2010 Full-Year Results

Strong improvement in performance in the second half

  • Sales at current metal prices of 6.179 billion euros and light organic growth of +0.4%
  • Marked upturn in sales in the second half (6.5% organic vs. H2 2009)
  • Operating margin rate of 4.8% for the full year 1)
  • Net income of 82 million euros
  • Net debt of 144 million euros at previous year level despite sharp rise in metal prices
  • Proposed dividend of 1.10 euros per share 2)

Paris, February 14, 2011 - The Nexans Board of Directors chaired by Frédéric Vincent, which met on February 11, 2011, approved the Financial Statements for 2010.

Net sales for 2010 totaled 6.179 billion euros compared with 5.045 billion euros in 2009. At constant non-ferrous metal prices3), the figure is 4.309 billion euros compared with 4.026 billion euros in 2009.
At a constant consolidated scope and exchange rates, business was up by a slight 0.4%4). The second half was marked by a net improvement in activity in all Group businesses with organic growth of +6.5% compared with the second half of 2009.

The operating margin totaled 207 million euros, that is, 4.8% of sales at constant non-ferrous metal prices, compared with 6.0% in 2009. At 5.6%, profitability in the second half of 2010 is up sharply compared with the first half of 2010 (4.0%) as a result of several factors. The Group benefited fully in the second half from the recovery of sales volume on its various markets; and business recovery was boosted by stabilizing prices at the end of the year. Finally, the first signs of improvement in high-voltage submarine contract execution enabled the Group to record a significant increase in the margin on this business in the second half. These elements combined offset the negative impact of the sharp hike in the price for plastic raw materials and oil derivatives, especially in those business areas for which prices are negotiated under multi-year contracts.

As in 2009, the operating margin benefited (+37 million euros) from the ongoing efforts to reduce non-ferrous metal inventory deployed by the Group. This inventory reduction reflects Nexans’ commitment to continue to optimize its capital employed in a context of rapidly appreciating raw materials.

The pre-tax net income totaled 110 million euros in 2010, compared with 51 million euros in 2009. A restructuring cost of 67 million euros was booked in the period and mainly concerned the closure of two plants of the Group, one in Italy and the other in Brazil.

The 2010 income benefited from a profit (without any cash counterpart) of 89 million euros from the impact of the increase in non-ferrous metal prices on the value of inventory revalued at the average weighted price. In 2009, this same effect was a slightly positive 18 million euros.

The tax charge for the year is 26 million euros, that is, 24% of the pre-tax income.

As a consequence, the net income (Group share) was 82 million euros in 2010 (compared with 8 million euros in 2009). Excluding restructuring costs, copper effect and capital gains on disposals, it was 78 million euros.

The Board of Directors will put to the General Shareholders’ Meeting, called in the first half of 2011, a proposal to pay a dividend of 1.10 euros per share for 2010, that is, a distribution of about 40% of the year’s current net income.

The consolidated net debt was 144 million euros at December 31st, 2010, compared with 141 million euros a year earlier. In 2010, the Group generated 268 million euros cash from operations before gross cost of debt and tax (including the impact of restructuring costs) compared with 258 million euros in 2009. At the same time, the Group continued to invest in emerging countries (new plants opened in Qatar and Morocco), and in strong growth potential market segments (high voltage). Finally, the efforts to structurally reduce working capital made it possible to offset the negative impact of rising metal prices in 2010, bringing the working capital requirement to 16.5% of current sales, compared with 18.9% at the end of 2009.

Commenting on the 2010 results, Frédéric Vincent, Chairman and CEO, said, “The overall improvement in the market environment in the second half has enabled Nexans to announce results slightly above expectations for sales and operating margin, and far better than anticipated for net debt. In a context marked by sharp hikes in raw material prices, our teams have strenuously defended margins and continued to reduce working capital. The end of the year also witnessed an upturn in the performance of our high-voltage submarine cable business, while the signing of major contracts, such as the Malta-Sicily interconnection, the Skagerrak IV project and the Estlink II project underscored the Group’s lead in this promising market segment.

In this context, we feel confident as we embark on 2011.

For 2011 as a whole, sales should continue to improve and therefore grow by more than 5% for the year.

On such basis, the Group operating margin rate should significantly increase in 2011 with a full-year target of 5.5%, in a context characterized by a marked upturn in activity in the fourth quarter and a strong increase in raw material prices”.
  

2010 Key Figures

(in millions of euros)

At constant non-ferrous metal prices

 

2009

2010

Sales
 

4,026   4,309

Operating margin

241

207

Operating margin rate (% of sales)

6.0%

4.8% 

Net income attributable to equity holders of the company (Group share)

82 

Diluted EPS (in euros)

0.29

2.84

 
Detailed analysis by business sector

Sales breakdown by business sector

 

2009

2010

 

Organic growth

(in millions of euros)

At constant non-ferrous metal prices

At constant non-ferrous metal prices

 

Energy

 

 

     - Infrastructure

1,798

1,814  

-5.7%

     - Industry

746

875  

16.1%

     - Building

838

879  

-5.0%

Telecoms

 

 

 

 

     - Infrastructure

185

182  

-7.1%

     - Private network (LAN)

221

244  

5.5%

Other

22

26  

N/S

Sub-total: Cable businesses

3,810

4,020  

-0.8%

Electrical wires

216

289  

21.9%

Group total

4,026

4,309  

0.4%


 

 Operating margin by business sector

(in millions of euros)

2009

2010

Energy

 

 

     - Infrastructure

179 138

     - Industry

6 22

     - Building

44 28

Telecoms

 

 

     - Telecom Infrastructure

16 9

     - Private Networks (LAN)

6 16

Other

(11) (13)

Sub-total: Cable businesses

240 200

Electrical wires

1 7

Group total

241 207

ENERGY

Energy business sales totaled 3.568 billion euros. At a constant exchange rate, it is down 1% compared with 2009.

  • Energy infrastructure: second-half recovery of power distribution business and the first signs of a an improvement in the execution of submarine contracts

Sales at a constant scope and exchange rate fell 5.7% compared with 2009.
For high voltage, the workload for the various plants remained high with the signing of numerous contracts in the fourth quarter. For December alone, the Group was awarded new contracts worth more than 350 million euros, bringing the order backlog to a new record of almost two years’ activity.

The corrective measures implemented in mid-2010 in the submarine cable business to counter the execution difficulties in a certain number of contracts are beginning to pay off.

For low and medium voltage cables, the second half of the year saw an upturn in sales compared with the first half. This sequential rebound was particularly strong in South America (+30%) and Asia-Pacific (+13%). At the opposite end of the spectrum, it was a more muted 2.4% in the so-called mature countries (Europe and North America). In Europe, the upturn in investment by energy network operators combined with the industrial reorganization following the announcement to close the Latina plant in Italy ensured that all other Group plants had a good workload. In North America, the Group is reaping the rewards of the 2009 restructuring operated in Canada. In the Asia-Pacific area, sales rose by more than 13% between the first and second halves of the year, mainly driven by the return of utilities’ investments in Australia. In South America, the second half saw the recovery of large electricity infrastructure projects in Brazil. Finally, the Middle East – Russia – Africa area reported continuing growth in the second half, especially with the increasing output of the area’s Russian plant.
In all, the operating margin of Energy Infrastructure business totaled 138 million euros, that is, a margin of 7.6%, down on the 2009 figure as a result of the execution difficulties encountered in submarine business and sluggish volumes at the start of the year.

The operating margin of 8.4% for the second half is up sharply compared with the 6.8% recorded for the first half.

  • Industry: gradual recovery in cyclical businesses and improved margins

At constant scope and exchange rates, industry cable sales rose by more than 16%, mainly driven by the automobile harness business for which sales jumped by more than 50% year over year to the next.

The other industry cable segments also benefited from positively trending figures, particularly in handling, automation, offshore, nuclear and the mining industry which delivered significant results for the Group given its strong presence in Australia and Chile. Transportation-related applications reported growth of 3.5% from one year to the next, due to railways, whereas shipbuilding contracted by nearly 6%.

Driven by volume growth, the operating margin totaled 22 million euros, that is, 2.6% of sales, compared with 6 million euros and 0.7% respectively in 2009.

The operating margin rate rose up to 3.5% in the second half compared with just 1.6% in the first half of the year.

  • Building: higher volumes and stabilized prices at year end

Organic sales contracted by 5% across the year as a whole. Even so, the second half actually saw a net upturn compared with the first and a sequential improvement of more than 7%.

This significant recovery was very strong in North America and Australia, but more muted in South America and Europe.

This positive market context enabled the Group to hold selling prices in the second half at the same level as the first half of 2010. For the year as a whole, the rise in plastic raw material and component prices impacted negatively on this activity’s margins as the market would absorb only part of these increases.

For the year as a whole, the operating margin totaled 28 million euros, that is, 3.2%, compared with 5.3% in 2009.
The operating margin rate in the second half was up sharply to 4.2% compared with just 2.1% in the first half of the year.

TELECOM

Sales of Telecom cables totaled 426 million euros in 2010, that is, a drop of 0.3% compared with 2009 at a constant scope and exchange rates.

  • Telecom Infrastructure: sales and margins up in the second half

After a first half marked by lackluster sales, the second half of the year saw a good improvement in optical fiber cables and components, as well as in the more mature copper cable segment. For the year as a whole, sales fell from 185 million euros in 2009 to 182 million euros in 2010, at constant non-ferrous metal prices, that is, an organic contraction of 7.1%.

Driven by volume sales, in the second half, the operating margin returned to the same level as in 2009, finishing the year at 9 million euros, or 5.1%, compared with 8.7% in 2009.

  • Private Networks (LAN): sales trending well and margin up on 2009

At comparable data, LAN cable business grew organically by almost 6% between 2009 and 2010.

This trend is primarily attributable to the ongoing double-digit growth in the American market, while sales in Europe contracted slightly.
The operating margin for the year was 6.7%, compared with 2.9% in 2009, as a result of volume growth in North America coupled with lower costs in Europe.

ELECTRICAL WIRES: Group production facilities operating at capacity thanks to a vibrant market

External sales of Electrical Wires totaled 289 million euros in 2010, up 22% compared with 2009 at a constant scope and exchange rates.
The European production facilities are now focused on the Group’s own needs.

In 2010, this refocusing strategy and a positive market environment enabled the Electrical Wires activity to return to positive figures with an operating margin of 7 million euros, or 2.4% of sales.

Readers should also consult the Group’s Web site on which are available in particular the presentation to financial analysts of the 2010 results, the full financial statements and the 2010 management report, which includes the Group’s risk factors and confirmation of the risks relating to the antitrust investigations described by Nexans in its press release dated February 12, 2009.

Financial calendar

  • April 27, 2011: First-quarter 2011 financial information
  • May 10, 2011: Individual shareholder information meeting in Nancy*
  • May 31, 2011: General Shareholders’ Meeting
  • June 28, 2011: Individual shareholder information meeting in Nice*
  • July 27, 2011: 2011 Half Year Results

* Approximate date to be confirmed.

In accordance with the AMF recommendation dated February 5, 2010, Nexans confirms that the audit procedures for the financial statements referred to in this press release have been performed and that the auditors’ certification report is under preparation.

Appendices

  1. Consolidated income statement
  2. Consolidated statement of comprehensive income
  3. Consolidated statement of financial position
  4. Consolidation statement of cash flows
  5. Information of reportable segment
  6.  Information by major geographical area
     

1) A management indicator used by the Group to measure its operating performance. The operating margin rate is expressed as a percentage of the sales at constant non-ferrous metal prices.
2) Proposed dividend that will be submitted to the 2011 General Shareholders’ Meeting for approval.
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.
4) Presentation of 2009 sales on the basis of comparable data corresponds to constant non-ferrous metal sales, recalculated after adjustments for comparable scope and exchange rates. The exchange rate effect on sales at constant non-ferrous metal prices amounts to 264 million euros, and there is no scope effect.

Related Document

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About Nexans

With energy as the basis of its development, Nexans, worldwide expert in the cable industry, offers an extensive range of cables and cabling systems. The Group is a global player in the infrastructure, industry, building and Local Area Network markets. Nexans addresses a series of market segments: from energy, transport and telecom networks to shipbuilding, oil and gas, nuclear power, automotives, electronics, aeronautics, material handling and automation. 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 engagement, 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 23,700 people and had sales in 2010 of 6 billion euros. Nexans is listed on NYSE Euronext Paris, compartment A. For more information, please consult www.nexans.com