From the desk of Christopher Guérin, Chief Executive Officer

HOW NEXANS IS DEALING WITH COVID-19

We succeeded in turning adversity into opportunity. Despite the unprecedented global health and economic crisis, 2020 marked a turning point for Nexans. Firstly, in what has always been a priority for us, we were able to protect the health of all our employees. By relying on our experience in China, we were able to anticipate and implement the requisite measures before regulatory recommendations were even announced. We also proved ourselves capable of stepping up the Group’s transformation and surpassing our financial objectives in terms of ROCE and free cash flow, reducing net debt to its lowest level in ten years. And although sales fell by 11.2%, given the context, our attributable net income was once again positive, at €78 million. To offset the general slowdown in demand and safeguard our profitability, we stepped up our transformation plan by implementing new cost-cutting measures and rolling out the SHIFT program to all of our businesses, with a view to optimizing cash management. This enabled us to keep profitability on course in spite of the drop in demand.

OUR GUIDING PRINCIPLES: ANTICIPATION AND GOOD PRACTICE

Three main factors – namely (i) unwavering attention to customer satisfaction, (ii) crisis management and (iii) speeding up the transformation – enabled us to maintain our profitability and cash generation, with working capital requirement at an all-time low thanks to structural improvements. We showed considerable foresight in our management of the crisis, in particular by studying the health statistics of the 1968 flu pandemic and its successive waves, anticipating potential supply shortages and, naturally, protecting our teams and our clients. We,are neither fatalistic nor passive. On the contrary, by using available knowledge to model the future we can get to grips with, prepare for and anticipate it even better, thus minimizing the business risks connected with major events. It is well known that the health crisis has been a contributing factor to corruption. With this in mind, Nexans has strengthened its internal compliance program and its efforts to combat risks of corruption, paying particular attention to due diligence measures and the preliminary assessment of any intermediaries with whom we may work.      

A HOME RUN FOR THE NEW NEXANS

First, we amplified the SHIFT program to increase the conversion of value burners into profit drivers. We also enhanced cash optimization and consolidated the costcutting measures implemented in 2018. These initiatives considerably enhanced our cash position. Then, during the second half of the year, our main focus was on our long-term ambition, by defining our purpose and values, as well as our ambitious ESG commitment to being carbon neutral by 2030. We are enthusiastically forging ahead with this new phase of our strategy, which will take us up to 2024.

THE GROUP’S PURPOSE AND VALUES

In November 2020, we unveiled our new purpose —Electrify the Future— which is part of the Company’s DNA. This stems from the vision and meaning we give to our mission and defines our identity and the way we contribute to the larger public interest. In February, we selected the three values that guide our actions and our relationships with the various stakeholders. As it is crucial that these values be taken on across the board, we asked each and every employee to suggest the three values that would embody the new Nexans. We are PIONEERS, once explorers, prospectors and initiators of the energy transition that will become the benchmark for a viable and sustainable electrification of the future. We are DEDICATED, entirely invested in the Group’s challenges and resources and focused on our clients’ needs. And lastly, we are UNITED in a climate of confidence within Nexans, staunchly allied with our clients and with local communities. Armed with these three values, we will spearhead and enable this new world of electrification.

STRATEGY: SIMPLIFY TO AMPLIFY

A new electric revolution is underway, whether through the production of new, carbon-free energy or upgrades to power networks and an increase in electricity requirements. Electrification represents 65% of the global cable market and is expected to increase by 4.3% per annum over the next 10 years. We are convinced that maintaining a broad-based approach will become a weakness rather than a strength in the years to come, which is why we are looking to expand our leadership in growing sectors such as subsea high voltage, building, and electricity distribution, and focus our acquisitions in these areas. Our aim is to acquire between 1.5 and 2 billion euros worth of electrification assets by 2024, mainly in Asia, the United States and Latin America. We also need to scale back on historic sectors such as automotive, telecom, robotics, oil, aerospace and cruise ships and dispose of some 1.5 billion euros worth of assets in these industries by 2024.

2024 ROADMAP

The Group will streamline its operating model by cut ting back from eight macro-sectors (34 subsectors), to four (12 sub-sectors). We will thus become a unique and fully-integrated player covering the entire electrification value chain, from energy production through to transmission and distribution, right up to the end consumer. There will be two main focus areas for enhancing our impact, i.e., (i) continuing the transformation program across all segments, and (ii) strengthening and accelerating growth in the electrification segments. This major overhaul is required in order to free up the resources we need to invest and upgrade. We cannot be everywhere, and our clients no longer want cable and components alone, but rather interconnected solutions and systems. This massive transformation of Nexans must take place without losing sight of our sales target of between 6 and 7 billion euros by 2024. We also aim to significantly improve our profitability, with a consolidated EBITDA target of 10% to 12% of sales by 2024, compared with 6.1% at December 31, 2020. This is a substantial challenge for Nexans, with 55% of our revenue generated from the electrification industry.

ELECTRIFICATION PURE PLAYER

As an electrification pure player, Nexans will post standard sales of between 6 and 7 billion euros and increased profitability, with EBITDA of between 10% and 12% of sales, as well as improved free cash flow of between 500 and 600 million euros.

To achieve this pure player status, the Group intends to continue streamlining its cost structure and improving its industrial performance, building on its innovations and investments in the state-of-the-art cable-laying vessel Aurora, and expanding its high voltage submarine cables plant in Charleston (United States). We will also invest in additional capacities in the High Voltage & Projects segment, and of course continue our ambitious program to digitize the Group’s plants in order to take rapid advantage of the opportunities offered by Industry 4.0, with the support of top-tier partners such as Schneider Electric.

ACCELERATING THE ENERGY TRANSITION

For over a century, Nexans has been playing a leading role in electrifying the world, a role that it is now time to expand. It is the Group’s responsibility to ensure that the changes needed for this electrification are sustainable. But it cannot resolve all the issues alone. This is why, during our first Climate Day in September 2020, we strove to show our stakeholders that one of our aims is to bring various opinion leaders together to debate the key challenges and come up with responses through a joint, coordinated thought process. We are leading the charge towards the new world of electrification - safer, sustainable, renewable, zero carbon and accessible to all. At Nexans, we are electrifying the future sustainably and, to achieve this, I have made the bold commitment that Nexans will be carbon neutral by 2030, in line with the European Green Deal and the Paris Agreement.