Scienza e Tecnologia
Nexans steered for growth
PRESS RELASE _
Nexans steered for growth
Steady EBITDA performance and net income turnaround unlocking value creation
Outperformance in ROCE and free cash flow, 10-year low Net Debt, setting strong financial footing
Nexans transformation anchored
In full-year 2020, amidst the global pandemic:
Nexans has successfully anchored its transformation by unlocking value and setting a strong financial footing across the Group.
Paris, February 17, 2021 – Today, Nexans published its financial statements for the year ended December 31, 2020, as approved by the Board of Directors at its February 16, 2021 meeting chaired by Jean Mouton.
Commenting on the Group's 2020 results, Christopher Guérin, Nexans' Chief Executive Officer, said:
“Despite the unprecedented global health and economic crisis, 2020 was a tipping point for Nexans, as we demonstrated our ability to accelerate the company's transformation, outperforming our financial performance both in ROCE and free cash flow, resulting in a 10-year low net debt. Our efforts, in the second semester, were focused on our long-term ambition, defining our new purpose to “Electrify the future”, our new values, our new ESG & Carbon neutrality commitment.
It's full steam ahead that we will announce today our new strategic chapter up to 2024, and 2021 will be a year of acceleration of our new strategic moves on Electrification. Nexans is starting 2021 confident and with ambitious goals.”
2020 FULL-YEAR KEY FIGURES
I. Overview of the full-year 2020 and General Operating Context in an unprecedented crisis
In 2020, as the world was affected by the Covid-19 pandemic, the Group took action to adapt the organization to the new health and safety standards, mitigating financial impacts by focusing on financial liquidity preservation and accelerating the deployment of the “New Nexans” transformation plan while maintaining continuity of production. Nexans Executive Committee rapidly put in place a stringent mitigation plan, focused on 5 pillars: i) Workforce protection, ii) Supply chain and Production Continuity, iii) Customer engagement, iv) Liquidity preservation and financial modelling, and v) reinforced communication with External stakeholders and the Board of Directors. Across all units, mitigation measures were successfully deployed with strict internal control processes, preventive actions, employee engagement and trade union support.
As the pandemic spread and governments globally implemented lockdown measures, demand was down in the first half of 2020, impacting Nexans activities, with the exception of the High Voltage & Projects segment, and, then, gradually recovered in the second half of the year.
Despite these challenging times, the Group maintained production continuity throughout the crisis. Over 2020, no shortage in raw materials was experienced, neither in copper nor aluminum. Seizing the opportunity to accelerate the Transformation Plan, all teams reinforced cost reductions, margin improvements and cash conversion. First, 90 million euros in savings was achieved in 2020 as cost reduction initiatives were accelerated and amplified. Second, 36 million euros was obtained thanks to the SHIFT program, which was reinforced and deployed across the Group. Stepping-up on selective growth, focus was placed on customer engagement, notably the Tier 1 customers generating 90% of the profitability, and on further improving margins while tightening working capital management to support the Group's liquidity. Over the last twelve months period, the Group outperformed expectations notwithstanding the pandemic outbreak. EBITDA ended up at 347 million euros and free cash flows at 157 million euros, of which +366 million euros working capital improvement. At the end of December 2020, net debt position reached ten-year low level at 179 million euros.
Over the period, the Group pursued its strategic investments and portfolio management to refocus on its core business, notably completing two divestments and discontinuing two operations. On the investment side, the construction of the Aurora installation vessel is progressing as planned and will be delivered in May 2021. The extension of the Charleston plant for which 40 million euros where pushed to 2021 will be finalized by the summer 2021. This sole American based subsea high voltage cable facility has already created 150 jobs in the US. On the portfolio management front, Nexans completed both the sale of Berk-Tek, a manufacturer of local area network cables to Leviton Inc., on September 30, 2020, and Nexans Metallurgie Deutschland GmbH, on October 31, 2020. The divestments made by the Group in 2020 generated a net gain of 142 million euros in asset disposals. Finally, in July, Nexans discontinued operations at the Chester and Wallkill operations in the US. The success of Nexans' Transformation and the impact of divestments contributed to the turnaround in net income at 80 million euros compared to -118 million euros in 2019.
Nexans strong crisis management culture, the acceleration of the Transformation Plan, it's unrelenting customer satisfaction focus, have all been instrumental in maintaining profitability and liquidity, with a record low operating working capital in virtue of structural improvements. Nexans is set and geared for its next strategic plan which will be announced today, February 17, at 14:00 CET.
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Following the Covid-19 outbreak, Nexans took several measures such as:
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Nexans's full year results reflect a significant improvement in activity and profitability in the second half of the year compared to the first half of the year which was impacted by the slowdown in demand due to the Covid-19 pandemic in most activity excluding High Voltage & Projects business.
The Group's consolidated sales for the twelve months ending December 31, 2020 closed at 5,713 million euros at standard metal prices, compared with 6,489 million euros in the same period of 2019, representing an organic decline of -8.6%. Sales improved in the fourth quarter, up +2.3% compared to third quarter 2020, and down -4.5% compared to fourth quarter 2019.
In order to compensate for the general slowdown in demand and protect profitability, the Group accelerated its Transformation program, undertaking additional cost reductions while also rolling-out the SHIFT program across all units. As a result, Group profitability was maintained despite the drop in demand and EBITDA landed at 347 million euros in 2020 versus 413 million euros in 2019, representing 6.1% of sales at standard metal prices, comparable to 2019 by virtue of a cost reduction of 90 million euros, a 36 million euros gain from SHIFT and 11 million euros from growth initiatives, offset by a negative 55 million euros price cost squeeze effect, a 31 million euros decline in volumes considered unrelated to Covid-19, a 94 million euros estimated Covid-19 impact and a negative 23 million euros decrease linked to a scope effect related to the sale of Berk-Tek and foreign exchange impacts.
Operating margin totaled 193 million euros, representing 3.4% of sales at standard metal prices (against 3.8% in 2019).
II. Full-year 2020 Analysis and General Operating Context
CONSOLIDATED SALES BY SEGMENT
EBITDA BY SEGMENT
| Building & Territories
Sales for the Building & Territories segment amounted to 2,422 million euros at standard metal prices in 2020, representing an organic decline of -8.4% compared to 2019. After a mixed first half of the year, where Building demand slowed down as the pandemic spread while Territories remained resilient, the second half witnessed sound recovery in South America, Middle East and Africa as lockdown measures were lifted or softened. EBITDA totaled 128 million euros compared to 155 million euros in 2019 supported by Nexans' self-help plan focusing on cost reductions and improving performance with the SHIFT program, resulting in a drop in overdues by close to 40% over 2020.
Over the year, the Territories (Utilities) segment remained resilient, supported by the grid modernization and long-term client frame agreements. While the Building segment, highly GDP related and exposed to the construction market, was further impacted by the pandemic particularly in the first half of the year, the Group reinforced the SHIFT program notably by increasing customer selectivity.
In Europe , sales remained resilient throughout the year, down -7.3% compared to 2019, supported by continuous demand in Switzerland, Italy and Sweden, partially offsetting lockdown effects. The activity improved in the second half of the year thanks to a catch-up effect notably in the Building activity in France. Utilities demand remained stable throughout the year.
In South America , sales resisted strongly notably due to the robust recovery in the second half of 2020. Sales were down by -6.5% in 2020 against 2019, boosted by the lifting of lockdown measures in September and the solid restart of the construction market which followed in Peru (+2.8% in second half 2020 against second half 2019), in Brazil (+9.3% in second half 2020 against second half 2019) and in Chile (+10.5% in second half 2020 against second half 2019).
In Asia Pacific , sales were down -10.4% compared to 2019. Thanks to mild lockdowns and an overall dynamic market, both Australia (-4.3% year-on-year) and New Zealand (-4.5% year-on-year) benefitted from solid demand and continuous operations. While China, despite strict lockdowns and plant closure early 2020, showed sound growth over the twelve months of 2020, at +1.8% year-on-year.
In North America , despite solid demand in Canada (up +3.9% year-on-year) supported by the Utilities market, sales declined by -15.9% versus 2019, directly linked to the closure of the Chester plant in the US.
Sales in the Middle East and Africa were down by -5.1% year-on-year on an organic basis. The region picked up in the second half of the year, back to 2019 levels. During the year, both Turkey (+12.6% year-on-year) and Morocco (+3.2% year-on-year) regions witnessed backlog recovery with visibility into 2021, the latest benefitting from export sales growth. North West Africa recovered during the second half of the year. The situation in Lebanon remained politically challenging over the period and impacted sales negatively (-45.7% year-on-year).
| Industry & Solutions
For 2020, Industry & Solutions sales landed at 1,210 million euros at standard metal prices. After a sharp drop in demand in the first half of the year, activity firmed up in the second half notably in Automotive Harnesses which witnessed a record fourth quarter, leaving total segment sales at -1.4% in fourth quarter 2020 compared to fourth quarter 2019. EBITDA landed at 84 million euros for the full year compared to 109 million euros in 2019 supported by the strong recovery of Automotive Harnesses, the additional cost reduction initiatives and the deployment of the SHIFT program.
In line with growing investments in the energy transition and Nexans leading position in the OEM market, the Wind Turbine activity was strong in 2020 (+16.5% in sales year-on-year). While Railway Infrastructure & Rolling Stock sales only slightly decreased (-3.6% year-on-year) in virtue of the steady demand in China, Aerospace & Defense (-42.8% year-on-year) remained challenged by the pandemic restrictions worldwide and Automation (-13.8% year-on-year) witnessed slow recovery in demand in the second part of the year 2020.
After a challenging first half of the year as clients closed down plants for several weeks due to Covid-19 pandemic, Automotive harnesses sales rebounded by +8.1% in the second half of 2020 boosted by a strong catch-up in demand starting in the third quarter and progressively growing to land with a record fourth quarter (+17.9% compared to fourth quarter 2019). In addition, the flexibility of the cost base compensated for the drop in demand to a certain extent, protecting business performance.
| Telecom & Data
Telecom & Data sales amounted to 393 million euros at standard metal prices in 2020, down -14.8% organically compared to 2019. The segment was challenged throughout the year notably by Covid-19 lockdowns which put a strain on installation campaigns. EBITDA totaled 29 million euros in 2020, down -40.4%, due to slowdown in activity and the disposal of Berk-Tek to Leviton Inc.
In 2020, LAN cables and systems activity was mostly impacted by Covid-19 lockdowns in the first half of the year and then by the Berk-Tek divestment in the third quarter. In the second half of the year, the sector benefitted from the rebound in Asia as well as the resilient market in the Middle East who won major project awards. Despite, sales down by -12.5% in 2020 year-on-year, performance was resilient as a result of accelerated cost reductions.
Telecom Infrastructure over the year was impacted by intense Asian competition with high pricing pressure and by Covid-19 lockdown measures weighing on installation campaigns. Despite the underlying demand from end-users for Fiber to the Home (FTTH), deployment in most countries was slow over the second half of the year compared to the same period last year. As a result, sales for the business contracted by -23.5% in 2020 compared to 2019. Overall, fiber optic cables and accessories demands were dynamic in Sweden (+3.5% year-on-year) thanks to a sustained infrastructure market dynamic and market share gains, partially offsetting weak volumes in the rest of Europe, notably in France (-36.7% year-on-year) impacted by a base effect due to intense backbone installations and inventories build up in 2019. Throughout the period the segment worked on fixed cost reductions which enabled to deliver a good performance in the fourth quarter and overall resilience for the full year.
Thanks to the solid demand and Nexans' leading position, both sales and EBITDA were strongly up in the Special Telecom (Subsea) business year-on-year. With a buoyant increase in backlog compared to 2019, visibility for next year is strong.
| High Voltage & Projects
Benefitting from its well-balanced and low-risk backlog both in offshore wind farms and interconnection projects as well as the successful turnaround of the Land activity, High Voltage & Projects delivered a solid performance in 2020. Sales stood at 699 million euros at standard metal prices, in line with 2019, while EBITDA totaled 105 million euros, up by +1.4% year-on-year. Throughout the year, the Group enforced its risk-reward tendering analysis combining for each project: i) financial modelling, ii) technological risk and iii) contract terms & conditions.
Subsea high-voltage project execution was in line with backlog phasing and the activity benefitted from continued execution. Tendering activity continued to be strong as several projects were secured during the year such as Seagreen and Crete-Attica. Adjusted backlog landed at 1.4 billion euros at the end of December, with a 24-month visibility. Over the period, sales were resilient year-on-year thanks to a first semester boosted by four Inspection Maintenance and Repair projects, compensating lower sales in fourth quarter 2020 compared to strong fourth quarter 2019 as NordLink and East Anglia projects were completed. In parallel, the Charleston plant transformation extension progressed and the first phase of the Seagreen project cable manufacturing was launched. In line with the Group's flawless and disciplined project execution, progress was made on the execution of the turnkey projects NSL, Lavrion-Syros, Mallorca-Menorca and Mindanao – Visayas.
As planned, the Land high-voltage business achieved breakeven in 2020, supported by increased sales (+11.6% year-on-year) and the execution of both the closure of the Hannover, Germany, manufacturing plant and the transfer of all its projects to the Group's other plants. The activity is now set for sound project execution to abide by the Group's risk-reward policy and to keep its focus on integrated Land and Subsea projects to offer a unique and cost-efficient offer for subsea interconnection projects.
| Other Activities
The “Other Activities” segment – corresponding for the most part to copper wires sales – reported sales of 989 million euros at standard metal prices in 2020, down -6.0% year-on-year. EBITDA was +1 million euros over the period against a negative 4 million euros for 2019.
Since October 31, 2020, the Group completed the disposal of Nexans Metallurgie Deutschland GmbH, a Nexans company specialized in oxygen free copper drawing to Mutares SE & Co. KGaA.
The 2020 figures also include corporate structural costs that cannot be allocated to the other segments, such as the impact of IFRS 16 for lease assets not allocated to specific activities.
2. Accelerating the “New Nexans” 2019-2021 Plan
Under the backdrop of the unprecedented global Covid-19 pandemic, the Group accelerated and executed its “New Nexans” Transformation plan. First, by both reinforcing cost reduction measures initiated 27 months ago and implementing additional savings. Second, by amplifying the SHIFT program to increase portfolio conversion from value burners and transformation to profit drivers as well as enhancing cash optimization. Over 2020, 137 million euros of EBITDA improvement were achieved.
| Cost Reduction initiatives
In 2020, the Group accelerated cost saving measures to mitigate the slowdown in activity and generated 90 million euros of EBITDA improvement during the year.
| SHIFT deployment and Cash conversion
The SHIFT transformation plan, based on a holistic methodology developed in-house at Nexans, was accelerated and deployed across all units in 2020. Key customer focus and product selectivity, based on cash conversion criteria and profitability levels, was implemented across the Group, generating 36 million euros positive impact in EBITDA.
In order to safeguard liquidity and maintain a positive cash level, cash conversion measures focused on operating working capital management were deployed in record time:
| Value growth initiatives
Over the year, the value growth initiatives were mainly focused on High Voltage Subsea activities, strengthening Nexans position among the key players of the energy transition. In 2020, these initiatives generated a positive EBITDA impact of 11 million euros.
3. Analysis of net income/(loss) and other income statement items
The Group ended the year with a positive operating income of 246 million euros, compared with an 11 million euros loss in 2019. The main changes were as follows:
The Group reported an 80 million euros net income for the year, versus a net loss of 118 million euros for 2019. The 2020 figure corresponds to a 192 million euros income before taxes (versus 73 million euros in loss before taxes in 2019). Income tax expense stood at 111 million euros, the tax impact of the sale of Berk-Tek and the depreciation of some deferred tax assets in Europe being the main reasons for the difference with an income tax expense of 44 million euros in 2019.
The Group ended the year with an attributable net income of 78 million euros versus an attributable net loss of 122 million euros in 2019.
At the Annual Shareholders' Meeting, the Board of Directors will recommend paying a 2020 dividend of 0.70 euro per share.
Net debt significantly decreased to 179 million euros at December 31, 2020, from 471 million euros one year earlier, reflecting:
III. 2021 Outlook
In the current macro environment and incorporating no material change in the current view on the impact of the Covid-19 crisis, the Group expects to finalize the deployment of the New Nexans plan in 2021.
For 2021, Nexans therefore sets its targets as follows:
IV. Significant events since the end of December
February 16, 2021, Nexans' Board of Directors approved the entire early repayment of a 280 million euros French State backed loan guaranteed by the French State at 80% granted on June 11, 2020 and a 2021 of 250 million euros at a 3.25% rate.
February 2, 2021 , Nexans was selected by Réseau de Transport d'Electricité (RTE), France's Transmission System Operator (TSO) for a three year frame contract (option for 2 additional years) to deliver cables, accessories and installation services for underground grid connections at 90 kV, 220 kV and 400 kV.
February 1, 2021 , Nexans Submarine Telecom and Special Cables (STSC) business won a contract to continue to develop its customer relationship with the Programa Amazônia Conectada (PAC) and bring high-speed data connectivity to a remote and environmentally sensitive region of Brazil. The project involves laying fiber-optic cables on the riverbeds of the Amazon Basin.
January 27, 2021, Nexans reinforced its long-lasting relationship with Airbus with a new contract to supply specialized aerospace cables and wires that form the electrical backbone of civilian and military aircraft and helicopters.
January 21, 2021, Nexans strengthens its industrial presence in Morocco with the inauguration of a new plant for the Telecom Systems Business Unit. This inauguration was chaired by Mr. Moulay Hafid Elalamy, Minister of Industry, Trade, Green and Digital Economy of Morocco.
January 11, 2021, Nexans extended its long-standing partnership with Eiffage, one of France's largest civil engineering companies, by winning a contract to supply AGICITY® electric vehicle charging stations for the company's Vélizy headquarters.
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A video webcast/conference call is scheduled today at 9:00 a.m. CET.
Webcast link: https://channel.royalcast.com/landingpage/nexans/20210217_1/
To participate in the audio conference call , please find below the dial-in details:
• International switchboard: +44 (0) 33 0551 0200
• France: +33 (0) 1 7037 7166
• United Kingdom: +44 (0) 33 0551 0200
• United States: +1 212 999 6659
Confirmation code: nexans full year
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Financial calendar
February 17, 2021: Capital Markets Day
April 29, 2021: Frist Quarter Financial Information
May 12, 2021: Annual Shareholders' Meeting
May 19, 2021: Dividend – Ex date
May 20, 2021: Dividend – Record date
May 21, 2021: Dividend – Payment date
July 28, 2021: 2021 Half Year Financial Information
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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 also invited to visit the Group's website where they can view and download the presentation of the 2020 annual results to analysts as well as the 2020 financial statements and Nexans Universal Registration Document, which includes a description of the Group's risk factors
In addition to the risk factors described in Section 3.1 of the 2020 Universal Registration Document, the uncertainties for 2021 mainly include:
Without having major operational impacts, the two following uncertainties may have an impact on the financial statements:
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About Nexans
Nexans is a key driver for the world's transition to a more connected and sustainable energy future. For over 120 years, the Group has brought energy to life by providing customers with advanced cable technologies for power and data transmission. Today, Nexans goes beyond cables to offer customers a complete service that leverages digital technology to maximize the performance and efficiency of their critical assets. The Group designs solutions and services along the entire value chain in three main business areas: Building & Territories (including utilities and e-mobility), High Voltage & Projects (covering offshore wind farms, subsea interconnections, land high voltage), and Industry & Solutions (including renewables, transportation, oil and gas, automation, and others).
Corporate Social Responsibility is a guiding principle of Nexans' business activities and internal practices. In 2013 Nexans was the first cable provider to create a Foundation supporting sustainable initiatives bringing access to energy to disadvantaged communities worldwide. The Group's commitment to developing ethical, sustainable and high-quality cables also drives its active involvement within leading industry associations, including Europacable, the NEMA, ICF and CIGRE.
Nexans employs nearly 25,000 people with an industrial footprint in 38 countries and commercial activities worldwide. In 2020, the Group generated 5.7 billion euros in standard sales.
Nexans is listed on Euronext Paris, compartment A.
For more information, please visit www.nexans.com
Contacts:
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Appendices
The audit procedures have been carried out and the Statutory Auditors' report is being issued at the date of the present press release.
CONSOLIDATED INCOME STATEMENT
(1) Sales at standard metal prices calculated using reference prices are no longer presented in the income statement but are still presented in the segment information.Sales at standard 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, the reference price for copper has been 5,000 euros per tonne (compared with 1,500 euros in 2019 and previous years). For both 2019 and 2020 the reference price for aluminum was 1,200 euros per tonne
(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) In 2020, "Other operating income and expenses" included some 142 million euro net disposal gains and (21) million euros in net asset impairment
(5) Financial income amounted to 3 million euros in 2020 versus 4 million euros in 2019.
CONSOLIDATED BALANCE SHEET
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 2020 primarily include (i) a negative adjustment of 98 million euros (2019: positive adjustment of 103 million euros) to cancel the net change in operating provisions (including provisions for pensions, reorganization costs and antitrust proceedings), (ii) a 7 million euro negative adjustment (2019: 13 million euro positive adjustment) related to the cash impact of hedges and (iii) 3 million euro positive adjustment (2019: 6 million euro positive adjustment) to cancel the cost of share-based payments.
(3) The Group also uses the “operating cash flow” concept, which is mainly calculated after adding back cash outflows relating to reorganizations (170 million euros and 129 million euros in 2020 and 2019 respectively), and deducting income tax paid.
(4) In 2020, this caption included 39 million euros corresponding to bank deposits by the Group's Lebanese company with Lebanese banks that have been reclassified from Cash and cash equivalents in accordance with IAS 7.
INFORMATION BY REPORTABLE SEGMENT
INFORMATION BY MAJOR GEOGRAPHIC AREA
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 (new standard price at 5,000 €/t) and aluminum.
The full year 2019 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 -€197m and -€45m respectively.
Consolidated EBITDA is defined as operating margin before depreciation and amortization.
12 months operating margin on end of period capital employed excluding antitrust provision.
The estimated Covid-19 impact included in the net loss corresponds to (i) the amount after tax of the EBITDA estimated loss, (ii) the depreciation of deferred taxes losses in Europe reflecting the update of business plans in Automotive, and (iii) the sanitary expenses spent to protect employees and maintain the activity.
Excluding M&A and equity operations.
Starting January 1, 2020 change in copper standard price from 1,500 €/ton to 5,000€/ton. 2019 data restated accordingly.
At standard metal prices, new copper standard of €5,000/ton and according to P&L simplification
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