September 2012 Shareholder Newsletter #29

september 2012
Shareholder Newsletter 29
Message from the Chairman
The first-half performance is in line with
our expectations: steady sales with
3.4% organic growth in our activities
excluding high voltage and a 15%
drop in the latter segment; an operating
margin rate of 3.6%; and higher
debt attributable to the acquisition
of AmerCable Holdings Inc. and
seasonality of our business.
On a sectorial level, all our segments
were up with the exception of
Transmission. For land high voltage,
the competitive situation is weighing on
margins and the situation in Libya offers
insufficient security for us to resume
activity at our installation worksites.
We have, however, received significant
new orders in Libya that do not involve
any laying services and these we will
be able to deliver quickly.
In submarine high voltage, we have
launched a major action plan to sort
02
LATEST NEWS
- 2012 First-half results
- Questions for Frédéric Michelland,
Senior Corporate Executive VP
out the operational difficulties caused
by the very strong growth of this
business. Significant improvements
were made in the second quarter and
I am confident we have the ability
to regain normal production levels
by the end of 2012. The effect on
the operating margin should be very
noticeable starting in the second half of
2012 and should continue to improve
throughout 2013.
are paying off. Construction of the high
voltage plant in the United States is now
underway. The takeover of the cable
business of Chinese group Shandong
Yanggu was finalized in August.
Our fifth employee shareholding plan,
Act 2012, has been a success. It reflects
the commitment of our teams and their
confidence in our Group’s potential.
I thank you for sharing that sentiment.
For the year as a whole, we are
therefore expecting a slight increase
in sales on a comparable basis and
a sharper rise in the operating margin
in the second half.
Several strategic initiatives progressed
well in the first half. The integration
of AmerCable, renamed Nexans
AmerCable, is proceeding in accordance
to our plans. Growth and profit have
not disappointed; the first synergies
04
Frédéric Vincent
Chairman and CEO
06
PRODUCTS
& SOLUTIONS
CHALLENGES
& OUTLOOK
ustomer-focus, innovation, sustainable
C
performance: success factors to
combine to your heart’s content
-U
nited States: cornerstone
for the new plant
- Nexans confirms its commitment
to using green drums
- Initiatives and successes
Stay connected
Log onto www.nexans.com/2012halfyearresults or scan
the QR code opposite to view the presentation of the firsthalf 2012 results on July 25 in Paris: business overview
and outlook by Frédéric Vincent, and presentation
and analysis of the financial results by Nicolas Badré.
Global expert in cables and cabling systems
02
Latest news
2012 first-half results
Transmission business weighed on the Group’s performance.
The second-half operating margin should be up sharply compared
with the first half of the year.
Organic growth 0.2%
On a comparable basis, sales rose 0.2%
and 3.4% excluding Transmission. The
second quarter saw Transmission business
improving and the Group’s other activities
stabilizing at the 2012 first-quarter level
and up slightly compared with the second
quarter 2011.
In millions of euros
Sales(1)
Operating margin rate 3.6%
The operating margin rate is down
1.5 points compared with the same period
a year earlier because of Transmission
business. The operating margin was up for
all other segments.
Net income (Group share) 13 M€
The net financial charge was 56 million euros, restructuring costs came to 8 million
euros, and company tax was 5 million
euros compared with 51 million euros,
13 million euros and 19 million euros
respectively for the first half 2011.
Net debt/Shareholders’
equity 34%
The higher net financial debt is attributable
to the 211 million euro acquisition of
AmerCable Holdings Inc., the seasonal
effect on working capital requirement and
Transmission business invoicing delays.
The financial structure remains very
strong with net debt kept down to 34%
of shareholders’ equity and 1.75 times
EBITDA(2).
The Group’s liquidity is still very strong,
backed by very solid long resources.
* The definitive financial consequences for
the Group may differ. The Group is also under
investigations by other Competition Authorities
in the same sector of activity.
EBITDA(2)
Operating margin(1)
Operating margin rate(1)
Provision for European
competition procedure risk*
Restructuring costs
Net income (loss)
(Group share)
Net financial debt
Net debt/Shareholders’ equity
H1 2012 H1 2011
2,398
2,287
160
87
3.6%
186
117
5.1%
-
(200)
(8)
(13)
13
(151)
678
34%
366
19%
At the end of February, we issued a 275
million euro OCEANE(3) maturing in 2019,
which has strengthened our debt profile: the
bulk of our 900 million euros of bonds and
OCEANE(3) should be reimbursed between
2016 and 2019. We can also count on
a confirmed and unused revolving credit
of 540 million euros and on a short-term
overdraft facility of 200 million euros.
2012 outlook
The Group is expecting slight organic growth
in its full-year sales and a sharp increase in
operating margin in the second half 2012
compared with the first half 2012. Year-end
debt should be similar to the level at June 30
at comparable copper prices and following
takeover of the cable business of Chinese
group Shandong Yanggu.
Analysis by business
segment
Transmission, Distribution
& Operators
Sales down 4%(4)
Operating margin rate 2.3%(1)
• For Submarine Power Transmission
For more information: www.nexans.com/finance-en
(23% of sales), activity and results suffered
from operating difficulties that delayed
production, installation and invoicing. An
action plan has been launched to restore
production rates and recover profitability. The
order backlog represents around 1.8 years’
activity.
• For Land Power Transmission
(12% of sales), activity was up slightly,
but competition pressure and the on-going
interruption to installation worksites in Libya
weighed on the margin. The order backlog
represents approximately one year’s activity.
• For Distribution (55% of sales), sales
of low and medium voltage cables and
accessories for electricity grids were up
slightly.
• The Telecom Operators business
(10% of sales) reports strong growth.
Industry
Sales up 3%(4)
Operating margin rate 3.5%(1)
• Considerable competition in traditional
shipbuilding and the shutdown of highspeed rail investment programs in China
weighed on this activity.
• The strong growth in energy and
mining resources, automotive harnesses
and aircraft manufacture offset the
negative trends. The conditions and rate
of integration of AmerCable are very
satisfactory and are contributing positively
to the results.
Distributors & Installers
Sales up 4.9%(4)
Operating margin rate 6.6%(1)
Dynamic markets in North and South
America, the Middle East, Russia and
Africa area and in South Korea more than
offset the slight downturn in Europe. The
operating margin rate was driven by the
increase in volume sales.
Other business
Sales down 0.1%(4)
Operating margin rate unchanged
This mainly refers to Electrical wires. Sales
are steady and the operating margin rate is
close to breakeven.
(1) At constant non-ferrous metal prices.
(2) Operating margin before amortization.
(3) B
onds convertible into and/or exchangeable
for new or existing shares.
(4) On a comparable basis.
Latest news
Questions for
Frédéric Michelland,
Senior Corporate Executive
Vice President responsible
for the global High Voltage
and Submarine cables
business as well as North
and South America areas
03
Initiatives and successes
What are the reasons for the difficulties
experienced in submarine high voltage?
We are dealing with a growth crisis caused
by a threefold increase in sales since 2004,
compounded by a more difficult environment.
Facilities are more complex and the deadline
and guarantee conditions have become more
demanding. There are only three companies
in the world with the ability to take on major
submarine interconnection or offshore wind
farm installation projects. Despite having
doubled the capacity of our specialist plant
in Norway, it still has a huge workload:
we have lost flexibility and so a production
incident has impacted on the installation
deadlines for several projects.
Innovation
Securing networks.
This superconducting coil is an excellent fault
current limiter. Under normal conditions, it is
transparent for the network but in just several
milliseconds, it stops the very high currents
that may result in the event of a short circuit.
Solution
A brand for medical applications.
NEWSENSETM is the name of a broad
range of microcables and cables combining
power and data. Its aim is to contribute to
the production of safe, comfortable and
intelligent medical equipment.
How will the action plan implemented fix
the situation?
The top priority is to stabilize the plant’s
production by the end of the year. The causes
of the dysfunction have been identified.
The management, organization and teams
have been strengthened; the key processes
have been reviewed and brought under
control. Contractual delivery deadlines have
been renegotiated. We will then need to
ensure the return to normal conditions is
durable so that production is able to return
by the end of 2013 to the operational
performance expected for this type of activity.
This involves alignment on new standards,
team specialization and performance
indicators integrated into our information and
supervision systems.
We are on the right track: the difference in
sales compared with 2011 fell from 32% to
15% between the first and second quarters.
We will not make up the time lost entirely in
2012, but the return to normal conditions is
well underway.
Germany
A competitive superconductivity solution
for urban grids.
Designed for RWE, the AmpaCity cable
transports five times more electricity than
a copper cable with the same diameter.
In Essen, it will replace a 110 kV cable
and so require a smaller number of
transformers that can be installed further out
from the city center.
Libya
Electrical infrastructure upgrade.
Nexans will supply public company
PEWCO (Public Electrical Works Company)
more than 1,000 km of transmission,
distribution and fiber optic cables.
These contracts worth 110 million euros
include engineering, technical assistance
and training services.
India
Air Force base upgrades.
Nexans is supplying special cables to Tata
Power for runway lighting at some 30 bases
across the country – a four-year contract
worth 5 million euros.
Multi-purpose 2G superconducting fault current limiter
Norway
Connecting an underwater facility.
Nexans will supply Statoil a 16.5 km
underwater umbilical power cable
to connect the Gullfaks C platform
in the North Sea to its submarine gas
treatment and compression plant:
a contract worth 16 million euros.
Manufacture of a land-based high-voltage cable
For more information: www.nexans.com
04
Products & Solutions
Customer-focus, innovation,
sustainable performance:
success factors to combine
to your heart’s content
Understand customer needs, differentiation through innovation and deliver
sustainable solutions: each day, these directions are proven to be effective individually
and even more so when combined.
Lo-SagTM: more power with the same footprint
Large cities in Brazil require everincreasing amounts of electricity, but the
creation of new lines comes up against
land acquisition costs, safety distances
from power lines and authorization
timeframes. Nexans and Light,
the Rio de Janeiro grid operator,
have therefore concentrated on raising
the capacity of existing lines.
This means we can maintain safety
distances between the conductor and
the ground even at high temperatures.
Thanks to these properties, the upgraded
overhead lines can be used much
more intensely,” explains Jean-Maxime
Saugrain, Corporate Vice President
Technical Nexans.
A composite material core
Lo-SagTM means the existing corridors
and pylons can be used with only a
few minor adjustments, which reduces
project execution costs and deadlines.
The solution is called Lo-SagTM.
This innovative overhead line has a
composite carbon fiber core encased
in a heat-resistant aluminum alloy.
“This composite core is far lighter and
50% stringer than a standard ACsr(1)
type conductor. Moreover, its thermal
expansion coefficient is 10 times less
than steel: the sag is therefore much
lower when it is heated by the high
current flowing through the conductor.
Cut costs and deadlines
Installed eight months ago on a 138 kV
transport line operated by Light between
Cascadura and São José in Pavuna
district (Rio de Janeiro), Lo-SagTM
has boosted electricity transportation
capacity by 72.5%.
An international product
The composite core is manufactured in
France, the heat-resistant aluminum alloy
in Brazil and the conductor is assembled
in Belgium. Decidedly international in its
design and production, Lo-SagTM could
become equally international by winning
over new markets.
Designed for large cities, it can meet
many other needs, such as improving
safety distances without having to raise
pylon heights, safely reduce the number
or height of pylons by as much as 30%,
or cross rivers or obstacles requiring a
span of more than one kilometer.
For more information:
www.nexans.com/losag-en
(1) A
luminum Conductor Steel Reinforced.
Products & Solutions
05
Karolinska University Hospital, Solna, Sweden
Think: the best choice for a long time
Developed by Nexans for the building
market, Think is a concept focused on
total ownership cost and so the value
delivered to the end customer. Instead of
concentrating on acquisition cost, as large
installation contractors often do, Think
seeks optimum performance across the life
span of the installation taking into account
three aspects (economic, environmental
and social) of sustainable development.
• The installation’s energy efficiency
is optimized using the EcoCalculator,
a specific tool developed by Nexans.
• The cables’ environmental footprint data
provided by the Eco Declaration is used
to select solutions with a lesser impact.
• Personal and property safety in the event
of a fire is ensured by choosing flameretardant and/or fire-resistant cables from
the Nexans ALSECURE®, ALSECURE® Plus
and ALSECURE® Premium ranges.
Sweden: the new Solna hospital
choses Think
The success achieved with the new
Karolinska University Hospital in Solna
illustrates the advantage of this approach.
Nexans, Skanska Installation and
wholesaler Ahlsell worked closely together
on their delivery for this project, one of
the world’s largest and most innovative
hospitals. Think made all the difference.
“We chose Nexans as the main supplier
because it met our stringent requirements in
the areas of energy, the environment and
safety. For large projects, we also look
for suppliers capable of delivering topshelf services,” explains Per-Ola Jönsson,
General Manager of Skanska Installation.
“Skanska’s decision strengthens Nexans’
position in sustainable construction and
confirms that we have made the right
strategic choices to develop cables and
services that meet future requirements in
the three areas of energy efficiency, the
environment and safety,” emphasizes Lars
Josefsson, Sales and Marketing Director,
Building Market Nexans Sweden.
Lebanon: a new shopping
mall certified LEED(1)
The new Beirut City Centre is certified
LEED(1) for its energy efficiency and
environmental standards. Nexans cables
contributed to this performance.
The Nexans subsidiary, Liban Cables,
manufactured and delivered more than
250 km of power and communication
cables, in particular fire-resistant cables for
the 158,000-square meter mall’s lighting
and elevators.
“The close cooperation with our customer
was a major contributing factor to the
success of this prestigious project,”
points out Chafic Katergi, Marketing
Communication Manager for Nexans
in Lebanon. “Our participation confirms
the Group’s ability to comply with the
specifications issued by designers of
sustainable buildings.”
Beirut City Centre shopping mall
(1) Leadership in Energy and Environmental Design,
a North American verification system similar to
France’s HEQ (High Environmental Quality) system.
06
Challenges & Outlook
United States: cornerstone
for the new plant
The construction of a new high voltage plant officially began on June 13.
June 13, 2012: cornerstone ceremony at the site in Berkeley County, Charleston, South Carolina (United States).
Situated on the banks of the Cooper
River, in an industrial complex in
Charleston, South Carolina, it will
manufacture Extra-High Voltage (EHV)
– up to 500 kV – underground power
cables for the North American market
which is expected to double by 2020.
“The establishment of our first high voltage
cable manufacturing plant in North
America is a key strategic development
for Nexans. It will enable us to capitalize
on the ever growing demand for high
quality high voltage cables designed
and manufactured to meet the specific
needs of the major power transmission
infrastructure projects planned in North
America and worldwide in the coming
years,” points out Frédéric Michelland,
Senior Corporate Executive Vice President
responsible for the global High Voltage
and Submarine cables business as well
as North and South America.
The new plant will employ the most
advanced technology to produce notobly
EHV 220kV XLPE cables with a copper
and aluminum conductor. The plant will
begin operation in 2014. It will employ
200 people.
For more information:
www.nexans.com/charleston-en
Green drums: Nexans goes further
With its “Green Drums” program Nexans
has confirmed its commitment to help protect
the environment. This wood drum recovery
and reuse program is the final phase in the
initiative launched in 2010: Nexans was
at the time the first cable manufacturer to
use drums made with wood sourced from
sustainably managed and PEFC(1) or FSC(2).
certified forests.
More than 280,000 drums have already
been reused between one and five times.
This equates to 35% of the total drums used
by Nexans and an annual savings of about
94,000 cubic meters of sawn lumber, or
100,000 trees and 111 acres of forest.
“Nexans has always reused its cable drums
where possible. The vital difference with
this new initiative is that we are working
proactively with our customers to set up
economical and efficient processes to
maximize the return and reuse rate,” says
Pascal Portevin, Senior Corporate Executive
Vice President.
“Changing the view of cable drums from a
one-shot, non-returnable item into a reusable
asset is a win-win situation all round.
Naturally, it saves trees and the amount
of waste going to landfills. It also saves
on storage space and disposal costs for our
customers, and ultimately savings on the
purchasing cost of new drums”.
For more information:
www.nexans.com/greendrums
(1) PEFC: the Programme for the
Endorsement of Forest Certification,
created in Europe in 1999, has been
global since 2004.
(2) FSC: the Forest stewardship Council
was created in 1993 with the backing
of the WWF and numerous NGOs.
Shareholders
07
Report of the shareholders’ information
meeting in Tours on June 6, 2012
Nexans extends its warm thanks to the many shareholders who attended the information
meeting on June 6, 2012, in Tours (France), alongside Air Liquide and organized by the FFCI(1).
This meeting was an opportunity
to present in detail Nexans’ expertise
and strengths, its businesses and markets,
along with its products and solutions,
in particular using tangible examples.
It also enabled the Group to comment
on its financial performance and
its outlook, especially its activity
in the first the quarter of 2012(2).
Lastly, topics such as the Group’s debt
structure, especially the 2013 and
2019 OCEANE, its dividend policy, the
effect of standards and regulations on
its business and the more general topics
of the euro’s economic situation and the
consequences of a potential general
recession in Europe were discussed with
the audience.
(1) F édération Française des Clubs d’Investissement –
French Federation of Investment Clubs
(2) S
ee the first-quarter 2012 sales press release
available on www.nexans.com
Success for Act 2012,
the fifth Nexans employee
shareholding plan
3,129 employees in 24 countries
subscribed to the fifth Nexans employee
shareholding plan. As for the previous
plan, employees were offered a plan
guaranteeing, in euros, the capital
invested.
On July 13, the magazine Le Revenu
published its annual ranking of Internet sites
for the shareholders in SBF 120 companies.
The Nexans site is ranked among the best
with its “♥♥♥ Very complete site”
rating, unchanged on 2011.
of Nexans France and a member
of the Supervisory Board of the FCPE
Actionnariat Nexans fund.
Act12_POS1_UK_ENG_Mise en page 1 17/04/12 12:06 Page1
499,984 new shares were issued on
August 3, 2012 (of which 399,995 for
the employees) resulting in a 12.1 million
euro increase in the shareholders’ equity.
As a result of this plan, employee
shareholders now own about 4.2% of
Nexans’ capital compared with 2.93%
beforehand. Since the Shareholders’
Meeting of May 15, 2012, they have
been represented on the Board of
Directors by Lena Wujek, an employee
From May 21 through June 7, 2012
Let’s Act together!
A fifth capital increase
reserved for Group employees
POS1_UK_ENG
A well-ranked
Web site
08
Stock market
Stock market data
Stock price
analysis
After a sharp downturn in the Nexans share price in the first half of the year, the trend
reversed at the end of July and continued to progress throughout August:
- The market responded positively to the Group’s financial results released on July 25;
- Reassuring comments by European leaders about the euro zone in August were reflected
in a stronger share market overall.
These two factors combined enabled the Nexans share to make up the ground it had lost
against its SBF120 reference index since the start of the year.
Despite continuing uncertainty in Europe, the Group is expecting the year to end with
a slight organic increase in its sales together with a sharp improvement in its operating
margin in the second half of 2012 compared with the first six months.
Volume
1,500,000
Volume traded
(left-hand scale)
Nexans
SBF 120
(right-hand scale)
Euros
60
1,200,000
50
900,000
40
•S
hareholders’ equity:
28,760,710 euros
•S
hares in circulation:
28,760,710 (at July 31, 2012)
•P
ar value: 1 euro
• ISIN code FR000004448
•W
here listed Euronext Paris
compartiment A
•D
eferred settlement service
•S
BF120 index
•E
thibel Excellence Investment
Register
- ESI Excellence Europe
- ESI Excellence Euro
Shareholders’ diary
•S
eptember 11, 2012: information
meeting for individual shareholders in
Strasbourg*
•S
eptember 26, 2012:
Superconductivity information meeting
for individual shareholders in Paris
•N
ovember 21, 2012: information
meeting for individual shareholders
in Paris*
•O
ctober 22, 2012: Third-quarter
2012 results
600,000
* Date subject to change.
30
300,000
20
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1
New CSR(1) Brochure
Join the Shareholder E-Club
for access to video reports and
interviews and email news alerts.
Simply register at
www.eclub.nexans.com
Our convictions, solutions and
commitments to sustainable
development
Targeting all Nexans stakeholders (customers,
suppliers, analysts, investors, shareholders,
journalists, decision makers, students, etc.), this
document presents Nexans’ convictions, solutions
and commitments in the area of sustainable and
responsible development.
Access to energy and information as well as the
mobility of people and goods contribute significantly
to the development of economic and social life. But they raise huge challenges.
As a global player in the cable industry, Nexans helps meet these basic needs
and is committed to doing so under the best possible conditions of performance,
safety and respect for people and the environment.
Consult the brochure at: www.nexans.com/csrbrochure
(1) Corporate Social Responsibility.
Issue 29 – Shareholder Newsletter // 8, rue du Général Foy – 75008 Paris, Tel.: +33 (0)1 73 23 84 00 // Publication Manager: Jean-Claude Nicolas //
Editor-in-Chief: Yann Gontier // Editorial committee: Sophie Auguié, Paul-Bernard Bonneau, Chantal Caillat, Yann Gontier, Jean-Claude Nicolas, Thierry Roucher,
//
Pascale Strubel, Carole Vitasse and Lena Wujek // Design-Production:
Photos and computer graphics: Nexans, Getty Images, V. Rackelboom, ZanArtphoto, WhiteTengbomTeam, DR // Printing: Document printed on 100%
PEFC paper – PEFC certification No.: 10-31-1232 / PEFC certified. This product is sourced from sustainably managed and audited forests / pefc-france.org.
Contact us
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From outside France, please dial
+33 (0)1 73 23 84 56
[email protected]
www.nexans.com
Nexans
Individual Shareholder Relations
8, rue du Général Foy
75008 Paris – France