(News Bulletin 247) – The cable specialist will increase its efforts in electrification by, for example, using technology and artificial intelligence. The company estimates that it will be able to generate an adjusted Ebitda of 1.150 billion euros by 2028 compared to 750 million to 800 million euros targeted this year. The stock jumped on the Paris Stock Exchange.

Christopher Guérin is attacking his third strategic plan at the head of Nexans. When he took the position of general manager of the cable producer in 2018, the group suffered on the stock market. The previous boss, Arnaud Poupart-Lafarge, abruptly announced his departure at the start of the year, and the company subsequently issued a profit warning.

Christopher Guérin then launched, as part of his first strategic plan, a recovery project which aims to put Nexans’ value-destroying activities (called “cash burners”) back on track. This is based on a so-called “shift” method, which is inspired by private equity practices.

Three years later, in 2021, the manager decided to transform Nexans into a “pure player” in electrification, that is to say by refocusing the company’s activities on production, use and electricity networks. ‘electricity. With this in mind, the company went through asset rotations, that is to say disposals and especially acquisitions. Christopher Guérin then mentioned on several occasions the imperative to concentrate on a limited number of promising activities at the risk of becoming, otherwise, the “Kodak of cable”.

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A molt not completely finished

Let us point out that this transformation is not completely complete, because the group has for the moment only sold its cables activity in telecoms unlike those in the automobile and industry. Last week, the group also launched the sale of its American subsidiary Amercable, which mainly manufactures cables for the gas, mining and oil industries.

These two strategic plans generally made it possible to relaunch Nexans. Between 2018 and 2024, adjusted gross operating income (Ebitda) increased 2.5-fold and Nexans’ market capitalization increased nearly six-fold.

So let’s move on to the third phase. After “restructuring” and “simplification”, Nexans moves on to “amplification”. “We are now talking about growth, which is new for us”, after having previously focused on value, declared the financial director, Jean-Christophe Juillard, to analysts this Wednesday. “Now that we have transformed the business we are ready for growth,” he added.

The group intends to accelerate the pace in electrification. To do this, the company will ride on a demand for electricity which should “increase six times more than the demand for energy” by 2035, explained Christopher Guérin during the presentation of this strategy to investors.

The cable market alone is expected to increase from 120 billion euros in 2023 to 160 billion euros in 2028, an average annual increase of 7%. But Nexans will also expand its market by adding different services, particularly linked to the “customer experience” and the “life cycle” of its products.

Growth but not at any price

Above all, the cable company will focus on technological solutions (such as software, monitoring devices) and artificial intelligence, which should allow it to more than quadruple its basic addressable market (120 billion euros). in 2023 therefore).

With this planned acceleration in electrification, Nexans intends to generate an adjusted gross operating profit (Ebitda) of 1.15 billion euros in 2028 (in the middle of the range, the interval being between 1.075 and 1.225 billion euros). euros). To the extent that the group is targeting an adjusted Ebitda of 750 million to 800 million euros in 2024, the expected increase is therefore between 35% and 63%.

This Ebitda objective is understood on a constant perimeter. The Ebitda generated by acquisitions would, in fact, replace that “lost” by the disposals that the company will make on its activities excluding electrification.

In its electrification activities alone, the company intends to achieve like-for-like growth of 3% to 5% per year over the period and improve adjusted Ebitda by an amount of 350 million euros in 2028 compared to 2024. In 2023, these activities had generated an adjusted Ebitda of 468 million euros.

The company also intends to generate a total of 1.4 billion euros in free cash flow before mergers and acquisitions and capital transactions, between 2025 and 2028. Nexans will also invest 1.2 billion euros between 2025 and 2028 to “stimulate” the growth of two segments, called “power-grid” (electricity networks) and “power-connect” (electrical uses).

For example in “uses”, Jean-Christophe Juillard explained that the company would favor activities with high profitability, even if it meant limiting growth, expected to increase “low to mid single digit” (i.e. from 1% to 5%). . This is so as not to “penalize the margins”, added the manager. Nexans intends in particular to specialize in electricity cables for so-called “critical” buildings, such as data centers.

Concerning the allocation of capital, the group will pursue a so-called “selective” acquisition strategy, will maintain its debt leverage (the ratio of net debt to EBITDA) at 1 maximum, and will return cash to its shareholders. respecting a minimum distribution rate of 30% of net income.

The Trump risk

On the Paris Stock Exchange, the market appreciates Nexans’ announcements. The stock advanced 5.4% around 11:55 a.m. In a note published before the market opened, JPMorgan noted that the Bloomberg consensus for adjusted EBITDA stood at 963 million euros for 2027. Which means that Nexans’ 2028 target of 1.15 billion euros ‘euros therefore, suggests “potential compared to consensus expectations on the rate of improvement in results”, notes the bank. In other words, it’s better than expected.

“At group level, the objective of reaching 1.15 billion euros in Ebitda by 2028 is significantly higher than expectations,” adds Jefferies.

Nexans is therefore regaining some altitude on the stock market after having suffered in recent sessions. As of Tuesday’s close, the stock had lost about 13.5% since Donald Trump’s election to the White House. The president-elect has adopted a very hostile tone towards renewable energy. He notably announced that he wanted to wipe “offshore” (at sea) wind projects off the map if he was elected, Oddo BHF noted at the beginning of October.

However, players in this market segment, such as the Danish Orsted and Vestas, are Nexans customers. In an interview with Les Echos published this Wednesday, Christopher Guérin wanted to be reassuring: “our offshore wind contracts in the United States represent 6% of our total order book of 6 billion euros”.

In front of analysts, this time, the manager recalled that the group had invested $150 million in its factory in Charleston, in the United States, in 2019 “under the (first) presidency of Trump”, both for onshore wind power. as a sailor. “We were the only ones to bring local content,” he added. “This unit is of course capable of serving Europe if demand slows down in the United States,” he said.