Preliminary Consolidated Results for 2003: Increase in profits thanks to an upturn in the 4th quarter, in a still difficult economic climate

Nexans 2003 Annual Results

2003 Full Year Results - Presentation

Paris, February 2, 2004 - The Nexans Board of Directors, chaired by Gérard Hauser, met on January 30, 2004 and reviewed the preliminary consolidated accounts for 2003.

  • Based on constant non-ferrous metal prices, fourth-quarter sales reached 1,035 million euros, an increase of 6.8% (3.9% on a comparable consolidation scope) compared with the same period in 2002 and a 9.7% increase compared with the third quarter of 2003. This improvement is being felt in all geographical areas and main product areas of the Group.
  • Sales in 2003 totaled 4.046 billion euros.
    Sales calculated at constant non-ferrous metal prices, were 3.924*billion euros compared to 3.955 billion euros in 2002 (at constant exchange rates), i.e. a 0.8% drop (-2.7% on a comparable consolidation scope).(*To neutralize the effect of variations in the purchase price of non-ferrous metals and thus measure its effective sales evolution, Nexans also calculates its sales using a constant price for copper and aluminum.)
  • Operating profit stood at 91 million euros and net income was slightly over the breakeven point at 1 million euros following recognition of a non-recurring charge of 21 million euros in respect of the Winding Wires business. These results are after taking into account, as announced in July 2003, the impact of CRC 2002-10 Regulation relating to accounting for fixed assets and goodwill (depreciation and impairment); the latter being an early application of the IAS standards 16 and 36.
  • Without the change in accounting method, operating profit would have amounted to 58 million euros compared to 56 million euros in 2002 (a 3.5% increase), with a tangible improvement in the operating margin in the second half of the year (1.9% compared to 1% for the first six months), and net income would have resulted in a loss of 31 million euros compared to a loss of 40 million euros at December 31, 2002.
  • Net debt at closingstood at 23 million euros at December 31, 2003 compared to 52 million euros a year earlier, confirming the Group's ability to generate cash in times of crisis and marking a further reduction in its debt ratio.

Commenting on these preliminary results, Nexans Chairman and CEO Gérard Hauser said:

"In spite of a difficult economic environment and the persistent low level of industrial investment, and thanks to the upturn experienced at the end of the year, Nexans has - before the change in accounting method - managed to increase its operating profit. The Group is thus reaping the benefits of its rigorous management, continuing to reduce debt and increasing its operating margin, all of which put it in a favorable position to take advantage of the hoped for economic recovery in 2004.

With this in mind, Nexans aims to increase sales by approximately 3% at constant exchange rates and further increase its operating margin while maintaining its cash generation requirements. We continue to seek targeted acquisitions to enhance our business portfolio and develop avenues for growth with a view to achieving enduring profitability.�

Confident in the Group's financial stability and in its return to profitability, the Board of Directors expressed a favorable view of the management's proposal in principle to pay out a total dividend of euros 4.6 million, i.e. euro 0.20 per share. The dividend proposal to be made to the General Shareholders' Meeting will be made by the Board when meeting to approve the definitive financial statements.

Sales - 4th quarter and FY 2003

Q4/02

Q4/03

in millions of euros

2002

2003

1,035

1,089

Sales

4,302

4,046

969

1,035

Sales

(at constant metal prices and exchange rates)

3,955

3,924

519

577

Energy

2,089

2,143

129

137

Telecom

539

545

244

248

Electrical wires

1,029

957

77

73

Distribution

298

279

Having fallen for the previous 6 semesters, sales finally picked up during the fourth quarter of 2003, up 6.8% compared with the same period in the previous year and up 9.7% compared with the third quarter of 2003. At constant non-ferrous metal prices, sales reached 3,924 million euros for the year.


Preliminary consolidated income by business sector

in millions of euros
(at constant metal prices and exchange rates)

2002

Before change in accounting method 2003

2003

EBITDA (*)

201

190

190

Operating profit:

Energy
Telecom
Electrical wires
Distribution
Other

71
(35)
12
16
(8)

65
(7)
(3)
13
(10)

78
(1)
10
13
(9)

Operating profit:

56

58

91

Net income

(40)

(31)

1

Earnings per share in euro

(1.78)

(1.47)

0.06

Net debt

52

23

23

(*) Operating Profit before depreciation

In July 2003 Nexans announced its intention to implement, as of December 31, 2003, the French CRC 2002-10 regulation relating to accounting for fixed assets and goodwill (separate depreciation periods for each element of tangible asset, and impairment tests). These new methods represent an advance application of the IAS standards 16 and 36 and result in an operating profit of 91 million euros.

Restructuring costswere 41 million euros, corresponding to the completion of the
130 million euro restructuring program started in February 2002 aimed at sizing the Group's manufacturing base to market conditions. This item should return to normal levels (around 30 million euros) in 2004.

With the prospect of the possible full or partial disposal of its worldwide Winding Wires business, the Group considered it necessary to acknowledge a non-recurring charge of 21 million euros in its 2003 results to bring the book value of the assets of this business into line with their estimated market value.

After taking into account these effects, and other pertinent items, net income stood at 1 million euros, slightly above breakeven.

Taking into account the diluted weighted average number of shares during FY 2003 (after the share buyback operations), net earnings per sharestood at 6 cents (euro cents).

Before change in accounting method, Nexans' operating profit amounted to 58 million euros, i.e. more than double that recorded at June 30, 2003 and net income amounted to a loss of 31 million euros compared to a 40 million loss in 2002.

Analysis of operating profit by business sector (before the change in accounting method)

Power cables: Sales in the Energy sector accounted for 55% of Nexans' total sales.

They rose appreciably compared with the first half of 2003 and reached 2.143 billion euros for the year as a whole, practically stable compared with 2002 at comparable consolidation scope.

Operating profit for this business, before the change in accounting method, was 65 million euros, down 8.4% compared with 2002. The outstanding performance of High-Voltage and Umbilical Cables, up 60%, and the good performance of Energy Accessories were nonetheless unable to fully compensate for persistently low sales of Low-Voltage Cables for the Building market, particularly in France, Italy and Spain. Corrective measures have already been implemented in these countries.

Telecommunications Cables: Sales in the Telecom sector stabilized at 545 million euros in 2003.

Operating losses were reduced to 7 million euros from a loss of 35 million euros in 2002, having benefited from the recovery of the industrial cables and accessories businesses and from the impact of the restructuring programs carried out in 2001 and 2002 which led to a 21.2% decrease in indirect costs over two years. However, business in the infrastructure cables sector has proved to be worse than expected.

Electrical wires: Sales of the Electrical Wires activities were 957 million euros in 2003 compared to 1.029 billion euros at December 31, 2002, i.e. a 7% drop.

Affected by weak sales in the Winding Wires business, an operating loss of 3 million euros was incurred compared to a profit of 12 million euros in 2002, notwithstanding the satisfactory performance of the Wirerod business in some still difficult markets.

Considering the persistent difficulties encountered in the fiercely competitive Winding Wires market and its business activities' lack of critical mass in the North American market, Nexans is considering disposal, joint venture and partnership solutions for this business.


Analysis of sales and operating profit by geographical area

Sales at constant metal prices and exchange rates
(in Meuro)

2002

2003

 

Sales

OP

OP/Sales

Sales

OP*

OP/Sales

OP

OP/Sales

Europe

3,040

29

1%

2,959

32

1.1%

54

1.8%

North America

697

19

2.7%

659

15

2.3%

22

3.3%

Asia

107

4

3.8%

175

10

5.6%

12

7%

Rest of the World

111

4

3.4%

131

1

1.1%

3

2.6%

TOTAL

3,955

56

1.4%

3,924

58

1.5%

91

2.3%

*Before change in accounting method

Europe

Sales amount to 2.959 billion euros, down 2.6% compared with 2002, reflecting a sharp contrast between the favorable performance of the Nordic countries and weak sales in France, Italy and Spain.

Operating profit equals 32 million euros, up 10.3% compared with the prior year, supported by excellent results in High-Voltage Cables and Umbilical Cables in Norway and Belgium.

North America

Sales amount to 659 million euros compared to 697 million euros in 2002, essentially affected by the sharp downturn in Winding Wires business in the USA.

Operating income equals 15 million euros compared to 19 million in 2002. The area has benefited from the promising trend of private telecom network cables, a favorable evolution of the product mix towards high value-added products (Category 6), and the effects of the restructuring carried out in 2002. The weakness of the Winding Wires market combined with the disruption to operations due to restructuring nonetheless had a negative impact on income.

Asia

Sales rose significantly by 63% in 2003 to 175 million euros, largely due to the entry of Kukdong into the group.

Operating profit for the area more than doubled during the year, rising from 4 million euros in 2002 to 10 million euros in 2003. This performance is essentially due to the breakthrough achieved in the marine cables market in South Korea and the highly encouraging increase in business in Vietnam and China.


Financial calendar
  • March 12, 2004: Board of Directors' Meeting to approve the definitive financial statements.
  • April 20, 2004: Publication of the first quarter sales
  • June 3, 2004: Annual Shareholders' Meeting
  • July 20, 2004: Publication of 1st half sales and results

A full set of slides for the presentation of the results as well as a detailed presentation of the accounts are available on the Nexans Web site www.nexans.com

 

Appendices

  1. Profit and loss account
  2. Balance sheet
  3. Fund statement


Preliminary Results

I - Consolidated income statement

in millions of euros
 

2003

2002

2001

Net sales

4,046

4,302

4,777

Metal price effect

(122)

(206)

(310)

Net sales at constant metal price

3,924

4,096

4,467

Cost of sales

(3,383)

(3,571)

(3,833)

Gross profit

541

525

634

Administrative and selling expenses

(403)

(421)

(445)

R&D costs

(47)

(48)

(50)

Income from operations

91

56

139

Financial income (loss)

(31)

(31)

(33)

Restructuring costs

(41)

(90)

(36)

Other revenues (expenses)

(2)

23

3

Income before taxes

18

(43)

73

Income tax

7

10

(28)

Share in net income of equity affiliates

(1)

-

-

Consolidated net income before amortization of goodwill

25

(33)

45

Amortization and depreciation of goodwill

(14)

(2)

(2)

Minority interests

(10)

(5)

(13)

Net income (Group share)

1

(40)

30

       

Earnings per share (in euros)

0.06

(1.78)

1.22

Diluted earnings per share (in euros)

0.06

(1.74)

1.22

 

II - Consolidated balance sheet

in millions of euros

ASSETS at December 31

2003

2002

2001

Goodwill, net

23

39

38

Other intangible assets, net

4

7

6

Intangible assets, net

27

45

44

Property, plant and equipment

2,843

2,870

2,918

Depreciation

(2,059)

(2,071)

(1,997)

Property, plant and equipment, net

784

799

921

Share in net assets of equity affiliates

3

4

10

Other investments and miscellaneous, net

65

63

65

Investments and other non-current assets

68

67

75

TOTAL NON-CURRENT ASSETS, NET

879

911

1,040

Inventories and work in progress, net

556

628

637

Trade receivables and related accounts, net

744

761

861

Other accounts receivable, net

170

133

133

Accounts receivable, net

914

894

994

Marketable securities, net

102

33

87

Cash, net

1

135

190

Cash and cash equivalents

104

167

277

TOTAL CURRENT ASSETS

1,574

1,689

1,908

TOTAL ASSETS

2,453

2,600

2,948

 

in millions of euros

LIABILITIES AND EQUITY at December 31

2003

2002

2001

Capital stock (EUR 1 nominal value; 23,122,972 shares issued at December 31, 2003)

23

23

25

Additional paid-in capital

1,014

1,014

1,044

Retained earnings

(40)

(7)

(23)

Cumulative translation adjustments

(28)

26

53

Net income

1

(40)

30

Treasury stock

(28)

(25)

(33)

SHAREHOLDERS' EQUITY

942

991

1,096

MINORITY INTERESTS

103

88

104

Accrued pension and retirement obligations

260

253

257

Accrued contract costs and other reserves

120

143

157

TOTAL RESERVES FOR LIABILITIES AND CHARGES

380

396

414

TOTAL FINANCIAL DEBT

126

219

348

Customers' deposits and advances

51

37

48

Trade payables and related accounts

463

485

530

Other payables

387

384

408

TOTAL OTHER PAYABLES

901

905

986

TOTAL LIABILITIES AND EQUITY

2,453

2,600

2,948


III - Consolidated statement of cash flows

in millions of euros
 

2003

2002

2001

Net income

1

(40)

30

Minority interests

10

6

13

Depreciation and amortization

113

148

143

Changes in reserves for pension obligations, net

3

(3)

(2)

Changes in other reserves, net

(36)

(1)

(11)

Net (gain) loss on disposal of non-current assets

2

(23)

(3)

Share in net income of equity affiliates (net of dividends received)

1

-

-

Other

-

-

-

Cash flow provided by operations

93

87

170

Decrease (increase) in accounts receivable

17

112

204

Decrease (increase) in inventories

69

1

82

Increase (decrease) in accounts payable and accrued expenses

(15)

(60)

(163)

Changes in reserves on current assets (including accrued contract costs)

(24)

(14)

3

Net change in current assets and liabilities

47

39

126

Net cash provided (used) by operating activities

140

126

296

Proceeds from disposal of fixed assets

15

12

8

Capital expenditure

(67)

(96)

(203)

Decrease (increase) in loans

(3)

(1)

(17)

Cash expenditures for acquisition of consolidated companies, net of cash acquired, and for acquisition of unconsolidated companies *

(35)

(64)

(53)

Cash proceeds from sale of previously consolidated companies, net of cash sold, and from sale of unconsolidated companies

-

41

-

Net cash provided (used) by investing activities

(90)

(108)

(265)

Net cash flow after investment

50

18

31

Proceeds from issuance of shares

-

1

2

Dividends paid

(8)

(15)

(24)

Net cash provided (used) by financing activities

(8)

(15)

(22)

Net effect of exchange rate changes

(13)

16

(4)

Net increase (decrease) in net debt / cash

29

20

5

Net (debt)/cash at beginning of year

(52)

(71)

(76)

Net (debt)/cash at end of year

(23)

(52)

(71)

* including Treasury Stock: EUR 3 million in 2003, EUR 25 million in 2002 and EUR 33 million in 2001

Related Document

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About Nexans

Nexans is the worldwide leader in the cable industry. The Group brings an extensive range of advanced copper and optical fiber cable solutions to the infrastructure, industry and building markets. Nexans cables and cabling systems can be found in every area of people¿s lives, from telecommunications and energy networks, to aeronautics, aerospace, automobile, railways, building, petrochemical, medical applications, etc. With an industrial presence in 29 countries and commercial activities in 65 countries, Nexans employs 20. 000 people and had sales in 2004 of euros 4.9 billion. Nexans is listed on the Paris stock exchange.

http://www.nexans.com/