Prysmian S.p.A. (PRY) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Prysmian Group 2019 Full Year Results Conference Call. [Operator Instructions] I would like to advise you that this conference is being recorded today, Thursday, the 5th of March 2020. I would now like to hand the conference over to your speaker today, Valerio Battista. Please go ahead, sir.

Thank you very much, and good afternoon to everyone for the Full Year 2019 Results Conference Call of Prysmian Group. Okay. Let's start immediately with the key achievements in 2019. First of all, strong cash generation. We generated EUR 433 million, proposing, at the same time, an increase of the dividend to EUR 0.5 per share from the previous EUR 0.43. Submarine business. The Submarine business has started, especially in the last quarter, to improve and the projects order backlog has been restored at over EUR 2 billion, consequently 2 years roughly. Submarine energy order intake has been over EUR 1.3 billion, consequently more than our output. Projects that are -- have been awarded to us, the Viking Link, the Dolwin5, the Vineyard Wind and the NnG offshore wind farm. Last, but not least, the Western Link has been commissioned. Synergies and the General Cable integration. The synergies have reached EUR 140 million. In the original plan, that was expected to be in EUR 120 million, so is faster than expected. Our focus is today even on ESG. We are in the Dow Jones Sustainability Index. We are the #2 in the valuation of the Dow Jones Sustainability. We are confirmed in the other indices like FTSE4Good, Standard Ethics and so on. And the engagement results for the Prysmian employees is 67%, not so bad. Let's flip to the following page. The financial highlights of the full year '19. Adjusted EBITDA reached EUR 1.007 billion, 8.7% of sales compared to the previous year at EUR 767 million, obviously, with the Western Link provisions we did. Energy is doing well with a solid trend in E&I and consolidated E&I and PD, especially in North America and Lat Am. Industrial & Network Component is improving, if we take into consideration mainly the fact that the Automotive business has been a declining business in 2019. Projects. The projects, as I said, had very good performance in the last quarter that was anticipated in our 9 months' conference call. Vice versa, mainly due to the very low order intake in 2018, the total result -- full year result has not been extremely good, has been scaling down a little bit. Telecom. Telecom had a very good performance in North America, stable in Europe, but lower in Asia Pac due to a lower contribution of YOFC. And in half 2, we have started to see the decline of the volumes and partly of the prices. To be noted that 2019 include a EUR 47 million of IFRS 16 application positive impact. Free cash flow. That, I believe, is the best performance of the company, EUR 433 million, with the net financial debt that closed at EUR 2.140 billion or EUR 1.971 billion excluding the IFRS 16 impact of EUR 169 million. This implies automatically the EUR 433 million free cash flow reported. On the basis of these results, we proposed -- the Board has proposed to increase the dividend to EUR 0.5 per share with a dividend yield of 2.7%. Let's flip to Page 5, the financial highlights. Sales. Sales have been almost stable, but on apple-to-apple basis, there is a little decline of 0.9%. The adjusted EBITDA, vice versa, went up significantly from EUR 767 million to EUR 1.007 billion, of which EUR 47 million, as I already said, comes from the IFRS 16 effect. So without the IFRS 16 effect, the EBITDA is EUR 960 million. Reported operative net working capital appears to be growing from EUR 707 million to EUR 749 million, but there is a technicality into it that has increased the free -- the net operative working capital on sales -- of the company without a real cash effect. And later, Francesco will better explain the reason why. The reported net financial debt has closed at EUR 2.140 billion, of which EUR 169 million is the effect of the IFRS 16 impact. By segment, what we can tell about the segments. Projects. Projects are -- organic growth in sales of 5.8% negative. That was, in a certain sense, already foreseen and expected. The good news is that the total amount of EBITDA has increased for projects from 100 to 221. Obviously, we have to take into consideration the EUR 165 million accruals we did in 2018 for Western Link and, consequently, apple to apple, the same perimeter. As it was foreseen, the low level of orders -- order income of 2018 has costed us EUR 44 million in the total EBITDA '19 versus '18 because we have to compare, excluding Western Link, the regions, 265 versus 221. The good note is that the order backlog has finally restored at over EUR 2 billion, and the last quarter has had a very high speed in terms of acceleration of the EBITDA. The execution in 2019 went very well, no problems. We delivered to the customer many projects. Later, if I'm not wrong, we are going to see the list of the projects. And the Western Link, most of all, has been commissioned and delivered to the customer. Energy segment. Sales organic growth 0%. We have to distinguish between E&I and Industrial, Network Components. Whereas E&I went up 0.7% in terms of organic growth, Industrial, Network Components continued to be a little bit below the previous year, 1.7%. From the EBITDA performance point of view, E&I's EBITDA up from EUR 202 million to EUR 288 million. That's mostly thanks to U.S. and South America. Industrial, Network Components, vice versa, went up from EUR 172 million to EUR 184 million with EBITDA margin of 7.4%. The performance here has been particularly strong in Power Distribution and especially in North and South America. Overhead lines, that is a [ new segment ] for us because it comes from General Cable, went nuts again. And the Industrial, Network Components, vice versa, has improved the profitability, you see, from 6.8% to 7.4%, driven mainly by OEM renewables and network components, whereas Automotive, as expected and as foreseeable, went down quite significantly. Telecom. Sales organic growth, full year, 0.4%, with a double speed in the first and the second half of the year. As you can see, in 2018, the EBITDA of Telecom closed at EUR 295 million, but in 2019, only at EUR 267 million, 16.2% of the sales. If we exclude YOFC and the one-off of 2018, the profit of -- the EBITDA of the segment went slightly up from EUR 235 million to EUR 244 million, keeping more or less a very similar EBITDA margin on sales. That's because YOFC obviously has declined quite significantly. And on the right side of the box, you can see that excluding YOFC and one-off, more or less, we kept the same profitability of the previous year. Overall, the situation in Telecom, as we have been commenting in Q3, is not so easy because the demand is -- has declined, prices have declined, and consequently, the market is becoming tougher. I flip to Page 7, by geography. And here, we can see that the organic growth of EMEA has been negative for 2.4%, except the Projects business has been down by 1.3%, with total sales of EUR 6.2 billion roughly. The total EBITDA of the EMEA region has closed at EUR 467 million, 7.5% of sales, compared to the previous year at EUR 513 million. Obviously, we have to consider that last year, in 2018, EMEA, that is the region that delivers the projects, most of the projects, has been impacted by EUR 165 million provisions. North America. North America closed with EUR 3.441 billion with an organic growth of 2.6%, except the Projects with an organic growth of 1.9%. The total EBITDA went up from EUR 242 million in '18 to EUR 338 million in '19, reaching a very good level of 9.8% on sales. That's thanks to the strong growth and results increase driven by E&I, mostly PD and partly T&I. That has been pretty stable even Q4. In Q4, vice versa, Telecom in North America has started to slow down. In all the North American region as well as the Latin American region, the integration has supported quite well in terms of performance, these 2 regions. Latin America. Sales at EUR 931 million with an organic growth of 0.7%; without Projects, with an organic growth of plus 2%. And EBITDA level that went up from EUR 76 million to EUR 97 million, going to 10.4% of the sales. At the end, we had -- we enjoyed accelerated General Cable integration benefiting margins, cross-selling opportunities, especially in the South American countries where Prysmian was not in the past, and consequently this happened, cross-selling opportunities. Last, but not least, Asia Pac with EUR 951 million sales and negative organic growth of 4.5%, quite significant; and without Projects, with a negative organic growth of 1.4%. The problem here is the EBITDA level of the region that scaled down from EUR 101 million to EUR 58 million that's why -- because of the drop due to the Telecom business in Australia and, most of all, a lower contribution of YOFC. Let's flip to Page 8. Synergies from the integration of General Cable. We had -- we closed '18 with EUR 35 million, obviously, you remember. We were planning EUR 120 million in '19. And you remember that the final goal to be reached there is EUR 175 million. The actual in 2019 has been EUR 140 million, so on the way to reach the 175 million by 2021. In the meantime, in 2020, we are having a new target of EUR 155 million. Most of the synergies have been partly realized. We have the most difficult ones to realize in 2020 and 2021. The total costs have been EUR 220 million over the 4 years of the integration. Let's have a look of Page 10. Energy transition. Energy transition is a very well-known chapter to be addressed. And one of the main area where have to be executed is in Germany. As you know, in Germany, a number of gigawatts has been installed in the North Sea, and now we have -- the industry has to bring this power to the users, the users that are in the hinterland of Germany, whereas the generation is on the North Coast on the North Sea. Totally, we have -- we expect over 5,000 kilometers of cables with a value estimated today over EUR 4 billion. The first order or the first award should happen in the summer of this year. The technology chosen by customers has been the 525 kV extruded, consequently, or XLPE or P-Laser. We have both technologies qualified. The projects are 3: SuedOstLink that counts for roughly 1,100 kilometer of cables; SuedLink, 2,750 kilometer of cables; and A-Nord, 1,280 kilometer of cables. The technology decided by the customers, TenneT 50 hertz, Transnet and Amprion, is the 525 XLPE or P-Laser. You can see on the right side of the chart even the completion date expected for those projects. Flipping to Page 11. Talking about energy transition again, the success story of offshore wind. May you remember or some of you may remember that some years ago, I'm talking about 2009, if I'm not wrong, in my opinion, the offshore wind farms could have been -- could have become one of the main generation sources for the green energy. Obviously, that may happen if the cost of the energy is not much higher than the cost of the traditional carbon-generated energy. The graph, you can see on the left side of the chart, that is not our analysis but is analysis of Goldman Sachs, show clearly that the global installed capacity was minimal in 2009, 2 gigawatts; 4 gigawatts in 2011; in 2013, 7 gigawatts. So the speed at the beginning has been pretty low. Today, we are in 2019, and there are already installed 27 gigawatts. The cost of the -- cost of equivalent -- equivalent cost of energy, euro per megawatt hour, has scaled down significantly from EUR 150 (sic) [ EUR 151 ] to EUR 62, and that's the driver really for the expansion of offshore wind farms. Now I cannot guarantee or comment too much on the forecast in terms of growth of this business. But even if you cut by 50% the speed of growth of those numbers in terms of gigawatt hours, there are 2 important chapters. First of all, the trend is growing. The speed may be lower. I showed you that could be more carefully expected at a lower speed, but the crucial point is that the level -- levelized cost of energy is expected to be in line or below the fossil fuel generation. And that's the real driver for the growth of this business. From the cable point of view, we made an analysis. And if we assume that as it is, that per each gigawatt installed, there are between EUR 250 million and EUR 500 million of cables, including the submarine cables to connect the offshore wind farm, the inter-array wind farm cable, and keeping out for the time being because it's minor, the value of the cables in the tower and in the nutshell almost 45% of the CapEx to develop a wind farm is related to our job, the job of the cable makers. So every gigawatt, we can consider that 45% of the value of the investments are related to the cable business. And we estimate that if we assume EUR 300 million per gigawatt, we are not wrong, that is going to generate a significant amount of value for the cable. If you look at 2019, that is today, and the growth year-on-year from '17, you can recollect quite easily the market of today. The market of today for submarine is roughly EUR 2 billion. Let's flip to Page 12. Taking into consideration the changing world, especially for transmission -- energy transmission, we are developing some new technologies, just in case, to serve our -- better our company. First of all, the 525 kV XLPE and P-Laser that are -- that is the one -- that is -- they've been homologated by us for the German corridors. Secondly, the high depth nonmetallic covering cable. Just for you to know, we have already produced and installed Evia-Andros-Tinos with this kind of technology, and we are now installing the other project, [ as for Evia, ] as you remember, Crete-Peloponnese. Both with Aramid armoring with a much lighter cable, that if you extrapolate to a single core -- because those are 3 cores, if you extrapolate to a single core is the way for us and for the market to transmit energy across very high depth, up to 3,000-meter valley in the bottom of the sea. That's to give, to our customer, the possibility to link 2 areas that have in the middle very deep sea because that's important. And there are projects that are under scrutiny in the market to understand if it's possible and viable financially to do it. From the Telecom business point of view, we have the optical fibers. The optical fiber. So we launched the 180 micron fiber nano cables. That's why -- because we cannot and makes no sense to fight simply on the price. We have to raise the level of the bar in order to create a gap between the players that are able and the players that are not. We homologated the 180 microns, having a much higher density for the fiber cables as well as we have developed the FlexRibbon cable up to 6,900 fiber per cable. Last, but not least, the control of the network for our customers, the monitoring systems. That's in the hands of Prysmian Electronics, and we developed the PRY-CAM. We developed the DTS, Distributed Temperature Sense. And we are developing other products that will be useful for our customers to control and monitor the network, to utilize as much -- as best as possible the link they have. Let me flip to Page 14, the outlook. Outlook 2020. The outlook is -- has a range of EUR 950 million, EUR 1.020 billion 2020. Obviously, I'm very transparent with IFRS 16 in. I don't want to create doubt or apparent tricks. The free cash flow continued to be good to over EUR 300 million. And that's included all the cash out for restructuring. We expect Projects improving but a little bit yet, not significant -- not significantly because we have to execute certain -- the projects. We have to continue to execute the projects in a flawless way. Projects are quite difficult and require a very big effort. Energy. Energy, we expect to have slight growth in North America and Latin America as it has been this year, not maybe so intense after this year, but not so bad. Telecom, vice versa, is the bad guy of the group. Why? Because the decline in Telecom is driven by volume and price pressure and YOFC. YOFC, obviously, for us, is a contribution only from the results point of view, not from the sales point of view because we do not consolidate the sales, and there is the doubt where it's going to go. We have to wait for the official release of the results of YOFC. I doubt that being YOFC in the center -- in Wuhan, in the center of the coronavirus epidemic, it will not be easy. We have to wait and see. Just a last check on COVID-19. Prysmian has implemented the highest possible safety monitoring standard to manage and control the development of COVID. There are mitigation actions put in place to safeguard, first of all, the people. That's our mantra. Number one, we have to protect the employees, even if today, we are here working regularly in our headquarters. As of today, we have no employees infected. All the group -- plants of the group are open and running, including China and Northern Italy. Obviously, both China -- Chinese plants and Northern Italy are not working at full speed, simply because the people is partly at home. And consequently, we are working at 80%, roughly, of the capacity. For the time being, there has not been relevant disruption nor -- in manufacturing nor in the supply chain activities with all the possible difficulties that, obviously, every day we encounter. Okay. Thank you very much for listening to me. I give the floor to Francesco Facchini for the financial results.

Good evening. Thank you, Valerio. As usual, I start from the profit and loss statement. As Valerio commented, organic growth for the full year is slightly negative, only 0.9% with a slowdown in the fourth quarter, which was substantially driven by the slowdown in the Telecom business volumes. EBITDA reached over EUR 1 billion, EUR 1.007 billion, including EUR 47 million of IFRS 16 impact. Important to focus maybe on the little box on the right of the page. You see that before IFRS 16, the fourth quarter at EUR 217 million is substantially in line or slightly above the fourth quarter of the prior year if you restate that for the Western Link effect. So EUR 116 million plus EUR 95 million, which was EUR 211 million, so EUR 6 million higher. And these are mainly thanks to the positive performance of: Projects, EUR 17 million above last year, I'm commenting the Q4, as expected recovery in Q4 as we anticipated after as expecting a slow start of the year in the first 3 quarters; and Energy where growth was confirmed in Q4 as well. Of course, on a slightly more challenging comparables, as Q4 2018 has already improved, specifically in North America. Whereas you clearly see the development of Telecom, excluding YOFC, throughout the 4 quarters, a very strong first half, then reaching a plateau in Q3 and dropping in Q4 with a minus EUR 18 million in terms of Telecom and then, of course, the drop of YOFC results, which contributed negatively, adding also some positive one-offs of 2018 for EUR 37 million. On this page, let me comment very positively the group net income, which was very close to EUR 300 million with a solid Q4 as well, also in consideration of the material restructuring charges that we took in Q4 and also some impairments related to the slowdown of some areas, such as, for instance, Southeast Asia. Flipping to page -- to the following page to comment briefly the adjustments on our EBITDA. First of all, we have some positive nonrecurring items, antitrust related, positive for EUR 32 million, which are coming from general reassessment of the antitrust provision -- antitrust risk provision that we decided to decrease a little bit. Restructuring cost amounted to EUR 85 million, sharply up in the fourth quarter. In year-to-date September, the amount was EUR 17 million, so an increase of EUR 68 million in Q4, and this increase is almost entirely attributable to the footprint -- industrial footprint and rationalization, which was launched in South Europe, specifically in Spain, that from the P&L profit -- from the profit and loss point of view, impacted 2019, whereas from a cash point of view will impact 2020. I was mentioning assets impairment when I was commenting the group net income. You see here that we posted a total amount of EUR 36 million, which is mostly due to the development of Southeast Asia business and, to a lesser extent, due to some specific impairment on machinery and equipment involved in the Spain industrial restructuring. I flip to Page 19 to comment the financial charges. Net interest expenses were absolutely in line with our expectation, fully realizing the synergies by the first half of this year coming from the General Cable debt refinancing, which was completed right after the acquisition, but whose benefits went through our profit and loss in the last -- basically in the period from closing to the first half 2019. Overall, we achieved a major drop of net interest expenses. Just to give you an indication, if I combine the net interest expenses of Prysmian Group and General Cable in a pro forma 2017 statement, i.e., the current level of net interest expenses is approximately EUR 50 million, 5-0 million lower than 2017. And this is mainly due to the synergies coming from the refinancing of General Cable debt, which was very expensive, as you all know. Our financial structure was strongly improved during 2019. First of all, in terms of maturities, now we have an average debt maturity which is well over 3 years. We paid back entirely the acquisition financing bridge for a total original amount of EUR 700 million, and this was possible thanks to the massive cash generation that we achieved in 2019 that Valerio has already commented. And we raised on -- mainly on the loan market, some specific loans with some financial institutions with a pretty long tenor. And also, we refinanced, in the first half of the year, the revolving credit facility for EUR 1 billion. So we are very solid from this point of view, no issue and facing the first important refinancing appointments in 2022-2023. I'm referring to a capital market refinancing, of course. On the balance sheet, let me comment on the dynamic of operating net working capital apparently rising by approximately EUR 40 million from EUR 707 million to EUR 749 million. As Valerio anticipated, this is mainly an accounting effect. There is no cash effect. It's mainly coming from the Western Link takeover certificate, which technically closed the project and which basically allowed us to transfer the construction contracts, which are part of working capital, as liabilities to risk provisions. And this technically -- as these are liabilities, of course, provisions in principle -- technically generated an increase of working capital and an increase of risk provision, which has basically no cash effect. Apart from this, our working capital was strongly driven down or improving, thanks to a very strong performance of the Project business, which executed and finalized some major projects in Q4 and collected a lot of cash with a free cash flow on a yearly basis, which exceeded EUR 100 million, on the other hand, was penalized by the extra costs and also the liquidation damages, which were converted into cash related to the Western Link, of course. Net debt, Valerio commented the exceptionally good performance, EUR 2.14 billion including IFRS or EUR 1.97 billion excluding IFRS 16, which is a deleveraging and a cash flow generation pretty much above expectation, I would say, around EUR 70 million, EUR 80 million better than expected. I'm sure that you remember that I was guiding starting from the half 1 results 2019 for a net debt without IFRS 16 impact around EUR 2,050 million, and actually, we landed with a debt excluding IFRS 16 at EUR 1,970 million. So EUR 18 million improvement or better performance that I was commenting. And also in terms of leverage, we are exactly where we wanted to be with a net debt on EBITDA at 2x plus or something, but a very strong and positive deleveraging. On Page 21, cash flow. Valerio has already commented on this. This was a record year, EUR 433 million, of course, including the EUR 42 million contribution coming also in this case from IFRS 16, but also without that EUR 390 million, EUR 391 million to be exact versus the guidance that you certainly remember at EUR 300 million plus/minus 10%. So a real strong performance. This was mainly generated or mainly achieved in the Project business, certainly, in the North American -- North America region and also in Lat Am region. These are the 3 areas, businesses and regions, which contributed so strongly to our cash generation. In the bridge, you can clearly see that the main contribution, the main boost, came from a cash reduction of our working capital of EUR 92 million, and this, as I said, mainly came from the Projects business. And you clearly see here also the negative cash impact of Western Link this year, EUR 95 million, and the EUR 75 million restructuring and integration costs related to the total perimeter, which were slightly lower than the EUR 90 million that we anticipated in the guidance. You remember the EUR 300 million plus/minus 10%, including the EUR 90 million restructuring costs. This EUR 90 million were, in reality, slightly lower at EUR 75 million, and this also contributed to boost our cash flow. Let me jump to the last page to briefly comment on the dividend proposal. As Valerio explained, EUR 0.50 will be our proposal to the upcoming shareholder meeting, plus 15%, 16% from the EUR 0.43 current dividend. Apart from the -- some normal swings in the business, I'm obviously referring to Telecom, that we may hear from time to time, depending on the cyclicality of this business, this wants really to signal a very strong commitment and confidence of this company -- of this group to keep generating a very strong cash flow and to keep deleveraging. So wants to be a very strong signal of confidence. Very good. I believe I'm finished, and we can proceed with the Q&A session.

[Operator Instructions] And the first question comes from the line of Max Yates from Crédit Suisse.

Just my first question is around the guidance. And on the Page 17, you gave us quite a helpful bridge to get from sort of 2018 to 2019 EBITDA by division. I'm obviously conscious the midpoint of guidance is EUR 22 million lower year-over-year, and you should have the LTI sort of management payments reversing for about EUR 15 million. So if you could maybe help us a little bit, by division, how we kind of bridge that gap from EUR 1,007 million down to EUR 985 million at the midpoint and what the major moving parts are. That's my first question.

The problem Max -- Valerio speaking. The problem obviously comes from one very clearly, and it is this business is Telecom. We have to consider that compared to the previous year, I mean the '19, especially in the first half, we are going to lose a significant amount of euros, something like EUR 50 million we expect as a loss in terms of profitability of the business. That's due to the volumes and the related prices. I don't know if Francesco wants to add something.

No, actually, you were very, very clear, Valerio. I -- basically, the bridge, just without going too much into details, is certainly burdened by the Telecom business dynamic that Valerio is mentioning, which will mainly materialize in the first half, which was, as you remember, very strong last year in 2019 and then was plateauing in Q3 and slowing down and dropping actually in Q4. We expect this sharp drop in Telecom to be driven by volume and price to be only very partially compensated by recovery in the Project business where we are very confident on an improvement, but on a longer term, actually 2021, as we commented also on the guidance page. And also a slight improvement in -- after the major improvement in 2019 of the Energy business. And once again, we expect this to come from North America and South America, but nothing in the magnitude of the improvement that we're seeing in 2019. Then we have synergies, of course. But as Valerio has commented, we overperformed in 2019 in terms of the synergies where you see that we have achieved EUR 140 million versus the target of EUR 120 million year-to-date 2019. And this, of course, limits the additional synergies that we can achieve in 2020, EUR 15 million, which are basically eroded by, call it, inflation, so will be difficult to see a further contribution in terms of total fixed cost in 2020. And then, last, but not least, as you are correctly saying, the fact that 2019 was penalized by the LTI cancellation for EUR 15 million, which will be recorded provided that, of course, the new incentive scheme will be approved by our shareholder meeting in 2020. This is the bridge, Max. I don't know if we have been clear. But I wish you enough that all the bridge where you should land -- you...

That's helpful. And just my second question is just around the Telecom business. And -- I mean I think we've talked kind of historically about 2 different things for this business. One is the destocking that you've seen with certain customers because the market was previously very tight and some regions had some bottlenecks. The second issue is, obviously, the overcapacity in China. So could you give a little bit of detail around how long you expect that customer destocking to be a drag on the volumes and then also a little bit of color what you're seeing from the Chinese competition side in Telecom? Are these now -- are you seeing sort of more often in kind of frame contracts local Chinese competitors emerging in those conversations? Or -- could you give a little bit of color around what you're seeing there?

Max, let me pass the question to Philippe Vanhille that is here around the table.

Max, on the destocking, we see the destocking going ahead for quarters. I mean we clearly see the destocking effect to last nearly for the whole year of 2020 now. We understand better than 3 months ago where our customers are. I think they also understand better themselves where they are because it's quite a complex project to roll out an infrastructure, and the consequence is that we do not expect the destocking to be over soon in the year. If we want to be optimistic, I would say, during Q4, but I would count that the 2020 is about destocking.

So just on that, is the Q4 organic decline of sort of minus 10% or the second half decline of sort of minus 7% or 8%, is either of those a good proxy for what we should expect for 2020 growth?

Yes, absolutely. It's close enough, yes. That's also what I expect. Then on the Chinese development, today, we see -- and without adding the virus issue that is adding some uncertainty on everything, of course, we see China still -- we see that the Chinese market is not resuming. It's still -- it even still, as I understand, slightly shrinking again. So of course, the overall capacity that is installed in China, as we all know, is still on. And as a consequence, we see our Chinese and Asian competitors, in general, being always more aggressive. As you know, we have been -- we have seen the impact of that aggressiveness a little bit in -- with certain delay because of our existing contracts. We still have contracts, but of course, with time, we have less and less ongoing contracts. And we see more and more of that pressure. We see this aggressiveness in the market, and I have to say that we are seeing it in -- now getting more brutal than a few months ago.

Could I just ask one final question. What do you see? Do you see this as structurally being the new normal? Or do you see something on the horizon in the next 2, 3 years that can fundamentally improve the situation? Or is it realistic to think margins could trend down from where we are today to historic sort of 12% to 14% levels? What can -- what is ultimately the trigger to change this and improve it?

I think the trigger is the global volume, and the global volume is, as we know, driven by the Chinese volume. So I think we -- in the industry, we, more or less all agree with the fact that when China will really launch a significant 5G plan, things could change because we could have, again, a trend of a market that would go up more than just a single-digit per year, which we all expect in any case. But if China launch -- would launch a 5G plan in the Chinese way, as they always do, meaning in a very strong way, then the overall capacity situation in China could revert, but no one expects that very soon. And there are still a lot of uncertainties -- technical uncertainties about how to do the 5G. And you know, as always, in China, it's a decision government. So it's extremely difficult to predict in terms of timing. So I would say, I personally expect to be under pressure for a couple of years, but I also expect my cost reduction road map to keep on paying off year-on-year and to offset a part of that pressure. I mean we've been in a very brutal situation in the quarter 4, and we are still in from both the price and the volume perspectives. Now we are going to keep on working on what we have always been working on, meaning our costs and our commercial presence. And our cost reduction offsets a part of the price pressure, for sure. Now it's a matter of time. And the timing in Telecom and especially given that situation in China is difficult to predict, the phasing is difficult to predict.

If you want an optimistic view, that is not my traditional way of looking at the business, we may expect that being the majority of the Chinese capacity in the region -- in fact, in the region of China, maybe that the pressure from Chinese will not be so high as it was in the last quarter talking about COVID.

And the next question comes from the line of Monica Bosio from Banca IMI.

The first question is again on Telecom. Now maybe the first one is on the guidance, which has been set up very cautiously. That's very direct. Do you feel comfortable toward the mid or toward the bottom end of this guidance? Because the situation is quite uncertain. The Telecom Cable visibility also on the back of the COVID-19 is even much more -- even much worse. And I'm just wondering, where do you feel more comfortable? And the second question is on Telecom. You have room for cost reduction for Telecom. And this could offset the part of the slowdown in Telecom, which is your floor in terms of profitability for the Telecom Cable business? Just an idea.

Okay. Monica, thank you very much for your questions. So they are not easy, frankly speaking. Anyway, it's clear that the situation today is pretty volatile. After -- with a little bit of delay, frankly speaking, after the tender of China Telecom last -- China Mobile last year, we cutted the CapEx for the capacity, and we focused the remaining CapEx only for the cost reduction. We are progressing doing it. And that's a reason also why we are able to keep with the EUR 250 million CapEx, the ship inside that was planned to be outside the global CapEx. Today -- so consequently, we are confident to be able to reduce further the cost of the fibers. I'm not so convinced to continue to invest a lot of money into this chapter, only for the cost reduction. Then which is the floor? Which is the floor is you should ask that to the Chinese competitors in reality because I believe -- that's a strong assumption, but I believe that the current price of the fibers in the market is really already the floor of the Chinese competitors. And sooner or later, I don't know how long will take, the Chinese will be obliged to rationalize their capacity, meaning to merge some of the industries. And they are able to do it because government will take part of it, obviously, by the way, creating larger and stronger companies. We have to think about this picture because I believe that in the next 1 or 2 years, something will happen in China and, consequently, have to happen in the rest of the world. But it's clear that with the current price of the fibers, very few of the players are able to make money for...

Okay. So 2020 will be, in any case, a tough year because it will take time before the consolidation and the [ best ]. So at the end...

Sorry, Monica. Say again.

No. Sorry, the line is very noisy. I can hear you well now. Hello?

Yes.

Can you hear me?

Yes, we can listen you.

Okay. Sorry, the line was disturbed. Please go ahead.

Okay. So consequently, we have to take into consideration that it will not happen in the very short term. It will depend over the political support of the -- made by the Chinese government and the other governments to the industries that are going to be affected. But today, most of the capacity in China is in the Hubei province. And we have to see what's going to happen today. Anyway, with the current level of price of the fibers that have been introduced in the market by the Chinese, we have to consider that not all the players, not the entire capacity that is clearly too much today is able to match such kind of prices. Consequently, sooner or later, a consolidation in the sector has to happen.

Okay. And on your feeling on the guidance toward the mid part of the guidance or maybe they'll hit bottom end, just a feeling.

Monica, the feeling is that the guidance is tough. As usual, we believe to be able to stay in the guidance maybe that we will not be in the upper side of the guidance.

Yes. Okay, clear.

But it's largely depending also by the coronavirus effect. Because the coronavirus effect has other implications other than the ones we see today that, for instance, are -- I give you a little color. Yesterday, our ship was in -- was going to a truck in the Singapore port, if I'm not wrong. And the authority has refused to receive an Italian ship in the port. We have been obliging the port. So -- because now Italians are spreading the coronavirus around the world and that -- we're not going to have a real consequence in the short term. But we have to take care of it.

Okay, fine. Very clear. Just a follow-up on the financial charges for Francesco. Francesco, sorry, can you give us an idea in term of financial charges for 2020?

I think substantially flat. I don't see -- because the synergies have been realized 100%, so plus or minus, a very few millions. I wouldn't see any big change.

And the next question comes from the line of Daniela Costa from Goldman Sachs.

Wanted to ask 3 things. The first one on -- like you've mapped out very helpfully all the German contracts. Wanted to understand a little bit in terms of like the terms and the -- of these contracts. It's quite a massive set of projects, and I guess sort of all the cable players will have to contribute somewhat to this. How does, like, the pricing, the technical terms on the contracts compare to sort of if we look at the average high-voltage contracts that you've got over the last few years? If you could give any color on that. That's number one. Number two, wanted to ask -- like one of your biggest competitor has signed a sort of a frame agreement for Submarine with Ørsted, which is a little bit different dynamic to what we're used to in like single one-point-in-time contracts. Wondering sort of what's your thinking towards entering in those type of agreements for capacity as wind offshore expands internationally. And my third point, just wanted to check on the dividend. It's sort of like being your biggest increase on the dividend in a long time. How shall we think about your dividend policy going forward? And then perhaps sort of, I guess, was quite a bigger increase than you've done over the past. How do you think about like buybacks and capital allocation going forward now that maybe consolidation is not as much in the agenda? I don't know, just interested on capital allocation as well.

Thank you, Daniela. First of all, German corridors. Yesterday, we were here in a restricted team to discuss about deficiencies of German corridors, I don't tell you which one of the 3, till 9:00 p.m. Why? Because it's clearly a quite important chapter. I've seen that -- I've heard that one of our main competitors has told something about it. We cannot talk about deficiencies of the German corridors during the tender. What I can tell you is that we are not probably going to accept deficiencies as have been submitted to us, finito. I don't -- I cannot go more in detail of it. Of course, we don't like and we are not available to take excess of risk to those projects. Pricing. From the pricing point of view, German corridors seems not to be so bad. Meaning that being a new technology, being very big projects, the pricing we see are acceptable. At the end, we have 2 pillars in the big high-voltage contracts, the deficiencies and the price. The acceptable one today is the price. Deficiencies is the most difficult one. I don't know if that's sufficient for you. Second point, frame agreement for Submarine. Okay, we have seen, obviously, the frame agreement that our main competitor took with customer for the high-voltage interconnection. I'm fine. Appreciate it makes sense. We are negotiating something else with customers, something similar to the customers, not for U.S. specifically because, as of today, we don't have a specific capacity in U.S. But that seems to be the style of the purchasing strategy of our customers. That makes sense in order to reduce as much as possible the cost per megawatt hour of the projects. Makes sense, and we have to follow it. Then as of today, we don't have a plant for Submarine in North America. Who knows what about the future? The last question was related to dividend, and I leave the floor to Francesco to give an answer to the...

Daniela, as you have seen, we have decided first to step up our dividend per share to be proposed to our shareholder meeting. I think that this reflects what we did in terms of cash generation in 2019 and what we are planning to do, and you have seen the guidance for 2020. I think it will be important still, of course, after the General Cable acquisition, we are at a financial leverage level, which is decreasing, but which is still, let me say, a bit higher than our average throughout the last cycle, that's throughout the few -- the last few years. So I believe that we will, in the medium term, that's my view, of course, to be then discussed with the Board if, in fact, in the next few years will be logic to keep the new level of dividend in place. On this, we are confident. Let me assure that we are not increasing the dividend and then step back the following year. Of course, if we increase the dividend, we increase the dividend with the current perimeter because we are confident that this is sustainable, and we want to keep this. Then to keep deleveraging and then whether we have deleveraged further, let me say, to a level which is 1.5 -- or between 1 and 1.5x, then we will -- at that point in time, we will have a better view in terms of real opportunities, real M&A opportunities in terms of a bolt-ons rather than a further consolidation. Maybe not as big as we have done recently, but maybe in some geographies, there is still some potential for consolidating the market. And depending on our assessment of these opportunities, we may even decide to step the DPS further up because let's face it, with a company generating this level of EBITDA and this level of cash flow, in theory, we have still room to increase the DPS, depending on the capital allocation strategy and the opportunities that we see, not so much on the organic, on the internal investments, but more on the M&A side, more on the acquisition side. Fair enough, Daniela?

And the next question comes from the line of Lucie Carrier from Morgan Stanley.

I actually only have 2 questions left. One was related to the slide you've shown on the offshore wind potential in terms of market. That's quite helpful. If I kind of make the math correctly, you're expecting about 50 gigawatts of increase between 2019 to 2023. If we take the average EUR 300 million of value per gigawatt that you've indicated, we are looking roughly at a EUR 15 billion market size over 5 years, roughly. So it's about EUR 3 billion, a 50% increase to the current market of EUR 2 billion. How do we think about that from your standpoint in terms of, one, being positioned for that from a geographic standpoint, where the projects are going to take place; but, two, also to be able to deliver potentially on this growth profile? And I appreciate you mentioned you don't necessarily expect all of this to happen within this time frame. But then maybe can you indicate a bit more closely what is your expectation and how you guys continue to deliver on that expectation?

Here -- Lucie, here, the pessimistic Valerio is coming back. Sorry for saying that. It's clear that there is going to be a growth. I -- frankly speaking, we took the most important analysis on the market. I don't believe that 9 gigawatt per year will be installed in the next years, frankly speaking. But -- simply because 9 gigawatt means that being each tower today, roughly 10 mega, means an incredible number of towers to be built, installed, connected and so on. It will happen, but with a lower speed. That's the reason why did we consider that the growth is going to come -- is in place, is not yet in the order in the Project's queue, not completely, but is going to come. It's not a problem of capacity, gentlemen. When the market demands, the capacity can be assessed properly in 1 or 2 years. So I used to say that I've never seen anyone that is missing cables so much. So I believe that will grow. That a proper discount has to be done on the yearly number of gigawatts installed, and there would be sufficient bread for everyone in the market. Unless, like in the fibers, someone is going to invest higher lot of money to grow too much the capacity in order to see later the prices going down. That is not what we wanted to do.

If I can make a comment as well, Lucie, on this Page 11 slide, we always like this company to concentrate on this. Of course, we like the long-term view and we like the long-term vision very much. And we believe very much in that apart from the -- then the final quantification of that, but we think that this kind of estimates are sometimes very solid in -- for the first few years. And then, of course, the longer term is there, but is more difficult to be predicted. So let me focus maybe on the first couple of years of these gigawatts installed projection. So from 27 gigawatts to 45 gigawatts, there is an increase of 18 gigawatts. So let me average these 9 gigawatts per year using conservatively the EUR 300 million conversion factor that we have put in the slide, this would land in a market only for offshore wind, which is EUR 2.7 billion, my annual market, only offshore wind, EUR 2.7 billion. Then we usually see over the last few years, a market -- we have seen a market for the submarine interconnection of EUR 1 billion, EUR 1 billion-plus or something. So these would, for the period, the 2020-2021, end up in a total market of between, let me say, conservatively, EUR 3.5 billion, EUR 4 billion, which is, however, a very significant, maybe not huge as it is in the longer term, but still a very -- already a very significant improvement and increase of the market. And of course, here, we are talking of offshore wind farms. We are not talking of interconnectors, where also the pipeline that we are seeing is very good in terms of projects maybe not yet finalized, not yet coming to the market, but very solid, but clearly coming to the market. And then we have also to -- we are excluding here the -- what is coming in strict relation with offshore wind farm, which is the strengthening of the underground network, of which the German corridors is a clear outcome. Hence we are not -- we have to add the German corridor on top of this to be very clear. So even focusing on the shorter part of this slide, this allows us to anticipate a very solid market, and we like very much this perspective.

But we wanted to see the orders.

Absolutely. Also because in this market, we have -- normally, we can afford the luxury in terms of time-to-market of the orders to see the orders, as Valerio is saying, and then follow-up in terms of CapEx to match -- to be able to match the go-for-the-market. Of course, we must be fast and good in doing that, but we normally are.

The biggest mistake, Lucie, that the market can do is on the basis of certain level of expectations to inject money and invest heavily in advance. The result will be, obviously, similar to the fiber in China.

I guess just maybe to try to put some numbers on this view. If we are kind of looking at the upper end of what you just indicated, Francesco, close to EUR 4 billion combined market between the offshore wind and the interconnection in the short to medium term, your usual market share depending every year about maybe 35%, 40%. So we will be -- I'm just trying to see or get a sense from you which type of growth you are expecting for your Project business in the short to medium term? And I appreciate there are some phasing, time of manufacturing, time of installation. But when we look at it, I would say on a maybe 2- to 4-year basis, are we talking about a solid mid-single-digit growth, at least, that you think the market can deliver or something higher, something lower? Because I think, for us, we get this forecast from various independent provider, but it seems to be very difficult to materialize it in the number.

Lucie, you know the left side of the chart. I'm referring to Page 11. The right side of the chart we did because I was very keen in having a potential translation from the gigawatt going to be installed to the business for Submarine Cable, keeping on aside the interconnectors. That's the reason why we made this assumption of EUR 300 million per gigawatt hour. That makes sense. Our market share is clearly something in between, as you said, 35%, 40%. So mathematically, it's easy. The rough number. We have to take care, most of all, of the ramp-up of the gigawatt installed in the next years. I, frankly speaking, don't believe in the left side, very sharp rise of the gigawatt. I hope to be wrong. But for the time being, our move would be on the line of a more modest growth. Hoping to be wrong. Then everyone can take the decision of how many gigawatt -- gigawatts are going to be installed on the sea. Remember also that sooner or later, the available low depth sea is not sufficient for all those gigawatts. Meaning that, sooner or later, the gigawatt hour to be installed in the sea where the sea's depth have to be -- have to become floating. There is no way. It's a matter of time. Okay? Any other question, Lucie?

Yes. Sorry, I think I was on mute. Just my second question quickly was -- if you could add some color on the deceleration we've also seen in the fourth quarter from the more cyclical business. So E&I and Industrial, is that really macro-related? How much are you having in terms of visibility right now as you start the year in those more cyclical businesses?

Lucie, Francesco speaking. I think that the -- actually it's not a deceleration. I wouldn't define this a deceleration. I think that the growth in terms of earnings of EBITDA of the Energy business was very massive in the first 3 quarters only because the growth started in the fourth quarter of 2018. So the fourth quarter 2018 provided a significantly stronger or more challenging comparable base. But in terms of margins, in terms of earnings, we didn't see any major difference between the linear or the sequential trend of the first 3 quarters and the last quarter. Then of course, there are some upper trends or down trends in different markets. But this is always part of the game and is always compensating. Then of course, going to 2020, the same business, mainly in North America and South America, will not be able to provide the same level of growth because we compare with a very solid 2019 throughout the full year. But don't see this EUR 16 million-plus in Q4 to be precise as a deceleration of the Energy business because it's not.

And it's not in our forecast. In our 2020 forecast, we expect Energy to be able to slightly grow faster.

It's actually part of our guidance, by the way.

And the next question comes from Akash Gupta from JPMorgan.

Valerio, Francesco, can you hear me?

Yes.

Okay, cool. So I have 3 quick questions, please. The first one is on Telecom. I mean we are hearing from some market player that Asian companies or some of Asian supply for fiber are selling below cost. What likelihood would you assign for potential antidumping duties maybe picking up sometime in 2020? So that's question number one. Question number two is on cash flow. Maybe if you can talk about what the assumption is for working capital? And if you get a sizable share in German corridors, then could there be upside on free cash flow for the year? And then the third one is on Italy. Can you talk about -- if you look at 2019 year as a whole, and if you look at sales by destination, then how much exposures you have to Italy, both for sales and for production?

Okay. Let me -- Akash, let me leave the floor to Philippe for the Telecom answer.

Akash, I don't know whether someone is selling below their costs. For sure, there is a suspicion of dumping towards a certain number of players. And the association of the cable industry in Europe has decided to look at that point and is now in the process of acting on this. I cannot say much more than this. But for sure, there is an association in Europe that is really seriously taking care of that. In case the dumping would be proven, then of course, there would be a case. And we do not have yet the conclusion of this, but many of us have a strong suspicion, let's say.

And going by previous examples, how long it can take for European Commission to act?

Okay. It's a matter of months, for sure. What I understand is it could take between 1 and 2 years. It's not as fast as in some other places like the U.S.A., for instance, recently, or China also. Europe is a slow-moving animal from this perspective. But when they go, they can go very serious. So if -- we like competition because it's the way for us to improve what we do, but it's also absolutely legitimate to fight against unfair practices, if unfair practices are proven. That's what we are after as an association and as Prysmian as well, of course.

Akash, Francesco speaking, on the free cash flow guidance, let me first comment a little bit more generally, and then maybe come down to your question about the down payment function. Basically, we are guiding for a free cash flow that at the midpoint is approximately EUR 100 million lower than this year, still very strong, but still EUR 100 million lower. To cut it short, this has mainly to do with the fact that this year, we were able to achieve a major reduction in working capital cash-wise with EUR 92 million that you have seen in the bridge, which is not factor for next year. It's true that this is partially compensated by the fact that next year, we will not have the negative impact coming from liquidated damages of Western link, repair cost of Western link, but still the reduction of working capital that we have achieved in the Project business this year has been very massive and has driven up our cash flow. Then, of course, we have, taking our EBITDA guidance, some lower cash flow coming from that front. It's taking the range of the guidance that in terms of adjusted EBITDA that we have given. CapEx, I think, will be broadly stable in terms of cash impact, maybe slightly higher restructuring costs because, as I said, we took the full profit and loss charge of the South Europe Industrial restructuring in 2019. But cash-wise, this will fall 100% in 2020. And also from a tax point of view, I believe that we will have a higher cash out, higher level of tax paid, simply for the reason that our results, our earnings before tax in North America is increasing very sharply. And this is only partially reflected in 2019, will be normalized in 2020. Regarding the down payment function, I think the down payments, all in all, will not be very different in 2020 from 2019. Of course, we have assumed some -- to take some share, let me say, in -- of German corridor business. I think we have made a reasonable assumption. Of course, I will not disclose which assumption we have made, but I can say that we have assumed to take a share, for sure. But let me highlight that also last year, we had a major down payment related to the Viking project. So this explain why, in terms of total contribution of down payments, 2020 doesn't look very much different from 2019.

Finally, if I may, I used to say that the bottom of the barrel does not exist in the efficiency. Consequently, maybe that even if not reported in the target we settled for the free cash flow, maybe that's something from the working capital reduction we may still find.

And then on the thing...

Sorry?

Exposure to Italy for sales and production.

Can you repeat maybe, Akash? Because I believe your third question was not coming to us very clearly, if you are so kind to revisit.

Yes. So basically, I was after -- if you can disclose how much is Italy contributing to your group revenues and group production. I'm after revenues by destination because you also invoice sales in Submarine from Italy. So in your annual report somewhere, we get a bigger number, but sales by destination is -- I believe, is lower than that.

Italy.

In Italy.

Italy.

Yes. So the sales for the Projects, obviously, mostly comes from PPL company, and the PPL company is an Italian company.

But by destination, you mean the sales into the Italian domestic market, sir, overall.

Yes, yes.

I think that the sales into the Italian market are the sales of our Italian affiliate, excluding the Project business, and this is in the region of EUR 300 million. So it's quite -- I would say that it's even more irrelevant from -- and my Italian business colleagues will pardon me, but it's even more irrelevant from the earnings point of view, even more than from the revenues point of view. So don't be concerned on any...

If you are scared of the Italian market trends, that's not a problem. It's not going to be affected because it's very limited our participation to the Italian market. Maybe that we have to look at the European market trend because the Europe -- the coronavirus is affecting not only Italy. Has started from Italy, unfortunately, but it is going to spread all over Europe. And the demand of the market due to it has to be evaluated. It's too early. But there is not...

Do you have a number of -- do you have a number for level of production that is taking place in Italy? Because I think you have Submarine plant and also optical fiber plant there.

The production is not an issue, believe me. The issue may come from -- also because our plants are mostly, except one, the Merlino one that is in the Northern Italy, south side of Milano, all the other plants are in the south and, for the time being, are not affected at all, as I explained it in the last chart. Then the situation change every day, and there is no certainty.

And the next question comes from the line of David Baker (sic) [ David Barker ] from Bank of America.

Two quick ones for me. Just to go back on 2020. How are you looking in terms of capacity utilization in high voltage? And are there still some orders that you can fill that remaining capacity with? And then secondly, look, we've clearly been speaking a lot about renewables and offshore wind. And in this context, are you looking at making any more divestments in the portfolio to kind of refocus the equity story more generally? That's just my 2.

Okay. First of all, the capacity utilization mostly for High Voltage in 2020, assuming that, as expected, the first order, if any, will come by the summer of this year, we believe that the capacity utilization will not change significantly in 2020, will be surely fully saturated in 2021. If we are going to get a significant chunk, we're going to get an order and significant for these German corridors. We are not worried because to increase the capacity in high-voltage needs of 1 or 2 years, we have already qualified 2 plants for the German corridors, theoretically, 3, if we consider even the finished one. So we can have much. The problem in 2021, if the order will be significant, it will be probably to be obliging to switch part of the supplies from European plants to other plants. But we have other capacity available around the world, if needed, namely U.S., namely China, and we have to reallocate other orders to those 2 plants. Last, but not least, if the quantity of cables would be giant, we have nothing against the idea to invest. That is the last resort. The second question is about the renewal and offshore wind capacity...

It's more specifically about the portfolio. Is there anything that you're thinking of divesting?

Why divesting? Okay, the divestiture, we already -- is already in progress and is the little business of aerospace. I don't believe we need to divest anything else unless useful for us to divest, but we have no offers for the time being. To cover the CapEx, we have no problem because we have a significant cash flow generation. As you have seen, we have been able to insert in the budget, the CapEx budget of EUR 250 million even the new ship that was out. Consequently, I don't see significant role. Last resort is the boom of offshore wind. We require additional CapEx, we can increase the CapEx. Why not? Once we have the order in hands, we know what we have to do, we have the cash to do it.

And the last question comes from the line of Alessandro Tortora from Mediobanca.

Okay. I had 2 questions, one on the CapEx. Probably, you as well okay telling us that would be at a last resort, okay, to invest in extra incremental CapEx, okay, on Germany. The only question I have is on, let's say, the taxation, the fiscal side. I saw this year, let's say, 2019, a very high tax rate. So I would like from -- to understand which level, let's say, of tax rate we may assume for the next year of 2020-2021, considering, let's say, the high level seen in 2019?

Alessandro, Francesco speaking. I think for next year, you can assume a tax rate a few points lower than this. I would take 30%. You are right. You have spotted very clearly an increase of the tax rate in the last quarter, up to 33%. This has to do with a few drivers. First of all, we have the impairment that, as you perfectly know, is known fact, the Deductible has no tax effect. Then the second effect was -- is the restructuring in Spain, which is, of course, driving down the earning before profit of our Spanish legal entities. And given the overall level of profitability of these areas, I think, it's not given that we'll be able to recover these tax losses. And basically, we decided, in any case, not to activate any deferred tax assets. And last, but not least, we have, as I commented, by the way, a major increase of our net income or our earnings in the U.S. jurisdictions. This is building us earnings and profits in the U.S. jurisdictions that, sooner or later, we'll need to distribute upstream, our legal chain in the group, to be able also to serve dividends to our parent company shareholders. And unfortunately, there is a resulting tax between Italy and North America of 5%. And we have decided correctly to post the deferred tax liability on these earnings and profit, at least on the portion that we think is -- we anticipate to be distributed in the future years. But these are mainly one-off effects, right, on 2019 that will be normalized in 2020. And that's why I expect to go back to a 30%. Then with the current legislation, believe me, it's very difficult to decrease the tax rate below a 30% level with our mix of jurisdictions, of course.

Thank you. This was the last question. Please continue.

Okay. Thank you very much to all of you to -- for your participation to the full year '19 financial results of Prysmian Group. Have a good evening, and see you the next time. Thank you.

Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.