Nexans records strong growth of cable businesses sales 
(04/04/2008)
The Nexans Board of Directors has approved the accounts for 2007.
Key figures:
* Net sales in 2007 totaled 7.412 billion euros compared with 7.489 billion euros in 2006. At constant non-ferrous metals prices, sales amounted to 4.822 billion euros compared with 4.442 billion euros in 2006. At constant consolidated scope and exchange rates, sales have increased by 4.8% compared with 2006, representing organic growth of 12.1% for the cable businesses.
* Operating margin amounted to 409 million euros, an increase of 57% compared with 2006. Operating margin as a percentage of sales rose from 5.8% to 8.5% at constant metal prices.
* Net financial expense was 81 million euros compared with 69 million euros in 2006. This is due in particular to the rise in the average cost of financing following the decision to extend the average debt maturity from 6 to 8 years through a bond issue for an amount of 350 million euros with a maturity of 10 years.
* Income tax expense amounted to 84 million euros, representing an effective tax rate of 30%, compared with a rate of 16% in 2006 due to non-recurring tax exempt items.
* Net income (Group share) was 189 million euros in 2007 compared with 241 million euros in 2006. Excluding a one-off gain of 149 million euros in 2006 from the sale of distribution businesses in Switzerland, net income doubled over a 12-month period.
* The Group's net financial debt stood at 290 million euros at December 31, 2007, compared with 632 million euros at December 31, 2006. The reduction in debt is attributable to a significant increase in cash flows from operations in the second half of the year and the considerable reduction in the working capital resulting from the reduction in electrical wires activity.
2007-2009 strategic plan: continued refocusing and review of profit margin objectives
Nexans confirms its strategy based on “core businesses”, namely infrastructure, industry and building markets, and has decided to add LAN cables to the lineup. The capacity for innovation that the Group has demonstrated over the last few years in both systems and high-speed cables augurs well for the future development of these businesses.
As part of this continued refocusing, the Group today announced:
* a project for the divestiture of its telecommunications copper cables businesses activity in Spain.
* a study of the possible sale of its automotive cable harnesses business which, given its limited size on the world stage, no longer falls within the scope of the Group's strategic businesses.
The Group is also continuing its geographic deployment in high-growth countries, as demonstrated by its planned acquisition of the Madeco cables business in South America, for which the closing is expected in mid 2008.
Cables business sales totaled 2.96 billion euros, an increase of 13.9% on a like-for-like basis and constant metal prices and exchange rates compared with 2006. Operating margin rose from 144 million euros in 2006 at constant exchange rates to 264 million euros in 2007.
Growth was particularly strong in high-voltage cables and industrial cables, segments in which the Group is concentrating its development efforts. This growth was accompanied by increased profitability. Building cables maintained steady volumes and profits boomed in 2007.
In North America, cable business sales totaled 422 million euros, an increase of 5.4% compared with 2006 at constant consolidated scope and exchange rates. Operating margin for cable businesses was 72 million euros in 2007.
The housing market crisis in America had little impact on Nexans due to the Group's low exposure to this segment in the USA. The depreciation of the US dollar against the Canadian dollar on the other hand gave US producers a competitive edge. Profit margins have shrunk but remain satisfactory. Nexans is keeping a close eye on this market's development.
In the data cables sector, the new 10 Gbit/s cables have been an out-and-out success.
Asia-Pacific: more than 50% growth in China and profitability objectives fully met by Olex (EBITDA equal to 14% of sales at constant non-ferrous metal prices)
Since January 1st, 2007, sales for the Asia-Pacific region have included Olex's contribution which totaled 284 million euros in 2007. Cable business sales for the region amounted to 564 million euros in 2007 (at constant metal prices). At the scope of consolidation prior to the acquisition of Olex, organic growth amounted to 14.2%.
Operating margin for the area's cable businesses jumped from 15 million euros in 2006 to 49 million euros in 2007 (at constant exchange rates). The increased profits were due in particular to a qualitative pricing policy and the expansion of industrial capability in China and South Korea which enables the Group to take advantage of the boom in the industrial and electronic cables market.
Sales for the Rest of the World region amounted to 374 million euros in 2007, an increase of 14.5% compared with 2006 (at constant consolidated scope and exchange rates).
In 2006 and 2007, all the countries in this region reaped the benefits of the high level of investment enabling them to take advantage of the booming markets. Nexans in particular strengthened its positions in Industry (Brazil, Turkey, Morocco) and in Infrastructure (Lebanon, Egypt).
Commenting on the 2007 results, Nexans Chairman and CEO Gérard Hauser said: "Our results for 2007 indicate sound performance. Showing organic growth of more than 12%, our cable businesses sales are increasing in all geographical areas across the infrastructure, industry and building markets. A year after the launch of our 3-year strategic plan, this performance offers clear proof of the pertinence of our strategy, which aims to establish Energy at the core of the Group's activities, re-balance our presence throughout the world and constantly improve the value added of our product portfolio. Indeed in 2007 we started to see the first fruits of this new strategic direction. We are also pleased by the positive effects of our external growth strategy implemented several years ago. The strong performance of Olex is evidence that we are making the right choices. The integration of Madeco, the cable industry leader in South America, into the Group should also help to improve our performance in the future.
The strategy we have implemented makes us less vulnerable to cycle reversals: our sound balance sheet, our results, our rapid growth in long-cycle businesses, our ability to generate cash flow as well as our geographic diversification are our best assets for the future.
Over the 2008-2009 period – and after scope changes which would result from the sale of the harnesses business and the telecommunication copper cables business in Spain, and the acquisition of Madeco – the Group is aiming for an average annual organic growth rate of 6% for its cable businesses, continuing to outstrip market growth as a results of its investments. This should lead to a further increase in the operating margin, as a percentage of sales at constant non-ferrous metal prices, of between 7% and 10%, depending on economic conditions. The Group should continue to generate positive cash flow in the coming years."
Related categories: Cables, conduit and trunking Company changes
