SOLID H1 2023 PERFORMANCE DRIVING GUIDANCE UPGRADE

PRESS RELEASE _

SOLID H1 2023 PERFORMANCE DRIVING GUIDANCE UPGRADE

• Record high EBITDA and ROCE, pushed by unique value growth execution model
• Outstanding performance despite one-offs in Generation & Transmission business
• Completion of Reka Cables acquisition in the Nordics, deployment of operational and financial synergies at Centelsa, significantly ahead of plan
• Step-up in Prime offerings featuring the deployment of Nexans’ Fire Safety global offer; SHIFT Prime and Amplify programs delivering a +36 million euros EBITDA windfall
• Record high adjusted Generation & Transmission backlog at 5.2 billion euros excluding 1.4 billion euros, just awarded, EuroAsia Interconnector project
• Strategic investment in a new state-of-the-art cable-laying vessel to address backlog growth
• Full-year 2023 Guidance upgraded:
  • EBITDA in the range of 610-650 million euros (from 570-630 million euros)
  • Normalized Free Cash Flow between 220 and 300 million euros (from 150-250 million euros)
  • Demand to remain at high levels in Distribution, while anticipated deceleration in some Usages regions
• Strengthened Sustainability commitments and Net Zero by 2050 submitted to the SBTi¹
  
  

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Paris, July 26^th, 2023 – Today, Nexans published its financial statements for the first-half of 2023, as approved by the Board of Directors at its meeting on July 25^th, 2023 chaired by Jean Mouton.

Commenting on the Group’s performance, Christopher Guérin, Nexans’ Chief Executive Officer, said: “I am pleased to announce a new record-high EBITDA and strong Free Cash Flow generation for this first semester, in spite of some challenges in our Generation & Transmission business. These results associated to our transformation platform and strong backlog, reinforce our confidence on Nexans’ 2023 outcome and support a significant guidance upgrade for the full year.

We will continue to sharpen our focus on profitability through enhanced offering supported by new technologies, services, digitalization and sustainability, while actively managing our portfolio to become an electrification pure player.”

FIRST-HALF 2023 KEY FIGURES

(in millions of euros)	H1 2022	H1 2023
Sales at current metal prices	4,342	4,009
Sales at standard metal prices2	3,401	3,322
Organic growth	+5.1%	-0.6%
EBITDA3	308	354
EBITDA as a % of standard sales	9.1%	10.7%
Operating margin	220	240
Reorganization costs	(19)	(23)
Other operating items	62	(1)
Operating income	263	217
Net financial expense	(14)	(38)
Income taxes	(51)	(45)
Net income	199	134
Net debt	346	229
Normalized Free Cash Flow	104	281
ROCE	17.4%	21.2%

I.   H1 2023 HIGHLIGHTS

In the first-half 2023, sales at standard metal prices reached 3,322 million euros, down -0.6% organically compared to the first-half 2022 and up +4.1% excluding the Other Activities segment. In the second quarter, sales remained at high levels in Distribution and Industry & Solutions segments, while Usages was affected by a high base of comparison and deceleration in some geographies. EBITDA reached 354 million euros in the first-half 2023, up +11.6% on a comparable basis versus the first-half 2022. EBITDA margin was strong at 10.7% versus 9.1% in the first-half 2022, illustrating Nexans’ pursued focus on performance and value-driven growth.

• Electrification sales were down -2.5% organically. Accelerated value growth in the Distribution and Usages segments was partially offset by a lower contribution from the Generation & Transmission segment due to project mix and one-offs including the shutdown of the Umbilical activity, and delayed ramp up of Charleston plant. Excluding the negative impact of the exit of the Umbilical activity, organic sales growth of the business would be +3%. EBITDA stood at 250 million euros, thanks to the strong performance of the Distribution and Usages segments.
• Non-electrification (Industry & Solutions) sales were up +20.0% organically, benefitting from strong momentum in the first-half and SHIFT improvements in Automation, Mobility, Mining and Automotive Harnesses. Consequently, EBITDA was up +68.8% versus the first-half of 2022, at 109 million euros.
• Within the Other Activities segment, the Metallurgy business continued to be downsized in accordance with the Group's strategy to improve profitability of the business.
  
  

ROCE reached a record-high level at 21.2% for the Group, versus 17.4% in the first-half 2022, and 27.1% for the Electrification businesses.

Normalized Free Cash Flow came in at 281 million euros, versus 104 million euros at end of June 2022, boosted by a strong operating cash flow performance reflecting the profitability improvement and Generation & Transmission strong cash collection in the first-half 2023.

Forging the future of Distribution and Usages

Nexans is continuing to actively pursue its non-organic growth strategy, coupled with best-in-class integration deployment, in the Distribution and Usages markets. The Group completed the acquisition of Reka Cables in Finland in the first-half of the year, for an equity price of 54 million euros. With operations in four countries, Reka Cables achieved sales of 172 million euros and EBITDA of 11 million euros in 2022. The Group expects to generate approximately 7 million euros annual synergies after ramp-up. Additionally, the integration of Centelsa in South America is progressing seamlessly, exceeding expectation on performance and synergies deployment one year ahead of plan.

Nexans' transformation platform continues to achieve outstanding financial results and is operating at full speed for all units within the Electrification businesses. In the first-half of 2023, the SHIFT Prime and Amplify programs generated a positive EBITDA impact of +36 million euros. The Group has made significant progress toward the step-up in its prime offerings with the launch of its Nexans Fire Safety offer. This comprehensive offer revolves around the safety of people and buildings beyond cables. The Group offers a diverse range of solutions, including innovative tools to simplify cable selection and installation, and post-installation management and monitoring.

Driving sustainability

In April 2023, Nexans made a commitment to achieve Net Zero emissions by 2050. The Group is steadfast in its determination to contribute to fighting climate change and has set ambitious targets. By 2030, it aims to reduce greenhouse gas emissions by -46% in Scopes 1 and 2 and by -30% in Scope 3 (both in comparison to 2019 baseline), which surpasses initial target of -24%. To reach these goals, the Group will leverage its innovative E³ performance model, across its entire value chain and ecosystem, ensuring a holistic approach including sustainability.

In May 2023, the Nexans Foundation celebrated its 10^th anniversary. Throughout the past decade, driven by its mission to bring electricity and sustainable development to disadvantaged communities worldwide, the foundation’s unwavering dedication to creating positive change has made an incredible impact. More than 2.2 million individuals' lives have been significantly transformed through the support of 145 projects across five continents.

II.   FINANCIAL PERFORMANCE

a.   First-half 2023 financial performance per Segment

CONSOLIDATED SALES AT STANDARD METAL PRICES² BY SEGMENT

(in millions of euros)	H1 20224	H1 2023		Organic growth H1 2023 vs. H1 2022	Organic growth Q2 2023 vs. Q2 2022
Electrification	1,953	1,873		-2.5%	-4.7%
Generation & Transmission	478	384		-10.3%	-9.9%
Distribution	551	599		+4.3%	+2.0%
Usages	924	890		-2.8%	-6.8%
Non-electrification (Industry & Solutions)	762	908		+20.0%	+17.9%
Total excl. Other Activities	2,715	2,781		+4.1%	+1.9%
Other Activities	686	541		-19.2%	-23.7%
Group total	3,401	3,322		-0.6%	-3.3%

EBITDA BY SEGMENT

(in millions of euros)	H1 20224	H1 2023	H1 2023 vs. H1 2022		H1 2022 EBITDA margin	H1 2023 EBITDA margin
Electrification	240	250	+4.0%		12.3%	13.3%
Generation & Transmission	89	30	-66.1%		18.5%	7.8%
Distribution	47	82	+73.6%		8.6%	13.7%
Usages	104	137	+32.2%		11.2%	15.4%
Non-electrification (Industry & Solutions)	65	109	+68.8%		8.5%	12.0%
Total excl. Other Activities	305	359	+17.8%		11.2%	12.9%
Other Activities	3	(5)	n.a.		0.5%	-0.9%
Group total	308	354	+15.1%		9.1%	10.7%

ELECTRIFICATION BUSINESSES

| GENERATION & TRANSMISSION: Addressing one-off performance

Generation & Transmission sales came in at 384 million euros in the first-half 2023, down -10.3% compared to the first-half 2022 reflecting the ongoing exit from the Umbilicals activity. During the period, the largest contributors to sales were the Crete-Attica and Tyrrhenian Link interconnectors and Revolution, Moray West and South Fork offshore wind projects.

EBITDA amounted to 30 million euros in the first-half 2023, down -66.1% compared to the first-half 2022. As anticipated, EBITDA was impacted by a combination of factors, including project mix and phasing, and one-offs. These one-offs were related to (i) the gradual ramp-up of Charleston manufacturing plant which impacted some project progress, (ii) inflation costs on some contracts and (iii) delays on EuroAsia Interconnector award.

These headwinds are expected to gradually ease, thanks to an adjusted backlog 97% subsea driven, up +133% since the end of June 2022, at 5.2 billion euros at end of June 2023, excluding the EuroAsia Interconnector awarded in July 2023 for 1.43 billion euros. In the first-half 2023, the Group was awarded its largest contract ever, worth more than 1.7 billion euros, with TenneT, which consists in three turnkey 525kV HVDC projects for offshore wind farms in the German North Sea to be commissioned by 2031.

With this record-high and risk-reward modelled backlog, the Halden plant in Norway, the Charleston plant in the United States, together with Nexans’ cable-laying vessels will be fully loaded until 2025, with strong backlog visibility secured up to 2028. In order to bolster its installation capabilities, Nexans has decided to invest in a new ultra-modern, technology advanced, cable-laying vessel. This advanced vessel will be equipped with a state-of-the-art logistics and handling system capable of laying four cables simultaneously and is expected to be operational by 2026.

| DISTRIBUTION: Secular trends and transformation platform driving record margins

Distribution sales amounted to 599 million euros at standard metal prices in the first-half of 2023 up +4.3% organically, compared to the first-half 2022. The segment is benefiting from expanding grid investments in Europe and North America, and demand for Accessories. EBITDA reached 82 million euros, up +73.6% versus the first-half of 2022, representing a record 13.7% margin. This substantial margin expansion reflected successful SHIFT programs deployment and high asset load level, resulting from strong demand.

During the first-half 2023, the Group made significant progress in the deployment of value-added solutions to enhance customer experience, with more than 850,000 connected users (vs 540,000 in 2022) and more than 44,000 connected objects through its ULTRACKER digital services.

Half-yearly trends by geography were as follows:

• Europe was up driven by the execution of new contracts, consistent demand from utilities to strengthen grid infrastructure, and a strong operating performance.
• South America maintained selectivity to drive performance improvements.
• Asia Pacific suffered from lower demand in China and New-Zealand.
• North America was strongly up propelled by the enduring momentum.
• Middle East and Africa demonstrated a notable performance improvement, supported by solar projects and the resilience of the Moroccan market.
  
  

| USAGES: Structurally improving performance

Usages sales reached 890 million euros at standard metal prices in the first-half of 2023, down -2.8% organically compared to the first-half 2022 resulting from selectivity and prioritizing structural performance. As a result, EBITDA reached a record 137 million euros, with a strong EBITDA margin of 15.4% (vs 11.2% in the first-half 2022), reflecting the continued strength in pricing and successful transformation efforts. Furthermore, the rise in prime offers and related volumes also contributed to this performance. Nexans made notable advances in the development of its Fire Safety offering (before, during and after cable installation solutions), which forms an essential component of the Group’s strategy to increase value creation in its low-voltage product range.

Half-year trends by geography were as follows:

• Europe benefitted from sustained pricing and resilient volumes, notably in the Nordics thanks to fire safety and prime offers.
• South America was affected by the economic environment in the region. Centelsa performed well with the integration progressing ahead of schedule with strong synergies.
• Asia Pacific demand was lower on a still weak market in China.
• North America moderated from previously high levels in residential, as expected.
• Middle East and Africa benefitted from a rebound in Turkey and resilient demand in Morocco.
  
  

NON-ELECTRIFICATION BUSINESS: ROBUST PERFORMANCE IN H1

Industry & Solutions sales were 908 million euros at standard metal prices in the first-half of 2023, representing an organic year-on-year increase of +20%. This growth was primarily driven by solid momentum in the first-half 2023 and performance improvements, notably in the Automotive Harnesses, Automation and Mining businesses. Consequently, EBITDA rose to 109 million euros, up +68.8% from the first-half of 2022, with an EBITDA margin of 12%.

Automotive Harnesses was up +25% in the first-half of 2023, driven by the ramp-up of projects in the United States, a strong demand in Europe and an increased share of electric vehicles.

OTHER ACTIVITIES: CONTINUED DOWNSIZING OF THE METALLURGY BUSINESS

The Other Activities segment reported sales of 541 million euros at standard metal prices in the first-half of 2023, down -19.2% organically year-on-year, reflecting Metallurgy’s continued scale-down as part of Nexans’ strategy to prioritize tolling and reduce external copper sales to improve margins of the business, and lower sales in Telecom. EBITDA was a negative 5 million euros over the period.

b.   Analysis of other income statement items and net debt

(in millions of euros)	H1 2022	H1 2023
EBITDA	308	354
Specific operating items	-	(27)
Depreciation and amortization	(88)	(87)
Operating margin	220	240
Core exposure effect	25	6
Reorganization costs	(19)	(23)
Other operating income and expenses     o/w net asset impairment     o/w net gain (loss) on assets disposals	38 (13) 54	(6) 7 (6)
Share in net income (loss) of associates	(1)	(0)
Operating income	263	217
Net financial expense	(14)	(38)
Income taxes	(51)	(45)
Net income from continuing operations	199	134
Attributable net income	197	132

Starting in 2023, consolidated EBITDA is defined as operating margin before (i) depreciation and amortization, (ii) share-based expenses, and (iii) some other specific operating items which are not representative of the business performance.

In the first-half 2023, specific operating items included an expense of 7 million euros related to share-based payments, and an expense of 20 million euros related to additional costs on long-term projects impacted by previous reorganizations. These additional costs led to losses at completion that are not representative of the business performance.

Operating margin totaled 240 million euros in the first-half 2023, representing 7.2% of sales at standard metal prices (versus 6.5% in the first-half 2022).

The Group ended the first-half of 2023 with operating income of 217 million euros, compared with 263 million euros in the first-half of 2022. The main changes were as follows:

• The core exposure effect was a positive 6 million euros in the first-half 2023 versus a positive 25 million euros in the first-half 2022.
• Reorganization costs amounted to 23 million euros in the first-half 2023 versus 19 million euros in the first-half 2022. In 2023, this amount mainly included costs for the on-going termination of Umbilical projects in Norway, costs from the conversion of the Charleston plant in the United States, as well as costs related to new transformation actions launched during the period.
• Net asset impairment represented a positive 7 million euros in the first-half 2023, versus an expense of 13 million euros in the first-half 2022. In the first-half 2023, the reversal of impairments was related to the US entity Amercable on the back of the continued strong performance. In the first-half 2022, the impairment losses were related to tangible assets in Ukraine.
• Net loss on asset disposals amounted to 6 million euros in the first-half 2023 for the disposal of an equity investment. In the first-half of 2022, the net gain of 54 million euros was mainly related to the sale of the Hanover property in Germany.
• Other operating income and expenses represented net loss of 6 million euros in the first-half 2023, to be compared with a net income of 38 million euros in the first-half 2022. The main items are the net asset impairment and the net gain on asset disposals mentioned above.
  
  

Net financial expense amounted to 38 million euros in the first-half 2023, compared with 14 million euros during the same period last year. The increase is mainly related to the higher cost of net debt for 9 million euros, 6 million euros of negative changes in impairment on certain financial investments (negative for 1 million euros in the first-half 2023 versus a positive 5 million euros in the first-half 2022), as well as the change in the hyperinflation impact in Turkey, 4 million euros lower in the first six-months 2023 than the same period of 2022.

The Group’s net income came in at 134 million euros in the first-half 2023, versus net income of 199 million euros for the comparative period. Income before taxes reached 179 million euros in the first-half 2023, versus 250 million euros last year. Income tax expense stood at 45 million euros, down from 51 million euros in the first-half 2022.

The Group ended the period with attributable net income of 132 million euros compared with 197 million euros in the first-half 2022.

Net debt increased to 229 million euros at June 30^th, 2023, from 182 million euros at December 31^st, 2022, reflecting in particular:

• Cash from operations of +237 million euros;
• Reorganization cash outflows of -24 million euros, down 8 million euros compared to the first-half 2022;
• Capital expenditure of -148 million euros, a large portion of which was related to the strategic investments made at the Halden plant;
• Net cash outflows of -70 million euros for M&A operations, of which mainly -68 million euros for the acquisition of Reka Cables;
• Investing flows of -3 million euros;
• A +142 million euros positive change in working capital, partly due to the positive impact of cash collection in the Generation & Transmission segment in the first-half 2023;
• Cash outflows of -130 million euros related to financing and equity activities, mainly including the Group dividend payment of -92 million euros and interest payments of -33 million euros;
• A -14 million euros negative impact corresponding to new lease liabilities;
• A negative impact of -36 million euros for favorable foreign exchange fluctuations in the first-half 2023.
  
  

III.   SIGNIFICANT EVENTS SINCE THE END OF JUNE

On July 19^th – Nexans was awarded the major turnkey contract valued at 1.43 billion euros for the section of the EuroAsia Interconnector that connects Greece and Cyprus.

On July 24^th - Nexans announced the arrival of Pascal Radue as Executive Vice President, Generation & Transmission Business Group and member of the Executive Committee, from September 1^st.

IV.   2023 OUTLOOK

Nexans remains confident in its ability to maintain and enhance its performance momentum, even in an uncertain geopolitical and economic environment. The Group will continue to prioritize value growth over volume in its strategy, leveraging its transformation platform to convert short-term growth into long-term structural growth, while investing in the expanding Generation & Transmission markets. Furthermore, Nexans is still in the early stages of its premiumization journey, as it continues to develop value-added systems and solutions to cater for the evolving needs of its end-users.

Nexans is upgrading today its financial outlook for full-year 2023 and expects, excluding non-closed acquisitions and divestments, to achieve:

• EBITDA of between 610 and 650 million euros, versus 570 and 630 million euros previously;
• Normalized Free Cash Flow of between 220 and 300 million euros, versus 150 and 250 million euros previously.

The Group anticipates the following trends:

• A persistently uncertain geopolitical and economic environment
• The continuation of dynamic market demand, supported by the secular trend of electrification and backlogs in the Generation & Transmission and Distribution segments;
• Demand to moderate from elevated levels in some residential segments and Automation;
• A focus on structural transformation and premiumization to support improvements in Distribution and Usages margins;
• Generation & Transmission risk-reward backlog reinforced by EuroAsia Interconnector award while executing legacy contracts with dilutive margins.
  
  

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A webcast is scheduled today at 9:00 a.m. CET. Please find below the access details:

Webcast
https://channel.royalcast.com/landingpage/nexans/20230726_2/

Audio dial-in

• International switchboard: [phone]
• France: [phone]
• United Kingdom: [phone]
• United States: [phone]

Confirmation code: Nexans

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About Nexans

For over a century, Nexans has played a crucial role in the electrification of the planet and is committed to electrifying the future. With around 28,000 people in 42 countries, the Group is leading the charge to the new world of electrification: safe, sustainable, renewable, decarbonized and accessible to everyone. In 2022, Nexans generated 6.7 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: Generation & Transmission, Distribution, Usages, and Industry & Solutions. Nexans was the first company in its industry to create a Foundation supporting sustainable initiatives bringing access to energy to disadvantaged communities worldwide. The Group pledged 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.comwww.nexans.com

Contacts:        

Investor relations Elodie Robbe-Mouillot [e-mail]

Communication Emmanuel Guinot [e-mail]

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 2023 half-year report and 2022 Universal Registration Document, which include a description of the Group’s risk factors. 

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¹ Science Based Targets initiative - The SBTi is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF).
² Standard copper and aluminum prices of respectively €5,000/ton and €1,200/ton.
³ Starting 2023, EBITDA is defined as operating margin before (i) depreciation and amortization, (ii) share-based payment expenses, and (iii) some other specific operating items which are not representative of the business performance. In the first-half 2022, EBITDA included 9 million euros of share-based payment expenses while there were no other recurring operating items that were not representative of the business performance.
⁴ Pro forma 2022 figures. Impact of changes of allocation are detailed in the appendix to this press release.

 

Attachment

• Nexans_H1 2023 Press release_Final