2011 Third Quarter Financial Information

Continued business evolution in the third quarter reflects the trends reported in the first half of the year

Organic growth of 3.9% in the third quarter and of 6.8% in the first nine months of 2011

Paris, October 27, 2011 – Nexans today announced 2011 third quarter sales of 1,711 million euros (at current non-ferrous metal prices), or 1,127 million euros at constant non-ferrous metal prices*, which corresponds to organic growth of 3.9%**.

For the first nine months of the year, the organic growth in sales was 6.8% compared with 8.2% at the end of June 2011. These figures reflect the continued trends reported during the first half 2011 in all the Group’s businesses.

In the energy infrastructure business, the distribution segment (low and medium voltage cables and related accessories) reported a significant improvement in the third quarter for all geographic areas.
In the transmission segment (High Voltage), the terrestrial activity started to benefit from the end of the third quarter from resumptions of contracts in the Gulf. The recent events in Libya will result in the resumption of business in that country in 2012. In the submarine business, bidding activity remains strong and 2011 revenues will be up despite delayed revenue recognition related to cables requiring additional tests.
As a whole, activity level in High Voltage in 2011 should be comparable to that of 2010.
A positive trend is also confirmed in the Industry speciality cables activity with organic growth of sales close to 10% in the third quarter and of about 14% in the first nine months. The automotive harnesses activities kept growing strongly (+27% in the first nine months). The other segments (transportation, resources…) reported organic growth close to 9% over the same period.
The Building segment took advantage of the favorable market environment with organic growth close to 7% in the third quarter and 9% over the first nine months of 2011. However, the situation varies significantly depending on the area: there was strong growth in North America, more limited growth in Europe, Asia-Pacific and South America and stable sales in the Middle East.

Provided market conditions remain the same, the Group confirms its targets of organic sales growth of between 5 and 7% and operating margin rate of approximately 5.5% with a stronger contribution from the Industry and Building activities and to a lesser extend from the Infrastructure segment.

Net financial debt amounts to 378 million euros at the end of September 2011 and is stable compared with the position at the end of June 2011. The Group confirms its target to reduce net financial debt to about 300 million euros at the end of December 2011.

2011 THIRD QUARTER CONSOLIDATED SALES

(in millions of euros)

2010

2011

 

At constant metal prices (*)

At constant metal prices (*)

3rd quarter

1,094

1,127

2nd quarter

1,129

1,158

1st quarter

971

1,129

Total at September 30 3,194 3,414

  

Organic growth

 

H1 2011

Q3 2011

Sept. 30, 2011

ENERGY

     

     - Energy Infrastructures

4.8%

2.8%

4.1%

     - Industry

15.8%

9.6%

13.7%

     - Building

9.3%

7.4%

8.7%

TELECOMS

     

     - Telecom Infrastructures

17.2%

6.0%

13.3%

     - Private networks (LAN)

1.0%

2.9%

1.7%

Sub-total : cable business

8.5%

5.2%

7.4%

Electrical wires

3.9%

-13.8%

-2,3%

Group total

8.2%

3.9%

6.8%

ENERGY 

Energy business sales came to 946 million euros in the third quarter 2011. At constant exchange rates and scope, this figure is 5.5% higher than in 2010.

  • Energy Infrastructures: growth accelerating in distribution cables and accessories, slight decline in transmission

Sales figure was 477 million euros, up 2.8% in the third quarter and up 4.1% over the first nine months of 2011.
Transmission activities sales were slightly down over the first nine months of 2011 as the growth in submarine high voltage cables did not manage to offset the weakness in terrestrial high voltage cables.

Activity remained weak during the third quarter in high voltage terrestrial activities. The very recent improvement of the political situation in the Middle East did not allow the Group to recover its historical activity level. The number of international tenders remains very high for submarine high voltage cables (offshore wind market and interconnections in Europe) as well as for underground cables (growing share of Europe compared with the Middle East).

The order book for transmission activities is stable compared with the end of June 2011 and represents about 18 months of activity.

For low and medium voltage cables and accessories, growth accelerated during the third quarter. Trends reported in the first half of 2011 in Asia-Pacific, South America and Europe were confirmed. In the Middle East, Russia and Africa area, sales have grown significantly over the quarter thanks to public investments resuming in Egypt and stronger growth in Russia.

  • Industry: further growth

Third quarter sales representing 10% growth in organic terms, are evidence of the strength of Industry activities.

As far as automotive harnesses are concerned, sales continued to grow despite the rate of growth being limited by high comparison bases (+17% over the quarter, +27% over the first nine months of 2011). The Group benefited from its strong market positions with high-end German carmakers who continued to enjoy strong demand in emerging countries.

The underlying railways market remained strong despite the recent slowdown of sales in China. Aeronautics benefited from a favorable environment thanks to the progressive ramp-up of manufacturing at the Group’s clients. In shipbuilding activities, sales recovered after several quarters of decline.

Industrial activities for capital goods grew further during the quarter continuing the trend reported in the first half of 2011. Robotics reported a higher than 20% growth over the quarter. The positive trend reported during the first half in Oil & Gas businesses, nuclear, mining and renewable energies was also confirmed.

During the third quarter, except in the Chinese railways market, the Group did not witness a slowdown in demand for any of its industrial cables activities.

  • Building: sustained growth

Sales were up about 7% during the third quarter and up close to 9% over the first nine months of 2011.

In Europe, business was driven by the high level of industrial investments, especially in France, and sustained demand in Scandinavia and in UK. Benelux was slightly down due to the weakness of the Dutch market. In southern Europe, business was stable.

In North America, sales grew strongly. The Group benefited from its strong positions on the Canadian market. In South America, demand remained strong but sales growth was moderated by the Group’s selective approach in these markets. In Asia Pacific, the business environment remained positive, especially in Australia.

Finally, in the Middle East, Russia and Africa area, sales were impacted by the weakness of the market in Turkey.


TELECOM 

Sales of the Telecom activities reached 110 million euros in the third quarter 2011. At constant exchange rates and scope, they are up 4.3% compared with 2010.

  • Telecom Infrastructures: sales growth accelerating in copper cables, slowdown in optical fiber cables and components

During the third quarter, telecom infrastructure cable sales rose by 6% resulting in 13% growth over the first nine months. Growth was driven by copper cables in Europe and South America, whereas sales of fiber optic cables and components slowed down during the third quarter.

  • Private networks: sustained growth in North America

During the third quarter, sales of cables for private networks were up 2.9% at constant exchange rates and scope. However, the business environment is very uneven with strong growth in North America and demand still weak in Europe.

ELECTRICAL WIRES: external sales down due to strong internal demand

Sales of the Electrical Wires activity reached 65 million euros during the third quarter 2011, down 13.8% in organic terms. The drop in external sales is mainly due to the Group’s decision to give priority to its internal needs in terms of copper rod.

 

Financial calendar:

  • November 10, 2011: General shareholders’ meeting and special shareholders’ meeting for the holders of shares with double voting rights (implementation of the Madeco agreement)
  • November 23rd, 2011: individual shareholder meeting in Toulouse
  • February 8, 2012: 2011 Annual Results  

The reader is invited to refer to the 2010 Registration Document which contains a Risk Factors section which provides details in particular of the risks linked to the competition authority investigations opened in January 2009 in Europe and in certain other countries for anti-competitive behavior in the sector of submarine and underground power cables and related accessories and services. If the outcome of these investigations is unfavorable, together with the consequences thereof, could have a material adverse effect on the results and the financial situation of the Group. The reader is also invited to refer to the 2011 half-year financial report which highlights that a 200 million euros provision was recorded after the receipt of a Statement of Objections from the European Commission’s Directorate General for Competition.

(*) To neutralize the effect of variations in the purchase price of non-ferrous metals and therefore measure the underlying sales trend, Nexans also calculates its sales using constant price for copper and aluminum.

(**) 2010 sales on the basis of comparable data correspond 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, at the end of September 2010 is 10 million euros, the scope effect is -6 million euros.

APPENDIX

  Q3 Sep YTD
  2010 2011 2010 2011
At actual metal prices 1,566 1,711 4,521 5,238
At constant metal prices 1,094 1,127 3,194 3,414
 
Sales at actual metal prices by business segment
 
Energy    1,212 1,359 3,542 4,111
  Energy Infrastructures 551 608 1,626 1,818
  Industry 280 310 821 960
  Building 381 441 1,095 1,333
           
Telecom   126 134 368 407
  Telecom Infrastructures 52 59 147 180
  Local Area Network (LAN) 74 75 221 227
           
Others   8 7 23 26
           
Electrical Wires 220 211 588 694
           
Groupe Total 1,566 1,711

4,521

5,238
 
Sales at constant metal prices by business segment
 
Energy    900 946 2,643 2,851
  Energy Infrastructures 460 477 1,357 1,430
  Industry 217 234 644 722
  Building 223 235 642 699
           
Telecom   109 110 315 331
  Telecom Infrastructures 46 49 130 150
  Local Area Network (LAN) 63 61 185 181
           
Others   8 6 21 23
           
Electrical Wires 77 65 215 209
           
Groupe Total 1,094 1,127 3,194 3,414
           
Sales at actual metal prices by geographical area
 
Europe 806 855 2,399 2,720
North America 255 263 677 805
Asia-Pacific 195 231 559 678
Middle East, Russia, Africa 120 151 372 391
South America 192 213 519 650
Corporate area -2 -2 -5 -6
Groupe Total 1,566 1,711 4,521 5,238
           
Sales at constant metal prices by geographical area
 
Europe 629 647 1,889 2,036
North America 131 129 364 380
Asia-Pacific 135 144 391 421
Middle East, Russia, Africa 84 92 249 235
South America 117 117 306 348
Corporate area -2 -2 -5 -6
Groupe Total 1,094 1,127 3,194 3,414
(in millions euros)

Your Contact

Michel Gédéon Investor Relations
Phone +33 1 78 15 05 41
Michel.gedeon@nexans.com
Jean-Marc Bouleau Institutional Investors Relations
Phone + 33 (0)1 73 23 84 61
jean_marc.bouleau@nexans.com
Jean-Claude Nicolas Corporate Communication
Phone +33 (0) 1 73 23 84 51
jean-claude.nicolas@nexans.com
Pascale Strubel Corporate Communication Department
Phone + 33 (0)1 73 23 85 28
pascale.strubel@nexans.com
Angéline Afanoukoe Press relations
Phone +33 1 78 15 04 67
Angeline.afanoukoe@nexans.com

About Nexans

With energy as the basis of its development, Nexans, worldwide leading 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 more than 6 billion euros. Nexans is listed on NYSE Euronext Paris, compartment A. For more information, please consult www.nexans.com or http://www.nexans.mobi