Scienza e Tecnologia
Nexans: Strong Performance Supports Structural Value Growth
PRESS RELASE _
NEXANS: S TRONG PERFORMANCE SUPPORTS STRUCTURAL VALUE GROWTH
2021 G uidance rais e d on the back of record EBITDA in H1 2021
Subsea High Voltage leadership in motion with Empire Wind projects preferred supplier agreement , Nexans Aurora vessel delivered and Charleston US plant on track for Q3
Building blocks of Strategic Ambition to become an Electrification Pure Player
Positive net income at 81 million euros
Paris, July 2 8 , 2021 – Today, Nexans published its financial statements for the six months ending 30 June, 2021, as approved by the Board of Directors at its meeting on 27 July, 2021 chaired by Jean Mouton. Commenting on the Group's performance, Christopher Guérin, Nexans' Chief Executive Officer, said : “ Ahead of expectations for 2021, we are confidently building the blocks of our 2022 – 2024 new strategic ambition presented at our Capital Market s Day last February.
This first semester 's strong performance anchors the first steps of our strategic vision to become the pure player in sustainable electrification. Nexans is now a structured, healthy and solid Group. We will continue to trigger structural value growth while amplifying our impact on energy transition. ”
FIRST HALF 2021 KEY FIGURES
I. First half 2021 Highlights
and G eneral O perating
C ontext
Record half year performance
Success ful “ New Nexans ” 2019-2021 Transformation Plan
Building blocks of Nexans' 2022-2024 strategic ambition : Electrify the Future
During the first half, the Group started laying the groundwork on its three main pillars :
II. H1 2021 analysis per
Segment
CONSOLIDATED SALES BY SEGMENT
EBITDA BY SEGMENT
| BUILDING & TERRITORIES: +2 34 bps EBITDA margin thanks to selective growth
Building & Territories segment sales amounted to 1,277 million euros at standard metal prices in first half 2021, a +5.3% organic growth compared to the same period last year. Sales were sequentially up +7.9% in second quarter 2021 supported by an upturn in most geographies notably in Europe and well oriented end-market demand.
EBITDA was strongly up at 90 million euros compared to 58 million euros in first half 2020, with solid EBITDA margin of 7.0%. This +234bps increase reflects the successful management of raw material price inflation and supply as well as the significant cost and complexity reductions implemented since 2019, notably through the in-house SHIFT Program.
Over the period, the Building segment demand recovery was strong across most geographies driven by volume growth while remaining selective to support profitability. The Territories (Utilities) activity witnessed good dynamics in South America, sound demand in Europe thanks to solid recovery in France and a slowdown in North America, notably in Canada.
The half-year trends by geographies were as follows:
| INDUSTRY & SOLUTIONS : R obust growth boosted by A uto-harnesses and Automation
Industry & Solutions sales landed at 697 million euros at standard metal prices in the first half of 2021, up +18.7% organically year-on-year and +34.8% in the second quarter of 2021 supported by strong dynamics in auto-harnesses and automation. EBITDA more than doubled to 68 million euros against 30 million euros during the same period last year and EBITDA margin also strongly improved at 9.7% compared to 5.0% in first half 2020.
Automation was strongly up (+44.0% year-on-year), boosted by demand in Europe. Railway Infrastructure & Rolling Stock sales were slightly down -3.3% year-on-year in virtue of lower Asian demand. Aerospace & Defense witnessed the first signs of recovery in the second quarter (+84.3% compared to second quarter 2020) while Oil & G as remained challenging. After several quarters of dynamic activity, in light of raw material increase, Wind Turbine activity was down (-22.4% in sales year-on-year).
Automotive harnesses was strongly up by +50.9% in the first half. Sales reached a record high in virtue of growing market shares of electrical vehicles supported by Government subsidies. A contract in body harnesses has been awarded and will secure the growth momentum in the future.
| TELECOM & DATA: LAN cables and Systems continued upturn ; Q2 supported by recovery in Optical Fiber infrastructure market
Telecom & Data sales amounted to 160 million euros at standard metal prices in first half 2021, up +2.7% organically (excluding Berk Tek sold in third quarter 2020) compared to first half 2020 and up +9.5% in second quarter 2021 showing a rebound in demand. EBITDA improved by +14.6% and reached 18 million euros in the first half 2021, reflecting continued profitability focus which more than offset unfavorable base effect of the Berk Tek sale and pricing environment, which is now stabilizing. As a result, EBITDA margin improved strongly at 11.0% compared to 7.0% in first half 2020.
LAN cables and S ystems rebounded by +27.7% organically in the first half 2021 compared to first half 2020 with activity benefitting from the upturn in both Asia and Europe.
Telecom Infrastructure was down -7.9% in first half 2021 as demand started to return in the second quarter. Pricing pressure was mitigated thanks to cost reduction and competitiveness measures.
Thanks to the solid demand and Nexans' leading position, sales were up +9.7% in the Special Telecom (Subsea) business year-on-year and backlog remained strong.
| HIGH VOLTAGE & PROJECTS : H 1 2021 penalized by unfavorable H 1 2020 comparable ; solid grounds for a strong second half
High Voltage & Projects standard sales stood at 346 million euros in the first half of 2021, down -11.8% year-on-year, in line with project phasing and unfavorable comparative in first half 2020 which had benefitted from three repair contracts. Sales will accelerate progressively throughout the second half, reflecting project phasing, delivery of the state-of-the-art Nexans Aurora cable laying vessel and completion of the Charleston plant in the US.
EBITDA landed at 52 million euros, down -14.2% compared to first half 2020, reflecting the absence of repair contracts in first half 2021. Excluding these three contracts, the growth would have been close to +30%.
Subsea high-voltage was down -15.6% in the first half 2021, impacted by a strong base effect as stated above. In line with the Group's flawless and disciplined project execution, progress was made on project execution, notably on interconnector projects NSL, Crete-Attica, and Lavrion-Syros as well as offshore wind farm projects such as Seagreen OWF and Dolwin6. Adjusted Subsea backlog was at 1.4 billion euros at the end of June with high visibility and fully loaded Halden plant in 2021. Tendering activity continued to be strong, Nexans was selected as preferred supplier by Empire Offshore Wind LLC to electrify the future of New York State, connecting the Empire Offshore Wind Farms to the onshore grid. As part of managing critical transmission assets, Nexans was awarded aftermarket consulting services for Kintyre – Hunterston subsea high voltage transmission link. In parallel, the Charleston plant conversion made progress and completion is expected in the third quarter despite slight delays due to Covid-19 travel disruptions and material supply constraints. Nexans Aurora vessel was delivered on-time and the Group held her naming ceremony on June 8 , 2021. The vessel is now ready to sail on numerous secured projects such as Seagreen OWF in the United Kingdom, Crete-Attica interconnector in Greece and Empire Wind OWF projects in the US.
Land high-voltage was up +3.5% in the first half 2021. Project execution gradually increased over the semester, in line with backlog phasing. Performance remained above breakeven level, after the successful turnaround of the unit last year.
| OTHER ACTIVITIES
The Other Activities segment – corresponding for the most part to copper wire sales and including corporate structural costs that cannot be allocated to other segments, such as the IFRS 16 impact for lease assets not allocated to specific activities – reported sales of 631 million euros at standard metal prices in first half 2021, up +47.1% year-on-year mainly linked to strong copper wire demand in North America. EBITDA was -4 million euros over the period against -1 million euros for first half 2020.
III. Successfully e xecuting final steps “New Nexans” 2019-2021 Plan
The Group is well on-track to complete its “New Nexans” transformation plan launched and has exceeded expectations in first half 2021. The teams continued to reinforce cost reduction measures and amplify the SHIFT Transformation program to enhance cash conversion as well as complexity reduction. Focus on operating working capital and customer selectivity on all commercial opportunities and turnkey projects is now embedded within units to improve profitability in all environments. During the first half of 2021, 74 million euros of EBITDA improvement were achieved:
In a context of raw material price inflation, focus on copper and other raw material was enhanced across the Group to secure procurement, avoiding any supply shortage and pass-through price increases.
IV. Analysis of net income/(loss) and other income statement items
Operating margin totaled 145 million euros, representing 4.7% of sales at standard metal prices (against 2.9% in 2020).
The Group ended the half-year 2021 with an operating income of 168 million euros, compared with 4 million euros in the first semester 2020. The main changes were as follows:
Net financial expense amounted to 34 million euros in 2021 compared with 19 million euros during the same period last year. The increase is mainly related to the impairments of some financial investments for 13 million euros, notably in Lebanon.
Group's net income landed at 81 million euros for first half 2021, versus a net loss of 54 million euros for first-half 2020. The 2021 figure corresponded to a 133 million euros income before taxes (versus 15 million euros in loss before taxes in half-year 2020). Income tax expense stood at 52 million euros, the increase of the taxable profit being the main reason for the difference with an income tax expense of 39 million euros in the first six months of 2020.
The Group ended the period with an attributable net income of 81 million euros versus an attributable net loss of 55 million euros in 2020.
Net debt decreased to 112 million euros on 30 June, 2021, from 179 million euros on 31 December, 2020, reflecting among others:
V. 2021 Outlook
Following the strong first half performance and, based on current macro-economic environment and assuming no material impact from COVID-19, the Group upgrades its targets for 2021:
VI. Taking into account Environment, Social and Governance impact of our activities
During the first half, Nexans celebrated the tenth anniversary of its CSR department and made significant progresses towards its ambitious Corporate Social Responsibility commitments.
The Group appointed Elyette Roux as first Corporate Vice President & Chief Sales & Marketing, Communications Officer to strengthen its Executive Committee and lead the new Marketing & Sales organization that will support Nexans' new equity story ambitions.
The Group joined the Copper Mark as a partner committed to promote responsible copper production, being the first cable manufacturer to join the organization aligned with United Nations goals.
As a responsible leader fully committed to have a positive impact in its ecosystem, the Group launched its first supplier day to share its purchasing ambitions, roadmap and new CSR supplier charter with more than 250 key suppliers, and finalized the 9 edition of the Nexans foundation, aiming to help disadvantaged communities to access energy.
VII. Significant events since the end of June
On July 22 - Nexans joined the Copper Mark organization as a partner to promote responsible copper production globally.
On July 21 - Nexans was awarded by SSEN Transmission after-market consultancy services to support a business continuity strategy for its critical high voltage transmission link between Kintyre and Hunterston.
On July 2 - Nexans strengthened its global wind network and increased its cable harness production capacities to meet the growing demand for clean energy and electricity in the world with a new production facility in the city of Tianjin, China.
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A conference call is scheduled today at 9:00 a.m. CET. Please find the access details:
Webcast
https://channel.royalcast.com/landingpage/nexans/20210728_1/
Audio dial-in
Confirmation code: Nexans
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Financial calendar
November 3, 2021: 2021 third quarter financial information
February 15, 2022: 2021 full-year earnings
Appendice s
The limited review procedures were carried out and the Statutory Auditors' report is being issued.
Consolidated income statement
(1) Sales at standard metal prices calculated using reference prices are presented in the segment information.
Sales at constant copper and aluminum prices are used by the Group to monitor its operational performance, because the effect of changes in non-ferrous metals prices is neutralized to show underlying business growth. Cost of sales is restated on the same basis. Since January 1, 2020, reference prices have been unchanged at 5,000 euros per ton for copper and 1,200 euros per ton for aluminum.
(2) Operating margin is one of the business management indicators used to assess the Group's operating performance.
(3) Effect relating to the revaluation of Core exposure at its weighted average cost.
(4) D uring the first semester of 2021, "Other operating income and expenses" included 15 million euros in net asset impairment of Lebanon. During the first semester of last year, this item included 18 million euros in net asset impairment, primarily on the property, plant and equipment of certain operations in South America.
Consolidated statement of financial position
Consolidated statement of cash flows
(1) Effect relating to the revaluation of Core exposure at its weighted average cost, which has no cash impact.
(2) “Other restatements” in 2021 primarily include ( i ) a negative adjustment of 41 million euros (2020: negative adjustment of 59 million euros) to cancel the net change in operating provisions (including provisions for pensions, reorganization costs and antitrust proceedings), (ii) a positive adjustment of 15 million euros to cancel the loan's impairment, (iii) a positive adjustment of 11 million euros to neutralize write off effects of tangible and intangible assets, (iv) a 7 million euro positive adjustment (2020: 2 million euro positive adjustment) related to the cash impact of hedges and (v) a 3 million euro positive adjustment (2020: 3 million euro positive adjustment) to cancel the cost of share-based payments.
(3) The Group also uses the “cash from operations” concept, which is mainly calculated after adding back cash outflows relating to reorganizations (61 million euros and 98 million euros in
2021 and 2020 , respectively), and deducting income tax paid.
Information by reportable Segment
Information by major geographic area
(1) Based on the location of the assets of the Group's subsidiaries.
(2) Countries that do not individually account for more than 10% of the Group's net sales at
standard metal prices.
About Nexans
For over a century, Nexans has played a crucial role in the electrification of the planet and is committed to electrify the future. With around 25,000 people in 38 countries, the Group is leading the charge to the new world of electrification: safe, sustainable, renewable, decarbonized and accessible to everyone. In 2020, Nexans generated 5.7 billion euros in standard sales.
The Group is a leader in the design and manufacturing of cable systems and services across four main business areas: Building & Territories, High Voltage & Projects, Industry & Solutions and Telecom & Data.
Nexans is the first company of its industry to create a Foundation supporting sustainable initiatives bringing access to energy to disadvantaged communities worldwide. The Group pledge to contribute to carbon neutrality by 2030.
Nexans. Electrify the future.
Nexans is listed on Euronext Paris, compartment A.
For more information, please visit www.nexans.com www.nexans.com
Contacts:
NB: Any discrepancies are due to rounding
This press release contains forward-looking statements which are subject to various expected or unexpected risks and uncertainties that could have a material impact on the Company's future performance.
Readers are invited to visit the Group's website where they can view and download the 2020 financial statements and Nexans Universal Registration Document, which includes a description of the Group's risk factors .
To neutralize the effect of fluctuations in non-ferrous metal prices and therefore measure the underlying sales trend, Nexans also calculates its sales using standard prices for copper (standard price at 5,000 €/t) and aluminum (standard price at 1,200 €/t).
The first-half 2020 sales figure used for like-for-like comparisons corresponds to sales at standard non-ferrous metal prices, adjusted for the effects of exchange rates and changes in the scope of consolidation. Exchange rates and changes in the scope of consolidation impacted sales at standard non-ferrous metal prices by -€11m and -€106m respectively.
12 months operating margin on end of period capital employed excluding antitrust provision.
Excluding M&A and equity operations.
Given its first half achievements, and despite a persistently uncertain environment due to the pandemic situation.
Copper standard price at 5,000€/ton.
Adjusted subsea backlog including contracts secured not yet enforced.
Attachment
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