Nexans Announces 2010 First Half-Year Results
Wednesday, Jul 28, 2010
· Sales at constant metal prices(1): 2.1 billion euros, down 5.3% in organic terms
· Net upturn in sales in the second quarter: 12%(2) higher than the first quarter
· Operating margin as a percentage of sales(3) at 4%, in line with expectations
· Expected increase in sales and operating margin for the second half of the year. Full year operating margin as a percentage of sales expected around 4.5% with possible upside
Paris, July 28, 2010 - The Nexans Board of Directors, chaired by Frédéric Vincent, met on July 27 to examine the Group’s consolidated financial statements for the first half of 2010.
Sales for the first half of 2010 come to 2.955 billion euros compared with 2.514 billion euros for the first half of 2009. At constant non-ferrous metal prices(1), sales amount to 2.1 billion euros compared with 2.085 billion euros for the first half of 2009.
At constant consolidated scope and exchange rates, sales are down organically against the same period in 2009 by 5.3% (6.3% for cable businesses alone)(4). After a particularly difficult first quarter marked by an organic decrease in sales of 11.1%, the second quarter saw a sharp 12% upturn in sales across all businesses.
The operating margin comes to 83 million euros. The operating margin as a percentage of sales has progressively improved with the end of unfavorable weather conditions and with the gradual resolution of difficulties in executing certain high-voltage submarine contracts to ultimately reach 4.0% at 30 June 2010 (5.3% for the first half of 2009), in a context of downward pressure on prices in building cables. The impact of these various factors was nonetheless partially offset by the restructuring operations implemented in 2009 resulting in further cost reductions over the first six months of the year. The operating margin also benefited from the policy to reduce non-ferrous metal inventory implemented by the Group (positive impact of 15 million euros), reflecting
Nexans’ commitment to continue optimizing its capital employed.
Nexans – 2010 First Half-Year results 2/12
The pre-tax profit for the first half of 2010 is 5 million euros, compared with a loss of 36 million euros for the corresponding period in 2009. It takes into account a restructuring cost of 56 million euros, asset depreciations of 26 million euros and an income of 50 million euros (without any cash counterpart) from the revaluation of the Group’s copper inventory.
As a consequence, the net loss (Group share) is 17 million euros (compared with a loss of 57 million euros in the first half of 2009). The consolidated net debt comes to 277 million euros at June 30, 2010, compared with 312 million euros at June 30, 2009 and 141 million euros at December 31, 2009.
Efforts to reduce the structural working capital requirement have released about 50 million euros in cash. These efforts have, however, been neutralized by the combined effect of increased business in the second quarter and the price of copper in the first half of the year. At 18.3%, the ratio of the working capital requirement to the annualized last quarter sales reveals a further improvement of 60 basis points at June 30, 2010 compared with December 31, 2009. Restructuring cash costs totaled 32 million euros for the half year.
OUTLOOK
For the second half-year, sales should improve when compared with the first half of 2010. In this same second half, operational profitability should rise given the nonrecurrence of certain unfavorable aspects of the first quarter, to an operating margin as a percentage of sales of around 4.5% for the year as a whole. There is a potential for further improvements if assumed commercial conditions turn out to be even better. After a net loss (Group share) of 17 million euros in the first half of 2010, the Group should end the year with a profit*. Net debt should decrease at year end compared with the situation at June 30, 2010*.
Commenting on the first half-year results for 2010, Frédéric Vincent, Chairman and CEO, said, “After a difficult first quarter that undermined the half-year’s profit, sales volumes have risen in the past three months, especially in those industrial sectors qualified as early cycle, such as automotive and local area networks. Positioned on strong segments, such as, renewable energies, Transmission and Distribution networks (T&D), as reflected in our participation in the Transgreen industrial initiative-, transport and energy resources, Nexans has access to considerable growth prospects. With a solid financial structure, further strengthened by our ongoing actions to cut costs and rationalize our industrial facilities, the Group has the necessary resources to continue to implement its strategy of a firm commitment to development in emerging areas. This is demonstrated by commercial and industrial projects in Russia, China, India and the Middle East, where we will shortly inaugurate our first production site in Qatar. Lastly, with a view to optimizing our organizational structure, transversal programs targeting manufacturing excellence, commercial efficiency and employee training are gradually being rolled out to all Group units. Based on these factors, and looking beyond the 2010 transition year, Nexans remains confident about its economic model.”
Source: Nexans
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