Nexans Reports Organic Growth in Second Quarter 2013

The Nexans Board of Directors meeting on July 24, 2013, under the chairmanship of Frédéric Vincent, approved the Group’s consolidated financial statements for the first half of 2013.

Sales for the first half of 2013 came to 3.412 billion euros at current non-ferrous metal prices compared with 3.577 billion euros for the same period of 2012. At constant non-ferrous metal prices4 , sales amount to 2.351 billion euros compared with 2.398 billion euros in 2012 that is a 3.4% organic contraction for the Group as a whole.

The business performance is contrasted among the various areas and businesses:

– The improved production conditions for submarine high voltage cables result in double-digit revenue growth. Conversely, the unfavorable market conditions in the Middle East and Europe, as well as the lack of any installation activity in Libya resulted in land high voltage sales contracting;

– In the other businesses, the situation remains difficult in the European and North American building segment because of a lack of sales volume although in a context of relatively stable prices. In the infrastructure cable sector in Europe, the difficult situation is attributable to the drop in demand from the main operators and the overproduction of energy that exceptionally was a feature of this half year. On the other hand, special cables for industry reported growth driven by the strength of the transportation segments and the global Oil & Gas business.

The EBITDA margin comes to 151 million euros, or 6.4% of sales at constant non-ferrous metal prices (6.7% in the first half of 2012).

The operating margin comes to 75 million euros, or 3.2% of sales at constant non-ferrous metal prices, compared with 3.7% in the first half of 2012.

The 2013 first-half operating income comes to a loss of 78 million euros compared with 76 million euros profit in the first half of 2012. In addition to the drop in the operating margin, this change can be explained by several other factors:

1. A non-cash charge of 92 million euros linked to asset impairments, of which 80 million euros concern the assets of the Australian entity Nexans Olex5 as part of evolution in the industrial positioning of Australia in order to address the substantial deterioration in the market, which has accelerated sharply in the Mining business at the same time as a strong competitive pressure coming mainly from increased imports;

2. The core exposure effect linked to the drop in copper prices which translated into a non-cash charge of 27 million euros;

3. The restructuring cost of 32 million euros, of which 13 million euros relating to a restructuring plan developed in 2012 for Nexans Olex.

The net financial charge comes to 46 million euros compared with 58 million euros6 in the first half of 2012. This decrease is primarily due to a drop in the cost of the net debt, an improvement in the result on foreign exchange and to financial reserves that impacted the first half of 2012.

The net income tax is 21 million euros compared with 5 million euros for the same period in 2012.

On these bases, the net income (Group share) for the first half of 2013 is a loss of 145 million euros. It was a profit of 13 million euros at June 30, 2012.

The consolidated net debt comes to 820 million euros at June 30, 2013, compared with 606 million euros at December 31st, 2012. This increase is attributable to the seasonal rise in working capital on the one hand and a deferred payment for a submarine high voltage project (which should result at the end of August 2013 in a significant drop in the working capital) on the other hand.

Furthermore, the measures included in the strategic plan aimed at doubling the operating margin by 2015 continued to be implemented throughout the first half of 2013.

At an organizational level, the Group provides specific supervision of 18 important streams. Additionally, Nexans Management has been strengthened with the appointment of Arnaud-Poupart-Lafarge as Chief Operating Officer reporting to the Chairman and CEO.

In this period of Nexans’ transformation, this strengthening reflects the focus on simplified decision-making processes through a new organizational structure designed to speed up the rollout of the Group’s strategic initiatives.

The cost saving studies underway could lead by mid-October to consultations with the employee representative bodies and, within this context, the main outline of a proposal could be communicated at the latest at the occasion of the publication of the 2013 third-quarter sales.

Commenting on the 2013 first-half results, Frédéric Vincent, Chairman and CEO, said, “Business in the first half of 2013 was relatively weak as we had anticipated at the start of the year. Nonetheless, there was a sharp upturn in the second quarter compared with the first. However, the market environment remains difficult, especially in Europe and the Middle East. The action plan implemented and aimed at achieving a structural recovery in the profitability of submarine high voltage business is beginning to pay off with production returning to a normal level in this first half year. Our order backlog is still solid and provides us with more than two years’ visibility for this activity.

We are stepping up the Group’s transformation in particular with a strengthened executive management team and a structure specifically tasked with tracking the rollout of strategic initiatives.

The operating margin in the second half of 2013 should be higher than that of the first half of the year and be at a level in the same order of magnitude as that for 2012, subject to a stabilized environment in Europe. Additionally, the cost saving plans under consideration could result in reserves that could produce a net loss in the second half.

Net debt at year-end, on the basis of copper prices as currently observed, should be similar to that at December 31st, 2012.”

[mappress]
Press Release, July 26, 2013