Nexans SA · EURONEXT:NEX
Nexans SA — FY2008 Earnings Presentation
41 slides from Nexans SA's earnings presentation, Feb 12, 2009
Slide 1: 2008 Full Year Results
2008 Full Year Results 2008 Bond Full Year Résultats investor Results annuels presentation 2008 February 12,2009
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements relating to the Group’s expectations for future financial performance, including sales and profitability. The forward looking statements contained in this presentation are dependent on known and unknown risks, expectations and assumpt
Slide 3: Contents
Contents 1 2008 review : Strategic choices have proven to be correct 2 Financial results : Further progress in profitability and solid financial base 3 Business review & Outlook : A stronger Group ready to tackle an uncertain economic environment 4 Appendices 2008 Bond Full annuels Résultats Year in
Slide 4: 2008 review: Strategic choices have proven to be correct
2008 review: Strategic choices have proven to be correct Gérard Hauser Chairman and CEO
Slide 5: 2008: Key figures
2008 : Key figures Sales (*) Operating margin 4,320 4,451 +6% 427 organic 409 3,641 growth of cable 260 activities Electrical wires Cables activities in M€ Restated net income (**) Free cash flow 189 195 291 172 275 82 33 2007 2008 Résulat net Net income Résultat netNet “Recurring” "courant" income
Slide 6: Highlights 2008
2008 Highlights 2008 : In a difficult economic environment Ongoing reconfiguration of the Group 2008 Full annuels Résultats Year Results 2008 5
Slide 7: On target with the objectives
On target with the objectives Organic growth within + 6 to + 7 % +6% (Cable activities) 2007 Operating > Operating 427 M€ margin (vs 409 M€ in 2007) margin Net debt between 500 and 600 M€ 536 M€ 2008 Full annuels Résultats Year Results 2008 6
Slide 8: A reconfigured Group
2001 / 2008 A reconfigured Group Refocusing on energy infrastructure Development of specialty products Geographic Withdrawal from redeployment non-strategic activities A reconfigured Group 2008 Full annuels Résultats Year Results 2008 7
Slide 9: Refocusing on Energy Infrastructure
2001 / 2008 Refocusing on Energy Infrastructure 2008 2006 40% Refocusing 2003 on Energy Infrastructure 2001 Contribution to consolidated sales at constant metal prices (in %) Extending our offer and optimizing our production facilities : 1st very long submarine link • cables/connection accessories (
Slide 10: Development of specialty products
2001 / 2008 Development of specialty products Sales in priority segments 2008 (at constant metal prices) 2006 516 M€ 2003 56% of Industry sales 2001 Development of specialty products Definition of priority growth areas according to the double criteria of : • Growth / Profitability • Competitive adva
Slide 11: Geographic redeployment
2001 / 2008 Geographic redeployment Organic In million € at constant metal prices (2) growth (1) Divestitures 659 5,055 o/w & refocusing Acquisitions emerging countries: o/w emerging 4,467 ( 1,143) 1,072 39% countries: 8% Europe SAM & (3) MERA CAGR ’04 / ’08 +9% Electrical APAC wires Geographic 2001
Slide 12: Withdrawal from non-strategic activities
2001 / 2008 Withdrawal from non-strategic activities Contribution to consolidated sales at constant metal prices (in %) Distribution Electrical wires (including winding wires) 32% Withdrawal from non-strategic activities 7% Divestitures at multiples higher than the Group average (distribution) Withd
Slide 13: A stronger Group for 2009
A stronger Group Refocused business portfolio = optimized capital employed Continuous adaptation of manufacturing facilities A stronger Group Stronger market positions for 2009 Greater exposure to long-cycle activities (infrastructure) Generation of free cash Payment of flow a dividend Solid financi
Slide 14: Financial results: Further progress in profitability and solid financial base
Financial results: Further progress in profitability and solid financial base Frédéric Michelland Chief Financial Officer
Slide 15: Increase in profitability and strong free cash flow generation
Increase in profitability and strong free cash flow generation (in Million €) 2007 2008 08/07 ▲ Electrical wires Sales at current metal prices 7,412 6,799 down-sizing and drop in copper price Sales 4,822 4,776 + 6% organic at constant metal prices cable activities Operating margin 409 427 Operating
Slide 16: Sustained growth in cable activities
Sustained growth in cable activities 6 % organic growth of cable Sales(**) by destination activities (*) proforma Madeco cables and Intercond over 12 months Electrical Wires down-sizing South America 10 % In M€ Sales at constant metal prices MERA FX 14 % 4,822 Cable 48 % Electrical activities 4,776
Slide 17: Income Statement
Income Statement (in Million €) 2006 2007 2008 Sales at constant metal prices 4,442 4,822 4,776 Margin on variable costs 1,209 27.2 % 1,476 30.6 % 1,527 32 % Indirect costs (855) (966) (994) EBITDA (operating margin before depreciation) 355 8.0 % 510 10.6 % 533 11.2 % Depreciation (95) (101) (106) O
Slide 18: Sharp drop in copper price and concentrated in Q4
Sharp drop in copper price and concentrated in Q4 10 000 9 000 8 000 - 55 % 7 000 ov e rt he 6 000 la st 3 m 5 000 on th s (* ) 4 000 3 000 COPPER USD 2 000 2/1/08 30/1/08 27/2/08 28/3/08 25/4/08 27/5/08 24/6/08 22/7/08 19/8/08 17/9/08 15/10/08 12/11/08 10/12/08 (*) ie the duration of the operating
Slide 19: Impact of the drop in copper price
Impact of the drop in copper price Impact : Sales systematically hedged Neutral Accounting effect corresponding to the Impact : difference between the copper price - 165 M€ invoiced to the customer and the Weighted Average Cost (WAC) Mark to market of metal derivatives Impact : - 127 M€ Impact to be
Slide 20: Income Statement
Income Statement (in Million €) 2006 2007 2008 Sales at constant metal prices 4,442 4,822 4,776 Margin on variable costs 1,209 27.2 % 1,476 30.6 % 1,527 32 % Indirect costs (855) (966) (994) EBITDA (operating margin before depreciation) 355 8.0 % 510 10.6 % 533 11.2 % Depreciation (95) (101) (106) O
Slide 21: Balance sheet
Balance sheet (in Million €) Dec. 31, 07 Dec. 31, 08 Long-term fixed assets 1,179 1,525 of which goodwill 192 400 Deferred tax assets 48 91 Non-current assets 1,227 1,616 Working Capital 1,235 1,004 Assets (net) held for sale 105 0 Total to finance 2,567 2,620 Net financial debt 290 536 Reserves 434
Slide 22: Continuous efforts to reduce operating Working Capital
Continuous efforts to reduce operating Working Capital 22.6 % 19.0 % 17.8 % (in Million €) 1,689 1,409 1,208 Percentages calculated on the basis of annual sales at current metal prices 2008 Full annuels Résultats Year Results 2008 21
Slide 23: Free Cash Flow generation at the heart of Group priorities
Free Cash Flow generation at the heart of Group priorities Cash flow from Capex Restructuring Dividend ∆ WC FCF operations 177 291 2008 346 (156) 116 275 2007 374 (161) (165) 2006 35 33 226 (102) (74) 197 2005 (120) 2008 Full annuels Résultats Year Results 2008 22
Slide 24: Change in Net debt
Change in Net debt (in Million €) Dec. 31, 07 Dec. 31, 08 Net debt at beginning of fiscal year (632) (290) Free Cash Flow 275 291 to be collected back during Margin calls 0 (140) the operating cycle Acquisitions (15) (349) of which share buy-back Other 82 (48) (29) Net debt at end of fiscal year (29
Slide 25: Strong increase in Return on Capital Employed
Strong increase in Return on Capital Employed 2008 2007 2006 + 60 % + 1% * Excluding acquisition during that year 2008 Full annuels Résultats Year Results 2008 24
Slide 26: Business review & Outlook
Business review & Outlook: A stronger Group to tackle an uncertain economic environment Frédéric Vincent Chief Operating Officer
Slide 27: 6% organic growth with a slowdown in Q4
6% organic growth with a slowdown in Q4 Organic growth of Cable activities H1 Q3 Q4 2008 Ongoing trend in energy infrastructure Energy Infrastructure 19.7 % 22.6 % 17.0 % 19.5 % Industry Industry 4.8 % -2.7 % -12.1 % -1.3 % sharp slowdown in automotive Building -4.2 % -4.3 % -8.1% -4.9 % Drop in Tel
Slide 28: High-level margins
High-level margins Operating Margin rate 2007 H1 ‘08 H2 ‘08 2008 Faster pace for Energy Energy Infrastructure 9.3 % 11.4 % 11.8 % 11.7 % Infrastructure Industry 8.7 % 8.6 % 5.4 % 7.0 % Industry margins highly impacted by Building 11.1 % 9.7 % 11.3 % 10.4 % the automotive Telecom Infrastructure 7.2 %
Slide 29: Achievements and Outlook
Achievements and Outlook What to expect from our 2008 Achievements - markets in 2009 ? Infrastructure Industry Building 2008 Full Résultats Résultats Year Results semestriels annuels 2008 2008 28
Slide 30: Energy Infrastructure
Energy Infrastructure: 40% of Sales* / 52% of Group margin Network Interconnection Renew- able 2008 Highlights energies Emerging 2009 Trends Countries • Organic growth • Extent of order backlog Past under- close to 20% (High Voltage) : investments 1.5 years’ sales backlog at • Operating margin x 1.5
Slide 31: Industry
Industry Resilience : Strong Energy Medium Auto Low (Cables & harnesses) 2008 Highlights 2009 Trends Transpor- Cables tation • Transportation and energy •Satisfactory performance but for electronic (Aeronautic, Shipbuilding, expected to hold up well – Auto market collapsed industries Railways) (32%
Slide 32: Building
Building Breakdown of sales Europe (at current metal prices) = 62 % of which France= 26% South Am. 2% MERA 2008 Highlights 2009 Trends 10 % Asia • Drop in activity by around Pacific North Am. 5% (especially due to volume 10 % 16 % effect) • Activity expected to continue to contract in 2009 • The geo
Slide 33: LAN & Telecom Infrastructure
LAN & Telecom Infrastructure LAN 2008 2009 Sales growth througout the year but slowing in Q4 in North America and Europe (shrinking building sector) United States expected to hold steady Success of 10 Gigabit in the United States for equipping data centers Less visibility in Europe Strong activity g
Slide 34: Our road map
Our road map Embrace the new Key challenges Initiatives Expected Mobilize potential in recent acquisitions resources Overcome the Defensive measures current crisis Result of Solid foundations our strategy 2008 Full Résultats Résultats Year Results semestriels annuels 2008 2008 33
Slide 35: Our road map: Defensive measures
Our road Defensive map measures Déjà lancé Underway Actions on Contain fixed costs and costs freeze administrative recruitment Cash Continue to generate free cash flow (at constant metal prices) and implement actions to reduce WC CAPEX Reduce investments other than those already committed (≅ 100 M€)
Slide 36: Our road map: Potential in recent acquisitions
Potential in Our road Defensive recent map measures acquisitions Déjà lancé Poids croissant Geographic growth : Madeco cables – No. 1 desServing in South America Infrastructures the strategic plan d'énergie Speciality products : Intercond – Industrial applications, Robotics Strengthening position in
Slide 37: Olex: synergies obtained
Potential in An example Our road Defensive recent map measures OLEX acquisitions Déjà lancé OLEX : Synergies obtained on a yearly basis PURCHASING: 0.9 M€ SALES (Nexans products through Olex and Olex products through Nexans) : 3.7 M€ INDUSTRIAL « BEST PRACTICES » : 4.4 M€ TOTAL : 9 M€ i.e ≅ 20% valu
Slide 38: Key initiatives: new countries, products, markets
Potential in An example Our road Defensive Key recent OLEX map measures initiatives acquisitions Déjà lancé New New New countries products markets Continue Upstream the value Address redeployment towards chain towards tomorrow’s emerging countries « solutions » requirements Accentuated growth Energy
Slide 39: Potential for improvement beyond 2009 uncertainties
Potential for improvement beyond 2009 uncertainties Geographic mix ongoing « Megatrends » related to society’s development 2009 : hard to predict Transformed Positive impact of but product mix public recovery plans Nexans team focused on an Building Industry Infrastructure operating margin rate of 6
Slide 40: Appendices
JSNexans
Slide 41: Sales and Operating Margin by Business
Sales and Operating Margin by Business In M€ 2007 2008 OM OM Sales* OM Sales % Sales* OM Sales % Energy Infrastructure 1,643 152 9.3 % 1,917 223 11.7 % Industry 1,005 87 8.7 % 924 65 7.0 % Building 1,132 126 11.1 % 1,089 114 10.4 % Private networks (LAN) 282 31 11.1 % 290 31 10.6 % Telecom Infrastru