2012 First Half-Year Results
- Sales organic growth of 3.4%1) excluding Transmission, +0.2%1) for the Group
- Operating margin rate at 3.6%2)
- Plan implemented allowing a gradual return to normal production of submarine high voltage cables
- Net debt at 678 million euros after acquisition of AmerCable and seasonal effect of working capital needs
- Increase of the operating margin rate expected for the second half of 2012
Paris, July 25, 2012 – The Nexans Board of Directors met on July 24, 2012, under the chairmanship of Frédéric Vincent, to approve the Group’s consolidated financial statements for the first half of 2012.
Sales for the first half of 2012 totaled 3.577 billion euros compared with 3.527 billion euros for the first half of 2011. At constant non-ferrous metal prices3), sales amount to 2.398 billion euros compared with 2.287 billion euros for the first half of 2011, that is a 0.2%1) organic growth (3.4%1) excluding Transmission)
The operating margin comes to 87 million euros, or 3.6% of sales at constant non-ferrous metal prices, compared with 5.1% in 2011. The difference is primarily attributable to the deterioration in the profitability of Transmission activities whereas the profitability of the other businesses improved slightly.
The 2012 first-half operating profit comes to 74 million euros. Operating income was negative 81 million euros in the first half of 2011 due to, among other things, a 200 million euros reserve relating to the ongoing EU proceeding for anticompetitive behavior in the sector of submarine and underground power cables as well as the related accessories and services.
The second quarter of 2012 is marked by an improvement of the Transmission activities and the stabilization of the Group’ other activities at the first quarter level. It shows a slight increase compared to second quarter 2011.
The financial charge comes to 56 million euros compared with 51 million euros in the first half of 2011, and the tax charge amounts to 5 million euros compared with 19 million euros for the same period a year earlier.
On this basis, net income (Group share) for the first half of 2012 is 13 million euros. It was a net loss of 151 million euros at June 30, 2011 because of the above mentioned reserve.
The consolidated net debt comes to 678 million euros at June 30, 2012, compared with 222 million euros at December 31st, 2011. This increase is attributable to the acquisition of AmerCable for 211 million euros, the seasonal working capital needs and the deferment in invoicing in the Transmission activities.
Moreover, implementation of strategic initiatives designed to strengthen the Group continued during the first half. The integration of AmerCable unfolds very positively and initial synergies have been recorded.
The preparation of the construction phase of the high voltage plant in the United States got underway in the second quarter on schedule.
Finally, the process involving the setting up of a cable business joint venture with Yanggu in China advanced in the first half, and the Group is expecting to finalize this operation in the coming weeks.
Commenting on the 2012 first-half results, Frédéric Vincent, Chairman and CEO, said:
“After a first quarter marked by significant production difficulties for submarine high voltage cables, the situation improved markedly in the second quarter with a gradual return to normal production status. In this business, the operational difficulties encountered in the first quarter required that we implement a major action plan to rectify profitability structurally. This action plan should enable the Group to reestablish a regular level of production in this business by the end of 2012 and to regain expected operating performances for this type of activity by the end of 2013.
In a European environment that remains uncertain, the Group expects a slight organic growth in sales for the year. Operating margin for the second half of 2012 should increase significantly considering the improvements in the Transmission activities recorded in the second quarter. Debt at year end should come out to a level close to that of June 30, after integration of the Chinese acquisition Shandong Yanggu and assuming copper prices comparable to June 30”.
Key figures for the first half of 2012
|(in millions of euros)||At constant non-ferrous metal prices|
|H1 2011||H1 2012|
|Operating margin rate (% of sales)||5.1%||3.6%|
|Net income (Group share)||(151)||13|
|Diluted earnings per share (in euros)||(5.29)||0.46|
Detailed analysis of activity by business segment
Sales by business segment
|H1 2011||H1 2012||Organic growth|
|(in millions of euros)||At constant non-ferrous metal prices||At constant non-ferrous metal prices|
|Transmission, Distribution & Operators||1,024||1,006||-4.0%|
|Distributors and Installers||604||652||4.9%|
Operating margin by business sector
|(in million of euros)||H1 2011||H1 2012|
|Transmission, Distribution & Operators||68||23|
|Distributors and Installers||32||43|
Transmission, Distribution and Operators
Sales for the Transmission, Distribution and Operators segment came to 1,006 million euros in the first half of 2012, that is, an organic contraction of 4%. This change results from varying trends between Transmission activities on the one hand, and Distribution & Operators on the other.
Land high voltage
The land high voltage business recorded a slight growth in the first half of 2012 compared with the same period in 2011. The competitive environment remains difficult, especially in the Middle East. The operating margin for this business was also affected in the first half by the non-resumption of installation works in Libya, as the necessary security conditions were not sufficient in this country.
At the end of June 2012, the order backlog represented approximately one year’s activity.
Submarine high voltage cables and systems
The first half of 2012 was marked by a slower than expected production start-up rate for submarine high voltage cables and systems. These difficulties are reflected in invoicing delays that cannot be compensated in the second half given the high workload rates at the Halden plant in this activity.
The activity’s operating margin has suffered from these invoicing delays and lighter installation activity.
Given this situation, the Group launched an action plan aimed first at restoring production stability at its Halden plant in Norway by the end of 2012. The causes of these issues have been identified, the key processes have been isolated and are subject to a progressive containment. The plant’s organization has been strengthened. In a second step, the Group's objective is to find, by the end of 2013, a stabilized operating mode. At the end of the first half of 2012, the order backlog for this segment represented 1.8 years of activity.
Sales of low and medium voltage cables and accessories for the power distribution network market came to 565 million euros for the first half of 2012. This reflects slight organic growth compared with the same period 2011.
Europe, which accounts for about 48% of the segment, is still growing thanks to the contribution of France and Scandinavia, and despite business contracting in Germany, Italy and Benelux. In North America (about 7% of this segment), the Group is benefiting from strong demand resulting in double-digit organic growth for the period. In Latin America (about 18% of the segment’s sales), the activity stabilizes at a significant level, equivalent to the first half of 2011. Activity has contracted slightly in the Asia-Pacific area (about 12% of this segment’s sales) mainly because of the unfavorable climate conditions in Australia. Finally, the Middle East, Russia and Africa area (15% of this segment’s sales) has reported strong growth compared with the first half of 2011 (which had suffered a significant slowdown because of the Arab Spring).
“Operators” business sales came to 94 million euros in the first half of 2012, representing an organic growth of more that 10% from one year to the next. For copper cables, business is driven by the strong demand in South America while the growth reported for fiber optic cables and components is mainly attributable to the vigorous demand in Europe.
In all, the operating margin of the Transmission Distribution & Operators segment comes to 23 million euros, or 2.3% of sales at constant non ferrous metal prices, a sharp contraction compared with the same period a year earlier.
Industry business sales come to 585 million euros for the first half of 2012, that is, an organic growth of 3%.
Harness business, mainly for premium German automakers, is continuing to grow steadily. In the transportation segment, aeronautical business increases while rail is suffering from the absence of the high-speed segment’s recovery in China. Shipbuilding, a large part of which is now given over to the platforms and FPSO dedicated to the oil & gas market, is continuing to grow. On the other hand, capital goods and automation have contracted, mainly in Europe. Lastly, the Resources segment (oil & gas, mining and renewable energies) continues its double-digit growth. The integration of AmerCable, now renamed Nexans AmerCable, is very satisfactory and contributes positively to the segment results.
The operating margin rate is 3.5% of sales at constant non ferrous metal prices, that is, a comparable level to that recorded for the first half of 2011.
Distributors and Installers
The Distributors and Installers segment sales come to 652 million euros for the first half of 2012, that is, an organic growth of nearly 5%.
Europe, which accounts for about 40% of this segment, has again seen its business slightly set back. This trend mainly concerns LAN cables, a sector suffering from lack of projects in commercial real estate and data centers. Power cable business is overall steady thanks to the Group’s high exposure in Northern Europe, while the trend in Southern Europe continues to head downwards. North America (24% of this segment’s sales) has reported robust growth of about 6%. The weakness of the LAN market is more than offset by buoyant power cable business in the United States and Canada. In South America (12% of this segment’s sales), business is growing at a double-digit rate, underpinned by strong demand in Brazil, despite the increased pressure from competitors in this country. The Middle East, Russia and Africa area (10% of this segment’s sales) is also experiencing double-digit growth in Turkey, Lebanon and in Morocco. There is nonetheless increasing pressure from competitors in Turkey and Morocco. Lastly, in the Asia-Pacific area (14% of this segment), the Group is benefiting from its commercial repositioning in Australia, and business continues to be strong in South Korea.
Bolstered by higher volumes, the operational profitability is higher than in the first half of 2011, reaching 43 million euros, or 6.6% of sales at constant non ferrous metal prices.
The “Other activities” segment, which now includes Electrical Wires, reported sales of 156 million euros, unchanged to 2011. The operating margin is close to breakeven.
- September 11, 2012: Individual shareholder information meeting in Strasbourg (France)*
- November 21st , 2012: Individual shareholder information meeting in Paris (France)*
- October 22nd , 2012: Third quarter 2012 sales figures
* Approximate date to be confirmed
The presentation of the half-yearly results, the financial statements for the period ended June 30, 2012, approved by the Board of Directors at the July 24, 2012, meeting and the half-yearly activity report are available on the Nexans web site www.nexans.com. The statutory auditors issued their summary audit report on July 24, 2012.
Readers are also invited to consult the 2011 Reference Document, and the half-yearly activity report which presents the Group’s risk factors, especially those related to the authorities’ antitrust investigations in Europe, the United States, Canada, Brazil, Australia and South Korea for anticompetitive behavior in the submarine and underground power cable sectors, and the related accessories and services. An unfavorable outcome of these investigations and follow-on consequences could have a material adverse effect on the results and the financial situation of the Group.
The forward looking statements in this press release depends on the risks and uncertainties, known and unknown as of this date, that may impact on the Company’s future performance, and which may differ markedly from that presented here.
In addition to risk factors and recovery of the Transmission business discussed above, the main areas of uncertainty for the second half of 2012 principally concern:
- The economic environment in Europe;
- The resilience of energy infrastructure markets in emerging countries;
- Growth on renewable energy markets and in Oil & Gas, as well as customers’ investment programs in these markets;
- The recovery of industrial cables in some transportation segments, e.g., shipbuilding and rail growth in China;
- The Group’s ability to improve its productivity;
- The absence of any impact in 2012 of the antitrust investigations opened in 2009;
- The customer credit risk, especially in Europe and Egypt, and most particularly in Greece where the credit risk is no longer insurable;
- The recovery of business in the Middle East and North Africa, especially in Libya where the performance of certain contracts has been set back.
1) First-half 2011 sales on the basis of comparable data correspond to constant metal sales, recalculated after adjustments for comparable scope and exchange rates. The exchange effect on sales at constant non-ferrous metal prices amounts to 56 million euros and the scope effect amounts to 51 million euros.
2) Management indicator used by the Group to measure its operating performance. The operating margin rate as a percentage of sales at constant non-ferrous metal prices.
3) To neutralize the effect of variations in the purchase price of non-ferrous metals and thus measure the underlying sales trend, Nexans also calculates its sales using a constant price for copper and aluminum.
- Consolidated income statement
- Consolidated statement of comprehensive income
- Consolidated statement of financial position
- Consolidated statement of cash flows
- Information by reportable segment
- Information by major geographic area
- Information by major customer
With energy at the basis of its development, Nexans, worldwide expert in the cable industry, offers an extensive range of cables and cabling solutions. The Group is a global player in the energy transmission and distribution, industry and building markets. Nexans addresses a wide series of market segments: from energy and telecom networks to energy resources (wind turbines, photovoltaic, oil and gas or mining…) to transportation (shipbuilding, aerospace, automotive and automation, railways...). Nexans is a responsible industrial company that regards sustainable development as integral to its global and operational strategy. Continuous innovation in products, solutions and services, employee development and commitment, customer orientation and the introduction of safe industrial processes with limited environmental impact are among the key initiatives that place Nexans at the core of a sustainable future. With an industrial presence in 40 countries and commercial activities worldwide, Nexans employs 25,000 people and had sales in 2011 of 7 billion euros. Nexans is listed on NYSE Euronext Paris, compartment A. For more information, please consult: www.nexans.com or www.nexans.mobi