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

Dear guests, welcome to Prysmian's Capital Markets Day and allow us to introduce on stage, our CEO, Massimo Battaini.

Good morning to everyone and welcome. You do see many familiar faces that were in Naples last time, but also many new ones. So thank you for joining us. Thank you for being here with us today. Thanks also to those who are connected remotely. Thanks to our Board members that have joined us today with this important event. I also thanks to all our employees that are connected from remote, my colleagues. Without them, I would not be here today. It's only thanks to their continuous effort that we performed what we did in the last few years, and we will continue to perform. I'm very excited to be here today. It is really a special day. You know why? It is my second Capital Market Day, first of all. Secondly, we made an important announcement of a new acquisition last night. And thirdly, we are here in the U.S. where I used to serve at CEO of North America a few years ago after the General Cable deal. I had great memories for the time. Even if during a moment, I had to spend 8 months in lockdown in my home, in Cincinnati by myself, where my family was also locked down by a different place in Italy. So a challenging moment. It was also challenging. I remember when we started the integration of General Cable. I had a big question back then. So I thought how to engage, how to effectively engage the people on the 2 different companies, had to make them work as one single team. So I thought to engage them with an inspiring vision. So I have organized the Town Hall. I gather all people, and I told them, we have a goal, we have a vision. We want to turn North America into the largest and most profitable region inside the Prysmian Group. It is not going to be easy. But if you work together with a [indiscernible] spirit, passion and innovative approach, we will make this happen. And we did it. A few later North America, account for 40% of the revenue of the group and 50% of the EBITDA of the group. So my vision became reality. And that's why this place means a lot to me. So why are we here today? Why did we gather you, again, after only 1.5 last time from our last Capital Market Day. I think you know the answer, obviously. It is because in '24, we beaten the goal of 2027. For those who were not there last time, we set the goal of EUR 2 billion EBITDA for '27. It was a very ambitious goal because we were coming from EUR 1.5 billion EBITDA in 2022, a few years before. But we were confident to be able to achieve it in 2017, in 4 years. But we didn't make you wait for years. We didn't just one. In 2024, we reported EUR 2.1 billion EBITDA pro forma. So how has this happened? How could we deliver the target of '27, 3 years in advance. It is because this is a new Prysmian. It's our new leadership style, we're agile, dynamic innovative in the way we move in the market. In the way we seize the opportunities for growth in the way we drive our market leadership. You always appreciate the Prysmian for delivering a consistent and superior performance over our history. But you will notice that the last 2 years have been different. We are in a new mode. We are in accelerating mode. If you look at the EBITDA CAGR 2007-2022, it has increased by 7%. We committed last Capital Market Day to deliver a 6% increase from 2022 to 2027. We actually deliver 20% in the last 2 years. So what is the reason behind this acceleration? Threefold. Strong market demand, strong market demand across all business segments, especially strong in Transmission and Power Grid. Our consistent enhancement of profitability. Due to our focus, revived focus on innovation and solution on an expansion of our business portfolio, due to our M&A agility, proven by 2 large M&As in less than 12 months. And we will continue with this acceleration in the coming years as we capitalize on our leadership, on our strength in order to deliver both organic growth and inorganic growth. Yes, we will keep pursuing growth in [ 2T sensing ], in every sense. Sorry for data. And talking about growth, think of what we were 7 years ago. We were just 1 of the main cable players. There are a few like us with similar EBITDA. You see, Prysmian, you don't see there are names, but I think you can figure them out. So where are we today? We are 3x the size of the first direct competitor. Also here, you can guess who is. The competitor #2, #3 do not exist any longer. We merge them. And competitor #4 has remained a tiny one. So we significantly expanded our company. We significantly transformed our company from one of the cable maker into an undisputed global leader. An undisputed global leader that has a distinctive assets, capabilities, a global footprint, the unparallel portfolio, the large customer base and the innovation power that is impossible to match. Thanks to these assets capability. We can provide a unique strength. Growth, combined with resilience. Let me tell you what growth combined with resilience means. Back in January, this year, we were all done, all set with the Capital Market Day preparation. The target for '28 well defined and the equity story was ready to go. Then we noticed some dynamics in the North American market. We are seeing some softening in price in the Industrial and Construction space. We shared this with you at our last earning calls. We disappointed you. The market panicked and we lost a 12 percentage point of stock price in one single day. Fortunately, we didn't panic. We reflected a more moderate growth of the I&C business in our 4 year plan. We leverage -- we embedded a stronger growth in Transmission, thanks to the solid backlog. We ended up with the same EBITDA as before but with a different contribution of the different business segments. High-quality mix of contribution. So this is the beauty of this company. This is our strength. We enjoy and we rely on a multi-business portfolio, a multi-geography footprint and often the geographies, this business, don't move in sync. In fact, they never move in the same duration, one go up and one go down. But what matters that the bottom line EBITDA of the company, the EBITDA of the company always grows. Take, for example, the last 4 years, '21, '24. We experienced all sorts of negative adverse impact from the market. We had the raw material source shortage, inflations, storing energy costs. pricing normalization in I&C, destocking in digital solution in Telecom North America. Have you seen any impact to our EBITDA, obviously not. Our EBITDA has grown unabated from EUR 1 billion in '21. I think you can tell the number too, EUR 1.7 billion in '24, excluding Encore Wire. So this is what growth with resilience means. It is not a slogan for us. It's a real history, it's our track record of performance. It is our DNA. It is our ultimate value. And if this is also your value, this is the company you should invest in. You should invest in the company in a way, the stock price is very attractive these days. So how did we create. So how did we create this combination of growth with resilience. It has been a longer, deeper and successful transformation of this company over the last 17 years. Back then, we were a European-centric player. We are no longer a European-centric player. We are a global leader. We are a global leader with a dominant position in fast-growing markets like the U.S., where we had 10% of our EBITDA and now we can count on 50% of our EBITDA. So over this period, we also significantly transformed this company. We shifted it from a cable manufacturer, from a cable manufacturer player into a world-class solution provider leader. So we do play in a different league. We play in the more rewarding and profitable, innovative electrification and digital solutions space. You noticed that alongside the growth in EBITDA and in revenue over the last period, we also drove significant value creation, significant value creation. We were EUR 3 billion at market cap in 2017. We end up with EUR 9 billion in the last Capital Market Day, 1.5 years ago, we now sit on EUR 18 billion market cap. And by the way, a few weeks ago, we hit EUR 21 billion before we disappointed the market. So clearly a story of great value creation. A story of value creation that shows also here an acceleration of the last 12 months. The TSR grew 470% from our IPO, but has grown 75% from our last Capital Market Day. And by the way, those of you who invested in us, who bet on us last time. Well done, you clearly made a good choice. So I speak as CEO of the company, but I am also a shareholder of this company. And as shareholders, I'm particularly proud, extremely proud to lead the company where 50% of the employees are also shareholders. including the shop floor workers. And as shareholders, we will continue creating value for this company. As we capitalize on organic growth, on the M&A opportunity, on the strength and the tenacity of a company that has great ambition on the one hand, also solid foundation on the other hand. I'm not referring to the plants or the equipment here. I am referring to the invaluable know-how gain to our inclusive M&As. We will also capitalize on the strong drivers from the market as we've seen over the last 4 years that are bringing new life to the cable industry. Take, for example, the electricity generation. It is today based on 30% renewable sources and 70% fossil fuel. Tomorrow, this will shift from 30-70 to 70-30, tomorrow is [ 2050 ]. The electricity demand is surging with a factor of 2.5x. The Power Grid in order to cope with the additional demand electricity is going to double in size. And the digital transformation is further fueled by data booming and AI expansion, data center expansion. We designed our organization with 4 business units, which exactly match the 4 drivers of the market. We are the only one that could do so. We are the only one with the luxury of a portfolio, so large and comprehensive that covers the entire demand from the market, unprecedented, unique. Have a look at this video to show how do we play in the different segment of the energy and digital transformation. [Presentation]

So we already beaten the target of '27 in 2024. We are now a solution provider. We play in the electrification and digital solution space. We want to inspire you with a new vision, with a new ambition. Obviously, you already read the numbers, but -- let me play the story. From EUR 2 billion EBITDA in 2027 as per our last Capital Market Day to EUR 3 billion EBITDA in 2028. Imagine, EUR 1 billion more in 1 year more. Our EBITDA will grow to EUR 3.50 billion. Our free cash flow to EUR 1.6 billion. The EPS will increase by 15% -- sorry, 19% and the shares of revenues that are considered solutions in our footprint, we moved from 28% in '24 to 55% in 2028. These are great targets, very ambitious targets. But as ambitious as they are, I'm sure that you will challenge them with our consensus. You will stretch us with our consensus. As we did 1 year ago, we acquired Encore Wire. It was -- our target for '27 was EUR 2 billion. We added a EUR 600 million, the [ perimeter change ] business and synergy included. We were at EUR 2.6 billion. You took the EUR 2.6 billion as -- what you did, you rounded that to EUR 2.7 billion. Where this EUR 100 million came from? Difficulties to deliver EUR 100 million EBITDA in this company. So this time, unfortunately, we came with an ambitious number, EUR 3.50 billion, but now we have a problem. It is not a round number. And I assume that you will not round this down to EUR 3 billion, that was our original idea. And you would probably run this up by EUR 3.1 billion doesn't make any sense. And you probably want to round it up to EUR 4 billion. Please not yet. It's not -- we are not ready for that. One day, we will be there. And also, this time is different from last time to prevent you from thinking that we set goals and then we bid them with the M&A, as we did last year with Encore. This time, we embedded the M&A upfront. The EUR 3.50 billion includes the M&A benefit, channel acquisition, obviously. So how we're going to grow to EUR 3.50 billion. We are going to grow organically to EUR 2.9 billion. The next bid to EUR 3.50 billion is EUR 150 million coming from channel acquisition, including synergies. So how are the different business unit going to contribute to the EUR 3.50 billion. This plan hinges on a stronger and remarkable growth in Transmission, which is totally in hand, supported by a strong backlog, a high-quality backlog of EUR 16 billion. Why did I call it high quality? High quality is our backlog because it's reliable. It is large, it's secure, it is ready, reliable because it consists of projects. located in Europe with transmission system operator, which has reliable customers. We don't have any fancy projects belonging to financial developers in our backlog, then most of the time are either delayed, postponed or canceled. Large or backlog because it's large enough to cover all the revenue through 2028. We don't have any speculative business in our plan as far as Transmission is concerned. It is secured because it's based on notice to proceed in end and the down payments. It is ready guys, it is ready because we have the capacity ongoing. The capacity expansion is ongoing. As far as the other business segment is concerned, Power Grid Electrification and Digital Solution, why they still benefit from stronger driver from the market, from solid drivers from the market in light of the lower visibility and the shorter backlog, that is specific to these businesses. We played a more moderate growth in our 4-year plan. So the plan is solid, backed by Transmission growth. But should the drivers of the market in the other 3 segment further strengthen, we might see some upside, not enough to bring the -- to close the gap to EUR 4 billion, probably, but we might see some upside. So let's see -- let's deep dive on each single business, at Transmission first. You see the market here as it surged from a EUR 3 billion market level in the last decade to EUR 13 billion in the last 4 years, '21-'24. And the markets continue to remain strong, so strong that we recently decided to unlock additional capacity for submarine and land capacity increase in Europe, not in U.S.A., where we don't see the market growing, but in Europe. In order for us to remain market leader with a 35%, 40% historical market share of this market. So why are we market leader in this space? What is it that makes us unique in Transmission? First of all, we mastered a full vertical integration in this space. We are the only player that is able to install all the cables that we produce with our 8 vessels, without resorting to third parties installers, which is crucial because we are the best control of the margin. the cost, the timing and the quality of the execution, thanks to the comprehensive installation activity. Secondly, we offer the market a unique inspection, maintenance and repair solution to fix network damages, either from internal failure or external damages. You know why it is unique? Because most of the time, everybody repairs assets, repair network. But the assets are normally busy with our projects. So this solution is unique because we have a vessel, a crew, jointers, installation engineer in standby, ready to intervene to be mobilized and fix the network. And thanks to this solution, we can shorten I would say, half the time to repair from the usual 14 weeks it takes today with a KONE solution to less than 6 weeks. Think of the benefits for TSOs in terms of reduction of the revenue losses they incur when there is an outage in the line. And this solution becomes also particularly strategic these day -- these days that cable have become targeted to geopolitical conflicts. But what truly distinguishes us from the others is our technological leadership. Something that we pursue with determination, with passion, with obsession with innovations in 3 dimensions, in cable, in installation and sensing. Cables. We keep developing a system that can transmit more power. So the cost per megawatt transmitted is lower and this makes the energy transition financially more sustainable. Installation, we keep enhancing our capabilities, like the 3,000 meter water depth installation. It's unique. We are the only one to have it. Thanks to it, we can open the market to new connections, new routes, like that's, for example, between North Africa and Italy and Europe. Sensing. We offer cables with integrated sensors that can maximize the flow of energy in the cable and allow a fast detection of the cable fault. So we are not a market leader by chance here. Technological leadership is key. It is crucial to maintain and grow our market leadership. We will pursue it forever in every sense. Please watch this video to have a sense of how innovative our solutions are. [Presentation]

So how we will grow from the result of last year, EUR 361 million to the new targets. We will grow capitalizing on the capacity expansion on the better margins of the project in our backlog with a rate of -- with a CAGR of 25%, 28%. I heard that some of you were surprised this morning when you read the press release. Is it real? This CAGR? Yes, it is. It is, we mean it and not giving you the exact number of EBITDA of 2028. But I'll give you a hint. The chart is exactly to scale. You can measure the height of the bar, you'll figure out the EBITDA down to the last million. It will be an impressive number. Let me move to the second segment, Power Grid. So Power Grid segment is made 3 sub segment. High voltage AC, Power distribution, some medium voltage and voltage cable to expand the grid overhead lines. And then we offer all sorts of sensors applicable to all these segment of business to monitor the network. The grid is huge. Today, the grids account for 80 million kilometers of cables. But the demand of electricity are strong in the next 25 years that this grid will double in size from 80 million to 160 million kilometers. So 80 million more kilometers is going to be deployed in the next 25 years to allow the flow of renewable energy and to satisfy the users' demand of additional electricity. Here, we did super well, I would say. We already beaten '24, the target that we set for '27, EUR 474 million last year target EUR 410 million. But more remarkably, we've grown the EBITDA margin from a -- not exactly, I agree, 5% only 2 years ago into 13% now. Is it sustainable? Obviously, this is your most asked question. The answer a month ago was, yes, in the range 12%, 13%, and I confirmed in the range of 12%, 13%, this will be our margin Power Grid for the next future. Then it depends on the mix of geographies and the different imbalance between capacity and demand. But the demand, as I told you before, is super strong. We hire the only global leader in this space. We are unique because we are the only one with a large footprint. We have at least 40 factories in the world that make Power Grid cables, located close to every customer. So we have a large footprint. We have a very close proximity to all utilities. And then we have this unique exposure to the medium voltage, low voltage Power Grid space of United States. So we are also unique because we drive innovation and sustainability through the whole value chain of this business, from supplier to customers. And we provide our customers with unique solutions, unique sustainable solutions that help customers achieve their sustainability goals. We work in this regard in 2 dimensions, Scope 3 and Scope 4. Scope 3 are the reduction of the emissions of cables during the cable operations. It's an important KPI for our customer to underpin their goals. We deliver cables that have energy losses reduction, thanks to sensors that are made of recycled material, copper, aluminum, polymers, but the most innovative piece is the Scope 4. This is the new frontier. It is about no reduction of emission. It is about avoidance of future emissions. Here, we offer a solution then our Head of Innovation, Srini, will tell you more in a moment. It is called 3x. It is a special coating applied to existing overhead lines, whereby the power of line, the power that the line can transmit is enhanced by 25%, 30%. In this case, the reconductor in the line is avoided. Expensive investment for -- to reconductor the line and to replace the conductor with a new, more powerful conductor is not required and the emissions are not emitted. So why is sustainability important in our -- this business. It's important because for us, it's a competitive advantage. A couple of weeks ago, we participated to tenders in HVAC space in North Europe. We were not the cheapest in price, but with score high in sustainability. Now sustainability criteria are everywhere in the tenders, in transmission, in Power Grid, everywhere, and we won the projects. So differentiation, sustainability and innovation is key to drive our growth. Let me move to the Electrification segment. The I&C business is one of the segment Industrial & Construction, Specialties is the second subsegment. In I&C, we deliver low voltage, medium voltage cable to electrify buildings. Electrify building means to connect buildings to the power grid. This is a business where we connect a residential business, but more importantly for us, non-residential buildings. So industrial factories, plants, commercial center, airports, all the stuff. Specialty is about the electrification of equipment. So automotive solar park, crane, mining defense, marine. This market is undergoing a significant transformation because of the electricity demand that I mentioned to you. the electricity demand is going to surge from today is 20% of the total energy demand worldwide. In 2050, the electricity will be representing 45% of the energy mix. And this is for a twofold approach, twofold reason. There are fossil fuel-based application like gas heating that are going to be replaced by electricity-based application, heat pumps. And there are already existing electricity-based applications that are further expanding like data center, here in U.S. data center already consumed today 6% of the total demand of electricity. This number tomorrow in 2030 will surge to 14%. How did we do here? We've beaten also in this space. We've beaten the target in '27 in '24 organically, but more importantly, of course, thanks to the acquisition of Encore Wire. Why are we unique in this space? We are unique because also here, we drive sustainability, innovation, differentiation in the whole value chain. Think of the E Path product lines. It's a new line that we launched 2 years ago. It is made of products that are consistent, compliant with a major straight low-carbon criterias. We launched it in 2022. We gained momentum in the market in '24, 35% of the total electrification revenues, 35% means [ 3.5 billion ] were made of E Path compliant products, amazing. We're also unique here because we honor what I consider the most innovative and powerful and unique asset available in I&C space worldwide. Encore, Encore Wire in McKinney. what is it that makes Encore Wire special for us and for the customers is that this is a large, large production compound, basically a concentration of 12, 14 normal-sized plant. This is a compound fully verticalized upstream with production of rod and other compounds. It is also verticalized downstream, basically with a distributor. It is a large-scale distribution center attached to the cable side to the manufacturing side. With this, we offer quality cables in super, very short lead time. We can perform 24-hour service or cat line cables across the United States. Unprecedented and nobody copied you will need to restructure your footprint, close 14 plants, rebuild those 14 plants and 1 site, impossible to do it. So thanks to this solution, thanks to this asset, we can capture more demand and enhance our profitability. And now I'm touching a sensitive topic because I know you have million of questions about the sustainability, actually million of doubts about the sustainability of these margins. But this margin, I tell you are sustainable mid, long term because they are driven by the solid market drivers, the electrification demand, which stems from data center expansion, remanufacturing home plants -- sorry, repatriation manufacturing plant in the U.S.A. investment in infrastructure. Short term, we might see some softening in price, of course. But should this happen, we can still leverage the service to temper, to mitigate this price pressure and use it as a competitive advantage to outpace the market. So thanks to this asset when the market grows, we can grow more than our competitors. When the market softens, we soften less. We've done with integration of this business. Integration is fully completed, implemented. We are working on the synergies. Most of the operational and commercial synergies will be captured by the end of 2016. There will be some additional commercial -- sorry, operational synergy that will come on stream in 2028 once we'll have completed the investment in the new equipment for rod production. But you see probably this morning yes, this morning. We made the Board -- actually made an important improvement for a new -- for a brand-new medium voltage plant, 4 additional medium voltage plant are going to be built somewhere. We cannot tell you where, but you can guess in the U.S. to provide a medium-voltage cable to the IC space, further cross-selling opportunity, aim to provide medium-voltage cable to the Power Grid space. In both cases, leveraging the unmatched service level coming from an asset like McKinney. Let me move to the third one -- sorry, the third one is the fourth one. Digital Solution. You see how strong drivers from the markets are in this space. Mobile data, data center expansion, AI expansion, all sorts of data booming is fueling additional demand of data in the space. Here, in contrast to the other business segment, we are far from the target that we set in 2027. Then of course, we cannot excel in all places. So we are far because we suffer from significant destocking that occurred in the last 2 years in Digital Solution in U.S. Fortunately, the destocking is over, the panic buying that was in 2022 will not happen any longer, but the demand of the market started to rebound very solid and very resilient. We will beat the goal that we set for '27 organically and also thanks to the acquisition of Channell. This is the space, by the way, that you keep asking us -- why do you keep Telecom? Isn't it a distraction in your business portfolio to your -- a distraction to your core business? We see differently. We see differently because for us, Digital Solution is really relevant to our strategy for twofold reason. There is convergence in the market. There is convergence between the energy grid and the digital solution grid. And if you miss the optical portfolio, you would miss this opportunity. So Digital Solution is complementing nicely the portfolio of energy cables. It provides a synergistic portfolio. That's something that enabled us to sell one-stop shop solution to our customers. So we will continue to invest in this space. As we capitalize on innovation in fiber in optical cables to meet the growing performance required by challenging customer like carriers and hyperscalers. And we will invest to further expand the portfolio solutions and Channell acquisition comes into play here. Channell is a large acquisition in U.S. to enable us to combine our strength in cable, and in fiber with connectivity is a full-fledged player in connectivity space. And we were discussing this morning this with some friends. Connectivity is probably the most important piece of our business. If you don't join cable, you cannot produce cable longer thousands of miles. Connectivity is essential to the deployment of any network, be it the energy network or the digital network. So the rationale behind this acquisition is straightforward. It, of course, strengthen our position as a solution provider. It makes us an important player in U.S. space, U.S. in digital is, by far, the largest fiber-to-the-home, fiber-to-the-X market in the world. We also have access to fantastic platform of commercial strength and innovation strength from Channell that we can capitalize on and further expand organically our position in U.S. and outside the U.S. Now in light of this important acquisition in order to avoid that we lose focus on the integration and on the delivery of synergies and frankly speaking, also in light of this volatility that we noticed in the financial market in the last 2 months, we opposed the decision of U.S. listing. We opposed it while we still recognize the strong value creation associated to it. So you've seen how strong our targets are for 2028. And some of you might wonder, will they be able to achieve these goals. I tell you, we are highly confident to be able to achieve this goal. We are highly confident because we count on our market leadership. Our market leadership is based on a solid foundation that dates back 140 years. It is back on here in New York. In 1886, I'm sure you don't know it, we electrify the Statue of Liberty. And then we electrified it again in 1996, so obviously, cable cannot last beyond 100 years, and we had to replace them. Then we fortified our leadership, thanks to our [indiscernible] our discipline, our remarkable track record of M&A. Today, our leadership is centered on 3 great assets: Synergistic portfolio; the people, the unmatched people value; and the relentless pursuit of technological leadership. Synergistic portfolio, let me go with this first. With our 4 business segments and our comprehensive cable set, we can address the entire demand coming from the market. We can capitalize on the organic growth opportunity and further amplify this opportunity with our innovation and solutions and focus on sustainability. Let me give an example of the synergistic portfolio in action, data center. After the acquisition of Encore, thanks to their exposure to the electrification of data center. Now with our portfolio, we can address the entire demand of cables coming from data center. All our business segments, the 4 of them, Transmission, Power Grid, Electrification, a and Digital Solution are exposed. Exposed means that we make significant revenues with the data center, thanks to the deal center expansion. Second value, people. This is the real strength of this company. It's the real strength of the company because we develop it. We created it. With our inclusive approach in M&A, 2/3 of our people belong to former companies. To turn our people belong to Channell, Encore, General Cable and Draka. So it is true. It is obviously true that we do M&A because we want to buy assets, expand the portfolio, and a larger customer base. But the true reason, the real reason why we do M&A is because with M&A, we buy talent. We buy competence. We buy know-how. And then we engage these people with our company values. Team play, innovation and passion. Technological leadership. Technological leadership is key for us to further grow our market leadership, but it's also essential to continue our transformation from a cable manufacturing to a solution providers. We came a long way from 18% of revenue, [ there was ] solution in 2010, 28% last year and 55% is our goal for 2028. That means that more than half of the revenue of this company will not come just from cables, service, component, connectivity, differentiation, sustainable solution, a lot of other things, that help us enable differentiation and pricing power. So innovation, technology, performance, speed and sustainability. All these are key ingredients to our strategy and our success. And they are not just ours. We know there is another Italian company, an Italian champion that capitalizes on these values, to succeed in the market. Please watch this video and see who these other companies.

I'm very excited to welcome on stage Benedetto Vigna, CEO of Ferrari. Thank you for coming.

Thanks for having me here. Nice having being here with all of you.

I was given a few questions, actually, I had the million of questions that everybody wanted to ask you. And that shows some official one and then some personal one.

[ Best out of ] better one, the best one.

Okay. You want me to stop on the best one. Let me start from the official one. So what does it mean innovation in Ferrari? What makes very unique in terms of innovation.

I think that innovation is the only think that each company in this world has to pursue, to manage with the uncertainty of the future. I have the luck to work in a company that makes innovation at the center of what we do. I've been working more or less 30 years in my life on innovation. And this morning, I was chatting with our IR responsible. -- many people have many different definitions. For me, the definition of innovation is very simple. Innovation is the way to go from adding some know-how to money, that's it. I mean you can find any definition, other business review, strategy, that's it. For us, innovation is important. We do this kind of innovation, innovation of product, innovation process, innovation of the management, innovational system. So without innovation, I think Ferrari, Prysmian, many other companies cannot have a sustainable future.

So it is a strong driver of your brand, your growth, your market position in all markets, definitely.

Definitely. I mean, as I said, I have been -- before I was working in other company, making chips, so fiber-to-the-home, you were a client, there is only one thing really that can keep alive a company, this innovation. And I used to say that I made a phone call before I'm going to take some share in Italy.

By the way, it's not as simple, especially for you. I mean we are in a cable business on a B2B business. But you sell cars to private owners. It's not simple, I believe, to conjugate or to integrate innovation with luxury because you consider you bend a luxury brand. So [indiscernible], I think your engineers come in to a great clash every time when they invent something that makes innovation relevant. At the end of the day, you have to sell a product that looks real [indiscernible] to those things.

Yes. Look, I think that 1 of the points I'm working a lot in Ferrari and I'm telling to all the colleagues starting from myself, is that we are lacking because when we have to explain what we do, everyone understands that easily. But there is another point that I'm telling to the people in Ferrari, and I can get a sense when you were speaking today, that I can see in the eyes of many companies, like I saw you before. Also the company that are digging and mining the aluminum, also the people that are doing very, let's say, unsexy and popular and famous things that is the same kind of traction for innovation, okay? So this fact, must be always remember, especially when you are in a company that is Ferrari, it's a luxury company, where you have to put 2 dimensions together, the past and the future. I'd like to say to simplify that we have 2 eyes, one look at the past, one look at the future, one brain to put them together. That's what we have to do. In high-tech, I was working in high-tech and I think also here, quoting the past is useless. In a luxury company, the past is important. So what we do, we have the people of Ferrari that go in our archive that is part of Italian national treasures, and we go to study. Because you need to study the past. Otherwise, we make something that is a no relation. So in this sense, there is a difference, but...

Great. And I think you have -- apart from innovation, actually, you must have a different challenge now that in this time, sustainability as to any way be present everywhere. But how can you I mean, you emit sound, not noise, somebody will tell noise, sound CO2 emission by design, your cars are emitting CO2. How can you -- I don't know, lead sustainability in your company, be innovative also sustainability in your company.

First of all, I would like to say that the challenge we have and I don't want to make easier is the challenge that any market leaders has. The leaders, the company is a leader if and only if it's able to dare. When the people as not daring anymore. I don't think they deserve to be called the leaders. I believe it. So what I want to say is that it was 1947. When our founders after, let's say, 61 years after brands get out with the tricycle, okay, more or less. And this started to make what a combustion engine. Why? Because that was only propulsion that was available. The road were not even existing, okay. Now we go fast forward. We go, what, 2015, 2020, the people start to talk about electric cars and people are scaled, but why people are scaled. Because each one of us is cared about 3 things, whatever is diverse, whatever is new, and whatever is about the future.

So changes.

There is a change. I mean maybe it's a matter of preservation. But I think the reality is that today, we are talking about electrons. We are talking about digital solution. 20 years ago, when I was -- if you remember the bubble 2001, the bubble of 2001.

We do remember.

Okay. Yes. I was making chips, and we were making a lot of things. And the people said, this market is faded. Not at all true. So what I want to say is that, yes, electric car is posing some challenge. But this is nothing with the challenge that someone else had 78 years ago, when there were no roads and when he was doing something that other people are already doing. So we want to be a leader. Okay, yes, then we have 2 days. We may do some mistake. And so what, we will recover. I mean the problem is not to do a mistake, to make a mistake to say correctly in English. The problem is to recover, to learn. So we are making something a cash that will be unveiled in Q4 this year, that will be unique, something unique because we will not just put, let me say, 4 wheels with a battery and an engine like other people do for cost reason on the mass market. We are doing something that is exciting that is making the experience unique when you drive it.

So there will be still the sound?

There will be something. I don't -- let me say some, there will be some -- let's say, when you enter Ferrari, you interact with Ferrari with eyes, with ears and with the full body. So we have to wait a little bit. So this is a luxury, you have to wait.

So that was your first experience with Ferrari. When you first...

The first experience was in F50 end of '90s, I was here, living here on the West Coast. I was San Francisco and had some friends. One of them got an F50, F50 is a car, 12 cylinders than 1995. And yes, it was pretty unique experience. I mean this was -- it was just before the dot-com bubble. Yes. I remember now in Silicon Valley, when we hereon the radio, the radio that was there, the situation. So it was a unique experience because -- you don't -- when you are in Ferrari, you don't go from one place to another. It's a full body experience test. I mean I go usually on track every month, on ice or regular roads, winding roads, but there was a sentence here. You can understand only if you leave the passion. It's difficult to describe also because not a [ big butter tongue ], I may miss a lot of [ adjective ], but it's unique. So you have to try.

So what is it that makes the Ferrari experience so unique. It is a performance, the super performance with the sound, where is the fact that when you drive a Ferrari, everybody on the street stare at you and jealous of what you say.

We have different kind of clients. let's say, there are some people that buy the cars because they want to try it. Some people that buy our car because they want to show. Okay. We have the luxury to have, let me say, a lot of our clients are buying the car because they want to live it [indiscernible] want to show. Other brands, they go more in this direction. But our brand is more I would say, culturally relevant, okay? Having said that, we chart the dimension that we exploit to develop a Ferrari, one performances; two, design; three, driving trails; four sustainability. Standard is fundamental. And when you talk about driving trails, there is the linear acceleration. There is a lateral acceleration there is the braking, there is the sound, there is the gear box. There are many dimension. And we are considering all of this and the last one is the sustainability. I remember when I got in the company, people who were -- there were only a few people believing in it. Now if you come in Ferrari, everyone can tell you what is the carbon footprint of which material we buy. So 1 kilo aluminum, 10 kilos CO2, 1 kilo steel, 1 kilo CO2. We have all these things. The people know that. We changed the mind, so we -- this year, '25, we kept by a Factor 3, the CO2 emission, Scope 1, Scope 2, we cut the Factor 3 versus 4 years ago. And you know what is the CapEx we put on the table, only the CapEx for solar panel. It is in the range of EUR 10 million. Only the ideas of our people. We throw away, we save 5% of the aluminum because we throw away less and we buy less. CapEx 0.

Sustainability becomes a sustainable goal but also something that makes the company more efficient, more cost effective.

If you come in our company, you find solar panel, fine, you find fuel cell, hydrogen ready, you find that the latest generation, let's say, building that has been -- that got the LEED certification is the only industrial plant in the world with LEED certification that usually is giving to building not for industrial use. So we believe in it, we make it. And I'm sure, I'm sure we'll get there.

We have a last question, which is probably more a desire than a question. Can we swap the 2 position in 1 day. Se do you come to have an experience on Monna Lisa, our vessel, our Ferrari of the subsea cables and I can finally experience how to drive a Ferrari?

Done deal. I will come to see. Just tell me, I like a lot of those boats with a long cable. [Foreign Language]

So thank you. You've seen a lot of stuff, but more is to come, and I would like to welcome on stage Srini, our Head of R&D and innovation. Thank you.

Wow, thank you, Massimo. It's a pleasure to join you on stage and what a nice surprise, having Mr. Vigna here. I loved his vignettes, my favorite one. know how to money. And that's what I tell my team because they're dreaming always. So again, thank you all for being here. And it's my pleasure to spend some time here talking about innovation and a little bit about the future. So as I reflect on our company's innovation journey, it absolutely exemplifies what Massimo said, the strength. And unmatched global presence, our talent, and finally, technological leadership, leading to innovation and sustainability to being strong business growth drivers. Now the best evidence for this is seen in the growth of our new product and solutions, Vitality. We define this as a portion of our revenues coming from the previous 3-year time frame. We started the journey in 2007, with a laser focus on our product performance and cost control, which, by the way, remains to date in our DNA because the past is important. Now from there, we have grown to an industry-leading 24% with a major acceleration coming from the last 3 years. Now how exactly did we achieve this growth? We achieved this growth by starting with the foundation of 7 R&D centers with a very euro-centric footprint. Since then, we have built a global footprint of 27 R&D centers worldwide, close to our factories and most importantly, close to all our customers. We started with 400 inspired professionals with expertise in Energy Cables and grew threefold. Today, our global R&D team has more than 1,100 professionals, engineers, scientists, world-class experts in all 4 business units. And the result, we're really pleased with it. We're able to get EUR 4 billion of revenues in 2024 from innovations that did not exist 3 years ago. Please think about that. What is our aspiration? We're not done. In Prysmian, you're never done. We want to be at 30% by 2028. Now when we do that, we're going to be world-class. We'll be among the top innovative companies, 5% across all industry verticals. And you may ask, how are we exactly going to do that? For me, it all starts with our customers. We are closer to our customers or at least we aim to be closer to our customers than any competition. We take every opportunity to see our products in use across their entire life cycle. And that gives us precious ideas to come up with solutions to do 2 things: one, make our customers' lives easier; and two, expand the application spaces we play in. And that's the role of a market leader. Now this relentless external focus has really helped us set this trajectory, to go from being a cable manufacturer to a solution provider. And we're fortunate that we also get to play a meaningful role in the evolution of electrical and digital infrastructures of our communities. Now the interesting part. I want to take you all on an R&D tour in a Ferrari. A sneak preview behind the scenes on exactly what is fueling this desire to be a solution provider and our pipeline of future solutions. The tour is going to have these 4 stops. Let's start with the first one, our core technologies. Our core technologies are the building blocks of our business. When we get this right, we set the company up for long-term commercial success. And here, I'm excited to share that we're investing in groundbreaking technology platforms in not one, but all 4 business units. The world's smallest optical fiber for the next-generation telecom networks. Two, a very innovative hollow-core fiber technology that we announced last week, a partnership with Relativity Networks, which is going to help with the deployment of AI data centers in a much quicker way. The most fire stringent solutions to E Path. Massimo mentioned that. E Path is the industry's first low-impact cabling solution. And our customers have come to love it in the last 3 years, and we appreciate that. Next step is a personal favorite, and exciting one. We're going to talk about systems. Systems for our transmission business unit, where we expect the fastest growth over the next 4 years. These systems are what allow us to provide turnkey projects and services to our customers. Here, as Massimo said, we're the undisputed technological leader in high-voltage and submarine cable systems. We are the only player who has 2 extra high-voltage DC technologies, including our proprietary P-Laser technology. These technologies can push over 2 gigawatts of power. That is enough power for 1.5 million homes. And by the way, these technologies are very relevant to us. money-wise as well because they account for 2/3 of the EUR 20 billion backlog that Massimo mentioned. Going on to the next one, it's even interesting our ultra high depth. We are the only ones in the industry who have a synthetic armor technology and the vessels that can help us install cabling systems up to 3,000 meters. We just shattered the world record last year with a successful sea trial or a Tyrrhenian Link at 2,150 meters. Next up, we're fortunate to have a very advanced fleet of our vessels, and these help us actually extend the energy transition across many geographies. We're not done yet. Last month, if you've noticed, we also announced our latest innovation in this area. We are the only player now in the industry to have a full suite of medium-voltage inter-array and export high-voltage cables with dynamic conditions for the acceleration of floating wind. This innovation will expand the space of offshore wind into deeper seas in Europe, especially like the Mediterranean Sea as well as the North Sea. So again, the engineering in me allows to talk about these innovations. But I think it's better if we actually hear from a customer who is equally excited, if not more than me. So let's hear from Amprion. [Presentation]

I love [ Palazzo's ] passion about the future and being part of the future together. Now the next stop in our tour is going to be Sensing. We live in a digital age where our customers expect not only greener products and solutions, but also smarter ones. And in this area, we actually offer a complete suite of advanced electronic and optical sensing solutions through our EOSS unit. Now these solutions actually help our customers in many ways, operational excellence, preventive maintenance, intrusion detection that's getting a lot of air time now in Europe, like Massimo said. And finally, energy management, which is becoming very important. Even here shortly, we're going to be announcing a breakthrough. For the first time, our team has come up with a solution, an integrated monitoring platform with distributed acoustic and temperature sensing, which can monitor length over 1,000 kilometers. And when this is available in the marketplace, it's not only going to be a game changer for us, but for the whole industry. The final step, services. As Massimo give a heads up. The combination of Encore and Channell now has really boosted for us this fourth area of services suite. We are able to now bundle cables, accessories, connectivity and monitoring systems, to make our customers give a complete solution. We're also able to address another very important growing need, labor shortage. With pre-terminated cables, connectorized solutions, both in the energy as well as the digital space. Now for those of you who will join us at McKinney tomorrow, you're in for some nice surprises. You're going to see some brilliant examples of advanced packaging solutions that not only cut the carbon footprint but also reduced the labor intensity on a job site. Now these services are extremely vital for large-scale construction sites such as the data centers boom as well as the reshoring of manufacturing that's happening in North America. Again, here, I'd like for all of us to hear from a customer, a very important customer, Wesco on how we are partnering together to win in the space. [Presentation]

So there you heard from 2 of our important customers. By the way, Hemant will be joining us tomorrow at McKinney if Some of you would like to get a little bit more flavor from him in person. Again, our customers appreciate several things here: communication, collaboration, speed and accuracy of our services and solutions. But fortunate they trust us, our journey of innovation and sustainability. And talking about sustainability to share a little bit more about our sustainability efforts. It's my pleasure to invite my dear colleague Christina Bifulco on stage, Christina.

Thank you. Thank you very much, Srini, and good day to everyone. It's very exciting to return after 1.5 years to share remarkable milestones, breaking news and to set new ambitious targets also sustainability for both short and long term. I need to steal [indiscernible]. Sustainability is an important driver of our innovation strategy. But most of all, it's the heartbeat of everything we do. and innovation fuels our sustainability goals and both are the twin engines, accelerating our growth since they are the source of competitive advantage. -- allowing us to keep our leadership in the space. The concept of sustainability keeps evolving and goes far beyond the carbon footprint. Our stakeholders customers, investors, communities. They ask us, they help us to think big, to anticipate future needs, and to unlock growth opportunities, which combine performance with security, resilience with nature protection. And as a leader in our space, we believe that our responsibility goes beyond our direct business perimeter, and this to leave a positive impact, a long-lasting impact, a net gain on the ecosystem and the communities where we operate. Many of you are already familiar with our sustainability strategy. We updated it at the previous Capital Markets Day. So today, I will focus on what's new, where we are raising the bar, which new chapters we are adding to our sustainability road map. So we will spotlight climate and biodiversity while affirming all our commitment to the previously announced targets. Let's start with climate, which is where we are taking the bold step. At present, we believe that becoming bigger implies bigger responsibility. Our carbon footprint over the last few years materially increased, but so has our ambition. Our Scope 1 and Scope 2 baseline now exceeded 1 million tons 1,043,000 tonnes, showing a 20% increase in the last 4 years accelerated in the last 2 to take into account, of course, the acquisition of Encore Wire, but also our own capacity expansion. Think about our investors. Leonardo Da Vinci, Alessandro Volta, Monna Lisa. But despite this material growth, we stick to the same ambition, which is to decarbonize 90% of our 107 plants and 27 R&D centers by 2035, being aligned with the 1.5-degree trajectory as validated by science-based target initiative. So you may ask, how is this possible? How can you stick to the same ambition despite this relevant growth? And the first answer is because we're innovative. We are not all innovative in the way in which we launch solutions, but we are also innovative in the way in which we tackle decarbonization. So since have the pleasure to have Srini with us today, can I ask you how innovation is backing decarbonization? And what is making Prysmian unique?

Absolutely, Christina. So for those of you who joined us in Naples for last Capital Market Day and are back here, what's the big difference? We've really taken out a significant portion of our Scope 1 and Scope 2 emissions. And how do we do that? one word, maybe 2 words, sulfur hexafluoride. So sulfur hexafluride or SF6 is about full. All I can say is -- it is the most carbon-intensive gas regulated by the Kyoto protocol. To give you an idea, 1 kilogram of sulfur hexafluoride is equivalent to 22,800 kilograms of CO2, and we use sulfur hexaflouride for several decades in our factories for testing high-voltage cables and accessories. And so Christina, what we ended up doing was putting together a very accelerated innovation road map and in a matter of 2 years, we eliminated sulfur hexaflouride from our footprint. There you go.

Fantastic. Proud of what we're doing also because these accounts more than half of the reduction we recorded in Scope 1 and Scope 2 in 2024 versus 2019, 20% out of 36% -- so this is what is making Prysmian unique. But we're also going after the basic. So we explore all the energy efficiency actions from lead lighting to heat pumps from biofuels to the on-site renewable generation solar panel to off-site PPAs, we pull every lever to make this happen and to get some cost savings as well. But it is just scope 1 and 2, and this is not enough. If you look at where we generate the vast majority of our impact is for Scope 3. And there are 2 components here: upstream, how we source and downstream. Over 90%, 94% of the impact of our emissions is related to the downstream part. These are the emissions related to the use of our solutions once in the hands of our customers. And the main reason here is the expected lifespan of the cable. Once the cable is installed, is expected to last on average, 35 to 40 years. In our case, much longer than that. So if we look at where we are here, our baseline is 236 million tons. You can clearly appreciate the difference versus the 1 million tonnes in scope 1 and scope 2. At the end of 2024, we were able to cut by 57%, almost a 60% scope 3 downstream versus the baseline, which is amazing. And you may ask how this is possible? We are outpacing Scope 1 and Scope 2. And the main reason here, the first answer is grid decarbonization. So in 2024, the grid was greener than it was in 2019, our baseline. So the energy power in our cables was greener, thanks to the global investment in renewable generation that will contribute to develop. This is one of the reasons why we keep saying sustainability is what we do. At Prysmian my colleagues would say there can be energy transition without transmission. But you may challenge us and you can say, okay, this is the grid effect. And I know you very well. So what Prysmian is directly doing to cut the downstream emissions. So if we strip out the grid effect, -- at the end of 2024, we were able to cut by 21% Scope 3 downstream emissions. And this is the pure effect of our innovative solutions. So Srini, can you share with us an example of present unique solutions that help us to cut the downstream emissions but also our customer missions.

Another one of my personal favorites, E3X technology. Since we're in the U.S., let's talk about over headline transmission because overhead line transmission has been identified right now as one of the most important factors to improve the grid resilience of the U.S. grid. Over 70% of the overhead conductors today are more than 60, 70 years old. Here, we came up with a very elegant yet simple innovation, E3X technology. It's classified as an advanced conductor technology. The idea is you have a high MSVD coding, a highly functionalized coding that you put on the outside of an overhead conductor. And when you do that, you can benefit 2 ways, either you push more power, 25%, 30% more power or you actually save the same amount in losses. We've gone a step further now. We've developed a set of robots which can actually be put on the existing infrastructure. We're talking about 600,000 miles in our country here, where this upgrade can be done without reconducting or bringing the lines down. So this is a very good example, Cristina, how we are combining innovation sustainability for business impact?

We also won an award?

Twice, we won the Edison Innovation Award, which are called the Oscars of Innovation twice for this.

So I should have brought you a recycled copper [ starter ] today. No, thank you very much, Srini. And can you share -- I know that we have a few other options. Can you share with us another example of innovation, which goes also beyond Scope 3 and which allow us to avoid emissions, the so-called Scope 4.

Since we're in New York, I'd like to talk about something, which is more specific to New York. Just a piece of trivia for all of you in audience. New York is home to the world's largest underground distribution network. Right under our feet is 100,000 miles of power cables and 300,000 underground holes or manholes, where these cables are splice together. Now Con Edison, which is a utility that manages this whole network, very important customer to us. They came to us 2 years ago and shared that -- the single biggest concern or sources of failure they have in the network is poor workmanship. We're dreaming big together with Con Edison, Exelon and the U.S. Department of Energy to come up with the world's first fully automated splicing machine, which will reduce the network failures from over 85% to 5%. Again, this is a great example of using automation technology to reduce not only Scope 3, but also scope 4 emissions. And the most important part of all, we're hitting human safety. With this innovation, we're aiming to save lives.

Absolutely. It is amazing. Thank you very much, Srini. So let's complement the view on Scope 3 and move up to 3. This is how we source. Here, our baseline is 13 million tons, 5% towards the overall emissions to value chain, so less impactful than downstream, but more in our control. We are working partnering with our suppliers to decarbonize the value chain and introducing new standards into the system through recycled copper, low carbon aluminum bio-based material recycled polyethylene. And this is because the vast majority of the carbon footprint of the product is at the design phase. So Srini, how innovative we are here and how we are helping to push the standards of the value chain.

I was very pleased to hear Mr. Vigna share similar examples of what is happening in Ferrari. So yes, there's a lot of appetite right now across the value chain. And here, the only point I'd like to highlight is I spoke a lot about customers, customers. But our approach to open innovation and collaboration extends both ways in the value chain. And each of these examples have been joint technology developments we've executed with some of our strategic suppliers. Everything from recycled copper, low carbon aluminum that eliminates the carbon footprint of aluminum, 75%, 80%, recycled polyethylene and more recently, bio-based materials. Now bio-based materials have a negative carbon footprint. It's like you're sucking CO2 from the atmosphere. So yes. So we've got our engineers, our manufacturing facilities using all of these to reduce our carbon footprint.

This is amazing. Thank you very much, Srini. So if we add everything up, it's clear that we are accelerating. So we are accelerating our decarbonization journey and so we are able now to move forward the trajectory we were following for Scope 3 from the well below 2-degree trajectory to the 1.5. We are following the same trajectory for Scope 1, Scope 2 and Scope 3. So today, we are proud to announce that by 2035, we will decarbonize 90% of Scope 1, Scope 2 and Scope 3, which implies that we are bringing forward our net zero year from 2050 to 2055. We are bringing forward net zero by 15 years. We will be net zero by the next decade, and this represents a new standard in our space. But this is climate and circular economy. And then I told you before, we are adding new chapters to our sustainability strategy because it's never enough. And we are introducing a new dimension, which is biodiversity. Our relationship with biodiversity is not new. For decades, Prysmian has been a pioneer, not only in connecting the world through cutting-edge technologies, but in doing so with the utmost respect for the ecosystem. From land to submarine installation, which is where our biodiversity impact is mainly concentrated, we have always followed a do not harm approach, making sure that we were minimizing any disruption and protecting the overall ecosystem. But today, we are taking a leap forward. And we are moving from a do not harm approach to a net gain approach. And we are committing to be net gain on the most critical areas by 2035. Why? Because we are responsible, of course, but because also biodiversity is becoming a source of competitive advantage. And it's one of the most frequent questions I received from you in the last couple of years. If you take the most recent tenders in specific countries, especially EGL-1,/EGL2, but also EGL3 and EGL-4, they all have biodiversity KPIs in the tenders. And since we are the leader in our space, we don't only want to meet requirements. We want to introduce new standards, and we want to push the industry forward. A few examples, how we are doing that. We are using advanced sophisticated device, acoustic devices to direct and promote the nesting of protected species. We are using sensing monitoring systems with -- through the use of AI, deter marine life and monitor real-time marine mammoth to make them safe. Something we did for the Elba, Piombino, 40 kilometers of route. We have engineered specific equipment to protect the seagrass meadows, Posidonia, the length of the Mediterranean because these represent a vital carbon sink. And all these actions are not only helping the ecosystem to drive but also they are contributing to wind projects. What net gain means? It means that the overall ecosystem after our interventions will be in better conditions than we founded at the beginning of our operations. We will disclose our milestones through the most rigorous framework in this space. For those of you who are familiar with TNFD, the task force on climate-related financial disclosure, and we are completing the process to be considered an early adopter of this framework. We have been talking today about creating value for customers, communities, ecosystems through a holistic approach. But let's see how all these dimensions come to life in action. Let's take projects that you know very well, EGL 1, 2, but also NeuConnect. The overall aim of this project is to bring electricity to households. The 3 of them will bring electricity to 6 million homes. Green electricity. But on top of that, we are making sure that we even increase our impact. So we avoid -- we try to avoid or cut emissions. For EGL and EGL 2 will avoid 90% of the emissions through the use of biofuels, while NeuConnect will cut 13 million CO2 emissions in 25 years. Wherever the technology allows we will use recycled content. EGL 1 and EGL 2, they have 20% of recycled copper. We look after biodiversity. But we also engage with the local communities providing education, scholarship, mentorship to the local students. We are even opening our Sustainability Academy to our customers and our suppliers. But this is not only about the transmission, we follow the same approach across all the business segments. And we have KPIs that we use to monitor the impact of our business or sustainability impact of revenues in our business, which is the sustainability revenues. And these KPIs capture everything which goes from P-Laser to E Path. Sustainable revenues were 19% in 2022, 37% n 2023, 43% in 2024. And we are now targeting to exceed 55% by 2028. And you can clearly see the acceleration, and this trend is not accidental because our customers being them regulated system operators, utilities, distributors. They are all asking for green secure, long-lasting, reliable solutions. And we are replying with cutting-edge technologies, which cover all these aspects. We are using installation vessels and devices that protected ecosystems. We are launching green labels like E Path, which combine efficiency and the low environmental impact. So net zero by 2035. Net gain in biodiversity by 2035. Over 55% of sales from sustainable revenues, at least 50% of our employees shareholders of the company. We definitely like the [ 5 ]. These are not just numbers. These are not just simple figures. These are our values. This is our unwavering commitment to leave a better work for the future generation. And I'm sure Srini will agree.

Absolutely, Chris. We've got our plate full here.

So thank you very much for your attention. Thank you very much for your support. And I have now the pleasure to call to the stage our group CFO, Pier Francesco Facchini, who will talk about value creation from the financial standpoint.

Thank you, Cristina, and good day to all of you attending in presence and also special thanks to all the investors and our premium colleagues were following us from remote. It's really special to be here with you today. It's special because as Cristina and Srini told us here in New York City or in U.S., we are making such a big difference to our customers the communities through our solutions. So back to my role here is to guide you on how we convert, where we convert all the opportunities that my colleagues explained into value creation for our shareholders. And in order to do that, let me start from our long history of delivery of results delivery. In the period from 2007 to 2024, including Encore on a pro forma basis, our EBITDA grew by a factor of 4x, 4 times. In the same period, our free cash flow grew even faster by a factor of 5x. And what is even more important in the last 2 years, 2023 and 2024, this growth picked up speed, accelerated. You see that our EBITDA '23 and '24 grew at a CAGR of 20%, now our free cash flow at an even faster CAGR of 35%, specifically, our free cash flow in the last 2 years, '23 and '24 compared to the targets that we had set at the last Capital Market Day exceeded these targets by approximately EUR 0.5 billion. But you certainly remember that at the last Capital Market Day, we introduced a new financial target. EPS growth, earnings per share growth. And you remember that at that time, we set an objective in terms of CAGR for the period 2022, 2027 of a CAGR greater than 10%. Now I'm really pleased to show you that in the first 2 years of this period, '23 and '24, we overachieved this target. And we achieved an EPS growth, diluted EPS growth of 15%, definitely above the level that we have set at that time. These were our past achievements, our past results. I want to now move into our future growth and into our future financial targets. And in order to do that, I want to start with our investment plan, the new investment plan for the period 2025, 2028, 4 years. It's a total investment plan of EUR 2.6 billion for the 4 years, including EUR 0.5 billion related to the latest acquisitions to the latest changes in perimeter of Encore and just signed the Channell acquisition. This definitely marks the growth compared to our historical level of CapEx. You see here, we took a reference period of 2020, 2023 when our yearly average CapEx amounted to approximately EUR 400 million, and this is now rising to EUR 650 million. This will reflect very clearly the positive discontinuity, which is happening in our industry driven by the secular drivers of electrification, energy transition and digital transformation. Well, how does this investment plan compare with a plan that we were showing at the last Capital Market Day in Naples in October 2023. Here it is. Referring to the last investment plan presented in Naples and taking as a reference the period 2024, 2027, it is basically in line, taking into account, of course, the new investments coming from the acquisitions. So you see it's in line at EUR 2.1 billion, if we take out from the EUR 2.6 billion, the EUR 0.5 billion related to the new acquisitions. And well, this definitely means reinforcement of our capital efficiency. It definitely means that a stable level of CapEx is associated with upgraded financial targets, which is very important. And I believe that this is particularly evident for instance, in our transmission segment, where as Massimo showed us we have significantly upgraded our financial ambitions. Massimo anticipated our main financial targets. I want to now zoom deeper into the 4 key financial targets, starting from the growth of our adjusted EBITDA and focusing on the period 2025-2028. Adjusted EBITDA is growing from the midpoint of our '25 guidance at EUR 2.3 billion, up to EUR 3,050 million as anticipated. A growth of EUR 750 million, including, as you clearly see, the contribution coming from the just signed acquisition of channel, EUR 150 million, including synergies for 2028. A significant portion of this growth definitely stems from the transmission business. Here, we are deploying our capacity expansion, both in manufacturing and in installation. And this will drive a high double-digit growth, taking our revenues not far pretty close to the level of EUR 5 billion in 2028, and our EBITDA margin pretty close to the level of 20%. Also the other segments are giving a significant contribution to the growth of our EBITDA in the period, starting obviously from digital solution, and not only because of the just signed acquisition of Channell also because of the organic growth that we want to pursue in the market, specifically in U.S. For power grid and electrification, the key points are in power grid, definitely pursue the mid-single-digit organic growth coming from the market both on U.S. and European market and leveraging on the capacity expansion that we have done in the past and that as explained, will do also in the future. And for electrification, specifically for industrial and construction space in North America, the key point is to achieve our run rate level of synergies at EUR 140 million, adding approximately EUR 75 million, EUR 80 million on top of the synergies, which are already embedded in our 2025 guidance. Financial target number 2, equally important. Free cash flow. Our ambition here is to move from -- the EUR 1 billion midpoint of our guidance in 2025, up to a midpoint of our '28 financial target of EUR 1.6 billion, maintaining the cash conversion rate, so the conversion of EBITDA into free cash flow above the level of 50%, very high, a very high level. Let me underline here that our EUR 1.6 billion target 2028, assumes a normalization in the dynamics of working capital related to our transmission business. That's important. It means that for 2028, we realistically expect that the cash inflows coming from customers down payment will basically offset with the working capital growth driven by the execution projects -- the project execution accelerations and the very strong revenue growth. And this differs very much from the situation that we have enjoyed in 2024, where our EUR 1 billion free cash flow was definitely boosted -- strongly boosted by a decrease of working capital associated with large down payments from our customers. And as such, this makes, in my opinion, the target for 2028, quite sustainable also for the period beyond 2028. Financial target number 3, growth of earnings per share of diluted earnings per share. Massimo anticipated we target a growth, a CAGR between 15% and 19% in the period of 2024, 2028 that's obviously consistent with our EBITDA range -- with 2028 EBITDA range. And we made the exercise here to recalculate and adjust the diluted EPS, in order to exclude the amortization of intangible assets related to the past purchase price allocations related to our past acquisitions, Draka, General Cable and then Encore in particular. And that's interesting because it sets a range, a target range, 2028 between EUR 4.6 and EUR 5.2 per share with midpoint, which is substantially EUR 5 per share, very close to EUR 5 per share. Financial target number 4, return on capital employed. Well, -- the numbers here are not really comparable to the ones to the targets that we set in Naples for the simple reason that since then, our net invested capital grew massively -- by approximately EUR 5 billion on the back of the acquisition of Encore and just signed acquisition of Channels. Still, we set also in this case, an ambitious target, moving from 16% in 2024 to a midpoint of 21% in 2028, an increase of 500 basis points. I want to move now to our capital allocation priorities. And I want to show you our robust and strong free cash flow, cash generation over the period, '25-'28 allows us to combine equal important, equally valuable goals, the goals of growth organic and inorganic and the goal of further strengthening our financial structure. But let me start from this accumulative cash generation. We anticipate a cash generation for the 4 years at approximately EUR 5 billion. This compares with the EUR 3.2 billion that we set at the last Capital Market Day, Naples, but that one was a 5-year period of time. This is a 4-year period. So from EUR 3.2 billion to EUR 5 billion with 1 year less. And I definitely think that this is obviously ending at a much higher scale and a definitely higher level of cash generation. Back to the capital allocation priorities. Number one, continuing our policy of steadily increasing the dividend per share, the DPS. We want to allocate here in the period approximately EUR 1.1 billion, growing our DPS at a CAGR of 12%. And allocating approximately EUR 1.1 billion. Number two, reducing our net debt by approximately EUR 1.3 billion in order to achieve a run rate in terms of financial leverage in terms of ratio, net debt on EBITDA between 1 and 1.5x. Thus further improving our credit merit and further strengthening our financial structure. Last, we'll be left with the flexibility on our balance sheet. For approximately EUR 2.6 billion, actually, EUR 2.1 billion, if we take out from this EUR 2.6 billion, EUR 500 million approximately, of positive free cash flow effects coming from the application of IFRS 16. And this flexibility of EUR 2.1 billion, mainly there from 2027 will allow us to address further growth, inorganic growth, so further acquisitions or in case no attractive acquisition were there, which may always happen to improve to enhance the cash remuneration of our shareholders. But let me highlight here how the time line is very important. The leverage reduction of debt comes first. Of course, we come from a very large acquisition, in particular, Encore, in 2024. And this will -- this deleverage will take place in 2025 and 2026. And this will trigger the financial flexibility that I'm talking about mainly from 2027. So in a nutshell, this is how a strong cash generation meets our ambitions, in terms of inorganic growth and also improvement of the shareholder cash remuneration. I thank you very much for your attention. I hope I was able to convey you my confidence on these targets. And I'm now happy to invite back to the stage our CEO, Massimo Battaini for final remarks. Thank you.

Thank you for the time you spend with us today. And I want to say that we have really many ways to bring us to the goal of 2028. We have many, many pathways. We have certainly our stronger position as a solution provider that is helping us to gain more share in the market and more profitable revenues. We have our acceleration in the market, our dynamic approach and flexibility approach. We have also -- you heard this a lot today, technological leadership, to make us succeed even more. And most importantly, we have a CEO and the team highly committed to deliver these goals. Highly committed and my people, my colleagues are hearing this. And you are one large team. So we met today -- after 1.5 years from the last meeting at the Capital Market Day in Naples. So where are we going to meet next. Nobody knows it for sure. I tell you that we, myself and my team can wait to meet you soon to surprise you again with more good news. Thank you. I have one important moment again together. I will welcome stage Francesco Gori, our Chairman of the Board for one more good news.

Good news is that the morning is over. It's been an intense morning, I think very interesting. And I want to thank you all of you and all the people that is following us by streaming, for being with us today in New York. I want to thank Massimo also on behalf of the Board of Directors and his team for the hard work and the excellent presentation that I think was very interesting for us all, including the Board because reviewing the full story with all the participation, including Benedetto Vigna and intervention and the customers, it's been very interesting. So that is for today, the last news or information is the following: 2025, marks a very important moment in the life of Prysmian because it is the 20th year from when Prysmian was born. And 20 years, I think, that have been spent in delivering results, improving the company size, the company footprint worldwide and growing up talents that allow the company to reach the targets that today, Massimo showed you, everybody. So 20 years of leadership that we are now accelerating and there is no time like now to look forward to the future. Thank you.

It's time for Q&A. It's time for your questions. You were looking forward. I see Daniela already raise the hand -- so we'll take questions from people attending here, but we also have the opportunity to take questions coming from the web. Of course, let's start from you, Daniela.

I just have 2 questions. It sounds like the big message is sort of pivoting more towards service. When we think about service, a lot of the capital goods companies that we cover do significantly higher profitabilities in service than they do in products, sometimes 2x or more. But you guided sort of power grade slightly down the margins, electrification is sustainable. It's not on the transmission bridge, I guess, it's all on the digital solutions. Can you help us understand over the long run, what that pivoting for services can really mean on margins? Is it services materially better margins than products for you or not, it's just more about sustaining where you are in remaining competitive.

Service is keen a business that's, on the one hand, there's still some pockets of commodity, and so of course, the building wire space is a commodity without the service, we will not be able to sustain the margin. But there are also important portion of our business where service is less important because the technological leadership becomes prevailing. And altogether, we have a nice combination of segments or business unit. Service, technological leadership, sustainability will help us grow this margin. Today, we sit on 11%. The margin expectation for twofold points, the margin expectation on transmission grid is going to exceed what we said at the last Capital Market Day, where we said that we reach the 16.5% level in 2027. We are going to go beyond that level. It is embedded in the 25%, 28% CAGR, partly will come from volume, but a significant chunk will come from incremental EBITDA margins in the range of the 18%, maybe the 19%, maybe the 20%. And this, combined with also the acquisition of Channell, which is extremely accretive in the digital social space where our margin will move from the current 12% to 17%, just thanks to the acquisition, brings the total margin or the EBITDA margin of the company in 2028 above 12%. How much above we will see. It depends also a lot on the sustainability as we keep talking about it, how the I&C margins of power grid. But we have solid drivers. We have a great footprint. We have a larger intimacy with all customers. So we are best positioned in every asset to leverage all this stuff, capitalize on it and keep growing the absolute margin as well as the EBITDA margin.

And my second question is just more -- you've just decided to do 1 more step in the U.S., and there's a lot of anxiety, I think, from investors sort of which stage we are in terms of U.S. economy, where are we in telecoms and data centers, but you clearly decided to do this move for Channell now. Can you give us a little bit of a context of why now, was this a competitive process? Do you have a different view on the market maybe.

Channell is not our last minute chance. We've been working on M&As in target setting -- in targets definition, sorry and the assessment in telecom, especially in North America for at least 18 months. We mentioned this to you at the last Capital Market Day and there all shows following that Capital Market Day that we wanted to strengthen our position in telecom. We reach out to at least 12 targets in the last 18 months. Some were European with some strong presence in United States, most of them were European were U.S.-based because U.S. is the largest market, as I said before. So it is important to strengthen our position in Europe, but is ultimately important to strengthen our position in telecom in the United States. We came across 3 or 4, 5 opportunities in the U.S. viable in terms that they were willing to sell. And then for different reason, price, good fit, a lot of different things. We single our Channell because it was the best fit -- was the best fit in terms of size, was the best fit in terms of complementary portfolio, was the best fit in terms of financial sustainability. We didn't want -- we had another target large. You can also imagine who is -- but with a lot of financial debts that they were willing to offload to us, and we were not willing to receipt. Channell was the one that met all take old boxes. And now it's because, I mean, targets become available when they become available, when they become available, you have to accelerate and make them real merger. We started talking to them in June. I reach out to him. Bill Channel is the owner. He's a family-owned business in June last year. Then we, again, we got to go -- we got together, we understood each other, and we offer nonbonding price in December. And then in the last 3 months, we spent on the due diligence and the merger agreement and here where we are.

Chris Leonard from UBS. I've just got 2 questions, if I may. The first is on the target for EUR 3 billion or so of EBITDA by 2028. If I do the numbers, it seems to me that the electrification margin may be low sort of 10% by 2028. If we take into account Power Grid stay at 12% to 13% and the growth in transmission as well. Are those the right sort of numbers to be thinking about for electrification? And does that imply the Encore margin is slightly reducing out to 2028. Just trying to get clarity there. As you -- I think you said in your remarks, you'd see stability on margin. So just trying to understand electrification to 2028 and by voltage?

I think I've been pretty explicit on the margin of transmission because we count on solid backlog. And we have all the conditions in hand to deliver the growth in EBITDA and margin percentage. Then I also said that comfortable with a 12%, 13% level of margin in Power Grid. I also told you that we played a more moderate growth in the organic growth of electrification business. That doesn't mean that we foresee a reduction of margin in Encore Wire. Actually, I said that I would see in mid, long term, margins are sustainable -- sustainable means that they will be in the range of 14%, 15%, which is what we have seen since December. In quarter 3, the margin were 15%, in quarter 4, they slightly dropped to 14.6%, by the way. The quarter 4 I&C margin in North America was 14.6%. So there is a softening. It is right. We didn't build our plan on a significant rebound of volume and margin in I&C. We pose we want to keep it as a buffer because we want to deliver the EUR 3.50 billion by all means, that's why we committed to it. If we had additional opportunities upside coming from volumes and EBITDA margin improvement, we will beat the EUR 3.050 billion. And by the way, the top end of the range is EUR 3.150 billion, and this could be what can bring us to the EUR 3.150 billion.

Okay. Super clear. And second question on the capacity additions for transmission. Is there any sort of guidance you can give us on the CapEx we should be expecting there on transmission to support that EBITDA CAGR of 25% to 28%. And how are you seeing with that new capacity coming in, how are you seeing the supply-demand picture as well in high voltage?

We are no different from what we told the market at the last Capital Market Day more or less in the 5 years from '23 to '28, we will inject EUR 2 billion of CapEx in transmission. We removed the investment in Brayton Point in U.S. We admitted it. It doesn't make any sense. So when we make mistakes, we admit it. The market didn't start, didn't take off, not because of Trump guys. It's because already 3 years ago, we thought it would develop, in reality didn't develop even under Biden administration. So U.S. is working more on electrification, which obviously, in my view, makes much more sense than what Europe is doing, investing in generation and also electrification at once impossible to sustain it. So CapEx are EUR 2 billion. We removed an expensive investment for one brand new plant in Brayton Point, Massachusetts, and basically replace all of it with incremental investment in Europe, which is where the markets remains and strengthen and where the market grows in the coming years.

Vivek from Citi. I have a couple of questions on Digital Solutions, if I may. So the first question is a follow-up regarding Channell. You've alluded to the better margin in Channell. You've given us an absolute EBITDA number. It'd be quite interesting to learn what the margin is? And could you also give us a little bit of background on, has that margin been stable over time? Or has there been an improvement in recent years?

I do appreciate that everybody's concern is where the margins are sustainable, not and it's a key question, and we receive it every time in the investors meeting. We can tell you what we see, and we don't have a crystal ball for the future. What we see is, first of all, in connectivity, the margins are high, not only in channel, we have connectivity business in our core business in Europe and in APAC. And the margin that we have in connectivity in our legacy perimeter is more or less the same that we see in Encore -- sorry, in Channell. I still back with the old acquisition. So -- and the margin in Channell's are more or less 35% EBITDA. So you can work out. You have the price, you have the multiple, you can work out the EBITDA, you can work out also with the EBITDA margin and also the revenue.

My second question, again on Digital Solutions, a bit broader. It's a bit more -- we sometimes get questions given some of the news flow in the U.S. and some of the political chatter there's of course, Starlink and also more broadly, the questions around the BEAD program. I'd just be interested in some of your thoughts around that.

Not sure to understand...

The question, Vivek, is around the current trade and development in the U.S. on the Digital Solutions -- digital market development in U.S., specifically for Digital Solutions.

BEAD is rural.

It's -- I think the concern is probably about the rural broadband, which is certainly not what we factor in, in our main plan because there will probably be some rural broadband subsidies. But they've been talking about it for many years, and we didn't see any significant opportunities that are happening. The real growth that's happening in North America is the fiber-to-the-home, fiber-to-the X, fiber-to-the data center. Already 45% of our volumes of optical cables in U.S. are based on data center expansion. They are rich cables, they require high-density fiber. It's market growing very fast, and there are long distance connection in data center expansion. So we don't count match on fiber-to-the-home rural broadband as we count on fiber-to-the-home deployment in mid-cities -- large city and mid cities. I mean, U.S. is already -- is only at 35% of deployment of the fiber-to-the-home, not because they're lacking a rural opportunity, but because they are lacking midsized cities and all the rest. And data center will add additional demand on it.

I see Akash from JPMorgan.

I've got 2 questions. The first one is on margins. So Massimo you said in 2028, we could be above 12%. Last year, we were at 11.3%. And when we look at the moving parts, you have margin improvement -- significant margin improvement in transmission, significant margin improvement in Digital Solutions, some normalization in Power Grid and electrification largely stable. Now the question I have is more for like when we look at your presentation today and especially screening on innovation, where you highlight like these new areas where you are going into and also the grid following up from [ Daniela ] as well that more on service side. So like if you target higher vitality ratio in future, like what is the upside from those new innovation on margins? Like, I mean, I think Srini talked about a couple of those like this new groundbreaking technology in subsea cable that I think could be really revolutionary and same thing with these overhead wires. So maybe a question about like on margins, like there is a debate, but then there are moving parts. So how do you see role innovation playing in margins by 2028 versus where we are last year. So that's the first one.

Akash, if you look at our last 4 years, you've seen our margin growing from 7% to 11%. Part of it is due to the market is growing. It's more demanding, and this is more in balance, especially in transmission between the existing capacity and the available and the current demand. Some of it is because we leverage this innovation already, we really leveraged sustainability, pricing differentiation, service as a way to increase margin. We were at 7% in 2021. We grew to 11% last year. And agree that 12% might not be reflecting the full potential of this company. But you like -- I think you will appreciate our side. We want to set targets that we are confident to deliver and hopefully outpace these targets. And I'm pretty confident that this will be the case in 2028.

And my second question is more short-term question. So last month at Q4 results when you admitted that there is some price pressure in Encore, you told us that you expect improvement from March onwards. Now we are end of March. So can you confirm if you have seen improvement in Encore price or it will take more time than what you've previously said.

I have to wait to answer this question, either I do myself or I ask the person behind you, which is the CEO of North America, you can ask this question. But I will love to have a combined answer. He told me and he showed me that in the last month of March, different from what happened in November, December and more importantly, from what happened in January and February, where price pressure was still very high. In March, we've seen a strong rebound in profitability. Of course, we had to be much more selective in the market. We were not chasing volume for the sake of volume. We were holding price nicely. And finally, also those we are creating pressure in the market. I cannot name the company, but you can figure this out, have come to terms and set price improvement in the market. So that's why March looks completely different from November and December and from January and February. I hope this maybe anticipate your next question, that this is a trend, this sets a new trend, which will bring the level of margin in line with 15%, 16%, which is what we delivered in quarter 3 last year. March itself, it's already at the level of margin that we've seen in October and September last year. Sustainability margin depends then on the seasonality effect, where we see starting in March and April as we entered the high season. And again, don't forget the usual theme. They balance between capacity and demand, which I think will remain favorable to the supplier side.

Alasdair Leslie, Bernstein. So just a couple of questions. One on the U.S. listing, you said that was paused. I think it's put a little bit of pressure on the share price. Do you think do you sort of see that largely just as a sort of timing issue? This is maybe something you can return to once -- I think if channel completes in Q2, you can come back to this? Or do you think this is -- there's maybe a higher chance now that this doesn't happen at all? And then sort of second question on Data Centers and Digital Solutions. You sort of said in the past here, you acknowledged that perhaps you were a little bit kind of underrepresented here. So does channel with the acquisition from Channell, does that now give you everything you need to -- in digital solutions to really pursue all the opportunities in front of you there? Or do you need to continue to kind of innovate and develop organic and perhaps still do some bolt-on M&A deals here as well?

So there are 2 questions. [indiscernible]

First question is U.S. listing. And yes, we paused because the time is not ideal. We said that we recognize the greater value creation that can be unlocked, thanks to this U.S. listing. The Board is here with us. They can also help me answer the question, but we will revisit this opportunity in a few months as we get on with the closing and the first step of the integration of Channell. The closing is foreseen to happen in the Q4, the end of quarter 2, likely, this is going to be May or June. And at that time, we will review the situation of the financial market first because once we do it, we will not fail because we believe that we are serious about these things. We have to be sure that we have all conditions internally, more important than externally to be able to gain value and to be successful in that move.

Second question was on Digital Solutions and the strategy we want to pursue that channel is complementing our portfolio helping us to grow or if we are still looking for further M&A to further complement the portfolio?

You should be satisfied with 2 M&As in 1 year, guys. We have a very ambitious agenda in M&A because we build this company, thanks to M&A, thanks to the organic growth, thanks to the resilience, but the M&A opportunities where we create incremental value. So it's not simple to find available targets. It's not simple to find a bit of a target company that are for sale. It's not simple to find the best fit with our footprint. And our footprint is not just the cable footprint. It's also the cultural value of these companies. So it's very important for us that we find a cultural fit. It doesn't mean that we have a culture equal to ours in the company that we buy, but we have to make sure that when we acquired Encore, when we acquired General Cable, we said 1 plus 1 makes 3. Now with Channell, the owner of Channell told me 1 plus 1 makes 11, so the fit is essential. So we will continue scuffing the market for new opportunities. We need to have the fit. We need to have the availability. We have the financial ability to do it. I think for the next 2 years, I'm not saying we pause, but we will further invest in identifying the proper target. Now we closed a big gap that we have in our portfolio, 2 gaps. One was Encore. We were not a player in the electrification space in U.S., ticking the box. We had another gap. We are not a solution provider in Digital Solutions space in U.S., Channell close the gap. We don't have any major gap left now. So all we will do in the future is to find something else that can complement the portfolio, increase our leadership in geographies, in different markets, but all gaps that we had been closed.

I just have one, please. So on Power Grid margins. So for Power Grid, I guess you're investing a bit more into the U.S. And if I understand correctly that your U.S. margins is significantly higher than Europe. So how should we think about the margin dynamics given you have guided flat in the next few years? And I have thought like the U.S. growth should have lifted the margins a bit further?

The question is about on Power Grid margins. And since in any case, we are saying that U.S. market has higher margins, but we are guiding for flattish market on Power Grid, though expectations were for margins to continue to grow given our also investment in U.S. Power Grid.

First of all, I think that our target of mid-single-digit growth in Power Grid is both in U.S. and in Europe. Also Europe is clearly an opportunity in terms of growth. So I don't think that there is a big mix effect on that. Having said that your remark about the differential between EBITDA margin in North America and Europe for Power Grid is certainly there. And then we had -- we on the safe side, as we explained, we have decided to embed in our financial targets, let me say, minimal normalization of price and margins. And this means an EBITDA margin run rate between 12% and 13% versus the 13.4%, which was achieved in 2024. We think it's quite safe. It could be -- we hope it will be conservative. We hope and we think it's also well possible that margins remain stable in the -- both in U.S. and by the way, could improve in Europe because the gap, as you remark, is pretty significant. And this will potentially play on the top part of our target range.

Josh [indiscernible], Morgan Stanley.

It's Josh Miller from Morgan Stanley. Just, I guess, first question, going back to something Chris was asking on the high-voltage supply-demand environment. In the past, you've talked about the longer term as being 30% undersupplied. Since then, we've maybe seen a bit of a step-up from Asia competition in terms of expanding capacity in Western markets and also maybe a weakening of the offshore demand environment. I guess if you were to take a step back and reevaluate that statement, that view, what would that look like today? And I'll start with that question.

The market is still stronger. And of course, the imbalance will reduce because everybody has invested in this capacity as like this -- like what happened in Power Grid, everybody has invested million volt capacity in the United States. That's why capacity is not enough to lead and maintain market leadership. That's why innovation is a key element, which might not result in incremental margin increase, but it will result in becoming more cost competitive, more cost effective and more competitive in the market. So one day, there will be a full balance between the transmission demand and the capacity. This day has not come yet. It is probably likely to be '29, 2030. Bear in mind that our capacity is already sold out through 2020, 2030, 2031. And so until for the next 3, 4 years, we will leave this imbalance in capacity between the capacity and demand -- imbalance in the market between capacity and demand. And then remember that in transmission is not just a matter of cable manufacturing capacity. You are a Chinese, you are Koreans, you are LS or whoever, they come to Europe with a lot of capacity in transmission. They're also qualified with 525 kV, while they are qualified with 525, we already work on the 600 kV solution as we already do have it.. We also have 700 kV. And we own it from -- since 2018. Then when it comes to installation, they don't have any own installation vessel that works in Europe. That's why despite the significant imbalance that we had in the last 4 years, you've seen probably only 5% of the market demand in transmission satisfied with Asiatic players. It's not that we don't like Asiatic players, I don't get me wrong, but you need to have a full spectrum of capabilities if you want to succeed and remain in this market. So I don't see them creating or gearing up their company to the full spectrum. So the market demand will be balanced one day with capacity, with cable capacity. It will never be -- it will never happen that we'll have other competitors with global capacity -- capabilities in terms of installation manufacturing in this market. And this is what we will leverage to remain competitive and to gain market share and maintain our margins side.

Amazing. And then just a second question, again, sort of linked to high voltage. You're now guiding for sort of an 18% to 20% margin for '28. That's what it sounds like. I mean when you look at new orders, obviously, you had some new orders at the end of last year. When you look at these new orders you're still taking in, is there room for this to push higher in the throughout years beyond 2028? Do you feel like this is now the right level for this business going beyond into that mid, long term?

I think the question is, Josh, if I get this right, is we are targeting high teens on the EBITDA margin for transmission in 2028. So if we see the incremental projects we are taking now, there's room for further expansions considering everything we are discussing.

We have already this project with high margin, the EUR 16 billion. That is why we think that with the execution, with the good execution, we will raise our 15% EBITDA margin transmission of '24 to 17%, 18%, theoretically to 20%. So I can tell you, we have a margin in our backlog that is as high as 20%. We still have to deliver. So -- but if you look at the margin, it's already at that level, 20%. Today, we are still winning projects at very high margin because we are not yet there in terms of balance between capacity and demand.

I saw Akash and then we have...

It's Akash again from JPMorgan. A couple of follow-ups to Francesco. So the first one is on the Channell deal. I think when you acquired Encore, you gave us what sort of EPS accretion you are expecting from Encore. Could you quantify any -- like what sort of EPS accretion we should expect from Channell? And then the second one is the bridge between EBITDA and EPS because last time when we had previous Capital Markets Day, you did not give us EPS guidance this time around for '28. You have given EPS guidance. So maybe if you can talk about the big ticket items that go from EBITDA to EPS, so we can see what's your assumption behind some of these lines?

Okay. Let me start from Channell, not Channell, just to avoid -- even if margins are high, but maybe not that high, [indiscernible] actually, I don't know the margin of Channell, I will check. Apart from jokes, I think we have been in our press release quite explicit on the way we will finance that. We come from a very large acquisition in 2024. We are very keen on maintaining our investment grade, of course. So we have decided to go for that ambition, but at the same time, to finance this in a quite prudent way. And this quite prudent way is what I tried to express in the press release as a balanced mix of equity and debt in principle and equity provided by some disposals of the treasury share. You remember that we have just completed our share buyback in Q1 2025. So we had a quite significant portfolio of treasury shares. At the same time, we plan to tap the Capital Market with a hybrid. To be very clear, a hybrid is not a convertible. And hybrid is a subordinated bond, which will not result into issuance of new shares. Still, the -- normally, the interest rates of subordinated bonds is slightly higher, not massively higher, slightly higher than a senior bond, let's say, 100, 150 basis points higher. And boiling this down and putting this -- all this in a pot, I think this still will result into a certain accretion, a slight accretion, let me say, a 1-digit accretion of EPS coming from the Channell acquisition. And talking about the 15%, 19% EPS CAGR, which will convert in terms of adjusted EPS and substantially, we think the midpoint is very realistic at EUR 5 share, EUR 4.9, let's say, EUR 5 share. You have visibility on the EBITDA. The adjustment below the adjusted EBITDA line will definitely decrease because in 2024, they were particularly high on the back of digital solution restructuring and also all the transaction costs and also some PPA effects related to the Encore acquisition. So this will contribute to the growth of the net income. Our D&A, I'm trying to comment, Akash, on the most important items. Our D&A reflecting the increase of our -- the ongoing increase of our capital expenditure plan will definitely increase. By the way, we have reflected in the D&A increase all the effects related to the purchase price allocation of Encore. So I want to be clear, this -- the additional D&A coming from the purchase price allocation is taken into account in our EPS growth. And -- but definitely, our D&A will increase significantly up to a level, I believe, between EUR 600 million, EUR 650 million from the current EUR 460 million in 2024. Where else I think the financial charges, of course. Well, the financial charges will increase this year because we'll have the full year effect of the Encore acquisition financing. And then the cash generation is so strong and the deleverage will kick in so quick that we think that from a level of EUR 260 million, EUR 265 million financial charges this year, this will drop in 2028 well below the EUR 200 million threshold. Last but not least, the tax rate, quite stable, 26%, 27%, depending on the year. And this will actually drive a net income that including Channell, we see consistently with the midpoint of our EBITDA range in the EUR 1.45 billion, somewhere there. Of course, that's the midpoint of a range.

I see Matteo.

Matteo from Kepler Cheuvreux. . A question for Francesco on the link between free cash flow and working capital. So in 2024, you generated EUR 1 billion free cash flow, but more than 40% of that was working capital which makes sense because in '23, you announced big order and so you took the advance payment. So my question is basically, over the -- over your plan, what are your assumption for this item of the working capital also in relation? And that's the second question to your projection of EUR 15 billion to EUR 20 billion intake per year, which is a big number for transmission because some of your peers guide more EUR 10 billion to EUR 15 billion and not EUR 15 billion to EUR 20 billion. So I would like to know a little bit more, first of all, the composition of this EUR 15 billion to EUR 20 billion across interconnector and offshore wind, if you can provide a little bit more color. And second, in relation also to the intake in high voltage, the dynamic of the working capital to understand if it's going to continue to play a big role in your free cash flow?

Thank you, Matteo. Very interesting question. Our journey, our move from EUR 1 billion to EUR 1.6 billion basically. Let me say, first years or the central part of this period of time will be a bit -- in the growth will be a bit burdened by the increase of working capital related with transmission. And basically, the deployment of the additional capacity and the acceleration in project execution will drive a quite significant increase in working capital, which is embedded, of course, in our plan. And in the last part, let me say, in the last year, basically of our plan, as I explained, we think it's realistic to see a substantial balancing between down payments and further growth of the working capital, talking about transmission. And that's good because you are totally right, differently from 2024, where our free cash flow was boosted by -- you mentioned this 40% component, which was coming from the -- in principle from customers' down payments on transmission related to '24 and even more to '23, the 2028 will definitely be much more sustainable. So this growth will happen in steps, let's quantify them of EUR 150 million in the first 2 years, EUR 150 million in '26, EUR 150 million in '27 and then a stronger step around EUR 300 million in the last period of the -- our plan in 2028. Then maybe I didn't get exactly the...

The assumptions, I think, on the working capital coming from transmission considering that we are considering EUR 15 billion, EUR 20 billion market, which is higher than the estimate of our peers because they are guiding from a lower market in between the [ EUR 10 billion and EUR 12 billion ].

On working capital is what I was commenting. We are reflecting a decrease in down payments because this is embedded in our targets.

And my third question was EUR 15 billion, EUR 20 billion, how did you build that because it is different from what your peers typically say, where did you take this assumption? How did you build this assumption?

On the market evolution, the EUR 15 billion to EUR 20 billion market size is the estimate is, again, higher than some -- not necessarily Matteo because some of them are talking about addressable market. If I think about smaller players, which don't have the same coverage that we have, they are targeting the EUR 10 billion, EUR 11 billion. We have other competitors that are even talking about EUR 26 billion. So at the end, we are taking a more and more balanced approach. And then in our case, and then Massimo, of course, you can complement, it's a bottom-up. So what we are seeing is the pipeline of projects and the framework that we see coming -- we have -- if you do this exercise, of course, you also end up within higher numbers, which is not far from some of the other competitors, but we are taking a more prudent approach, lowering a bit the estimate. And then I don't know, Massimo, if you want to.

We see the pipeline of projects from competitor -- sorry, from customers. They already given us a lot of volume to cover revenues for us, another competitor through 2030, they launch in '25 and '26 project will be executed in 2031, 2032. So we have this visibility and the comfort that they are working on this project as we speak. So EUR 15 million to EUR 20 million is our best estimate, bottom-up estimate of the demand of intake over the next 5 years.

Xin Wang from Barclays. So my first question is on medium voltage. I remember back in Q4, as you were launching the 20,000 tonne new capacity on the U.S. market, you were very transparent about some margin softness that you see on the spot market. Now you have this new EUR 245 million investment in medium voltage in the U.S. ramping up from 3Q '27. Can you give us a bit more color on how you're comfortable with the 12% to 13% margin with more capacity? And maybe in particular, how you see the competition landscape in the U.S. given your biggest competitor here is a private player. We don't really have a lot of visibility on how much capacity they're adding.

I will try to sum up because unfortunately the audio is not very clear...

Low voltage and medium voltage U.S.

Medium voltage. Also because you were mentioning capacity expansion from other competitors. So it's the impact of the overall evolution, how much is driven by the capacity availability on the U.S. market, right?

It's power distribution. So we have a low-voltage cables for the grid and medium voltage cable for the grid is a market is high in demand. But over the last 3 years, everybody has invested in capacity. But different from this everybody, we have 3 channels to the markets in this space, power grid, utilities, renewable business and public power distributors. So we are more better positioned than the others to leverage these 3 channels to saturate our capacity has increased significantly in '24 and '25 will continue to increase with the new investment approved last night, we will further expand it. But we have 3 channels to play with. And the most difficult channel to own and to retain is the utilities channel. Utilities are -- I mean, you -- I think you explained it before, the most conservative customers in terms of cable specs and the most demanding customer in terms of service. So service matters. Service means you have to have cable in stock to deliver the demand in the shortest possible time. You have to have security of supply. You have to have qualifications to enter this space. Why -- and that's why in this space, we have a frame agreement. So there are contracts that last 3, 4, 5 years. And most of the time, if you perform service-wise and delivery, they don't even go out for a new tender. They just extend these 5 years by 1 or 2 more years. So that's why this is the most difficult space to possess. On the other hand, we have renewable projects is a spot business. The tender projects, you can win or lose and you move on to the next opportunity. Public power is the equivalent of a distributor for electrification space. So they buy spot. So it's easy for all those competitors to remain players in renewable and in distribution in public power. In fact, I'm aware of one large competitor in U.S. that have tried for 10 years to enter new utilities. They are not yet there. So we have this beauty. We can play on these 3 segments. And so we think we own all the assets and capabilities to succeed in this space, no matter what is the balance between the existing capacity and demand. We will have one chance more than the others to remain high in volume, in saturation and in profitability.

So my second question is on the vertical integration of Channell.

Channell is very nice.

Fiber optics is the most important or expensive part in the telecom table. I think in European market, Asian import makes up a lot of the supply given their cost advantage there. Is this the same in the U.S. market? If so, do you think -- how do you see tariff play in here...

[indiscernible] in U.S.

U.S. is a protected market, not only in terms of optical fiber, but it's across the Board. We don't have a Chinese player in U.S. We have some Indian player, one Indian player, very minor, which is, by the way, struggling. And on the contrary, Europe is open to fibers and to other stuff imported from [indiscernible] players. But as U.S. is already super protected, also Europe is becoming more aware of raising fair barriers to this unfair competition because the digital network alongside the energy network is a critical network, is a critical infrastructure for U.S.A. as it is critical for Europe. So Europe is becoming more aware. We succeeded 1, 2 years ago with our antidumping case for Chinese imports into Europe, tariff as high as 25%, 40% has been applied since then to Chinese cables importing into Europe. There is another case that we filed 2 years ago for fiber importation into Europe. So gradually also Europe will raise this obvious protection towards the local producer. U.S.A. is not protected by this tariff -- additional tariff that tariff has set. Already, there are little share of the current market U.S. across the Board, transmission, high voltage power grid, electrification and digital, where foreign player can play a small role.

My last question, if I'm allowed, is on the transmission market size you commented on this EUR 15 billion to EUR 20 billion that you expect between '25 and 2030. So I saw the APAC bar is growing. So obviously, previously, you already commented on transmission business being a global market. I'm just wondering -- and recently, you were selected as the preferred supplier for the Malaysia to Singapore link. So in this market, what specific countries maybe do you have in mind for this growth?

I caught the first part of the question and the last part. So the market is foreseen at EUR 15 billion, EUR 20 billion, 85%, 90% of it is European market. U.S. is, as I said before, not in the position to be a player in this market because on the one hand, they don't have the need of investing offshore wind. They have plenty of space onshore, and they are investing a lot in renewable onshore and solar onshore. So why would they spend or embark on expensive project offshore to generate the same quantity of electricity that can generate green in onshore application. And secondly, they don't have the, I would say, the morphology of Europe. Europe, all countries are surrounded by sea. And the fastest way to deploy high-voltage long line is to go via sea and via land. In U.S., it's the opposite. They are using the [indiscernible] lines because the density of operation is very low, nobody is disturbed by this high [indiscernible] lines is the best way for U.S. to transmit the green electricity across all states. So U.S. will never become a sizable market in submarine space for HVDC land underground. But APAC is an important market for us. China, we cannot enter in that market. We're not allowed to participate to bids in China, and we don't even want to. Europe and APAC are two important markets for our global presence in transmission business. So I don't know...

I think that was right a question. You're addressing both points.

This is [ Andrea Carzana ] from [indiscernible]. I have a question for Srini. I really enjoy your presentation. Can you help me understand how you allocate capital because I'm sure you have plenty of projects, right? Where you can invest in. How do you think about which one you want to prioritize? Is there any financial KPI in mind? And secondly, it would be interesting to understand if some of that innovation comes from clients coming to you and asking for XYZ or are you going to them with sort of like a breakthrough innovation?

Do the second one, if you want to.

Let's start with the second one.

It's easier.

Yes, we have customers coming to us.

But more importantly, we are proactive in this approach. So P-Laser technology, the one we highlighted, the world was not asking. It was our idea and customers embrace it. And then you have ideas or E3X, same thing. It was something we envisage in our labs and customers are embracing it. Then you have other solutions like the automated splicing and a whole bunch of other things where customers are seeing the need. And quite honestly, it's a luxury to have the second part because things go faster. It's really a good mix of both for us. Yes.

Yes. When you innovate and you are the ones -- the only one providing this solution to customers. Some customers want to have a double source. So this is when innovation is not enough to penetrate a customer. But again, when medium voltage laser -- laser solution was invented, customers were reluctant because they could not find the same alternative among other suppliers. But then with time you break this barrier and you are really able to push your innovation through our customers.

And then I think the question was also around how we allocate resources in terms of we decide to invest in terms of innovation?

I would say to comment is that we are definitely selective in terms of projects that we are keen to take and to follow. I think that the split of our backlog, which is very focused on the TSO and much less focused on developers, for instance, financial developers is a clear indication for that because we definitely believe that there is much more risk to go after projects with developers in terms of uncertainty of the time line and also potential uncertainty about the project. In terms of -- we always try to balance and to look at both the margins and of course, the terms and conditions of the contracts, which are important because they reflect directly on the level of risk. It's a part of the level of risk of embedded in a project. Having said this, I don't -- I cannot say we are, can I say, strictly applying financial parameters in taking our projects. No. We have also to consider that the cash flow dynamics, the cash flow profile of the project business of the transmission business is a very good one. It's a very strong one for the simple reason that in the -- early in the life of a project, we get the down payments. We have pretty large milestones that we collect. And this creates a situation where the working capital before coming obviously to a balance at the end of the project is basically positive throughout the life. So also this has to be taken into consideration in order to decide whether to go after a project or not because something is margin, something else, of course, is the return on capital, which is extremely strong in the transmission. In principle, you could even think that a part of the larger CapEx that we have on transmission. It's approximately 0.5 -- close to EUR 0.5 billion of the total EUR 2.6 billion that I was is financed, is covered by the positive profile of working capital and the down payments. You can also think in this way.

We have time for a couple of other questions, if any. I don't see questions coming from the web. I'm not so sure the device is working. It sounds strange to me. We have been very long.

Just another follow-up, if I may. So I can see on the appendix you not assumed an impact from import tariffs. I was following up again on that question. But in terms of the pass-through mechanism, it would be great if you could just walk us through how those work maybe by business, particularly around some of the metal tariffs that have been proposed recently?

Congratulations because you were carefully reading the presentations, appendix included.

It's a strange situation. It's an odd situation this one. I think correctly I am try to promote local production for local business. In some cases, probably it is taken some bias towards I want to put tariffs no matter what. The metal tariff is out in this case. Why would you put tariffs on metal, aluminum rod -- aluminum copper when local production is not enough to supply to deliver all the volume required by the local demand. U.S. is not self-standing in terms of aluminum and copper production. But in the end, we are in the same boat as the other competitors. We all resort to importers, third parties importers, some from Canada, like us, some from other regions like LatAm or Middle East. It put barriers of 25% against them all. It means that we will be naturally and probably very quick transfer this to the market. And even before tariff came into play, the Midwest premium, which is the transformation cost applied to the aluminum metal to reflect the transformation from ingot into rod has increased, has started increasing in January this year. As soon as I mentioned, I might think of putting 25% of Mexican production or LatAm production, Middle East and Canada, Midwest reflected this increase. So since January, we are already in the condition where we are -- we have worked to pass on this cost increase to the market. This will, in the end, unfortunately, result in one backfaring situation. The cost of everything will increase. This will lead to inflation. And obviously, at a certain point, maybe before it's too late, the market realized that these tariffs are not going to help the local production. We are also working to make sure that the administration knows that besides applying tariffs to pure metal, they also apply tariff to products, cables that are importing from Asiatic players or Korea and so on, which can bypass the tariff because cables is not a metal. But there's a lot of metal in cables. So there you see the inconsistency. So this can actually turn pretty soon is a significant competitive advantage for the local producer once he added tariff to the products, not just the raw material.

Thank you. I think we are unfortunately running out of time.

We are 10 minutes late on our schedule. It's probably my fault. I over ran by a few minutes and then you all follow us. So thank you again. Some of you will join us with a tour to Encore Wire. So you will see how large and impressive this site is. Some of us will return to your location, and I hope to meet you soon really. Thank you.

Thank you.