2013 Q3 update. October 15, 2013

Transcription

1 October 15, 2013

2 Disclaimer and safe harbor NOT TO BE DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN 2 This document has been prepared by Nexans (the Com p a n y ) solely for use at the analyst meeting to be held on October 15, The activity and the financial condition of the Company are described in the French language prospectus (the French Prospectus ) comprised of (i) the registration document (document de référence) of the Company which was filed with the Autorité des marchés financiers (the AMF ) on April 3, 2013 under number D (the Registration Document ), (ii) the update to the registration document (actualisation du document de référence) of the Company, which was filed with the AMF on October 14, 2013 under number D A01 (the Update to the Registration Document ) and (iii) a securities note (note d opération) (which includes the summary of the French Prospectus) filed with the AMF on October under n (the Securities Note ). The French Prospectus is available free of charge from the Company. The French Prospectus is also available on the website of the Company ( and of the AMF ( This document includes forward-looking statements. These forward-looking statements relate to the Company s future prospects, developments and business strategies and are based on analyses of forecasts of future results and estimates of amounts not yet determinable. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that its actual financial condition, actual results of operations and cash flows and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company s financial condition, results of operations and cash flows and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this document, other than as required by applicable laws and regulations. In addition, the occurrence of certain of the risks described in the Registration Document or the Update to the Registration Document could have an impact on these forward-looking statements. The Company draws attention to the risk factors included on pages 34 to 42 and 185 to 197 of the Registration document, in chapter 3 and chapter 4 of the Update to the Registration document and in chapter 2 of the Securities Note, and especially the risks linked to the antitrust investigations by authorities in Europe, the United States, Canada, Brazil, Australia and South Korea (in addition to the on-going procedures regarding local business) for anticompetitive behavior in the submarine and underground power cable sectors. An unfavorable outcome of these investigations and follow-on consequences could have a significant material adverse effect on the results and the Company s financial situation, even beyond the potential fine that may be imposed by the European Commission. Following the Statement of Objections received from the European Commission s Directorate General for Competition on July 5, 2011 by the Company and its subsidiary Nexans France SAS for alleged anticompetitive behavior, Nexans France SAS recorded a 200 million euro provision in its individual financial statements for a potential fine that could be imposed on it, which provision was included in the Group s consolidated financial statements since June 30, As the outcome of the proceedings will likely be known within 12 months, the 200 million euro provision has been reclassified within current items in the 2013 interim consolidated financial statements. In addition to the risk factors, the main uncertainties weighing on the fourth quarter of 2013 are : The project of plans for savings which will lead to consultations with the employee representative bodies in the last quarter and which may have a negative impact on the balance sheet and the net profit, and significant negative consequences for operations; The operating performance of the High Voltage business, in particular compliance with delivery times and successful results of the tests requested by customers, together with the positive outcomes from managing turnkey project claims; A sufficient level of demand maintained in Europe; Preservation of asset values in unstable economies, such as Argentina and Egypt; Increased credit risk, which in some cases cannot be insured, or fully insured, in Southern Europe, especially Greece, and in some customer segments in China; The assumption of limited impact in 2013 of the antitrust investigations begun in 2009 and in any event consistent with the accounting options adopted. Besides the Group is currently conducting a periodic detailed review of its activities and its strategic initiatives for 2015 and will communicate on this at the time of the publication of its 2013 results.

3 Disclaimer and safe harbor 3 This document includes only summary information and does not purport to be comprehensive. This document should be read in conjunction with the French Prospectus. In the event of any discrepancies between this document and the French Prospectus, the French Prospectus should prevail. The information contained in this document has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. The information set out herein is provided as of the date of this document and is subject to updating, completion, revision, verification and amendment and such information may change materially. The Company is under no obligation to keep current the information contained in this document and any opinions expressed in this document are subject to change without notice. The Company and its shareholders and their respective affiliates, advisors, representatives or employees shall not have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this document or its contents, or otherwise arising in connection with this document. This document contains information in connection with the markets of the Company as well as the positioning of the Company on such markets. This information is extracted from various sources or results from estimates of the Company. Investors may not rely on such information to make their investment decisions. This document does not constitute an offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares of the Company and neither it nor any part of it shall form the basis of, or be relied upon in connection with, any contract, commitment or investment decision whatsoever. Any offer of securities of the Company shall be conducted in France only under a prospectus or, outside of France, under an offering document prepared for this purpose in accordance with the legislation of each jurisdiction where it is carried out. This document is not a prospectus within the meaning of Directive 2003/71/EC of the European Parliament and the Council of November 4, 2003, as amended and as implemented in each Member State of the European Economic Area (the Prospectus Directive ). With respect to the Member States of the European Economic Area which have implemented the Prospectus Directive (each a Relevant Member State ), securities may not be offered or sold absent the publication of a prospectus in any Relevant Member State or an exemption from such publication under the Prospectus Directive. As a consequence, in any Relevant Member State, this document is directed only at persons who are qualified investors as defined under the Prospectus Directive. In the United Kingdom, this document is directed only at persons who (i) have professional experience in matters relating to investments and fall within Article 19(5) ( investment professionals ) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the Order ), (ii) are persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations, etc. ) of the Order or (iii) are persons to whom this communication may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). In the United Kingdom, no person other than a relevant person may act on the basis of this document, any investment or investment activity to which this document refers may be carried out only by relevant persons. The securities of the Company have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), and may not be offered or sold in the United States except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act. The Company does not intend to register all or a portion of any offering in the United States or to conduct any offering of securities in the United States. Reports relating to Nexans that will be published by analysts who will attend this conference shall not be distributed in the territory of the United States or to U.S. persons as defined in the Securities Act. This document is being provided to you solely for your information and may not be reproduced, retransmitted, forwarded, further distributed to any other person or published, in whole or in part, by any medium or in any form for any purpose and in particular, may not be forwarded to any person in the United States, Canada, Australia or Japan. The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. By participating in the meeting and/or accepting this document you agree to be bound by the foregoing limitations. Investor relations : Michel Gédéon Laura Duquesne Carole Vitasse michel.gedeon@nexans.com laura.duquesne@nexans.com carole.vitasse@nexans.com

4 AGENDA 4 I. Q3 13 activity overview II. Outlook 2013/2015 III. Operational initiatives to support strategic positioning IV. A 284M rights issue to improve the financial structure of Nexans (Holding)

5 XXXXXXXXXXXXXXXXX Q3 13 activity overview

6 Sales (*) in M and year on year organic growth Sales figures 6 Distributors & Installers: -7.3% YTD Industry: +2.3% YTD -3.8% QoQ -6.5% QoQ Q1 13 Q2 13 Q3 13 Q1 13 Q2 13 Q3 13 Utilities & Operators: -6.1% YTD Transmission: +3.1% YTD -5.9% QoQ +15.5% QoQ Q1 13 Q2 13 Q3 13 Q1 13 Q2 13 Q3 13 Total Group: -2.9% YTD 1,130 1, % QoQ 1,171 (*) Sales at constant metal prices Q1 13 Q2 13 Q3 13

7 Q3 sales (*) and year on year organic growth 7 Distributors and Installers Industry Q M -7.3% Q M Q M +1.4% Q M Challenging environment Europe still under pressure LAN not picking up in the US Environment still challenging in Australia Strong performance in Peru and Colombia not offsetting the slowdown in Brazil Positive demand in Turkey and Lebanon Organic growth remains positive despite slowdown in Q3 Harnesses growing at constant rhythm Transport segment well supported by aerospace, railways, shipbuilding Resources segment affected by delays on O&G projects in the US and mining outside US Korea remains strong in offshore No improvement of sales in other applications Transmission, Distribution and Operators Others Q M -0.7% Subsea HV: +24% yoy Most of the legacy now behind Production and installation on track Strong backlog Q M Land HV: -26% yoy No significant upside in trend Backlog >250M Power distribution: -4.1% yoy Strong reduction in Europe (France, Germany) No improvement in Australia Same positive trend in Brazil as of Q2 13 Slowdown in MERA Q3 12 Q M -1.1% Stable activity in Q3 (*) Sales at constant metal prices 71M

8 Impact of foreign exchange and scope 8 Sales at constant metal prices in M Q3'12 FX Volume Scope Q3'13 Distributors and Installers Industry Transmission, Distribution and Operators Other Total Group 1, ,171

9 Outlook 2013/2015 XXXXXXXXXXXXXXXXX

10 FY13 Outlook 10 Positive trends confirmed in some areas Uncertainties appeared during Q3 Strong recovery in submarine transmission On-going dynamism in South America, Korea, Lebanon, Turkey Positive development in transport segment Transformation project office in place Continuing volume pressure in D&I Europe and North America Further reduction of utilities CAPEX in Europe O&G projects delayed in North America In this context, OM expected between 130M and 150M EBITDA (*) target between 285M and 305M (*) Operating margin before depreciation

11 Steps to Reminder of main levers towards 2015: High Voltage Variable cost savings Mature markets Fixed cost reduction Innovation Attractive markets OM objectives (*) in M status On-going PMO now in place All initiatives launched Some benefits already achieved Local plans launched in H1 EU consultation launched today APAC under reorganization Harnesses OFCC pulled up by 4G Smartgrid development for accessories Improved momentum in most emerging countries Expansion CAPEX underway (Lebanon, Turkey, Chile) Integration of Yanggu on-going Recover timing differences (incl. LAN in the US) Delays in O&G projects in the US On-going other initiatives (incl. possible disposal of loss making entities) The Group remains confident in its mid-term perspectives (*) as presented in the FY12 and HY13 presentations

12 XXXXXXXXXXXXXXXXX Operational initiatives to support strategic positioning

13 13 Actions already launched Strengthen top management Turnaround submarine transmission activity (stable operations and order intake) Develop strategic segments in attractive markets (Harnesses, O&G Korea, South America) Implement direct cost reduction programs Local restructuring plans in mature markets already launched (>160 positions cut in Germany, Australia, Switzerland) Acceleration of 2 reorganization initiatives Focus on Europe initial communication of the reorganization project to the employee representative bodies today Reorganization in APAC

14 14 1 st initiative : Project to reorganize Nexans Group activities in Europe to restore competitiveness A 3 fold reorganization project I. Industry Market Line Europe II. Land High Voltage Cables III. R&D and Support functions

15 A comprehensive project for Europe 15 Objective: Maintain sales based on an optimized footprint and streamlined support functions Summary of impacts 1/ Reduction of headcount Main impact in 5 countries : ~10% of positions impacted 2/ Downsizing of footprint 15 sites impacted: production stopped on 1 site 3 plant closures 2 production sites materially downsized 2 small sites shutdown Load and production redistributed Jobs cut -468 Jobs created 39 Headcount net / Rationalization of support functions: Sales & Marketing, Finance, Communication, IT, Purchasing, HR 4/ Strengthening of R&D

16 A three fold reorganization project 16 Industry- Europe Land High Voltage R&D and support functions I. Industry Market Line Europe Rationale High market fragmentation : 18 different segments Strong products dispersion and overcapacity in many of the 11 European factories Initiatives Concentrate on 7 strategic segments (Aerospace, Rolling Stock, Shipbuilding, Automation, Windmill, Defense, Medical), key customers and a reduced number of products Adapt the European production capacity to estimated needs Consolidation of Automation by moving from 3 to 2 sites (Italy and Germany) Production stopped on 1 big site (France) and transferred (France & Germany mainly) Consolidation of the footprint in Switzerland (1 site shutdown, production transferred mostly locally) Stop metallurgy operations on 1 site in Germany

17 A three fold reorganization project 17 II. Land High Voltage Industry- Europe Land High Voltage R&D and support functions Rationale Increasing market regionalization through local productions up to 220kV systems Production overcapacity worldwide and severe price drop on all markets including in Europe Initiatives Streamline the LHV service activity to integrate it in a more competitive global project offering, while reducing costs Adapt and optimize the industrial footprint in Europe, currently spread over 4 plants (3 in cables, 1 in accessories ) in Belgium, Germany and Switzerland. Consolidate all EHV production (AC/DC markets) on 1 site Consolidate other MV/HV cables for AC on 1 site to be downsized (Germany) Consolidate accessories and shutdown of 1 site (Switzerland) Total capacity down from 7 to 4 CV lines in HV, ie 50% capacity reduction

18 A three fold reorganization project 18 Industry- Europe Land High Voltage R&D and support functions III. R&D and support functions R&D: reinforce our leadership on innovation Initiatives Lyon Nexans Research Center (NRC) to be strengthened through additional engineering skills and technical means Set up of 7 competence centers across Europe, dedicated to specific market segments, for product development and support to Operations. Regroup all Superconductor activities from 2 to 1 site in Germany, allowing to increase the synergies and favor critical size Support functions: standardize and streamline Rationale Adapt internal organization to current market conditions and search for more efficiency Initiatives Roll out of an integrated Market Line Management model (Sales & Marketing, Supply chain, and industrial operations), to all European countries Streamline Finance, Communication, IT, Purchasing and HR functions through more standardization and mutualization

19 Social Process Prerequisite 19 Compulsory social procedures Consultation at European level: Nexans European Work Council (NEWCO) Consultation at National and Local levels: Works Councils and/or Unions for the plan in each of 5 countries Consultative opinion These procedures will be initiated in parallel From October 15: NEWCO From October 15 & 16: Country Works Councils Potential timeline NEWCO opinion targeted by end 2013 Local Councils opinion targeted by Q1 14

20 Expected timetable 20 Targeted Social Calendar (*) Oct 13 Dec 13 Q1 14 NEWCO (EWC) FRANCE GERMANY SWITZERLAND BELGIUM Target NEWCO Opinion 4 months legal (France) ITALY NEWCO = Nexans European Works Council Project Potential implementation (*) Potential calendar subject to the Employee Representatives Bodies Consultations

21 21 2 nd initiative: reorganization in APAC Rationale: opportunities for more integration and specialization within the region to deliver more growth and savings Initiatives: China: Leverage our acquisition in Yanggu to penetrate the domestic market and develop supplies to Pacific area Regroup production of 2 current sites on one unique site in Shanghai: a new plant dedicated to Industry market under construction Korea: Leverage market position with naval shipyards to develop O&G sales Australia: Restructure supply chain: adapt local production and source supplies from best competitive source Net impact on headcounts: >200 job cuts

22 Savings impact of restructuring plans 22 The targets of savings for 2015 and 2017 are confirmed as previously communicated In M Plans rolled out in H1 13 Europe 2013 ROW Total Anticipated return in OM of which by end Payback expected (years) 3,0

23 XXXXXXXXXXXXXXXXX A 284M rights issue to improve the financial structure of Nexans (Holding)

24 Strengthen the capital structure to face the challenging environment A rights issue to leverage the operational upturn 24 Restore financial ratios Gearing deteriorated over time including the impacts of non operating items (such as CTA s or IAS 19) Improve capital structure and reduce Net debt/ebitda ratio vs. major peers, as well as restore adjusted debt to capital to lower levels Strengthen the group financial structure Sustain credit profile Support credit rating and optimize financing costs, in particular through, subject to market conditions, repurchase or repayment of local debts (which may amount to approximately 100 million euros) or financial instruments of the Group Increase financial flexibility through long-term access to diversified sources of financing Give flexibility in the execution of our strategic initiatives Peak of cash consumption in FY14 due to, among others, CAPEX plan of 600M Focus on organic growth With the support of the main shareholders Quiñenco Group and Bpifrance Participations SA More robust balance sheet Optimized financing and flexibility

25 Terms of the capital increase of Nexans (Holding) 25 Size 284M rights issue Rationale More robust balance sheet Optimized financing and flexibility Placement Transaction primarily dedicated to existing shareholders Share capital increase with shareholders preferential subscription rights Irrevocable entitlement or entitlement subject to a reduction Public offer in France Private placement outside France Terms of the rights issue Parity: 3 new share for 7 existing shares 12,612,942* new shares representing 42.9% of share capital Subscription price: per new share Representing a 38.3% discount to TERP Preferential subscription right s theoretical value of based on closing price of Nexans share on October 14, 2013, i.e euros * This amount may be adjusted in case of exercise of stock options

26 Subscription undertakings and intentions of main shareholders 26 Subscription Undertaking and Underwriting Subscription undertakings by main shareholder: Invexans (Quiñenco Group) by irrevocable entitlement, for 100% of its rights, c % of the total size of the offering Invexans commits to subscribe any unsubscribed shares up to 24.9% of the capital, post rights issue, and reserves its right to increase its stake up to 28%, during or outside the subscription period, through the purchase of shares and/or preferential subscription rights, in accordance with the March 2011 shareholders agreement amended in November 2012.These commitments illustrate the main shareholder s confidence in the Group s strategy Bpifrance Participations SA intends to subscribe at least for 100% of its rights, c.5.5% of the total size of the offering Total size excluding Invexans irrevocable entitlement is fully underwritten by the syndicate of banks Lock-ups Invexans: 180 days subject to customary exceptions Nexans: 180 days subject to customary exceptions Joint Bookrunners BNP Paribas Crédit Agricole Corporate & Investment Bank

27 Timetable of the rights issue 27 AMF Visa on the Prospectus 14 October 2013 Detachment of the preferential subscription rights 16 October 2013 at close Opening of the subscription period 17 October 2013 End of the subscription period 30 October 2013 Announcement of final results 6 November 2013 Settlement/Delivery Admission of new shares to listing on Euronext Paris 8 November 2013