nexans transforming nexans’ value delivery model3354d890-c9f6-431f... · we have challenges… 1...

Nexans

Transforming Nexans’

value delivery model

2018

Strategic update, Nov. 9th 2018

2

This presentation contains forward-looking statements which are subject to various expected or unexpected risks and uncertainties that could have a material impact on the Company's future performance.

The uncertainty in the economic and political environment in Europe including the possible consequences of Brexit which could lead to lower growth ;

The impact of protectionist trade policies triggered notably by the current US government as well as growing pressures to increase local content requirements ;

Geopolitical instability including embargoes of Qatar and Iran, political instability in Libya and Ivory Coast, as well as persistent tensions in Lebanon, the Persian/Arabian Gulf and the Korean peninsula ;

The continued uncertain political and economic situation in South America, particularly in Brazil, which is affecting the building market and major infrastructure projects in the region as well as creatingexchange rate volatility and an increased risk of customer default ;

Abrupt changes in non-ferrous metal costs that can impact short term customers’ purchasing patterns;

A significant drop in metal prices leading to core exposure reevaluation and a direct impact on net income, though without impact on cash or operational margin;

The impact of rising inflationary pressures, notably on raw material costs (resins, steel etc.) and labor costs which may impact competitiveness depending on the ability to pass them through into the sellingprices to our customers;

The impact of changes in exchange rates on the conversion of the financial statements of the Group’s subsidiaries located outside the euro zone.

The sustainability of the high rates of growth and/or Nexans’ market penetration in the segments related to renewable energy development (wind and solar farms, interconnections etc.);

The speed and magnitude of recovery in the LAN cabling markets in North America and the Group’s ability to take advantage of the strong growth in large data centers;

The risk that the expected sustained growth in the automotive markets in North America and in the electric vehicle market worldwide does not materialize;

The Group’s ability to adapt to changes in O&G customers’ investments in exploration and production in reaction to oil and gas price fluctuations;

The risk that certain programs designed to improve the Group’s competitiveness such as programs of design to cost, fixed cost reductions, R&D and innovation programs, or certain business developmentplans targeting new markets, experience delays which can result from the speed in technology transfer on obtaining customer qualifications, or which otherwise do not fully meet their objectives;

The risk in particular that the time and cost foreseen to return Land High Voltage activities to profitability will not be met;

The risk that the timing of expected contract awards or entering into force of contracts in submarine cables are delayed, or accelerated, which can result in unused capacity, otherwise disrupt planning, orexceptional capacity utilization in any given year;

The inherent risks related to carrying out major turnkey projects for submarine high-voltage cables. Those might be exacerbated in the coming years as this business becomes increasingly concentrated andcentered on a small number of large scale projects (Beatrice, Nordlink, NSL, East Anglia One and DolWin6, which will be the first contract to supply and install HVDC extruded insulation cables), leading toa high capacity utilization rates of the plants involved;

The inherent risks associated with major capex projects, particularly the risk of completion delays. These risks notably concern the construction of a new submarine cable laying ship and the extension of theGoose Creek plant in North America to add production of submarine high-voltage cables, two projects that will be instrumental to 2021 objectives.

All figures presented in this document are not taking into account future application of IFRS/16

INVESTOR RELATIONS:Michel GÉDÉON +33 1 78 15 05 41 [email protected]ème DIOP +33 1 78 15 05 40 [email protected]

We have chal lenges…

1

2

3

Undertake further transformation▪ The potential of turnaround remains high▪ Manage for growth the 50% of the Group that generates a very good return▪ Transform the remaining 50% to unlock value

Mindset change from volume to value growth▪ More volume does not mean more profit, we need to scale more than to grow▪ Move up the value chain rather than focus on growth at all cost▪ Grow value by positioning Nexans as a service provider and conquer new white

spaces

Adjust organization structure to introduce more accountability and agility▪ Higher discipline in execution ▪ Stronger focus on Return on Capital Employed and Free Cash Flow generation▪ Simplified, leaner and more agile organization

3

The current strategic plan and the initiatives it describes are based on assumptions and scenarios used as hypothesis upon which the attached document is based. These assumptions and scenarios are exposed to all risk factors and main uncertainties described in the 2017 Registration document and in the 2018 Half-year financial report of the Group. Moreover, certain scenarios considered in the current strategic plan will be further analyzed prior to deciding their implementation, and projects resulting from those studies will be submitted to relevant legal bodies including to employee representatives bodies if applicable and when needed.

1

2

3

A differentiation DNA▪ Demonstrated capabilities to differentiate through deployment of services and use of

marketing, creating value in very competitive markets such as Building & Territories▪ Successfully managed to develop systems in segments such as wind turbines▪ Our service team is being reinforced to scale this up

Megatrends support our value chain move▪ Capturing new services, building modules & systems to escape commodity traps

and future intermediation risks ▪ Address the €120Bn market services with new offerings and strategic partnerships

A turnaround method already proven and scalable▪ Europe and Middle East Africa Areas, have succeeded their transformation▪ A methodology called SHIFT has been designed by Nexans▪ Our teams are already starting to deploy it in underperforming units

… and a great potent ial to unlock

4


5

The World population will increase by +20%, and urbanization by +40%

Energy consumption will jump by +40%

Renewable energy will double

Energy transition bringing huge needs in Infrastructures and Networks

2030

2018

Cable & connectivity production will grow 3.9% per year to 2030System management will grow up to 9.2% per year to 2030.

L E A D T H E V A L U E G R O W T H ( I N N O V AT I O N & S E R V I C E S )

Long term perspectives are excellent and require a move alongside the value chain leading to value growth more than volume growth.

By capturing new services, building modules and systems Nexans will:1- Deliver the best value for money for its clients 2- Escape the commodity traps and future intermediation risks. 3- Address the €120Bn market services with new offerings and strategic partnerships

All third party trademarks (including logos and icons) referenced here remain the property of their respective owners. Unless specifically identified as such, Nexans’ use of third party trademarks does not indicate any relationship, sponsorship, or endorsement between Nexans and the owners of these trademarks.

Cable production(Incl. accessories and cable assembly)

Cable Services

Asset management(design, build and maintain equipment & infrastructures)

Operations

System management

€220Bn

~€120Bn

~€1,000-1,100Bn

~€1,100-1,400Bn

~€20-25Bn(fast growing)

Total ~€2,700BnFirst estimate

Big picture view of the Energy & data management market Focus on Transmission & Distribution (power & data out of scope)

Cust

om

er

need

Fro

m b

asi

c to

sophis

ticate

d

+

-

FOCUS

Reduce operation complexity, be more selective

SIMPLIFY

Reduce organization complexity, increase efficiency

ADAPT

Optimize operations & Shift the portfolio

CONNECT DIGITALIZE DISRUPT

Develop new customers’ offering with partners

Digital transformation to capture higher returns

Penetrate new white spaces with less capital intensity

2019 2020 2021

Managem

ent fo

cus

TRANSFORM OUR OPERATIONAL MODEL

Pay our performance Debt

TRANSFORM OUR POSITIONING

Change Playfield to grow value

Scale up the new

model

Del iver on t ransformation to bui ld our future

6

Agile organization, Talent Management, Corporate Social Responsibility

2018


Our 2021 object ivesB a s e d o n t h e c u r r e n t m a r k e t c o n d i t i o n s

2018E

8.5 %

2021P

15.5 %

+7.0 pts

R O C E

-190 M€

2016-2018E

> 200M€

2019E-2021P

F R E E C A S H F L O W

C U M U L A T E D

I n M i l l i o n s E u r o s

325 M€

500 M€

2018E 2021P

+175M€

E B I T D A

• Transform underperforming units towards greater profitability• Focus profitable units on growth for value via differentiation and innovation• Restore competitiveness through ambitious cost reduction plan• Enforce more discipline in CAPEX management and ROI monitoring

7

I n M i l l i o n s E u r o s ( B e f o r e M & A a n d d i v i d e n d s )I n % ( B e f o r e t a x e s )


EBITDA: Operating Margin (OM) before depreciations ROCE: 12months on end-of-period capital employed restated for antitrust provisions. Yearly depreciation amounting to approximately 140M€ in 2018 and 150M€ beyond, Operating Margin can be computed accordingly.

~

~

Transforming Nexans’ Value Delivery Model

A new roadmap

8

FOCUS SIMPLIFY ADAPT CONNECT DIGITALIZE DISRUPT

2019 2020 2021

Managem

ent fo

cus

Strategic scorecard : 2 Sequences, 6 Management streams

CSR priorities – p15


Pay our performance Debt


Change Playfield to grow value

Scale up the new model

9

Transformation plan – p12 to p13

Zoom

on s

ele

cted

initia

tive

s

KPI & Routines – p14

Business Unit portfolio management – p10 to

p11

Dedicated presentation in 2019

Cost reduction initiatives – p11


2018

FOCUS Strong business unit portfolio management

EBIT% of Net Constant sales

Net Constant sales% of OWC

Restructure

Milk

Value burners

Profit driversProfitable cash tanks

Cash tanksTransformation candidates

NEXANS BUSINESS UNIT PORTFOLIO ANALYSISA granular view

BY 2021 WE TARGET A COMPLETE TURNAROUND OF VALUE BURNERS, ONE THIRD OF THE COMPANY WILL STILL BE IN TRANSFORMATION PHASE

Split of the estimated 2018 turnover per Business Unit segment (Simplified and at iso-volume)

Value Burners

Profit drivers and Profitable Cash tanks

10

2021P

2018E

2018E

2021P

2021P

2018E

2018E

2021P

Building & Territories

High Voltage & Projects

Telecom & Data

Industry & Solutions

Transformation candidates and Cash tanks

1

2

3

1

2

3


11

FOCUS Strong business unit portfolio management

11

Our Strategy

Our Initiatives

Our targets

Status

RestructureManage for cash

Sales Attrition

Freeze CAPEX

Transform

No volume growth or attrition to

target margin ratios

increase

CAPEX freeze Except

maintenance safety and

environment

Incremental 100M€ EBITDA run rate by 2021

Reduction of 190M€ OWCthrough SHIFT and other

initiatives

▪ Deploy transformation task force

▪ Focus KPIs on cost control and free cash flow

▪ Favor attrition of the activities to target margin ratios increase

▪ Optimize Industrial footprint

2Manage for Value Growth

Grow ValueAllocate CAPEX

Differentiate & Innovate

Focused & profitable growth targeting 55M€ EBITDA run

rate by 2021

400M€focused on a

limited number of initiative of

which Aurora new HV

subsea boat

Seed for value growth

New offerings,

Smart products

Turnkey, new capabilities

▪ Deploy Service & Innovation task forces

▪ Carry out Differentiated offers methods

▪ Focus KPIs on growth and free cash flow

▪ Boost value growth

TurnaroundManage for cash

1 2 3

ALL UNITS Offset Price cost squeeze & labor

inflation

Cost reduction initiatives

210M€ fixed and variable cost reduction run rate by 2021

To offset the Price cost squeeze & Labor inflation, estimated at ~190M€ over the

period

▪ Industrial Footprint optimization

▪ Indirect spend reductions

▪ LEAN manufacturing implementation

▪ Support functions optimization


12

FOCUS & ADAPT

Results

Rethink business portfolio Reduce complexity, enhance density Break silos, become systemic, and holistic

The transformation project is split into Business Units that correspond to existing profit centers.Make KPIs simple: EBITDA, OWC, FCF

The mission is organized in project mode for 12 to18 months with a weekly tempo under direct supervision Nexans top management.

A task force fully dedicated to support and drive the transformation is being deployed on sites. Composed of consultants & Nexans leaders.

More than 30 transformation levers have been codified and adapted to the cable industry covering sales, logistics and operations into a holistic approach.

€CASE STUDY – European Activities – 2014-2016

What has been done?

Squad turnaround forces transforming Data into Actions and Actions into Results.

10 Business Units have been covered between December 2014 and December 2016 on a Sales perimeter of 0,9Bn€ (Constant metal prices) :

• An additional 20M€ EBITDA has been generated in 2016 vs. 2014.

• The OWC decreased of 70M€ on the period.

12

Transformation plan


Since 2014

Building & Terri tories

High Voltage & Projects

Telecom & Data

Industry & Solutions

HY 2018 2019 2020

13

FOCUS & ADAPT

The full transformation program targets a contribution of 100M€ EBITDA and 190M€ OWC reduction by 2021

Estimate is based on the results of our ‘financial stress test’ ran in Q3 2018, and our past experiences.

Transformation plan

The Land HV business unit is currently going through a special transformation plan, covering sales, OWC and industrial performance

Deployed on 5 Business Units



6 Business Units covered







13

We will stick with a time-tested approach that generates big returns from dramatic improvements in operations.


Accountability for results

Pace & routines

Indicators & targets

Switch the culture from Understanding to Acting Foster a results-oriented mindset by creating repeatable processes that

spur performance improvements again and again. Develop managers hard skills on turnaround practices

Stronger weighting of ROCE & Free cash flow Adapt KPIs to the business cluster (Growth vs. Turnaround) Align management variable remuneration

Increase the pace: from quarterly routines to monthly & weekly ones Actions & projects linked to financial result Increase routine frequency when results deviate from target Central control tower to lead and monitor weekly all initiatives

14

ADAPT New management routines, new kpi, Central control tower

14The current strategic plan and the initiatives it describes are based on assumptions and scenarios used as hypothesis upon which the attached document is based. These assumptions and scenarios are exposed to all risk factors and main uncertainties described in the 2017 Registration document and in the 2018 Half-year financial report of the Group. Moreover, certain scenarios considered in the current strategic plan will be further analyzed prior to deciding their implementation, and projects resulting from those studies will be submitted to relevant legal bodies including to employee representatives bodies if applicable and when needed.

CSR ranking 2014 2017

DC+

‘Prime’

D B

63/100 2017: 72/100

CSR as a value creation lever

Our TOP 4 priorities

15

KPI Target 2021

Safety

<1Workplace accident frequency rate

Women 25%

in management positions

Environmental certifications97%

sites certified EHP and/or ISO 14001

OTIF 94%

including logistic and plants data

Safety

Ensure health and safety at sites

Leverage safety rules enforcement to reinforce our discipline in execution

Trainings

Build people who build business

Reinforce Nexans employees hard skills (finance, sales & marketing, lean manufacturing)

Energy transition

Engage with customers to contribute to a more sustainable economy (energy transition, electric mobility, smarter grids and renewable energy)

Position ourselves on future proof business

Values & Ethics

Maintain a compliant framework and fair business practices

Promote Nexans as a business partner of trust for clients & investors


Transforming Nexans’ Value Delivery Model

A financial New Deal

16

2018-2021 Br idgeOverall Trajectory – Waterfall from Baseline to 2021 EBITDA

17

325

500

210

100

55

2018E Organic Growth & Value Growth

Initiatives

2021P

190

Transformation PlanPrice cost squeeze & labor inflation

Cost reduction initiatives

EBITDAIn million €



~

2018-2021 trajectory

18

325

500

FY18E FY19P FY20P FY21P

EBITDA

350 to 390

In million €

Actions financial impact (Cumulated % of 2021 Run Rate)

Transformation Plan

Organic growth & value growth init.

Cost reduction init.

Price cost squeeze & labor inflation

20-30%

5-15%

30-40%

33%

60-70%

55-65%

60-70%

100%

100%

100%

66% 100%



~


19

8.5%

FY18E

15.5%

FY19P FY21PFY20P

ROCEBefore taxes

FY21PFY18E

4.4 Bn€

FY19P FY20P

~3% CAGRSales Constant metal prices

9% to 11%




20

Delta OWC (Transf.)

EBITDA Cost reduction One-offs

CAPEX Delta OWC (Growth)

CF Before Taxes & Interest

Debt interest & pensions1

Cash Taxes

Cumulative CF2

Cumulated Free Cash Flow 2019P-2021P Before dividends and M&A

• Cost reduction one-offs estimated at ~250M€ on the period will be self financed within 2 years. • CAPEX : Includes 400M€ focused on a limited number of Profit Drivers segment initiative such as Aurora new HV subsea boat and North

America

>200M€

1.3 to 1.4Bn€



21

Conclusion

Walk the ta l kT h e c o m m u n i c a t i o n a g e n d a o n o u r i n i t i a t i v e s

22

Full Year 2018 results Half Year 2019 results



SHIFT– Status and results

New group operational organization

Cost reduction initiatives – Follow up and results


Transform Our Positioning – Strategic update

Full Year 2019 results Half Year 2020 results

Fact based Comprehensive review

We have gone deeper than ever before to understand our strengths and weaknesses building a view of the Nexans’ future based on a clear understanding of where we can succeed and how we must change to get there.

Transformation We have a clear, concise and actionable plan forward rooted on the past success of SHIFT. The turnaround we proved for 50% of Nexans’ will now be the focus for the rest of the company as we ramp up our value drivers delivering cash and building our future potential. Changing the company culture and structure from one of understanding to acting.

Sequential Continued Transformation Focus

Delivering on a future not based on wishful thinking but on the fundamental market trends driving our customers of today and those of tomorrow. Constructed on the market megatrends that spell out the future growth cycles, Nexans’ after its transformation will be uniquely positioned to drive customer and shareholder value.

Future proof Future based on customer success

Snapshot

Positioning

Transforming Nexans’ value delivery model

23The current strategic plan and the initiatives it describes are based on assumptions and scenarios used as hypothesis upon which the attached document is based. These assumptions and scenarios are exposed to all risk factors and main uncertainties described in the 2017 Registration document and in the 2018 Half-year financial report of the Group. Moreover, certain scenarios considered in the current strategic plan will be further analyzed prior to deciding their implementation, and projects resulting from those studies will be submitted to relevant legal bodies including to employee representatives bodies if applicable and when needed.

nexans transforming nexans’ value delivery model3354d890-c9f6-431f... · we have challenges… 1...

Documents