Nexans 2008 first-quarter financial information
- Further organic growth in cable business of 6.4%*
- First-half growth rate expected to be above 6%
- First semester 2008 profitability expected to show marked improvement: operating margin expected to be between 8.5% and 9%, compared with 7.6% in the first half of 2007
Paris, France – Nexans 2008-04-22 announced 2008 first-quarter sales of 1,743 million euros (at actual non-ferrous metal prices). At constant non-ferrous metal prices**, the quarter’s sales stood at 1,192 million euros.
Organic growth in the cable business was 6.4%*** (up 2.3% including electrical wires business for which the Group is gradually limiting production to its own internal needs).
For the first half of 2008, the Group is expecting the trends observed in the first quarter to continue, with organic growth of the cable business above 6% due to strong growth in energy cables, continuing growth in industry and steady business in building.
In terms of profitability, the Group should see additional improvement with the operating margin at June 30, 2008 expected to be between 8.5% and 9%, compared with 7.6% at June 30, 2007, on sales at constant metal prices. Improved performance is supported by the energy and industry cables segments, despite a slight drop in the profitability on building cables.
At June 30, 2008, the Group is expecting the net financial debt to be at a level significantly lower than at June 30, 2007 (533 million euros).
* Energy infrastructures: growth increasing at a quicker pace
The organic growth of the energy infrastructures business amounted to 16.4%. It has sharply increased compared with the first quarter 2007. Numerous high-voltage contracts awarded in the last few months were invoiced in the first quarter 2008. This growth has been made possible by the sustained investment policy in 2006 and 2007.
The high-voltage business order backlog is close to 1,300 million euros at actual copper prices at end March 2008, representing an increase of 20% compared with year end 2007.
* Industry: continuing growth in industry cables
Special cables sales, directed towards multinational OEMs, were up by 3.8% in organic terms. Sales of industry cables to Nexans’ priority market segments have increased at a faster rate than the Group average. For example, the growth rates for marine cables and oil and gas cables have been particularly strong, confirming the very buoyant nature of these two main markets: oil & gas and transport.
Sales of special cables to telecom OEMs in Europe and China have slightly decreased.
* Building: steady business
First quarter 2008 sales have remained stable. This should be viewed in relation to the very high comparative base of the same quarter a year earlier, in which growth of 16.7% had been recorded. Sales increased slightly over the last quarter 2007, with volumes remaining strong, but prices falling in North America.
* Telecom Infrastructures: slower sales for copper telecommunications cables
The slower telecommunications infrastructures business has been factored into the Group’s strategy of selling off its copper telecom cable business in Spain.
* Private Networks (LAN): growth still strong in North America
LAN cable business was up sharply (7%) in North America, and holding steady in Europe.
* Electrical wires: ongoing strategy to refocus on the Group’s own needs
Sales of electrical wires dropped by 31% (at constant metal prices, comparable scope and exchange rates), as a result of the ongoing strategy to focus on the Group’s own internal needs.
* Europe: strong growth in high-voltage energy infrastructures cables
Organic growth in the first quarter 2008 stood at 6.4% for the cable business. This increase is largely attributable to energy infrastructures cable business (up 16.8%), especially underground and submarine high-voltage cables. The building cable business remained stable.
* North America: growth driven by energy and industry cables
The cable business organic growth was 5.7% despite a slight 2.1% drop in building cables; these trends are in line with those observed in the last quarter of 2007. Strong volume sales helped in part offset the downward trend in prices.
Energy infrastructures cable sales were up sharply (17.9%), a development mainly attributable to the end of the strike in the Quebec (Canada) plant. Electronic cables continued their recovery with business rising by 16.1%.
* Asia-Pacific: growth penalized by the shutdown of the Telecom cable business in Vietnam
The modest 2008 first-quarter organic growth (up 1.2%) was due to the shutdown of production of the Copper Telecom cable business in Vietnam. But, growth is strong for building cables in Australia, energy infrastructures cables in South Korea and marine cables in China.
* Rest of the World: strong growth in all countries in this geographic area
Organic growth in the Rest of the World geographic area amounted to 15% in the first quarter.
It was particularly strong in energy infrastructures cables in Brazil, Lebanon and Egypt; automotive cables in Morocco; and LAN cables in Turkey.
OUTLOOK FOR THE FIRST HALF 2008
Ongoing business growth and improvement in profitability support the Group’s 6% organic growth target for its cable business. The Group is also aiming for an operating margin of between 8.5% and 9%, under economic conditions comparable to those observed in the first quarter 2008.
With energy as the basis of its development, Nexans, the worldwide leader 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, automotive, electronics, aeronautics, handling and automation. With an industrial presence in more than 30 countries and commercial activities worldwide, Nexans employs 22,000 people and had sales in 2007 of 7.4 billion euros. Nexans is listed on Euronext Paris, compartment A.
* Reminder: As 2007 first-quarter sales had increased sharply (cf. April 17, 2007 press release: Financial information for 2007 first quarter ) the comparison base effect is significant.
** 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.
*** 2007 sales on the basis of comparable data correspond to constant metal sales, recalculated after estimated adjustments for comparable scope and exchange rates. The exchange rate effect amounts to a negative 20 million euros mainly because of the US dollar’s decline, and scope effects for a negative 10 million euros.