Usages ]. So basically, we assume the same level of organic growth, 0 organic growth, in fact, in both businesses for '24. So we are quite conservative. But we continue to expand the margin like we've done in the past on Distribution and Usages. So that will be a contribution. Basically, that margin expansion will be a contribution into the increase of the adjusted EBITDA in 2024. That's one thing. We are seeing more normalization in industry. No more further Industry & Solution. No more further growth, both in terms of top line and in terms of margin. So more, I would say, continuity. And finally, the last piece, which is very important, obviously, for the guidance of 2024 is basically the recovery that started in the second half of '23 on the adjusted EBITDA margin of the G&T business because, number one, the one-off we've had on the first half are behind us. We will not repeat themselves in '24 by definition. And then the contract that has lower margins that were executed in 2023 will start to significantly diminish and have lesser impact, I would say, on the margin of the business in '24. And as you rightly said, we will start now to execute the EuroAsia contract, mainly starting the second half of 2024, which has a very, very strong margin level. So basically, yes, a very -- I mean a ramp-up, I would say, continuous ramp-up as we said, of G&T. And also in G&T, there is a ramp-up of the margin percentage, but there is also a quite significant lift up on the revenue because we have now the extension line producing revenue. So the top line will grow by about 40% in terms of revenue. So you will have both versus 23%. The improvement of the margin gradually, as I explained, and at the same time, a bigger -- much bigger revenue line due to the extension lines and the bigger backlog will start to execute. So that's basically how we come up with this increased guidance for 2024.

Sorry, can I just -- just a clarification on 2 things that JC just mentioned there. Distribution, you've said no growth, but given the hyper cycle, just a bit surprised on that given the commentary on the outlook on that?

There is a little bit growth, but not significant growth. There is a little bit. But we always prefer to be -- Daniela, I think we always prefer to be conservative and not assuming Distribution and Usages significant organic growth because, obviously, by definition, we don't know what will be 2024, but we have uplift in margin. So margin will continue to improve quite nicely in 2024 as we see it. A little bit of Distribution growth. Definitely no Usage growth at all little bit of Distribution growth, but mainly margin uplift.

But the dynamic on the frame-agreements for the medium voltage cable distribution are very, very positive right now. Regarding the second part of your question is an update regarding contract in the U.S. First of all, maybe you've noticed that NYSERDA in New York have announced as well with new 4 auction coming up at the end of February. We know that as well that Sunrise is rebidding process by Wind 1 with new submitted proposal. We should have -- the customer should have a feedback at the end of the month. The only thing I can tell you is that Sunrise is really under production for -- on our side, and we received as well advanced down payment from the customer. So we consider that it should be a positive catalyst for us, but we need to expect the final feedback from the customers. Regarding G&T recovery, yes, a recovery point in terms of margin from one semester to another one, keep improving in first half and second half, again, an improvement. Overall, what we see in terms of utilization is a fully loaded situation in all units, including the one that were mothballed for awaiting the EuroAsia project in Japan. So you should see a very strong organic growth in G&T in 2024.

If I may just quickly on EuroAsia, the advance you got seem very low in comparison with the size of the contract. Was that a trade-off on lower advances better margin, given what you just mentioned? Or how should we think about it?

No, it's not. We are -- we will receive the total advanced payment of 15% of the contract value. So the rest will come in the coming months. I remind you that we are still -- there is 1 milestone that needs to come, which is a financial close of the project. Despite the project is 70% funded by the European Union, there is a portion of that, that needs to be funded. We will -- however, we will get the remaining down payment of the contract in the coming weeks, months, I would say, first, second quarter. The piece we got is part of the down payment, but it's more a reservation fee to lock the capacity for EuroAsia to lock the line and it's a nonrefundable reservation fee of EUR 62 million. That's why we said.

Plus the notice to proceed.

And the notice to proceed and so on, but it's a part of the down payment, which is nonrefundable.

And we're moving on to Akash Gupta from JPMorgan with our next question.

I have 2 as well. The first one is on portfolio. So you made a good progress on acquisitions with the acquisition of La Triveneta Cavi announced last week. But maybe perhaps you can update us on where do we stand on the divestments? And what's the plan in terms of disposing the remaining non-core, non-Electrification businesses? So that's number one. And number two is on profitability of La Triveneta Cavi, if you can elaborate how does it compare? And maybe also provide some rough split of revenues of EUR 800 million plus between medium voltage and low voltage.

Akash, thank you for your question. I will start with the divestment -- an update on the divestment. So now telecom is behind us. We have -- I remind you, 2 blocks we want to divest. The first one is harnesses. Unfortunately, this one is not progressing that much due to the situation in Ukraine. Despite the fact we said, we explained that we have duplicated the asset outside of Ukraine. So if the war was going to move further into the country, we would be able to switch production somewhere else. And now we are basically -- with that being done in 2023, we are now, I would say, restarting the process of divestment. But to be transparent with you, it's not progressing that much. And I guess until the situation in Ukraine improve or change a little bit and get more visibility, I think it will be -- harnesses will be the last piece to be divested and probably not in 2024. The second group of assets is the entire industry and solution block, EUR 800 million. So this one, we are progressing well. We always said that it would be the last one to go because of the carve-out. We've completed, I would say, a big chunk of the carve-out. We are now attacking the -- we started to attack at the end of 2023, the information system, ERP separation, which is well in progress. We should be done by that, I would say, in the first half of 2024, and we will start on disposal of the asset, I would say, end of first half, beginning of second half and hopefully get the asset divested by the end of '24 or I would say, first quarter of 2025. So that's what I can tell you on the divestment.

Regarding La Triveneta Cavi, so it's roughly 90%, 9-0, on low-voltage cable, so for various applications. And the rest is about medium voltage on solar, but we have already a huge plant in Italy and basically we are doing medium voltage, so there is a very, very low overlap versus what we have already. And 1/3 of their revenue is located in Italy, a 20% in Germany and another 20% in France and after in very various countries. We don't disclose the profitability at that stage, but it's a pretty good number.

And maybe a follow-up on the guidance. So when I reconcile your comments that in Usage and Distribution, you are looking for flattish top line and margin expansion. And then in G&T, it's 40% organic and margin expansion in both first half, second half. What is the implied for industry business because it sounds like you are probably guiding for, at the midpoint, a big correction in profitability of Industry segment. Is that correct? Or am I reading too much into it?

No, Industry will not go down. It will not go down in '24. There will be a slight improvement in top line, mainly driven by the continuous recovery of, I would say, aerospace that is continuing to improve. We don't know, obviously, all of the segments. What we're foreseeing is maybe a weakener situation in the first half due to automation backlog being low. So there's probably going to be some impact on sales on automation, which is one of the large part of our Industry & Solutions, but we see a rebound in the second half. So overall, I would say that you have a moderate top line growth and the margin will also increase a little bit, but it will not be -- I mean, that different than the level -- extraordinary level of 2023, but it will continue to improve.

Taking into account that aerospace is booming, you've seen the record backlog of Airbus this morning, and we have more than 50% market share in that territory, fully loaded and as well some business like medical, which are very, very, I will say, positive.

And up next, we have a question from Sean McLoughlin from HSBC.

Firstly, just thinking about CapEx in 2024, given hyper cycle, given, I guess, your growth expectations, just what should we be thinking about CapEx this year? And I guess, is that then a new normal level going forward?

Yes. Thank you for the question. So the CapEx in 2024 will pretty much be at the same level than 2023, slightly below, but not that much. We will have the bulk part of the investment in the new vessel that started only at the end of 2023, the investment second half of 2023, last quarter of '23. We'll have the full remaining execution on that CapEx in 2024. So that will kind of offset the investment that we did in Halden in '23. So we'll spend about [ EUR 140 million, EUR 150 million ] on the vessel in 2024. And then we have basically a maintenance CapEx that will be around EUR 210 million. So basically, we will be around EUR 350 million on the total CapEx versus EUR 423 million. So a slight reduction but not yet significant. The CapEx normalization will really start starting in 2025.

And the second question, just regarding the high-voltage market environment. I mean, all the cable suppliers now have record multiyear backlog visibility. I'm just wondering how current market demand or how transmission operators and offshore wind developers are looking at cable contracts going forward? And what you expect in terms of new order intake in 2024?

Yes. I think we have still a significant tendering activity. You've seen as well the evolution of the backlog of our competitors. We are certainly the one that still have some slot available in 2027 and 2028. That give us in good position for future negotiation. But I will say, we don't see any slowdown in the tendering activity so far. All nations are waking up for energy transition on more interconnection. So I'm not concerned regarding future. And you've seen as well that in U.S. new auctions coming up in New Jersey and New York, so there is a kind of off race between states in U.S. between each other. And [indiscernible] as well announcing new offshore wind farm coming up in France. So the objective for us is not to show additional CapEx so far, give us -- we like to get the returns of the CapEx that we already made on the one that we already announced, but we are on the, I will say, evolution of a full utilization ratio of our line, both in production and installation. So very high confidence in that regard. Thank you, Sean. I know it's a very busy morning with many I will say publication, maybe another question.

[Operator Instructions] And up next, we have a question from Miguel Borrega from BNP Paribas.

A couple of questions for me. First, Generation & Transmission. Obviously, the margin remains below your expectations. And just wanted to ask, you have 2 out of 3 impacts that will disappear essentially in '24. So just can you give us some color around the percentage of legacy versus new awards in the 2024 P&L? How much is that is legacy? How much is that is new awards just trying to calculate the step-up in the margin we should see in the second half and then also in '25?

I cannot give you the percentage. I will tell you that we have some contracts that were executed in '23 that will go through the first semester of 2024, with lower margin level, mainly impacted by -- mainly coming from, I mean, pre-inflation time and we need to complete execution on. So that will take -- that will continue through at least the first half, second half of '24, but diminishing in the second half. And then in the second half, as I said, you have [indiscernible] revenue starting to kick in. And the margin on that project is definitely at a different stage than much more accretive. So you will see an improvement. It will be gradual. The bulk part of the improvement will be in the second half and then it will be in 2025 and '26, we will be back to the 17%, 18% target EBITDA margin. So definitely, what we don't have and you're rightly to say, we had some one-off, pure one-off like we took on liquidity damages in the account of the first half of 2023, that by definition, it was on a contract called [indiscernible]. This contract is finished. This one-off is behind us. It will not repeat itself. So this is why also H1 was -- '23 was a low point. And from now on, the manufacturing plant, both in Charleston and Halden are functioning and manufacturing according to our expectations. So the question is just to evacuate, terminate the contract with lower margin pre-inflation and then start the execution of the big backlog with a big contract with -- that was awarded to us with much better margin, and you'll see the ramp up already coming up in '24 then '25 to reach a level of -- in '26 of 17%, 18% margin.

That's very clear. And then if we turn to Usages, margins have now normalized. Where do you expect this to go in '24? Is there further weakness that you're seeing from the second half into the first half of this year?

Yes, it's normalized in North America, at least on our side. What we see is that we're not based on growth on Usages because level of predictability is pretty low there. Even if we believe that North America will be back to single-digit growth in coming months in Europe. We have first semester very weak. But overall, we still have our transformation program that keeps feeding our margin improvement because we still have some unit at single-digit EBITDA on sales that are going into our transformation program in order to reach a 10% to 12% EBITDA on sales in the coming years. So even if the year in demands could be a bit lower and may affect the slowdown, we are very, I would say, positive on the margin improvement in the coming months.

And then just one last question on metallurgy and others. So this was EUR 13 million EBITDA positive in '23. Can you give us some color on what this includes? And should we expect a similar figure for '24?

Yes, Miguel. So basically, this is the adjustment of IFRS 2 charge that went into the other segment. This number was EUR 13 million. So in fact, this is why you see the number. This number for 2024 will be around between EUR 18 million to EUR 20 million. The rest is basically the metallurgy margin of the energy business, which is, as you know, quite low. The margin on the metallurgy sales offset by some corporate costs that are not recharged, net corporate cost not recharged to the unit. So that's basically the combination of those 3 and the reason of the increase is this IFRS 2 recharge that we took out of the adjusted EBITDA.

Okay. So EUR 18 million to EUR 20 million in '24, that's correct.

Yes, that's right. That's right.

And we have a question from Bastien Agaud from Berenberg.

Regarding the acquisition of La Triveneta Cavi, when do you expect the transaction to be closed and to be taken into your account?

We have our -- let me -- thank you, Bastien, for your question. Let me pass over to the -- to our General Counsel, which Nino Cusimano, Italian.

Exactly. Nino Cusimano here. As Chris says, I'm Italian, so I've been very involved with the acquisition of La Triveneta. We're all very proud of transaction. We're expecting -- to your question, we're expecting closing in June. There's the statutory time that you have to wait for the antitrust and Golden Power filing, but we expect everything to go smoothly, so June, we should close the deal.

Okay. Perfect. So I have another question. If we, let's say, expect the closing to be successful, that means your new EBITDA guidance, which excludes the acquisition, should be definitely higher, right, if we take into account this acquisition?

Completely agree, yes. You're right.

And our last question comes from Akash Gupta from JPMorgan.

I had a follow-up on seasonality. Again, last few years, we have seen your first half has been a bit stronger than the second half. And just wondering this time around, given you're expecting a stronger projects in the second half and also a bit of slowdown in first half in some areas. So any commentary on how shall we expect the phasing of this guidance between first half and second half?

That's a very valid point. You're right that to say that typically, we have a stronger half. Again, like you say, with G&T, we foresee the improvement more coming in the second half than the first half. So first half would be more at par with what we've done in the second half of 2023. So we will have probably a more balanced situation between first half and second half than we had before where it was a stronger first half and a weaker second half. But again, the backlog we are seeing today in Usages, for example, we have a higher backlog at the end of '23, beginning of '24 than we were last year. So it's plus 8% on the -- it's a short-term backlog, obviously, by definition, it's Usages. But we talked about the trend on Distribution, which very strong. We have already frame-agreements for 2024 with volumes that are much higher than before. We have Usages backlog, which is plus 7%, 8% higher than last year, beginning of the year. So the signal at least for the first quarter on Usages are good. Distribution first half should be good. But the only one that will ramp up second half will be G&T. So yes, because of that, we will have a more balanced EBITDA between first half and second half. We have no questions. Thank you for your attention. I wish you a very good day. Thank you.

Thank you.

Ladies and gentlemen, that concludes today's call. You may now disconnect.