Group presentation October 2008

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Transcription:

Group presentation October 2008

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 assumptions, uncertainties and other factors which may cause the Group s actual results, performance and objectives to be materially different from those indicated d by the forward looking statements. These forward looking statements depend, amongst other things, on the following assumptions and risks : (1) the rates of economic growth in the areas where Nexans operates remaining at current levels until 2009; (2) the continued strong demand of the energy infrastructure market, in particular in developing countries, and in the Oil & Gas sector; (3) the possibility to pass on to final customers increases in the costs of raw materials, energy and transport; (4) the management of risks associated with sales in turnkey projects; (5) the effect of currency fluctuations being neutral; (6) the Company being able to modify customer and supplier payment terms relating to metals; (7) the Company being able to reduce its cost base through realization of restructuring actions in the anticipated time frame; (8) the Company being able to achieve productivity it improvements; (9) retention ti of key customers, (10) the absence of substantial ti capacity increases by competitors in Nexans key markets, (11) the Company successfully integrating acquisitions ; and (12) the Company being able to adapt its organization. Investor relations : Michel Gédéon michel.gedeon@nexans.com Angéline Afanoukoe angeline.afanoukoe@nexans.com Tel: 33 1 56 69 84 81 - Fax: 33 1 56 69 86 40

AGENDA I. Nexans in the Cable Industry II. Financial performance III. Strategy & MT Targets

A large and diversified industry A worldwide market of $156 bn in 2007 Three end-user markets Building Industrial, Public & Residential Buildings Medium & Low Voltage energy cables Data aa & communication ca o private networks (LAN,..) Industry Automotive, ti Shipbuilding, Aeronautics Oil & gas and petrochemicals Automation, mining, handling, nuclear.. Infrastructures Energy networks (T&D) Telecom networks Transport infrastructures (Railway networks, airports..) 3

Industry dynamics Healthy long term drivers $123 Bn 9.6 12.3 30.4 47.3 19.6 2003 4 Worldwide Market (at 2007 metal prices) $156 Bn 7.7 17 41.5 60.8 23.3 2007 5.7 $181 Bn 6.3 19.6 50.2 70 26.9 2011 8 Change 07-11 + 40 % Optical Fiber - 18 % Telecom Infrastructure + 16 % Telecom LAN & Industry + 21 % + 15 % + 16 % Energy Infrastructure Energy Building & Industry Winding Wires Energy networks : Long-term drivers Need to replace aging lines and interconnect the networks Electrification programs in emerging countries ti New forms of energy production Oil & Gas Offshore, onshore Development of international trade and transportation Shipbuilding, aeronautics, handling.. Railways infrastructures Safety / Standardization Telecom : Favorable product mix evolution Strong growth in emerging countries Source : CRU April 2008, Nexans estimates 4

Nexans: the world world-wide wide market leader 2007 Cable & Wire sales in M main listed players (proforma for Nexans, GC and LS) 8,005 (6,512 exc. EW) Madeco W&C 5,118 4,300e PDIC 2,816 2,367 1,484 1,409 1 409 4,800e o/w SE~ 2,200e, 3,300e p GC Belden Commscope Prysmian y Draka Leoni 2,300e 2,000e 1,549 1,198 El Sewedy Cables LS Automotive wiring systems breakdown non available Telecom Cables Energy Cables Note : 1 = 1.37 USD Electrical Wires Sources : Financial communication of corresponding companies, Nexans estimates 5 SEI Furukawa FujikuraTaihan

Nexans positioning : a full range approach Electrical Wires Energy Telecom ETS Infrastru ucture Energy Public Networks 38 % of Sales including HV insulated cables & Umbilicals Copper & Fiber Networks, Accessories 5 % of Sales END MARK ustry Ind Wirerod (mainly) & Bare conductors 7 % of sales Industrial Applications, Electronic and data communication Cables 20 % of Sales Building MV and LV energy cables 24 % of Sales Private Networks / LAN (Data & Communication) 6 % of Sales N 1 Worldwide N 1 in Europe Note : percentages based on HY 2008 Sales at constant metal 6

A multi-regional strategy Our markets are of multi-regional nature with a need for local presence Europe 51 % of sales* Leader strategy Above 10% market shares North America 17 % of sales* Asia-Pacific 12 % of sales* Challenger position, present only in selected business segments : Strong positions in Canada (Energy) 15% of LAN market in the USA Selective approach in North-East Asia Profitable market shares on selected business (HV, Shipyards,..) Leading player in Australasia ROW 20 % of sales* Leading player on selected regions Middle East, South America * based on 2007 Sales by destination, at actual metal prices proforma with Madeco 7

AGENDA I. Nexans in the Cable Industry II. Financial performance III. Strategy & MT Targets

Nexans is growing faster than its markets organic growth of Cable activities +9.3% /year since 2003 vs +5.2% market CAGR (*) In M Sales (at constant metal prices) Organic growth by cable types 4,822 3,924 2003 2007 (*) Compounded Annual Growth rate 9

Strong improvement of profitability OM rate from 2.3% in 2003 to 8.5% of Sales (*) profitability restored both in Energy and Telecom cables Operating Margin In M 12% OM rate (*) by cable types 10% 9,7% 8% 7,8% 9,3% 91 2003 409 2007 6% 4% 2% 4,5% 4,3% 3,3% 5,9% 5,6% 4,4% 7,7% 8,5% 5,8% 0% 2004 2005 2006 2007 (*) Operating Margin on Sales at constant metal 10

Nexans : a company that has been transformed Massive restructuring (2001-2005) 2005) Selective M&A policy and organic development focused on: Higher added value segments Fast growing geographic areas Portfolio turnover Powerful operating leverage created Strong financial structure maintained 11

Geographic & business mix re-orientation Divestitures Winding Wires USA August 2004 Simcoe April 2007 Distribution Norway June 2005 Tianjin July 2007 Winding Wires Europe February 2005 January 2007 Agro May 2002 Distribution Switzerland February 2006 Telecom Copper Santander February 2008 590 M yearly sales OUT 12

Geographic & business mix re-orientation Acquisitions & Joint Ventures TVG January 2007 PETRI June 2002 Liban Cables July 2004 Daesung Cable June 2001 Kukdong December 2002 Minority Repurchase in Korea November 2006 Viscas Japan (JV) July 2006 Furukawa cabos de Energia January 2003 Madeco Wire&Cables November 2007 Cabloswiss July 2004 Confecta Group January 2006 Intercond 1 Mds yearly sales IN June 2008 Nexans Polycab February 2008 LiOA Vietnam January 2006 Olex November 2006 13

Higher exposure to specialty products In M Specialty Product of which Priority segments: Specialty products in Sales : 2,328 1,932 1,730 327 362 661 + 18 % + 9 % + 11 % 386 393 734 + 23 % + 9 % + 22 % 476 430 893 2005 2006 2007 in Sales : 41 % 43 % 48 % OEMs Naval Shipboard Automotive Robotics Nuclear Handling BUILDING LAN Safety Heating cables INFRASTRUCTURE High Voltage Umbilicals l Energy accessories Railway xdsl FTTx Windmill Development plan in place for each priority segment Constant monitoring o through Country organization a o Primary target of M&A operations 14

Higher exposure to fast growing areas in M X 6 in 5 years Sales from high growth areas (*) at constant metal price (M ) 30% through internal growth 70% through acquisitions 218 + 140 % 522 + 65 % 860 + 49 % 1 280 2002 2005 2006 2007 Pro-forma with Olex Pro-forma with Madeco (**) % of total Sales : 5 % 12 % 18 % 25 % (*) Including China, Vietnam, South Korea, Middle-East, Morocco, Australasia and Latin America (**) based on estimated 2007 Sales for Madeco, 1 = 1.35 USD 15

Strong financial structure protected (in Million ) Dec. 31, 07 June 30, 08 Long term fixed assets 1,192 1,209 of which goodwill 192 201 Deferred tax assets 48 45 Non-current assets 1,240 1,254 Working capital 1,222 1,556 Assets (net) held for sale 105 1 Total to finance 2,567 2,811 Net financial debt 290 457 reserves 434 448 Deferred tax liabilities 85 105 Shareholder s equity and Minority interests 1,758 1,801 Total financing 2,567 2,811 Gearing 25 % Leverage (Net debt / 12m EBITDA) = 0.8 x 16

AGENDA I. Nexans in the Cable Industry II. Financial performance III. Strategy & MT Targets

Our medium term objectives A Nexans group: More Profitable Less Cyclical More Streamlined With more Synergies between businesses 18

A clear portfolio strategy Focus on four core businesses Energy infrastructures Industry (Energy & telecom) Building Telecom LAN Consolidating our leadership Commercial development Expanding the offer Enhancing the product mix Arbitrage within the Telecom activities Telecom Infrastructures Downsizing Telecom Copper activities, opportunistic attitude in Fiber Cables Down-sizing of high copper content activities Electrical l Wires Refocusing on internal needs only 19

Energy infrastructure: greater visibility and improved profitability Solid fundamentals Position of co-leader in the world Powerful growth drivers : Network renovation New energy sources Emerging economies Marked increase in order backlog 1 year 2004 2007 2 years' business in High Voltage and Umbilical Increasing weight of High Voltage (12 % of Sales in 2007) ~ 570 M + 45% Appropriate resources Capacity X 2 in two years for HV submarine ~ 390 M Submarine & umbilical Underground Aerial 2005 2006 2007 In 2008 : - Sustained growth - Increasing contribution to Group profits 20

Industry: High potential for growth and profitability Appropriate resources Backed by growth sectors Oil & Gas : New sales organization for global markets 2007/2011 Capex of this industry increased Multi-site offering structure by 25% vs 2002/2006 period Capacity freed up by re-examining customer and product portfolios Shipyards : order backlog X 3 in 5 years (Hyundai, Mitsubishi...) Other Transportation : in M 1,005 + 42% Alstom : order backlog entries doubled in 805 2007 Petrochemicals 706 Airbus 5 years' order backlog & nuclear Transportation Mining Industries Harnesses Oh Other industries 2005 (*) 2006 (*) 2007 OP margin rate 3 % 56 5.6 % 87 8.7 % In 2007 : Profitability up sharply In 2008 : - Continued growth - Potential for higher margins (*) Restated for segmentation changes made in 2007 21

Building: strength of Nexans business model A balanced product mix 2002/2007 : a different business model Industrial & ~65% Commercial Significant changes: Residential Building Construction ~35% Development of product portfolios Geographic redistribution residential US very limited : 30 M /year Industrial restructuring g( (Nexans = balanced breakdown in Europe (Maintenance & renovation = 43 % of the market) 26 M over 4 years) A geographical balance In % of Sales (*) France - Benelux 35 % Scandinavia 9 % Other Europe 24 % North America 15 % Asia-Pacific 7 % Emerging economies 10 % In 2008 : - Pressure on margins (observed in North America and likely l in Europe) - Business model holding up (*) at constant metal prices 22

Telecom: clarified positioning LAN Systems offering under development Progression of 10 Gigabit Confirmed in Core Business activity it Fiber Optic Rollout in progress in Europe Technology and service offering Potential partnerships Growth opportunities Telecom copper Infrastructure Lack of critical size Divestiture of Santander plant completed in May 2008 23

Electrical Wires: ongoing g down-sizing Faster down-sizing i Weight in Nexans Sales (*) 37 % reduction in external sales in 2007 Improved margins (prices and costs control) 18 % 10 % of Sales 2006 2007 Optimized capital employed Capital employed reduced to Reduction program stepped up: ~180 M at December end 2007 Objective: minimal external sales in 2009 24 (*) at constant metal prices

2009 objectives Operating margin 8,5% ~10% under favourable economic environment 4,4% 5,8% ~ 7% under depressed economic environment Sales 2005 Organic growth of Cable activities +8,2% +12,1% 2006 2007 2008 2009 +6% /year New targets including announced M&A operations Achieved results Free Cash Flow excluding metal impacts (*) 2005 + 33 + 275 (74) 2006 2007 2005 2006 2007 2008 2009 (*) Free Cash Flow excl. metal = Cash from operations + WCR at constant metal Capex - Dividends 25

Q3 08 trading update : Sustained growth in cable activities In M 7.4 % organic growth of cable activities (*) Sales (**) Electrical Wires down-sizing Sales at constant metal prices North America 18% by destination at Sept. 08 end 13% Asia Pacific 17% Rest of World Cable 1,166 FX activities 1,165 (34) Consolidation scope Electrical (10) Wires (32) 75 + 7.4 % 52% Europe Q3 07 Q3 08 (*) Excluding Electrical Wires (**) at current metal prices 26

Outlook for 2008 Assuming continuation of first-half 2008 economic trends Above 6 % organic growth in cable activities for the year Increase of operating margin compared to 2007 Net debt between 500 M and 600 M after acquisitions financing (Intercond et Madeco) and including the cancellation of the harnesses divestiture 27

Appendices

HY 2008: Break-down by business segments Sales by business segments at constant metal and exchange rates Operating margin by business segments Energy infrastructure 5 % 6 %7 % 7% 1% 3% 24 % 38 % Industry Building Private networks (LAN) Telecom infrastructure 24% 20 % 18% Electrical wires 47% 29

Sales & Operating margin by business In M HY 2007 HY 2008 Sales* OM % Sales* OM % Energy infrastructure 784 56 7.2 % 919 106 11.4 % Industry 510 39 7.7 % 482 41 8.6 % Building 589 65 10.9 % 571 55 97 9.7 % Private network (LAN) 147 18 12.3 % 149 15 10.4 % Tl Telecom Infrastructure t 129 9 71 7.1 % 118 8 68 6.8 % Other 5 (4) - 5 (7) - Total Cable 2,164 183 84 8.4 % 2,244244 218 97 9.7 % Electrical Wires 287 4 1.4 % 175 2 1.1 % Total Group 2,451 187 7.6 % 2,419 220 9.1 % * Sales at constant metal prices 30

Very high growth in Energy networks Organic growth of Cable activities 2007 Q1 Q2 HY 08 Q3 Energy infrastructure 10.2% 16.4 % 22.6 % 19.7 % 22.7 % Industry 17.5 % 3.8 % 6.1 % 4.8 % - 2.3 % Sustained Energy infrastructure activity Building 10.4 % -0.7 % -7.7 % -4.2 % -3.5 % Private networks (LAN) 13.9 % 2,5 % 3.4 % 3.2 % 2.7 % Telecom infrastructure 9.9 % -8.5 % 3.5 % -2.2 % 1.5 % Total Cable 12.1 % 6.4 % 7.8 % 7.2 % 7.4 % Growth in priority industry segments Slow down in Building increased by base effect Electrical Wires - 32.8 % - 36.1 % -30.3 % 31

Higher profitability in two of our main core businesses Operating margin rate HY '07 HY '08 Energy Infrastructure 7.2 % 11.4 % Energy infrastructure Industry 7.7 % 8.6 % accelerating Building 10.9 % 9.7 % Private networks (LAN) 12.3 % 10.4 % Consolidation of industry margins Telecom infrastructure 7.1 % 6.8 % Total Cable 8.4 % 9.7 % Electrical Wires 1.4 % 1.1 % Building margins holding up Total Group 7.6 % 9.1 % 32

Highly reactive to cost hikes Operating costs Impact HY 2008 (*) Actions margin on variable costs HY 08/ 07 Other fixed costs Payroll 8% Selecting Increase customers under control Productivity 13% 4% Energy, transportation Plastics and components 15% Copper and Aluminum 60% ~ 40 M ~ 20 M Partial pass through Full pass through Infrastructure : + 2.4 pts Industry : + 06 0.6 pt Building : - 0.3 pt HY 08: 3.3 Bn 100 % (*) Impact of rising costs at HY 2008 vs 2007 average Group: + 2.7 pts 33

Strong operating leverage maintained Excluding Electrical Wires (in Million ) June 07 June 08 Sales cable activities, at current metal prices 2,937 3,029 Sales cable activities, at constant metal prices 2,163 80 2,243 Margin on variable costs 687 751 Margin on variable costs (%) 31.8 % 33.5 % Indirect costs (*) (453) (481) EBITDA (**) 234 270 EBITDA margin (%) 10.8 % 12 % Depreciation (51) (52) Operating margin cable activities 183 35 218 Operating margin rate (on Sales at constant metal prices) 8.4% 9.7% 44 % (*) Includes factory indirect costs excluding Depreciation + R&D + SG&A (**) Operating margin before depreciation 34

Opportunities remain the same Growth potential Business model Profitability Financial structure Electrification needs worldwide Oil & gas infrastructure Transport needs Datacom private networks Global Constantly Solid and stable leader improving Cash flow Geography profitability and product Dividend Resilience redeployment constantly across the increasing cycles A consolidation player in the Financial Value creation industry flexibility + 9.3 % 33 % + 45 % Average organic growth 2003-2007 (*) (*) cable activity Contribution from high growth areas (**) (**) pro-forma with Madeco per year on average 2003-2007 Dividend: x 2 in two years Gearing: 25 % at end of June '08 35