Nexans' half year results: Positive operating profit maintained, Management remains highly focused in a tough economic climate

2002 half year results - Presentation

Paris, July 22, 2002 - Nexans� Board of Directors met on July 19, 2002 under the chairmanship of Gérard Hauser to review Nexans� financial statements for the first half of the year.

  • Sales for the first half were euros 2,228 million. At constant non-ferrous metal prices, sales were euros 2,090 million, down from euros 2,320 million (falling 11.2% at constant consolidation scope with respect to the first half of 2001, but by only 2.7% compared with the second half of 2001).

  • In the wake of the sharply deteriorating telecommunications market, operating profit came to euros 24 million for the period ending June 30, 2002, versus euros 79 million for the year-earlier period. The net loss of euros 11 million is in line with Nexans� announcement made at the end of the first quarter.

  • The cost of the restructuring programs that were announced in February 2002 has been confirmed (i.e. euros 80 million in cash and euros 40 million in exceptional depreciation for 2002 and 2003). Commitments have been made with respect to 40% of the total amount budgeted for these programs.

  • In accordance with the objectives set in February, Nexans remains highly focused on managing its working capital requirements and its investments and has thus cut its debt load at June 30, 2002 to euros 135 million, from euros 247 million one year earlier, resulting in an improvement of the gearing from 21.8% to 12.7%.

Gérard Hauser, Chairman and CEO, made the following comments on these results: "In 2002 - with the collapsing Telecoms market and the sharp slowdown in business investment - Nexans has put in place the means to maintain our market positions, re-size our industrial base and maintain healthy financial ratios. Looking forward, Nexans is now in much better shape to bounce back as soon as the economy picks up."

 

1. Consolidated results :

In millions of euros

H1 2001

H1 2002

Sales

2,536

2,228

Sales (at constant metal prices)

2,320

2,090

EBITDA
(% of sales)

151
6.5%

99
4.7%

Operating profit
(% of sales)

79
3.4%

24
1.2%

Net income

19

(11)

Net earnings per share (in euros)

0.78

(0.46)

Sales for the six months ending June 30, 2002 amounted to euros 2,228 million versus euros 2,536 million for the year-earlier period. At constant non-ferrous metal prices and consolidation scope, sales amounted to euros 2,090 million, down 11.2% with respect to the first half of 2001.

Operating profit came in at euros 24 million, versus euros 79 million in the first half of 2001: Energy performed well, Electrical wires is on the road to recovery but difficulties persisted in Telecom.

Financial expenses were euros13 million compared to euros 20 million for the year-earlier period, due on the one hand to the non-recurring nature of the expense recognized in the first half of 2001 in Turkey and Brazil, and on the other hand to the reduction in Nexans' average debt level. From one year ago, borrowings have been reduced by euros 112 million, as a result of the reduction in capital employed.

Restructuring expenses came to euros 33 million, taking into account reserves established for the restructuring programs announced in February, notably in the Energy and Telecom divisions.

The consolidated tax expense came to euros2 million, versus euros 25 million in the first half of 2001, essentially due to the lower taxable profit.

In line with the forecast made at the time of the announcement of first quarter sales, a net loss has been recorded for the period of euros 11 million, after taking into account the exceptional expense relating to the first portion of the restructuring expenses and in spite of the capital gain of euros 14 million generated on the disposal of Agro.

 

2. Results by activity:

in millions of euros

H1 2001

H1 2002

             

Q2.01

Q2.02

 

Sales
(1)

Operating profit

Sales
(1)

Operating profit

Sales
(1)

Sales
(1)

Energy

1,085

32

1,066

34

573

551

Telecom

461

23

299

(22)

243

155

Electrical wires

605

18

569

8

302

286

Distribution & other

169

6

156

4

83

80

Total

2,320

79

2,090

24

1,201

1,072

(1) Sales at constant metal prices

Energy:
Sales for the Energy Division came to euros 1,066 million, buoyed by infrastructure market sales growth, sustained sales volumes activity in security cables and success in export projects, such as the Transrapid project (the magnetic levitation train for China). The change from the first half of 2001 (-1.8%, or -3.7% at constant consolidation scope) shows that this division, which represents 50% of Nexans' sales, has a strong capacity to resist the effects of a tough economic climate.
Operating profit was euros 33.7 million for the period ending 30 June 2002, up 3.6% over the year-earlier period.


Telecom:
Sales in the Telecom division were down 35.3% to euros 299 million (a decline of 36.8% at constant consolidation scope). The sharp fall in demand experienced in the fourth quarter 2001 was exacerbated at the beginning of the year, affecting all sectors. The public network cable infrastructure sector, in which sales fell by 50% compared to the first half of 2001, remains the most seriously affected. Restructuring programs were set up in each of the division's three product lines, bringing down the units' indirect costs by 22% with respect to the year-earlier period.
There was an overall operating loss of euros 22 million, compared with the operating profit of euros 23 million recorded in the first half of 2001, despite the fact that US private network business has returned to profitability.

Electrical wires:
Sales in the Electrical wires division came to euros 569 million, falling 5.8% against euros 605 million in the first half of 2001. However, sales showed a sharp increase (+14.5%) compared to the second half of 2001. This incipient improvement was due primarily to the demand pickup for pump and transformer winding wires in Europe and for bare wires.
Operating profit of euros 8 million represents a decline of 55% compared to the first half of 2001, but the restructuring measures carried out at the end of 2001 have helped the Division recover from its loss-making position in the second half of 2001.

 

3. Outlook for 2002:

Given the low level of visibility of the telecommunications market and certain industrial markets, the expected operating profit improvement in the second half of 2002 will be driven by the stable good performance of the Energy Division, the traditional seasonality effect in Nexans� businesses, and the benefits of restructuring program cost reductions. However, the operating profit for 2002 is expected to be lower than 2001 as a result of the operating loss forecast for the Telecom Division.

A net loss for the full year is expected, given the impact of the remaining restructuring costs planned for 2002 which have not yet been provided for (approximately euros 67 million).
Within this context, Nexans will continue to pursue with vigor its policies implemented in the fourth quarter of 2001 of carefully managing its borrowings limiting investments and controlling working capital levels.

 

4. Financial calendar:

Publication of third-quarter sales: October 16, 2002

Appendices:

1. Income statement
2. Summary balance sheet
3. Cash flow statement


Consolidated income statements

in millions of euros

Notes

1st half 2002

1st half 2001

2001

Net sales

(3)

2,228

2,536

4,777

Metal price effect

 

(139)

(216)

(310)

Net sales at constant metal price

(3)

2,089

2,320

4,467

Cost of sales

 

(1,816)

(1,981)

(3,833)

Gross profit

 

273

338

634

Administrative and selling expenses

 

(224)

(234)

(445)

R&D costs

 

(25)

(25)

(50)

Income from operations

(3)

24

79

139

Financial income (loss)

(4)

(13)

(20)

(33)

Restructuring costs

(9)

(33)

(12)

(36)

Other revenues (expenses)

(5)

15

2

3

Income before taxes

 

(7)

49

73

Income tax

(6)

(2)

(25)

(28)

Share in net income of equity affiliates

 

-

-

-

Consolidated net income before amortization of goodwill

 

(9)

24

45

Amortization of goodwill

 

(1)

(1)

(2)

Minority interests

 

1

4

13

Net income

 

(11)

19

30

         

Earnings per share (in euros)

(7)

(0.46)

0.78

1.22

Diluted earnings per share (in euros)

(7)

(0.45)

0.78

1.22

Consolidated balance sheets
in millions of euros

ASSETS

Notes

June 30 2002

June 30 2001

December 31 2001

Goodwill, net

 

33

33

38

Other intangible assets, net

 

6

5

6

Intangible assets, net

 

39

38

44

Property, plant and equipment

 

2,905

2,885

2,918

Depreciation

 

(2,047)

(1,990)

(1,997)

Property, plant and equipment, net

 

858

895

921

Shares in net assets of equity affiliates

 

4

10

10

Other investments and miscellaneous, net

 

89

56

65

Investments and other non-current assets

 

93

66

75

TOTAL NON-CURRENT ASSETS, NET

 

990

999

1,040

Inventories and work in progress, net

 

635

806

637

Trade receivables and related accounts, net

 

889

1,045

861

Other accounts receivable, net

 

172

217

133

Accounts receivable, net

 

1,061

1,262

994

Marketable securities, net

 

30

29

87

Cash, net

 

157

277

190

Cash and cash equivalents

 

187

306

277

TOTAL CURRENT ASSETS

 

1,883

2,374

1,908

TOTAL ASSETS

 

2,873

3,373

2,948

 

LIABILITIES AND EQUITY

       

Capital stock (Euro 1 Nominal value; 23 121 472 shares issued at  June 30, 2002)

 

23

25

25

Additional paid-in capital

 

1,014

1,044

1,044

Retained earnings

 

(6)

(23)

(23)

Cumulative translation adjustments

 

41

69

53

Net income

 

(11)

19

30

Treasury stock

 

-

-

(33)

SHAREHOLDERS� EQUITY

(8)

1,061

1,134

1,096

MINORITY INTERESTS

 

96

93

104

Accrued pension and retirement obligations

 

260

260

257

Accrued contract costs and other reserves

(9)

148

168

157

TOTAL RESERVES FOR LIABILITIES AND CHARGES

 

408

428

414

TOTAL FINANCIAL DEBT

 

322

553

348

Customers� deposits and advances

 

39

39

48

Trade payables and related accounts

 

527

615

530

Other payables

 

420

511

408

TOTAL OTHER PAYABLES

 

986

1,165

986

TOTAL LIABILITIES AND EQUITY

 

2,873

3,373

2,948

Consolidated statements of cash flows

in millions of euros

1st half 2002

1st half 2001

2001

Net income

(11)

19

30

Minority interests

1

4

13

Depreciation and amortization

76

72

143

Changes in reserves for pension obligations, net

4

1

(2)

Changes in other reserves, net

(4)

2

(11)

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

(14)

(2)

(3)

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

-

1

-

Other

-

-

-

Cash flow provided by operations

52

97

170

Decrease (increase) in accounts receivable

(69)

(43)

204

Decrease (increase) in inventories

(11)

(81)

82

Increase (decrease) in accounts payable and accrued expenses

-

-

(163)

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

(3)

2

3

Net change in current assets and liabilities

(83)

(122)

126

Net cash provided (used) by operating activities

(31)

(25)

296

Proceeds from disposal of fixed assets

2

5

8

Capital expenditures

(47)

(98)

(203)

Decrease (increase) in loans

(11)

(1)

(17)

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

(19)

(20)

(53)

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

27

-

-

Net cash provided (used) by investing activities

(48)

(114)

(265)

Net cash flow after investment

(79)

(139)

31

Proceeds from issuance of shares

1

-

2

Dividends paid

(3)

(23)

(24)

Net cash provided (used) by financing activities

(2)

(23)

(22)

Net effect of exchange rate changes

17

(9)

(4)

Net increase (decrease) in net debt / cash

(64)

(171)

5

       

Net (debt) / cash at beginning of year

(71)

(76)

(76)

Net (debt) / cash at end of year

(135)

(247)

(71)

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 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 28 countries and commercial activities in 65 countries, Nexans employs 17,500 people and had sales in 2001 of euros 4.8 billion. Nexans is listed on the Paris stock exchange. More information on www.nexans.com