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

Ladies and gentlemen, good morning, and welcome to Nexans' Full Year 2024 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, Mr. Christopher Guérin, Nexans' CEO. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us today. Here is Chris Guérin, CEO of Nexans; with me, Jean-Christophe Juillard, Deputy CEO and CFO of Nexans; and the investor relation team. I will turn you over to Élodie, who will go to the conference call rules.

Thank you, Chris [ and everybody ]. 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 you over to Chris, who will go over the 2024 highlights.

Thank you, Élodie. This was your last conference rule [indiscernible] information. So bravo. And congratulations for your promotions. And we are now welcoming Audrey Bourgeois, which is -- will be in charge of the investor relation for Nexans, starting today. Thank you. So let's go to Slide 4. As you can see, in 2024, Nexans reaffirmed its ability to drive profitable, sustainable growth in very dynamic and boiling markets, setting new financial record. The group showcase the success of this structural transformation as we repeat every year our long-term strategic vision. What you can see, in the course of the last 3 years, we have pursued our ambitious strategy centered on reshaping the portfolio, strengthening cash generation and enhancing operational experience. And our key achievements include M&A executions, successfully integrating 3 companies, expanding our market presence and boosting electrification revenue by EUR 1.3 billion, thanks to those 3 acquisition; of course, investments on capacity expansion. In spend, it's investing nearly EUR 1 billion in electrification sectors to enhance capabilities and advanced technology in key sectors, doubling our PWR-Transmission manufacturing and installation capacity. As you can notice as well, of course, a record order growth, more than EUR 8.2 billion of order intake over the period, securing unprecedented orders in PWR-Transmission. This is a testament to a strong market demand, obviously. And of course, we are maintaining a very selective approach to ensure healthy and high-value backlog. So those milestones have strengthened our foundation for long-term success. Let's go to Page 5. I think we are very proud about these sections because, in 2024, we did not just meet our financial target. We surpassed them, exceeding the upgraded projection from July and the commitments set during our January -- February 2021 Capital Market Day. Disciplined execution in a dynamic environment enabled us to deliver results over expectation, as you can see, EUR 804 million of EBITDA; adjusted EBITDA margin that was projected between 10% to 12% and will reach 11.4%; and of course, a record in normalized free cash flow. So we achieved significant sustainability milestone as well, reducing our carbon footprint ahead of schedule by minus 29%. If you go in the, on the page -- following page, Page 6. On this slide, you can witness the continuous structural improvement of our performance. Let's have a look on the numbers. So in 2021, we were at EUR 463 million EBITDA. Now we reach, we achieve EUR 804 million, meaning an upside of 74% versus 2021, reaching a record of group history in terms of EBITDA. Very strong cash conversion result in a normalized free cash flow of EUR 454 million, significantly above our initial expectation, while free cash flow stand at a record high at EUR 313 million. Of course, return on capital employed improved to 21%, reflecting our very disciplined capital allocation, but as you can notice as well, the Electrification-only return on capital employed is at 26%. Let's go to Page 7. It's important because we would like to, of course, be a pure player of our strategy. So let's have a look on the specific Electrification contribution that really outpaced the overall group performance, reaffirming this pivotal role in our profitable growth trajectory and simplification of our portfolio. You can see that now Electrification accounts for more than 74% of the group, with an adjusted EBITDA reaching 13%, so of course, outperforming the group overall margin of 11%. What you can notice as well is that the EBITDA of the electrification sectors is equivalent to the overall EBITDA of the group in 2022, which is as well a sign of vitality of that margin progression. Normalized cash conversion stand at 73%, exceeding as well the group performance. So notably, our full year EBITDA for Electrification, as I mentioned, reach, match the entire group '22 result but, of course, is for us behind those 2 ratio with all the others, a testament that our simplify to amplify strategy is fully in action. If we go have a look on Page 8. We have, of course, achieved key milestone in strengthening our Electrification portfolio, reinforcing the strategic focus on our position for the long term. Divestment of Non-electrification business, on one hand: We have successfully exited noncore sectors like telecom. And most recently, the divestment of AmerCable, we need to mention because it appear -- it happened on the beginning of January. Those moves allow us to sharpen our focus and streamline our operation. Acquisition in Electrification, expanding capacity in key geography while accelerating development of cost and revenue synergy ahead of schedules is what happened with La Triveneta, Reka and Centelsa. And of course, as JC will mention, our level of treasury but as well with the potential future proceed of Lynxeo [ not electric ], we need to redeploy this capital for further acquisition that will be either unlock new value pools with technology solution, either scaling operations through targeted investment, either high-growth vertical. And of course, we are willing to expand in some other geography outside Europe in the coming years. So that was the Slide #8. I love the Slide #9 because we -- like all companies, we are caught in the vortex of listed companies that -- forced to deliver result quarter after quarter, but these slides give us an overview, kind of helicopter perspective of what we achieved in the last years. It highlights more importantly, for me, [ that life ], the coherence and the consistency of our message year-over-year, plan after plan. Numbers are crucial, of course, but so is the business story. From the first equity plan, we have highlighted our structural capacity of transformation whatever are the economical condition. And this transformation power is still there and show its, I will say, success month after month. With the second plan, in 2021, we were the first to highlight the secular growth potential of electrification and our desire to capture a big part of it and as well to simplify our portfolio. What is important as well for us and what is highlighted there is that all investment that have been announced, promised, have been made. Promise have been kept. Commitments have been respected. We say what we do. We do what we say. On the Page 10. Starting in January 2025, we have implement this new organizational setup designed to deploy this, of course, the strategy, sparking electrification effectively. PWR-Transmission, given the size of the backlog and the big focus on execution, remain unchanged as a business group, with, of course, clear ambition to deliver this ambitious plan. The change come on the PWR-Grid and PWR-Connect organization. That will combine 2 market division as a kind of architect of Nexans' future growth to strengthen the focus on high-value market vertical, a big focus on strategic customers and, of course, scaling up reputable innovation model offers region to region after to -- region after regions. And in front of that, we have 5 region to align our operations, resources, decision-making close to the field, close to the customer; and to foster profitable growth across Europe, South America, Middle East and Africa, North America and Asia Pac. With that, let me turn it over to Jean-Christophe that will guide you to the business highlight, as well the financial details.

Thank you, Chris. So if we look at the highlight of the achievement of 2024. You have them, I would say, the main achievements, summarized on the page. I will start with the strong growth of our revenues. Standard sales grew 8.7%. I will come back in the coming slides about the organic growth, but 8.7% reported growth on standard sales. As Chris mentioned, a record level of backlog in our transmission business, EUR 7.4 billion adjusted backlog at the end of 2024. We continue to have a strong balance sheet, sound and strong balance sheet with a high liquidity level. I will come back on that, EUR 1.3 billion of cash on the balance sheet at the end of the year; a leverage ratio which is slightly higher than it was at the end of 2023 mainly due to the acquisition of asset in -- new asset in Italy, La Triveneta Cavi. And as Chris mentioned in terms of portfolio rotation, we completed acquisition of new revenue in Electrification with La Triveneta, adding EUR 800 million recurring per year to Electrification of Nexans. And we have made significant progresses on Lynxeo divestment. And we have divested since early January 2025 our unit in industry and solution, our unit in the U.S., AmerCable. Turning to the next page, let's have a look at our organic growth, as I mentioned, 8.3% standard sales growth, organic growth at 5.1% for the year; a very strong finish of the year with a Q4 reported organic growth of 8.3%. We had a timing issue we highlighted when we presented the Q3 organic growth. And we said that part of the low organic growth in Q3 was a timing that was pushed to Q4, and this is what you see here with 8.3%. What is quite remarkable is that Electrification has been the big contributor of the organic growth of 2024 with plus 13%. Obviously I will get back to you on the detail, but a chunk of that, a big part of that is due to the transmission backlog execution in 2024. Non-electrification, after a very strong organic growth, positive organic growth, in 2023, showed a decline of 2.5% in 2024 mainly explained by the Automation business which has been declining 27%, offset by some of division, I would say, industry like shipbuilding, for instance, that has been growing double digit. Other activities is mainly, as you know, our metallurgy business, which is part of strategy. We have been, year after year, declining that business to focus basically the rod production for our own needs in Nexans and reducing external sales of rod to competition. We have reached the target of 2021. We said we would reduce by 50% during the 4 years of the '21, '24 equity story the revenue, external revenue, of that business. We achieved that, so from now on it will not be a negative impact on the organic growth of the group. And it has been done in 2024 by 14%, as you can see here. If I move now and we start to look a little bit in the detail of the main division on Page 14. I will start with PWR-Transmission. So as Chris mentioned, backlog is up 21% to reach record-high level of EUR 7.4 billion. Organic growth is double digit, high double digit, at 50% organic growth year-on-year '23 to '24; and also a strong Q4 organic growth. And importantly, the adjusted EBITDA has been improving by 72% versus a low point of 2023, made of a mix between additional revenue due to the new capacity, at the same time improved profitability, where we gained 1.5% of EBITDA margin from '23 to 2024 through the project -- execution of the backlog. If I move now to Page 15, I will give you a little bit of detail because I know there's a lot of question about the backlog, our backlog. And so I will clarify what it means, EUR 7.4 billion, again, record-high adjusted backlog. It give visibility for the top line of the business until 2028 at 90%. And our plants with Charleston, Halden are above 90% full capacity until 2028. That includes every year of the next 4 years until 2028. When we look at the structure of our backlog. 92%, we always say it's mainly subsea. So you see 92% subsea backlog; very low exposure to land, only 8%. 85% of our backlog customers are TSOs. And also very important to say, the U.S. exposure of our backlog is 4%, which -- roughly EUR 350 million, with 4 project under execution today that have been confirmed, all of them, and that will be completed by the end of 2025. If I move now to page -- the next page, Page 16. And we have a look at our grid business, a very good year for grid, a 3% organic growth but a 9% adjusted EBITDA growth. You see a fourth quarter organic growth, very strong 8 -- plus 8%; a slight decline in Europe but a very positive organic growth in North America and South America and in Middle East and Africa. What is interesting to notice here is also the mix of the revenue and the margin. We have had a 4% overall growth from the cable manufacturing part of grid, but the Accessories business has been growing 34%. And you know that the margin on Accessories are almost twice the margin of the cable supply, therefore explaining the 1-point improvement that you see in the business between '24 and '23, reaching [ high-time ] high of 14% EBITDA margin. If I move to the next page. And we look at our connect business, a business that has been growing significantly in terms of standard sales, with a limited organic growth, 1%, but a strong scope impact because of the acquisition of La Triveneta Cavi in June of 2024; a fourth quarter '24 strong organic growth for the same reason, lower Q3 but a catch-up in the fourth quarter, with also all regions increasing but Europe that show a slight single-digit decline in the quarter; very strong improvement also of the EBITDA, mainly a scope effect because margin remains at a high level of 14%. But with the addition of La Triveneta Cavi, we see a 24% increase in adjusted EBITDA value. So that's basically for the review of the operational businesses' performance during the year 2024. Now -- we'll now deep dive a little bit in the financials performance of the company for the year '24. So I move to Page 19. So you see the improvement of the EBITDA, plus 21%, on the bridge here. You can see as well that all of the businesses have been significantly contributing to this EBITDA improvement 21%, to reach a record level of 11.4% margin and EUR 804 million EBITDA value. So that, explained partially by the organic growth of plus 5.1% I mentioned. We've had a little bit higher reorganization cost mainly due to the costs of separation of the Lynxeo business that we announced at the end of 2024; higher financial results mainly -- versus last year, mainly coming from the fact that we financed the La Triveneta Cavi acquisition with issuing a new bond. I will come back to that in couple of minutes. And higher income tax as well mainly due to higher profit and also the origination of the profit in countries that have been improving with a slightly higher tax rate and also the fact that in 2023 we recognized some deferred tax asset that lowered the income tax level. Overall, a net income increase of plus 27%, higher than the EBITDA increase of 21%. Moving to Page 20. And we look at our net debt and our leverage. As I mentioned, slightly, I will say, a increase of the leverage ratio from 0.32x in '23 to 0.85x in 2024, mainly explained, as I said before, by the M&A financing of the La Triveneta Cavi acquisition. If I look at the cash from operation, you see that we continue to have strong positive change in working capital of almost EUR 180 million but at the same time continue to have high CapEx of EUR 378 million, with including into that the high-voltage strategic CapEx for EUR 121 million, which is mainly the progress we have made on the building of our third vessel, Electra, that will come to operation in the first quarter of next year. Overall, normalized free cash flow of EUR 454 million and a free cash flow generation of EUR 313 million. For both ratio, for both cash flow metric, this is a record-high level. Moving to Page 21, we look at our liquidity, again record-level liquidity; EUR 1.3 billion, as I mentioned, cash on the balance sheet at the end of 2024. When you look at the total available liquidity of Nexans, we are above EUR 2 billion if you include the undrawn credit -- revolver credit facility of EUR 800 million. Our gross debt increased in 2024 by the issuance of 2 new bonds, one maturity 2029 and one maturity 2030; for both of them, totaling EUR 925 million. Again, the EUR 575 million was used to finance the acquisition of La Triveneta Cavi, but the ratio remains below 1 in terms of leverage. Page 22. We will propose at the general assembly an increase of our dividend of 13% to EUR 2.6 per share. It's also a -- I think, every year, we have been raising the dividend to our shareholders as part of our commitment. We'll continue to do that. It's a payout ratio of our normalized net income of 35%, largely above the target we gave in the CMD of '21 of 20%. And if you look at the past 4 years, it's a total shareholder return of 97%; and over 6 years, of 390%. I will conclude my presentation with the outlook. So 2 things which are important in the outlook: The first one is we have significant change of scopes, and I will explain that in the next slide. We will commit to an adjusted EBITDA range from EUR 770 million to EUR 850 million for 2025 and a free cash flow generation. And here I want to emphasize the fact that, since the next -- last time, the CMD in November, we are talking about free cash flow including all CapEx, not normalized free cash flow. So that includes all the growth CapEx we will have in the future, so it's quite different metrics. Just to remind you: In '24, we had EUR 120 million of strategic CapEx. So that's now included in the free cash flow metric. So a free cash flow of EUR 225 million to EUR 325 million, which is a 34% cash conversion on EBITDA. Just I will conclude on '25 giving you a little bit of explanation about the guidance of EBITDA for 2025. So we achieved EUR 804 million for '24, in 2024. You know that we have divested on January 2, 2025, our AmerCable business in the U.S., which has a scope effect obviously in 2025. So -- and we have also to add the 5 months of La Triveneta Cavi that we acquired in 2024 because we acquired the business in June. So obviously, in 2025, you will have 12 months versus 7 in 2024. Overall, you're talking about a negative effect of roughly EUR 30 million. For pro forma view of 2024 for the basis of the guidance of 2025 would be more EUR 770 million. And we are proposing a range of EUR 770 million to EUR 850 million through basically organic growth that we committed and also margin expansion. The range is slightly larger than we gave in the past. It's a 5% variance versus midpoint, up and down. Mainly it will include the GSI risk. That concludes my presentation. I will now turn back the mic through the -- to the operator.

Thank you, JC. Open for questions.

[Operator Instructions] And up first, we have Lucas Ferhani from Jefferies.

So I have 3 questions, if we can take them 1 at a time. Just the first one, on the free cash flow, can you go over the key drivers of that strong free cash flow in 2024; and maybe whether there are timing impacts that reflect on the 2025 free cash flow, which might be a bit below what we expected?

Well, I think there's a bit -- a little bit of confusion because of the change for normalized free cash flow to a full free cash flow conversion. The free cash flows of the guidance is -- as I said in the presentation, is a 34% cash conversion from EBITDA. Just, if you make it comparable, last year, we gave a guidance of 19% of -- on free cash flow. So it's a significant increase of the guidance of free cash flow. I'm talking free cash flow of 2025 versus guidance of last year. We achieved in 2024 39%, so it's quite comparable to the guidance we gave, maybe a couple points lower in 2025. We had significant improvement in working capital in 2024 due to the increase of the backlog in G and T -- in transmission, sorry, that we are seeing more normalizing in 2025, but again overall, the free cash flow conversion is much higher than it was in the guidance of '24. And the last thing to say, we have a quite significant CapEx in 2025, have -- as I have highlighted in the CMD in November, we need to continue to complete and build the vessel of a -- our third vessel. There's about EUR 100 million CapEx left to be spent in 2025. We have announced also that we will increase our recycling capacity in Lens to move from -- as part of the CMD commitment, from 5%, 6% of recycling today to 35% by 2028. So that investment will start in 2025. We also announced a new plant in Morocco for grid. And we'll start to put the first stones of that plant building in -- I mean the -- spending the CapEx for the -- building that plant in 2025. And we have also Charleroi capacity increase. So overall, we have about EUR 200 million included in that 2025 guidance into the free cash flow. And we still reach 34% cash conversion.

Perfect. That's really helpful. And then on to transmission and just the Great Sea Interconnector, can you give us a bit of an update on kind of how it's running on your side? What are you hearing from the grid operator? And how do you expect 2025 really to unfold?

Yes. Thank you, Lucas. Yes, that's -- of course, that's a big burden of 2025, the conversion of and the notice to proceed our GSI project, which is meaningful in terms of EBITDA impact for 2025. And what are the recent developments? And it was a kind of status quo in December and January. That make us a bit nervous but, I mean, much more confidence because the analyze of the seabed have restart a few days ago in national waters of Greece and starting in international waters. We have a very, very strong support from IPTO top management but as well the Greek government, the European Commission and the French government; as well as Cyprus is very willing to pursue this project, so I will say, as of today, I see a lot of green lights. We receive as well, maybe JC can comment, significant cash since a year ago. And we have -- the recent discussion that we have with IPTO is that we have not changed at all the final delivery date. And the production of cable is still in process, fully in process. Maybe on the cash point, JC, for GSI, I mean...

Yes. I mean we -- in fact, we have not received the final notice to proceed, as Chris explained, but we have been progressing on the contract as if we had because we are fully mobilized on the project. We have received EUR 138 million of cash through the end of 2024. We have recognized significant gross margin on the project and EBITDA of the project. And again the project is going on for us. And we were already [ scared ] in September and last year, every quarter, but in fact, we are progressing on the project. And that should continue. At least, we are confident that this should be continuing.

Great. And do you have kind of a date in mind where you think the notice could arrive? Or you're not really kind of...

Yes. The -- yes. Notice to proceed is -- will be finalized as soon as the survey of the seabed will be over. So we believe, at the end of the month, beginning of March. But of course, it's this survey is operating in a complex geopolitical situation, so -- and we do not master all the topics there as Nexans team, but once again I repeat: In the last 2 weeks, we've seen positive moves and signal. And today's survey is under operation.

Great. And the last one will be just on the disposals. Any update on Lynxeo specifically? I think the carve-out was done and there's some progress on that process. And maybe, any thoughts on auto electric, if there's any change to -- is it most likely 2026? Or if there is a change in the situation in Ukraine, could that come maybe a bit earlier than planned?

No. Definitely, I mean, we're progressing. I cannot give you exact timing, but what I can tell you is we are quite confident that Lynxeo divestment should happen in 2025, think it's reasonable to believe that. We will see how we progress on this, but today, I mean, this is something which is ongoing. For auto electric harnesses business, it's like you highlighted, a little bit more complex due to the war situation. However, I remind you that we duplicated the CapEx. The manufacturing facility has been duplicated outside of Ukraine, so in fact, for a potential buyer, I mean, the worsening of the war will not have a significant impact on the business, but anyway, it's a little bit more complex. I think I see more of this happening probably first half of 2026.

And our next question now comes from Akash Gupta from JPMorgan.

I've got a few as well. The first one is on GSI. So you said in your prepared remarks that this year the guidance is a bit wider because of uncertainties in GSI. Can you help us understand? Like, when we look at the bottom end, midpoint and upper end, like, what sort of contribution, compared to last year, you have assumed for GSI project? To help us understand what is there, excluding GSI, in terms of improvement in EBITDA. That's the first one.

Yes, Akash. I will not give you the contribution, the exact contribution of GSI in the number of 2025 because we don't give that level of detail for by project. What I can tell you is that, as I said in my presentation, we are covering the worst-case situation into the range of the guidance, meaning that if the project was going to start tomorrow morning or today, with no more cash inflows from the project, basically we will still be in the range of the guidance. So it's a worst case, and this is not what we are targeting and what we are seeing today. Again I think we are rather optimistic in the project to be happening and receiving in the coming weeks the final notice to proceed. I mean we have been -- as a sign, we -- as I said, we have been paid on a regular basis. And obviously, the more you get paid, the more difficult it becomes to cancel the project, so we are really confident about this project continuing and, hopefully, sooner than later, receiving the final notice to proceed. However, I remain prudent. And I wanted to be conservative in the low part of my range of the guidance of EBITDA, in case of, but again this is for me and for us low probability.

Yes. I think we are prudent but confident. And we have a lot of opportunities and -- to potentially partially compensating in case of cancellation. And we can reallocate resources for other projects, but once again, for the meantime, for GSI, it's progressing, I will say, positively.

My second one is on the other segments. So JC, I think in your prepared remarks you said you have reduced the revenues here, external metallurgy revenues, by 50%. And now the drag is not going to be there, so just to clarify: Are you saying that there will not be any drag in revenues? Or there will be a lower drag in the revenues. And then on the same topic, in others, for second year's in a row, we saw first half was negative. Second half was positive, so maybe you can explain the dynamics. What is driving there? And when we look at 2025, what shall we expect between H1 and H2?

Yes. So first question of regarding the metallurgy revenue, yes, I confirm. We should not see -- we should see a stabilization, I would say, of the revenues, starting 2025. I'm not foreseeing any negative -- I mean obviously we don't know how 2025 will look like, but definitely there will be no pressure on our side anymore to reduce any further the revenue -- external revenue side, so we should be -- the growth of the business would be at par with -- the growth of the metallurgy activity should be at par the growth of the business. That's for the first question. For in terms of the spread between H1 and H2 in others. We've had a little bit of one-off costs in the second half of 2024 mainly due to the costs of Lynxeo separation. They might be a little bit more in the first half, so we could see a first half being slightly negative, but then as soon as Lynxeo is out of the scope, then things will normalize to a positive.

And our next question now comes from Sean McLoughlin from HSBC.

I mean, firstly, just coming back to the free cash flow guide in '25. Can I just confirm the CapEx number that you're guiding now for '25? And can you break that, let's say, into your old strategic and nonstrategic categories?

Yes. So the CapEx number is going to be around EUR 450 million for 2025, so that's about EUR 70 million higher than 2024. And in terms of, I will say, growth versus maintenance CapEx, it's about half.

Super. Second question, on the U.S. So it sounds like you're quite relaxed about the projects that you're delivering in '25, but just thinking '26 to '28, about vessel utilization if you're delivering from the U.S. towards European projects, how we might think about potential margin impact. And is that in fact your base case, that from the end of '25, Charleston will only be delivering into Europe?

Yes, Sean. It's Chris. And I will manage that question with Vincent Dessale, who is with us this morning. First, give us -- I will give you an update regarding the -- our U.S. offshore wind farm exposure. Revolution project for Ørsted is almost complete. So that will be complete in 2025, in coming weeks. And Sunrise manufacturing is ongoing. And we have no installation, so we should finish this project mid-2025; and as well complete manufacturing and installation in '25 for Empire Wind 1 for Equinor. Meaning that in 2025, at the end of 2025, our exposure in regards to offshore wind farm in U.S. will be over. And Charleston will start in '26 a manufacturing project that will be soon awarded for Europe. So I think it's important because was -- it was a key risk factors highlighted by some analysts in the last weeks with there were some project been on hold or delayed or canceled, like New England, clean plus -- Clean Pass or all the others, but that's not Nexans project. This is not -- those one have not been awarded to Nexans, so our exposure to U.S. offshore wind farm is extremely limited, beyond -- or close to 0 [ post ] 2025. And Vincent, regarding the costs of supplying from Charleston to Europe and as well installation capacity...

Yes. So I think you have 2 answer to this question. The first one is that, of course, when we plan our project and we plan the manufacturing either in Halden or in Charleston, we do the costing according to the organization -- when we have done in the past project in U.S. delivered both by Norway and U.S. So we do it in our costing. So that's the first answer. And after, just to illustrate the technical or the operational elements: When you want to deliver, for example, from Norway to Mediterranean Sea or from Charleston to Mediterranean Sea, you have only 1 day of difference in term of transport. So on a project which is around 5 to 6 years, it's basically nothing. So no impact.

Understood. My last question is just on Accessories, if you could maybe tell us what percentage of grid sales in '24 and where you see that by '28.

Yes. Sorry...

Can you repeat the question?

Accessories as a percentage of sales [ in grid ] business.

I -- it's -- in grid business, it's about 20%...

And where do you target that by '28?

I don't give that number because there is a mix of organic and inorganic moves in that direction.

And up next, we have Eric Lemarie from CIC Market Solutions.

I've got 3 question actually; the first one, on the competitive landscape in Europe. Do you see any change here? And have you, do you observe any new players from Asia, for instance, investing in Europe in new capacities? And I've got a second question, on AmerCable, which was sold last year and -- for an EV of [ 261 million ]. If I'm not wrong and if my calculation are right, it's equivalent to an EBITDA multiples slightly higher than 5x. Or maybe I'm wrong, but it sounds quite low to me. I would like to check the number with you and understand why it could be so low. And I've got a third question, regarding the pattern of the EBITDA margin growth in high voltage or in PWR-Transmission over the next years. Could you remind us the -- and as well regarding what do you expect in term of gradual increase in term of EBITDA margin for high voltage between 2025 and 2028.

Yes. Regarding [ organic ] landscape, if I take the first questions. So no major change. I will say Asian players are moving into Europe, specifically Japanese and Korean, but in very minor steps. I'm sure you referred to the Chinese. Chinese are very well right now loaded by their domestic demand but, of course, are very active as well to support the European energy transition. But I will say there is a kind of premium given always to the European players. And that's what remains unchanged, I will say, in all the contracts that have been award or the one that will be awarded in the coming months. Regarding AmerCable...

Yes. So AmerCable, just to precise the numbers. So the EV is USD 280 million. We have not as Nexans published a multiple of the transaction. It's coming from the buyer and in its press release. What I can tell you is that the '24 EBITDA that was reference for the multiple calculation was a peak figure. If you take an average of the past 3 years' EBITDA, the multiple becomes much higher as well versus the 5s that you have. You're talking more about 7x, 8x. So I mean it's a question of reference as well. For the second question, regarding the EBITDA evolution -- EBITDA margin evolution in our transmission business. As I said, we are on the path for improving the margin year after year. 2025 will still be a plateau year because of execution of the U.S. contract mainly. That was highlighted by Chris, will be out of the backlog at the end of the year, but starting 2026, onwards, there will be about a 1 point to 1.5 points improvement of the margin to reach around '27, '28 -- year '27, '28, 17%, yes, EBITDA margin. So that's the path in the next 3 to 4 years.

From Goldman Sachs, we now have Ilaria Buricelli with our next question.

It's actually Daniela over here. Sorry to ask again on GSI. Just wanted to clarify 2 things there and then ask another question on high voltage in general, but just to go back to the points before: I know you don't comment on '25, but can you clarify? Of the total GSI, how much have you already booked? And I guess, to the point on progressing, you can progress with production, but how much is the installation? And when does it start? That's the first question on GSI. I will ask the second so that you can address them both together. At Q3, I think you said it would be 55% to 65% organic growth in transmission if you included progress on GSI and 50% if you didn't, but you came lower than that. Is anything else in the backlog progressing slower? Or where does the difference come from?

Okay, I will take the first part of the GSI question, Daniela. So the first part is we've booked in the backlog the full amount of -- the adjusted backlog, not the firm backlog but the adjusted backlog, because it will move to firm backlog when we have the final notice to proceed. So right now it's in adjusted backlog; EUR 1.4 billion of amount related to GSI, so it's within the EUR 7.4 billion. We've progressed on the project according -- I remind everyone that we have a safe approach. We are progressing on the project based on the cash received. The cash we receive is nonrefundable over the costs, incurred costs, and the margin of the project, so everything that has been recognized to date, whether it's '23 or 2020, is secured in the worst-case situation of the project being canceled immediately. Is that answering your question on GSI?

That's very helpful, but just I think, in the first half, you gave the number on how much you did in GSI. Can you give that number for the second half to be able to sum up, of the total EUR 1.4 billion, how much has actually been already done?

I can tell you that we recognized EUR 110 million of sales in GSI in 2024; and about 50 million of margin, gross margin.

Okay. That's very helpful.

Yes. And the second question was related to the...

Organic growth.

Yes. I mean, on the organic growth, I think we are -- unless I'm misstating, but I think we are within the expectation in terms of organic growth for the transmission business in 2024. There's been obviously a little bit of delays in the first half due to the GSI uncertainty over the summer. And some of the work had been a little bit pushed to the third quarter and we had a very slow summer time, but I will say that, overall for the bulk part, we are completely in line with our expected organic growth, I mean, for the year 2024 in transmission.

So at Q3, I guess you were guiding -- the 55% to 65% with GSI was to have -- you expected to have [indiscernible] on GSI.

Yes. We were -- yes, definitely. Because again, I mean, we wanted to be cautious and not move on the project not receiving the cash beforehand. So the main concern was to protect Nexans and to make sure that every cost incurred was backed up by cash received. And obviously, sometime during the third quarter and mainly third quarter, the cash didn't come. It took a little bit of time, but -- so I think part of the difference is coming from GSI a -- being a little bit put more through the end of the year rather than Q3 [ over there ].

Understood. And then final one from me, just following up. I think, before, you said that you were going to start working [ sharp ] on a project that you expected to be awarded soon. I'm not going to ask you what the project is, but just in general, the tenders and awards in the industry have been quite low in the last few months compared to what we had been used in the 2, 3 years before. Do you see a pickup? How do you see that tendering pipeline and awards for the industry in '25, '26? Do you expect a reacceleration back to where we used to be?

It depends of what is your point of reference, Daniela. I will say the tendering is still very, very active. You have some major projects to come on the [ FTE ] side as well from [ tenants and others ]. As big as what we saw in the past like GSI and all the others, I'm not sure. I will say we have a lot of tenders in mid-size revenue. It means from EUR 300 million revenue to EUR 600 million, EUR 700 million; a lot to come, a lot. So a pretty high number in quantity but, in terms of revenue by project, a bit lower than in the past. And of course, on the subsea part, we -- Europe is still very, very, very active for offshore wind farm and interconnection, but we are losing in the dynamic of award the offshore wind farm in U.S.

Can the backlog still grow?

Yes, of course. It will. We expect, Daniela, order impact of 1:1, making sure that everything -- that we have an equivalent of EUR 1.3 billion of revenue, EUR 1.4 billion, for transmission a -- per year. And we -- our objective is to get EUR 1.4 billion of orders at the same time.

Book-to-bill of 1...

Book to bill 1:1.

[Operator Instructions] And up next, we have Alasdair Leslie from Bernstein.

A couple of questions. First is just a follow-up on GSI and a clarification. I was just wondering if you could check. You said you received EUR 138 million of cash-in for GSI. Was that a total cumulative figure, or just for 2024? Because I was just trying to reconcile this with some numbers that we had previously. I think you said the figure was EUR 120 million at the H1 stage. And I think you said, at Q3 stage, you sort of received another payment of around or close to EUR 30 million, so maybe you could just clarify the sort of total figure that you've now received to date.

Yes. So EUR 138 million is for 2024 only. We received also some payments in '23, so it's above that.

It's above that. Do you have the total figure? Or...

I don't have the total figures in hand of me. I just have the EUR 138 million for 2024, so you probably add EUR 20 million to EUR 30 million to that for '23, when we started to get the confirmation of starting manufacturing of the project.

Great, okay, perfect. And then the sort of second question was just on grid. I think the margins there sort of showed a kind of bigger seasonality versus sort of prior years. And the H2 margins were actually down year-on-year. What's the kind of main driver behind that, please? How much of -- I don't know how much of that is just explained by sort of changes in mix maybe versus sort of industry-wide pricing or supply-demand dynamics. And I guess, do you see that kind of H2 margin now as more representative of kind of current profitability levels, like -- rather than the kind of, what looks to be in hindsight, maybe a very strong H1 '24 margin level?

Yes. I mean I think there is no structural change in the price dynamic for grid. You have seasonal effects. You have mix effects depending of the kind of SKU sections that you manufactures and as well, of course, by customers, by definitions, but what is important is that we are running at a 13.5% EBITDA ratio. It's a structural change versus the last 15 years. And today, what I can tell you is that we have very strong demand within the backlog in Europe, in South America, in APAC, in Canada, so I'm extremely comfortable with the dynamic of grid, supported by everything that you see in the price in -- for the matters of renewal of the grid, for matter of electrification. Maybe we can give as well, maybe Elyette, words on the needs for data centers, which is of course major drivers of grid modernization. Maybe, Elyette, you can say your word.

So yes. On the grid dynamics, very comfortable with the growth driven by indeed renovation of the grid; as well as energization projects of data centers, factories; and also, of course, the connection of renewables, starting with solar. I think everyone has noticed also the growth in renewables. So very comfortable with the growth that is going to be above 7% CAGR, as we explained in our CMD in November.

And up next, we have in Xin Wang from Barclays.

My first one is still on GSI. Can you maybe let us know what would revenue recognition schedule look like if we do receive the final notice to proceed in March? And then -- and same time, if GSI ends up being canceled, would you be able to pull forward production of projects in existing backlog? And if this couldn't be done, how should we think about the capacity underutilization impacts, please?

Yes. So right now we will not -- I cannot give you again the detail for GSI for 2025. We will not give you the revenue that we have, but right now we are progressing on the project as if we had received the final notice to proceed because, again, we are getting paid according to the schedule of the project. Therefore, we are manufacturing and progressing on the project as if we had the final notice to proceed. So if we -- when we receive it, it will not change 2025 because, again, that's what we're progressing on as of now. Definitely, if the project is canceled -- again, this is not what we believe will happen, but [ it means ] there will be collateral improvement on other projects. One of the bottleneck in the project sequence right now is the armoring, which is the isolation at the -- on the cable. And all project, all cable goes through armoring at one stage. And this is kind of a bottleneck in the plant, so basically, having GSI canceled will free up capacity of armoring for other project and will improve revenue recognition in 2025 for other projects, therefore mitigating the net impact of GSI within the year. This is why I'm comfortable that the low point of the guidance is a worst-case situation of GSI being canceled. Now I don't know if you had any other question on GSI.

So the capacity underutilization question was more on: So based on your current backlog, including GSI, you're 90% loaded. Without GSI, if we're looking at 70%, then what will be the margin impact there based on the same kind of backlog with and without GSI?

I think you are -- I mean you are doing very complex mathematics there to determine something that I don't understand. What I can tell you is that we will receive significant awards in coming weeks, and I think your question will become obsolete. And once again, what is important thing is that we show that, structurally when you see the numbers of Nexans, if you don't focus on one specific point that could be seen as only negative views, we are structurally improving the ratio of the group year-over-year, semester after semester. We are extremely confident in the future of the -- our -- on our ability to deliver 2028 numbers. And of course, we are managing a company with ups and downs, but it's more a question of prudence but -- in the guidance, but we are extremely confident that everything will go smoothly and as planned.

Good to know. My second question is auto-harness. So you commented in the release that auto-harness was stable during the year, but we know auto production was lower, especially in the second half in Europe, where Nexans is more exposed. Would you -- but earlier in the call, in prepared remarks, you also commented on weaker auto-harness contributing to the decline in Non-electrification business. Would you be able to comment on the divergence here?

So I think, Auto-harnesses, what we have been seeing in 2024 is that the volume has been -- the top line has been slightly decreasing with a negative organic growth, explaining part of the reported Non-electrification minus 2.5%. However, the margin has been improving. We gained a couple of points in margin in the business, so in terms of profitability, we have nothing -- we are not below our expectation. It's more a top line situation. Right now, for 2025, we're expecting to see sales basically mostly flat versus 2024, slightly moving but not that much; and margin being at the same level.

Yes. We can say that the automotive sector is not the most boiling sectors in -- on the planet right now. Of course, our exposure is very, very limited, but we may have a lower volume in coming months, slightly lower than 2024 but really nothing much. But I think what is important to say is that the risk of disruptions in production due to the war of Ukraine, touching wood, is behind us. And that was certainly the biggest threat for Nexans, is to have a massive disruption of this production line that will stop [ BMV, Porsche ] assembly lines, which is not at all a risk. So that's the good news of this part of the business.

So my last question is on PWR-Connect. So would you be able to give a bit more color on the split of performance or organic growth by region? Because I think residential weakness in Europe does not seem to be so much of a headwind to Nexans.

Yes.

Yes. You -- I'll let you comment '24. And I will give you some perspective for '25.

Yes. So I confirm what you said and what I explained during my presentation. We've had growth in PWR-Connect of 1.4% in 2024. When you look at Americas, North America and South America basically has been growing almost double digit; Middle East and Africa also double digit. And the 2 region that have been declining is Europe and APAC, mid-single digit. That's what we have seen in 2024 in terms of top line evolution.

And for the beginning of the year, at least backlog-wise, visibility is shorter, shorter than the other sectors. But a very strong dynamic in South America, North America; very, very strong Middle East. And I would say I believe that we reached a low point in Europe in Q4. And today, the load of our factory is not close to back to normal but not far.

Okay, great. If I can possibly ask a quick question on Sunrise Wind, please don't hate me for it, but Ørsted, on 21st of Jan, made another impairment of EUR 580 million; and commented in a public call that a defect in cable was discovered, leading to a redesign and remanufacturing of cables. They expect this to be finalized in Q1. Do you see any impact in Nexans at all?

No. That was a preproduction that have been remanufactured, so it's not a cable that have been installed. It's a cable that have been produced in Charleston that have been remanufactured. It's only one line of -- one length of cable. So this is behind us. It was part of the [indiscernible], so it's 2 years old now for us.

And from Equita, we now have Luigi De Bellis with our next question.

Luigi, we don't hear you.

Just to follow up on grid and connect; what we can expect in profitability for PWR-Grid and PWR-Connect for 2025, also considering the contribution of Accessories in grid in 2025 vis-à-vis 2024. And in terms of organic growth for the coming months or first half, depending on your visibility for these 2 division, do you expect a speed similar to that of Q4 2024? And lastly, can you give us an update on pricing dynamics for low voltage business both in Europe and North America?

In terms of grid and connect, in fact, we are right now foreseeing a single -- mid-single-digit organic growth as -- and a little bit higher for grid in 2025, as we explained into our CMD in November a few -- a couple months ago. So part of the expansion of the EBITDA will come from the top line because it's quite active. And you've seen some of dynamic in connect. In some of the markets, we're seeing a lot of momentum for growth. And I think also -- I mean definitely we will get -- we will continue to progress on our SHIFT transformation. We'll continue to have some units which are slightly below the average of the group in connect. And we'll continue to basically improve the margin, as we have been doing for the past 4 years successfully, so there's probably a couple of points that we can get from the lowest-performing unit in connect, to bring them to at least the average of the connect business, which is 14%. So that's, I will say -- so we are quite confident that we will maintain and continue to expand EBITDA increase in connect. And grid, definitely there is also a lot of momentum regarding Accessories, as we've seen at the end of 2024 -- I mean second half of 2024. And we'll continue to support that.

Yes. Maybe let me reinforce a bit the message as mentioned, JC. And grid, innovation are really based on Accessories growth, very high growth on the cable. And the profitability, structural profitability, is coming from the saturation of the line, cost competitiveness and as well a very high level of selectivity. And this is the job between you and me, Luigi, is [ those lever ] of margin, structural or contractual. Every year, we have the question. I confirm this is structural for grid. And for connect, it's a hard battle, but everything of the margin improvement is coming from innovation. We have been able, thanks to our innovations in the last years, to generate an improvement of EUR 25 million, up to EUR 50 million, EBITDA. And our customers are eager to get more innovation like MOBIWAY POP, which is fully patented, that have been launched 6 months ago in some countries and that will be now deploy in all the other countries where Nexans is present. So this is why innovation is not only a matter of growth, [ like a ] matter of growth for Connect. It's a matter of bringing innovation to our customers with a premium service and a premium price. And to conclude on why we are structurally improving those number as well year-over-year is what mentioned, JC, is we still have a high level of spread between top performers units versus medium- or low-performer units and where the SHIFT program of transformation is playing fully to reduce the spread. So we have a lot of room; even if we have some downturns in some region, still a lot of room to improve our financial ratios in that, I will say, market. Next question -- no more questions...

And this -- yes, there are currently no further questions in the queue, so I'd like to hand the call back over to Mr. Guérin for any additional or closing remarks.

No. I think we have a very, very large audience this morning. Thank you for everyone being connected. As you can see, Nexans is demonstrating a structural performance semester after semester, year after year. And what is important is that we are concluding our second equity story with surpassing our projection and our objective for 2024. So we are running in a very good shape and in full confidence to start '25 and onwards for our objective in 2028. Thank you for your attendance. And see you in the road show. Bye-bye.

Thank you for joining today's call, ladies and gentlemen. You may now disconnect.