Prysmian S.p.A.

Thank you very much. Good afternoon to everyone.

Valerio Battista on this call for the full year 2020 financial results of Prysmian Group. Okay.

Let's start with page two -- sorry three, the priorities we choose for 2020. 2020 as you know has been a very peculiar year due to COVID issue.

And we decided since the beginning on the basis of the experience coming from our Chinese affiliate that the first priority was to protect the people. Protecting the people, we were going to protect the business.

And that has been for the entire year the main direction of our action. Chapter 1, we decided to protect the people and obviously, the customers too.

Secondly, we protected the business protecting the people because if there are no people available, there is no capacity to satisfy the demand of the market. And vice versa having a quite good sustainable output of the factories due to the protection of the people, we have been able to follow and to protect our customer needs.

At the end, we have been able to keep this on-time delivery on the orders of our customers over 94%. That is not the top but considering the very difficult season we have been through, I can recognize to the team that they did a pretty good job.

Other than that we have worked a lot innovating to build our system and that has been mostly on the HVDC technologies, developing the P-Laser and the XLPE for the 525 HVDC the high-depth three-core and single-core submarine cable able to be sold over 3,000 meter depth for the single core. So, the three-core is around about 1,000 meter.

In terms of fibers, the telecommunication cable, the FlexRibbon and the Sirocco Extreme that -- with the 180-micron fiber has been reaching density of fibers per square meter that is extremely high. So, overall, we have been working on those chapters.

And the result moving to page 4, have been €10 billion sales with an organic growth negative unfortunately for 8.3%, but with a sequential improvement. In Q4, the decline has dropped to 4.8% and the same in Telecom.

So, we have had a year with the first half very low, especially the second quarter. That has been the quarter most impacted by this pandemic problem and going to recover in Q3 and Q4.

Q4 anyway has been still 4%, 5% organic decline. The adjusted EBITDA other than the sales suffer or can be recovered by the cost efficiency actions we implemented since the beginning.

We have seen in January 2020, we have seen the pandemic the virus coming. And we started implementing all the actions in order to mitigate as much as possible the effect of the pandemic on the company and consequently, being able to -- more or less able, to limit the effect of the pandemic on the business.

The result at the end of the story has been adjusted EBITDA closed at €840 million with more or less the same margin of the previous year, 8.4% versus if I'm not wrong, 8.7% because we protected the margins. We lost at the end 8% of the total because it is what it is.

And we have impacted very seriously, especially in the second half by the ForEx of €32 million. So, the exchange rate, especially of US dollar that for us is a very important chapter has been pretty heavy.

In two years, if I'm not wrong, we are round about €60 million ForEx effect. Free cash flow.

Once the pandemic came we have been starting to protect the cash. Protect the cash means not to give the products to customers, if not under a certain reasonable guarantee to get the money at the end of the game.

That's one of the reason why our free cash flow has been very high at €487 million. You have seen along the year that the free cash flow was pretty good, pretty sound every quarter.

We have been able to close up €487 million with a net debt slightly below €2 billion. The result has been really good.

And the free cash flow again is the real outcome of the company. The problem is that obviously with the EBITDA contracted by over €100 million the free cash flow has been unfortunately suffering a little bit.

Otherwise, it would have been much higher and about €600 million. Let's flip to page 6 – 5 sorry.

Page 5 the financial highlights. Sales from €11.520 billion in 2019 to €10.016 billion.

So a significant drop minus 10.3% organic decline, due to COVID obviously. And the adjusted EBITDA that's more or less kept the same EBITDA margin from 8.7% down to 8.4% with sales that vice versa scaled down significantly from €1.7 billion to €840 million.

So very significant reduction of the sales, with keeping more or less the margin. That has been obtained with an extraordinary effort on the fixed costs, on the variable costs, on all the items that we were able to control in our hands.

On the financial side, we have obtained a significant reduction of the working capital from €749 million December 2019 to €432 million reaching 4.3% of the sales. That is a very outstanding percentage of working capital on sales.

Unfortunately, the working capital is possible to reduce, but not forever. The goal you see now is becoming to keep it stable.

The financial debt as a consequence has dropped roughly €200 million slightly less after having distributed anyway €50 million of dividends to the shareholders. Contributed net financial debt from €2.140 billion went down to €1.986 billion.

Let's flip to page 7, the organic growth by geography. As you can see from the chart, it's very clear that the second quarter has been the most impacted by the pandemic, in all the regions except Asia Pac that has been impacted the first quarter.

You see that, the total group has been seriously impacted in the second quarter with a minus 17% organic growth after a first quarter with 5.4% driven mostly by the Asia Pac by China, because China brought significant, very significantly in the first quarter and then recovered. The other regions more or less have followed the trend with a second quarter very, very heavy.

You see that Latin America is relatively sizable minus 27.3% in the second quarter, but going to recover quite quickly in the following two quarters. North America minus 14% in the second quarter with a very good first quarter, with plus 3.3% and then started to worsen the performance because of the pandemic was affecting even North America more heavily.

Let's move to page 8, the trend of the EBITDA by business. So, projects.

Projects went down from €1.8 billion to €1.4 billion, so a minus 20.6% organic decline, a significant reduction. Because of under saturation of extruded capacity affecting submarine business, the HV land has been suffering the production and installation limitation due to the COVID effect, especially in half one and is recovering in the fourth quarter – has been recovering in the fourth quarter.

The energy E&I, this is stable with a minus 7.5% for the full year, an organic decline driven mostly by T&I and partially offset by power distribution, especially in North America. Because in North America, the renewable business has been pretty good in the first three quarters, let me say.

So same profitability you see 5.8% with a reduction of 7.5% of the sales from €5.3 billion to €4.7 billion. And the consequence on EBITDA that scaled down from €308 million to €275 million.

Industrial network component more or less on the same trend that reduced by 7% organic – an organic decline of 7% from €2.5 billion to €2.25 billion, with a slightly scaled down margin from 7.9% to 7.4%. Overall from €196 million to €166 million, losing €30 million EBITDA, what is good and what is not.

Renewable and elevators has been pretty good at least more than stable, whereas automotive as you know oil and gas and Avio have suffered a lot the pandemic effect. Last, but not least the Telecom, €1.6 billion sales in the first – in 2019 that become 1.4% short, with an organic decline of 14.1%.

Here the organic decline has been significant. And the problem is the optical cable.

But in Q4 has – it accelerated meaning that the telecommunication cables, the optical cables are increasing in terms of demand in terms of volumes, keeping a very low level of prices. So sequential improvement in the optical cable.

We took a lot of cost efficiency. We have to add the effect of YOFC that has scaled down from €22 million to €14 million.

You may remember that some years ago, the effect of YOFC on our P&L was round about €50 million. Now we are talking about €14 million.

So continuously, the reduction for YOFC impact has been pretty significant. Overall, a very difficult year.

Fortunately, thanks to the actions taken by the company, from the cash point of view, very positive, because the companies can bail out because of cash, not only because of EBIT or EBITDA. Let's flip to page 10 and have a brief look at the trading update for E&I.

You see in the graph that the total group is getting a trading update. February year-to-date that is positive, compared obviously to be February last year.

Overall, with North America, that is for the time being, below the previous year. Simply because, the previous year North America was growing very well, especially on power distribution.

This year is going reasonably well, but not as well as last year. EMEA is recovering -- is suffering -- has been suffering in the first half of the year, as well as APAC.

APAC has been terrible in the first half of the year. Today, the trading update is telling us that the total group is recovering in terms of volumes, not extremely high, but consistently better than the previous year in the first quarter.

Let's have a look at the EBITDA and the margins by geography, flipping to page 11. EMEA moved from €6.200 billion roughly to €5.344 billion, with an organic decline of 8.25%.

The margins went down 1 point from 7.9% to 6.9% and consequently EBITDA scaled down €491 million in 2019 to €370 million in 2020. So €120 million out of the total are coming from Europe, from EMEA, let's say.

North America, sales went down 6.5% from €3.4 billion to €3.084 billion, but improving the margin. Consequently the EBITDA has been stable.

North America has been enjoying a very good power distribution trend and the overhead. The margins have been driven by the very strong push on the cost side.

Latin America. Latin America has been one of the regions mostly suffering the pandemic with an organic decline of 10.4% and a margin decline of 2 points from 10.9% to 8.8%.

Overall, the EBITDA went down from €102 million to €68 million. The region has been heavily affected in Q2 with a better recovery in the second half.

That is giving a positive direction in the second half, especially because, the organic growth in Q4 has been quite good. Last but not least, Asia Pac.

Asia Pac moved the sales from €951 million to €813 million, with an organic decline of 10.1%. Obviously, the weight of Asia Pac is limited in our global numbers.

We are seeing a slight recovery in the Q4. From the margin point of view you see that from 6.5% the margins went down to 6%.

Asia Pac doesn't change our numbers, but it's a sign. Finally, let's go to page 14.

Let's flip the page, page 15, the outlook. The outlook for 2021 is €870 million €940 million.

Obviously, the outlook is not a certain. It's an expectation.

I believe that the upper side of the range is achievable, as we used to achieve every year. Unfortunately, we have to consider that next year there are a lot of uncertainties.

And that's the reason for the €870 million. The lower part of the guidance is taking in consideration that there are a lot of uncertainty in the speed of recovery of the economies, in the speed of the COVID leaving our economy.

You see from the arrows that projects is expected to grow, not extremely. Energy is expected to recover significantly.

Telecom, unfortunate, whereas we have clear signs in the last quarter, but even in the first quarter -- last quarter, last year of a significant recovery of the volumes. Prices are still under pressure and we have to take it to consideration, especially for the coming tenders.

Last but not least, the ForEx are not at all helping us, because we expect an effect of ForEx negative for at least €25 million -- €20 million, €25 million next year, next year, this year because we are into the year. Page 15.

Let me give you an update on the climate ambition and the targets, the Board has approved today. And I would like to give the floor to Cristina.

Cristina is the responsible for ESG inside the company and she is the best to communicate to you which are our targets.

Thank you. Thank you, very much Valerio and good afternoon to all of you.

We are proud to announce today Prysmian climate change ambition and targets. We set carbon reduction targets, which are aligned beside these target initiatives.

We signed business ambition commitment letter consistent with the 1.5-degree containment. We set net zero targets.

We set a net zero year between 2035 and 2040 for Scope one and two emissions and by 2050 for Scope three emissions. We set interim targets, which are consistent with these ambitions.

So a reduction of 46% of emissions for Scope one and two by 2030 and by 14% on Scope three by 2030. We are very focused and committed also for an early achievement of this target.

Our main focus is on the scope, we can directly influence, so Scope one and two. Our target is to decarbonize 80% of our carbon footprint on Scope one and two, so covering all our global operations of 130 sites, all the plants plus the R&D centers.

We are focusing of course on reducing these emissions and also in phasing out SF6 gas. This will entail approximately €100 million CapEx in the next 10 years.

So we are very, very committed, very focused and with big ambition in mind. Valerio, I'll lend you over again the presentation.

Thank you. Just you know that we don't like too much this show.

We took the choice to be at the forefront of the ESG, especially the environmental and we are going to act in that direction. Then obviously, the Scope three is pretty difficult, because it's not totally in our hands.

For sure, we are going to do whatever we can do inside our ability, our possibilities. Okay.

Finally, shareholder value. We are proposing to the Board and the Board has approved a dividend per share of €0.50 per share, increasing the traditional €0.42, €0.43 that last year has been reduced a little bit because of the COVID issue.

In that sense, we are going to propose €0.50 per share, 2.3% dividend yield. I believe that as you know, I have a lot of shares.

A lot of my assets are in the Prysmian Group shares and I'm very happy because our shares that other than distribute a certain dividend every year have the possibility and are able to grow. And I hope that will continue for the next years.

If you look at the TSR of our share, in 2020 has been 37.1% and since the IPO, 155.5%. As a shareholder, I'm reasonably happy.

Thank you, very much. I leave the floor to Francesco for the profit and loss statement and the financial details.

Thank you, Valerio and good evening to everybody. Starting from the financial of the profit and loss statement.

As Valerio said, sales closed very, very near to the €10 billion level, with an organic decline of 10% approximately, 8% excluding projects. What is very good is as Valerio remarked, a quite consistent and promising recovery catch-up of our volumes and sales starting in particular from the third quarter across I would say all the regions and across all the businesses.

Of course, more robust in some regions and businesses a little bit more subdued in others. But in general, the catch-up trend is pretty promising and evident everywhere.

In terms of adjusted EBITDA, as Valerio said, we delivered the pretty high part of the range of the guidance. We updated after the COVID outbreak with publishing our results last July 2020, €840 million.

And we did that despite a very heavy ForEx impact, which materialized as you clearly see in the box top right on that -- on this slide, which materialized in the second half of the year and which was particularly heavy in the fourth quarter. Out of a €32 million negative ForEx effect, €29 million in the second half out of which €17 million in the fourth quarter.

Let me clearly say, that we gave the guidance end of July. We didn't certainly expect €32 million negative ForEx.

So we expected more a ForEx negative impact in the region of €20 million. So without this very heavy impact, I think we would even potentially exceed the €850 million.

But of course ForEx is part of the game. It's part of the business.

It's something we have to deal with. Our EBITDA report is also benefited from a drop on [Technical Difficulty] Debt restructuring costs dropped from over €80 million in 2019 to €32 million in 2020.

[Technical Difficulty] by the pandemic and our share of asset impairment we thought it was prudent and wise to take in the fourth quarter for a total amount of €68 million. I would say pretty in line with what expected.

The -- boost to net income came from the very good drop of financial charges the major cut from €125 million to €101 million and I will elaborate a little bit better on this. Tax rate was also reasonably low at 31% of course is always high, but considering also the drop of the profit before tax that we experienced in some geographies and which normally inflates the tax rate, I think is a pretty good achievement in terms of tax rate.

And net income related to group shareholders closed at €178 million, of course down due to lower operating profitability to asset impairment as I said. But in the end, a pretty solid result.

In terms of EBITDA, if you focus at the box top right, you clearly see that the fourth quarter discounted pretty much the heavy ForEx effect. I have to say that the energy trend which apparently looks a little bit weaker in the fourth quarter is not weaker at all.

I would say that the only difference compared to Q3 is the very heavy ForEx effect which impacted the comparison with the prior year. Pretty good, the development that Valerio also highlighted on the Telecom side.

You see that the fourth quarter is the first quarter where the Telecom EBITDA is above the level of last year. By the way also this is impacted by ForEx pretty significantly.

Let me flip to the following page, just to comment very quickly the major drop of financial charges which comes from net interest expenses which closed to €77 million pretty in line with the indication I had given, I believe already in the half 1 with the half one 2020 results and driven by the very robust cash flow generated in 2020 and also by the very low leverage that we managed to achieve to reach at 2020 beginning of the year and which benefited most of the year in terms of low-margin and low financing contract price. The other piece of major drop of financial charges is related with the hedging costs which were reduced pretty much in some geographies particularly expenses hedging necessary to two business like for instance Turkey just to mention an example.

I switch to the balance sheet to comment the very robust performance achieved on working capital, down by an amount in excess of €300 million from €750 million approximately to €432 million. This was the real boost of our free cash flow in 2020 which reached a record level as we Valerio already highlighted.

Generally speaking I would say that half of this reduction of free cash -- of working capital results from a strong improvement of working capital in projects which is mainly driven by the major inflows coming from ordering down payments starting from the German Corridor, but not only for a very significant amount. The other part is related to the non-project business and I'm particularly happy to mention here the achievement of a reduction in receivable overdue by a very material amount of €70 million, €80 million in a very tough and challenging environment so not even at all.

And then the other part of the working capital reduction is less relevant because it's a new monetary component that's mainly related with the deflationary effect of ForEx once again. The net financial debt decreased by almost €200 million very good with a leverage which is only slightly in excess of 2x in terms of net financial debt on adjusted EBITDA.

Cash flow, this Chart as usual 2021 is bridging the debt -- the opening debt 2020 with the year-end debt 2020, so the €2.14 billion with €1986 million. The €375 million free cash flow mentioned in this slide includes the €112 million of antitrust disbursements most of which related to the well on payment of the EU fine, it was the fine which was done in December.

And this brings it back to the number that Valerio mentioned of €487 million. Of course the boost the big boost which unfortunately will not be there for 2021 is coming from the working capital reduction €259 million negative or decrease of working capital in 2020.

On the other hand, I think that 2021 will benefit from lower restructuring cost that in 2020 were still pretty material. But we also need to recover some CapEx projects which were quite contained in 2020 and which some of them were postponed in 2021 of course within a very still very reasonable amount with these two components or restructuring and CapEx which will broadly offset each other in 2021.

So in principle to explain very clearly the guidance of the cash flow that Valerio mentioned the well-known €300 million plus/minus 20%, we should simply think starting from the €487 million. Considering the lack of boost coming from working capital reduction and assuming a neutrality, a stability of working capital for 2021, a broad compensation of CapEx and restructuring cost and of course the challenge which is let me say reaching at least the midpoint of the -- of our EBITDA guidance which will drive an improvement of cash flow.

In principle, this €300 million free cash flow is consistent with a target of net debt year-end 2021, which will be around €1.9 billion possibly even a bit lower than €1.9 billion. So it's very important that we keep deleveraging and of course targeting an improvement of EBITDA which should reach a significantly lower level at year-end 2021 compared to year-end 2020.

Last but not least, I thought it was wise to update on the maturity and on the new let me say maturity schedule of our debt also following the issuance of the equity linked zero coupon bond that we executed beginning of January. You see that our average maturity increased very significantly, almost up to 4 years, 3.8 years to be exact, which puts us in a pretty comfortable situation both in terms of deadlines that we have to refinance and also in terms of very abundant liquidity which gives us confidence also to face still a pretty uncertain and difficult environment.

The first deadline which is coming at -- we will of course deal with in the second half of the year is the refinancing of the straight nonconvertible Eurobond for €750 million. But it's something where we are absolutely comfortable and confident to deal with.

Very good. I think I'm over with my presentation.

We can move on with the Q&A session.

Good afternoon, gentlemen, good afternoon, Cristina. Thanks for taking my question.

I have four actually today, I was hoping to ask and to go one at a time. The first one was around the bridge for 2021.

I see that on your qualitative guidance, you've guided for telco to be down. And I just want to try to understand the message here because we've seen the performance improving in the second half, especially from a profitability standpoint, where it looks like you've been able to very largely offset I would say the pressure you see both on volume and on price.

And so I'm trying to understand, why you are not expecting to be able to renew that type of performance next year or rather this year in 2021?

Hi, Lucie, Valerio speaking. Thank you for your questions.

I'll try to give you answer that have a sense. The real problem here is that the volumes are coming, are coming strongly from North America, not from Europe.

The problem are the prices, because contracts are going to be renewed now in the first quarter mostly with a significantly lower price than the previous year the previous contracts. That's the reason for the not pleasant expectations we have around the telecom business.

A lot of volumes, but not at all a recovery in the price. And consequently the prices will be under pressure creating unexpected slowdown in the performance -- global performance of telecom.

In addition to it, obviously we have to take into consideration our contribution or our participation to YOFC that we don't have any very clear guidance on it. But we expect not to be better than 2020.

If Valerio, I may add one quick elaboration on this comment. North America volume and prices are good.

It's actually in Europe where we suffer. Despite the stronger recovery or rebound in volume, we continue to suffer the price deterioration.

And the combined effect of these two areas geographical areas that Telecom overall is likely declining in 2021. But we did differentiation between the two regions.

Sorry, this is Massimo speaking, sorry.

Yes. Massimo, that's helpful.

The second question I had was around the backlog. You're ending the year with a €3.5 billion backlog for -- on the project business.

I was hoping you could help us understand a little bit how we should think about this backlog in terms of execution for 2021 and beyond. Because I was a bit surprised by the drop of revenue you had in the fourth quarter which seemed quite outsized versus what you had experienced during the rest of the year.

And also an update on maybe a new project to come because I think there were a couple of projects which were expected to be awarded even at the end of last year and for which we still haven't heard much?

Okay projects. The backlog is big.

I agree. The problem is that the €2 billion out of €3.5 billion are the German Corridors €1.8 billion.

And the German Corridors are going to start from December 2021, the execution consequent to the recognition of the revenues. So in the second half, we see an improvement, but not in the first half.

Moreover, we have a lack of backlog in terms of extruded cables submarine. And Eurasia, obviously is the main expected project to come.

As foreseen the reality, the conflict between the 525 and the 400 DC kilo, the 400-kilowatt DC is going to be in favor of 525. But the 525 DC submarine no one has yet obligated.

Consequently, the delay for the execution of the problem will be not minor and we have to deal with it. In few words, means that the project will not be for 2021.

But if I may add -- Massimo again. On a good note, the order intake in 2021 of the market is very strong and bullish.

And we believe that we will land good projects in 2021 to close this gap that we have in the extruded footprint. But as Valerio said, this will benefit more 2022 than 2021.

But the market is there. So -- and we are -- we're going to compete for this order intake.

If you like the expectations, the market is expected to ramp- up to €7 billion. Everyone is happy.

We do, but we wanted to have the order demands to realize it. And we still have a gap in the saturation of the HV submarine extruded.

Understood. My question related to that in project is around offshore wind in the US.

It seems that the vineyard is able to come through. And I remember that initially when you were awarded and that was a while ago before the regulatory delays, you were present on that contract.

So I just wanted to know what was the status now for you on the vineyard. And if you're also seeing now an -- a potential acceleration in regulatory approval in the US for offshore wind that could maybe lead you to have capacity?

Lucie, if it's true as they say that the regulatory body in US has approved the vineyard, we should receive the notice to proceed before year-end. And consequently, it will not have maybe significant effect if not in the last quarter.

But it's a first very good starting point. And I'm quite sure that it's going to happen.

Sorry, you said, you're quite sure or not quite sure?

Quite sure, it's going to happen. No, no.

We have been suffering almost two years with vineyard and other projects that have been postponed by the administration. Now seems that the administration finally has taken the decision to take off.

Valerio, it's Hakan speaking, if I may add. The first approval has been given.

The final approval is going to come very soon what we are also receiving from the customer. The third quarter we have a great expectation that the project is going to go forward.

It is the first project that the government is focusing in giving the green light and the news are positive. So, there is significant likelihood that the project is going to go forward this fourth quarter.

Thank you, Hakan.

And do you think you will accelerate approval in offshore wind in the US, or do you think it's going to continue to be slow until we have several projects kind of on stream?

Hakan, I'll give you the floor.

Yes. Thank you.

I have to tell you that of course the changes in the political environment in the US has given us a big thrust into the project of the wind farms in the US. There are already many projects that have been tendered in terms of licensing on the West Coast and also in the East Coast.

The majority is on the East Coast, but also California has plans to expand and has already opened up discussions of 2 gigawatts from the very beginning in the US. So there is a list of significant projects.

The vineyard is not the only one. Currently, there are already about 3 gigawatts, I can say already assigned to different developers.

And this year, we expect that the first start is going to be with the approval of the vineyard. We are seeing also positive news from the Boeing inside the US, and the pipeline is relatively strong.

And we are, let's say, talking to the developers being part of these projects. So we do not see the same struggles that were in the past, because there are high targets also inside the United States to improve also the carbon emission reduction and the significant policy change.

So we do not expect that these are going to be significant delays as we go in the past. So we are relatively optimistic as we think.

And lastly may I ask on the US steel, can you comment maybe on review regarding T&D investment on the land side this time around. On the back of the issue we have seen in Texas a couple of weeks ago, do you expect that this is going to trigger more momentum in T&D investment in the US?

And if so can you remind us your market position in this market in the US?

Hakan?

Valerio, this is more on the land side, but I can -- knowing the US, I would like to answer as well here. The Texas situation has created significant, let's say, power outages as you know.

And utilities have been in significant difficulties, which caused also, let's say, administrative, let's say, managerial issues inside the utilities as you may have seen. Through my experience and also what we see and what we talk also to our customers the undergrounding is going to be a significant, let's say, step that the utilities are going to take.

In short-term, definitely, there are going to be some repairs and improvements on the overhead lines and also in the undergrounding. But there are in the pipeline significant DC projects that will, let's say, have been planned for a long time, but have never come to the conclusion competing with the overhead lines.

So we see that these DC projects and also AC undergrounding are going to be in acceleration. And this is what we see also -- what we'll receive also from our customers as indication.

Lucie, if I may add Massimo speaking. We will see some improvement on these optical underground, although, we know that since years we have seen in the United States outages happen in California for fires in Texas and so on.

But the undergrounding cost lines is a big call is a big challenge. I think that we will see a stronger leap in demand in the underground cables once the onshore business became more effective, more popular in the United States.

And we're probably close to see this happening thanks to Biden administration and to the Biden stimulus and incentives for renewable sources.

Thank you.

Good afternoon, everyone and thanks for taking my questions. Just a follow-up on the energy projects.

I understood that a higher contribution will occur in the second part of the year due to the start of the execution in German Corridors. But as for the extruded in the submarine so when do you expect the negative impact of the undersaturation of extruded capacity might reverse?

Should we assume the second part of the year? And in relation to the energy projects do you have any update on the Eurasia Link?

And this is for the energy projects. Skipping to the Telecom.

Obviously, there is still a strong pricing pressure in Europe. Do you have any update on the timing for the outcome of the European Commission investigation in relation to potential anti-dumping tariffs?

Do you expect this could -- the introduction of anti-dumping tariffs might materially reverse your outlook in Telecom business maybe driving an upside rather than a downside? And just a follow-up.

The downside I understood that it will be on the absolute level. What about the margins?

And the last but not least from the financial side for Francesco. Can you just give us an idea of the copper impact on the working capital and a rough indication for the expected CapEx in 2021?

Thank you very much.

Thank you, Monica. Valerio speaking.

First of all, what about the projects and extruded shortfall in backlog. We are working on it.

Obviously, there is always a window for the projects. I believe that in the second quarter, we are going to receive new orders that will fill the capacity for extruded cables, but mostly starting from next year.

This year it's difficult to see something effective in the backlog. Eurasia.

Eurasia has not foreseen, but unfortunately expected. Eurasia has been postponed because of the Crete-Attica is 525.

Percent?

The Crete…

Sorry, go ahead.

The Crete --the other part of the link -- parties they would like to have a 525 in order not to have a double station, a power station, transformer station in Crete. Now the project originally was 400 kilowatt.

But 400 kilowatt it doesn't match with the 525 of Crete. And that's the reason for the re-tendering.

The re-tendering will come probably next year -- this year, sorry for execution a little bit late. But at this stage having known the technology of 525 submarine yet.

Moreover has to be 525 you see submarine at 3,000 meters. That would not be an easy task.

We'll need much more time in order to develop it. We were ready for the 400 kilowatt DC 3,000 meter.

We are not yet ready -- no one is ready for the 525.

Okay.

Can I add something, Valerio?

Of course.

Just to complete. Thank you.

Valerio explained very well the conflict that is in the project that created the delay. We are going to have the quotation in March-April time frame of this year.

We knew both 500 kV. The first step is that the European Commission has to define, which technologies to be chosen and the budget of the project.

So I -- we are expecting that until end of April, the discussions in the European Commission is going to be finalized. And the tender evaluation is going to be on the 525 kV.

Definitely the 400 kV was a project that we could do to complete in an earlier stage. This is going to create further development requirements, which definitely is going to affect the completion of the project at least one or two years later than the 400 that we were thinking.

Okay.

So however still we are, let's say, in the development and also in the discussion. And we hope that we are going to be part of this project.

On the AC extruded side there are many different projects that are currently under tendering. And we are expecting during the year as also Massimo said that we are going to be part of this, let's say, award.

However, we are showing already an improvement as in the guidance Valerio showed that project is going to improve for the coming year. It will very much depend on also the execution and the permits of these projects if they can be anticipated to make that happen.

Okay. Thank you.

Monica, let's move to the question for Telecom. I believe that Philippe is on the line.

Yes, I'm on the line, Valerio. I will answer that one.

Okay. Could you give an answer to Monica?

Yes. Hello, Monica.

The anti-dumping process that is ongoing should lead to a decision, let's say, between May and October this year. Of course, we don't know what kind of decision it will be.

So if -- I would say if there is any impact of the anti-dumping process in Europe, I it more to be about 2022 than 2021. And I would define it as about stopping the bleeding in 2022 more than completely eliminating the price pressure in 2021, of course, because they are -- it is essentially set to make Europe not anymore a systematic target for very aggressive pricing, because North America is protected.

China is protected. Japan is protected.

Korea is protected. Europe is not, at least not yet protected.

So that's the point. I think I expect an effect in 2022.

But, still there are also non-Chinese competitors. So, I think we are going to go back if the decision is the one, I hope it will be.

We are going to go back to a more level playing field, which does mean there is no competition anymore. I would look more towards China to understand whether the prices could rebound or not, because in reality all this is due to the excess of capacity in China.

And it depends very much on the Chinese 5G plan that is going to be launched very soon. If the Chinese plan goes strongly then we could see a change in the price trend worldwide.

Okay. So, at the end of the day, do you expect a deterioration in the margins of the Telecom business in 2021 and not only a decrease at the absolute value?

I would say that yes, our margin is going to be under pressure. Europe is -- we are more exposed to Europe than most of our American or Chinese competitors.

And Europe saw the price pressure coming with a certain delay due to long-term contracts and to the destocking effect that we have seen in the last years. So, I expect my margins to be under pressure although we continue our work on the cost.

If you look at 2020, actually, if you eliminate the effect of YOFC and you eliminate the effect of ForEx, the Telecom margin in percent was pretty stable compared to 2019.

Yes, correct.

So, we were quite able to offset the price pressure with cost actions despite the COVID situation. I expect 2021 to be under pressure, and then the time to fully implement the cost-reduction measures.

I expect, of course, to come back to that also level later in the year and 2022. This is margin to date if you want.

Okay. Thank you.

For your last question, Monica, I would like to leave the floor to Francesco to comment on the copper impact.

Yes. Thank you, Monica, for your questions.

You are right pointing out the sharp increase of the copper price will definitely have an impact in -- on our working capital 2021. We are talking of an increase of 35% or 40% in copper price in the last six months.

And as always, when you have this kind of increase taking place in the last part of the -- in this case 2020, the effect are to be seen in 2021. I think we can -- this will create pressure on working capital and the cash flow and by the way something that we have taken into account in our guidance.

I think that with this level of copper is to -- and to stabilize for the prior year, I would quantify an impact of at least €50 million, €70 million and €80 million on our working capital. This will make it not to keep working capital stable, because we will start with the minus to recover.

And I think that we will have an opportunity in any case to improve our stock level and further -- and reduce the days of inventory for the simple reason that with the recovery of the volume that we are seeing here the increase should be feasible. As the stock level in actual terms not high, of course, but in terms of days of inventory, increased a bit on the effect of lower volume talking about 2020.

With volume well down and with the volume recovery that we are seeing now, we should be able to optimize the level of stock and recover and work to recover this material copper impact that I was mentioning. So that, of course, is a challenge.

It would have been better to stay on a more stable copper price, but I see it's manageable and we will deal with that. Then you also mentioned that you were also asking for a CapEx indication.

Well, CapEx will definitely be a bit higher than 2020. I would say approximately €50 million just to give a sharp cut number.

And financially, I believe that this higher CapEx, which is again not higher CapEx in itself. It's only a recovery of some postponement of CapEx that we did in 2020 also for cyclical reasons, because it was difficult to look at all the industrial CapEx in the plans.

And financially, I think that we can be pretty confident that this higher CapEx will be offset as to restructuring challenges.

Okay.

So, components will be quite neutral on our cash flow for 2021.

Very clear.

Are you very clear, Monica? Thanks.

Very clear. Thank you, Francesco.

Thank to all.

Thanks, Monica.

Good afternoon, everyone. Thanks for taking my questions.

I've just got a couple. Firstly on capital allocation, there's been some comments in the press from you about potentially looking at a new acquisition in the US.

Obviously one of your major peers is talking about doing a lot of acquisitions. How are you thinking about the capital allocation process for the group going forward more generally?

And then, my second question is a bit more of a general one. You're obviously taking delivery of the Leonardo da Vinci ship this year.

How should we think that impacts the projects division in terms of margins and commercial capabilities? Is there any kind of mid-term margin uplift from having this ship?

Thank you.

Okay. David, thank you very much for your questions.

Capital allocation. The capital allocation, first of all, you have to have the capital.

We have the capital. Otherwise you are not able to allocate anything.

We have the capital, we can allocate. We have been talking about the desire to look at acquisition in the next let's say one or two years possibly in North America.

Why? Because North America is a market that we have seen is pretty sound.

It's a good market. It's a market where it's important to be relevant for customers.

We are and we would like to be more relevant for our customers. Now the problem is to find the proper target at an acceptable value.

We are working on it. And as soon as we are going to have a more clear view, we will let you know.

The second question, I'm sorry but I missed part of the question.

Leonardo da Vinci, the ship will improve our margins going forward giving us a complex…

No. Leonardo da Vinci will not improve our margins.

It will let us to execute a little bit better the big projects that are not anymore in the scope of Giulo Verne. Giulo Verne is going to retire let me say by the year-end.

And Leonardo da Vinci is going to be fully in charge by July this year. Did I answer your question?

Thank you. Thank you very much.

That's all I have. So I’ll just go back in the queue.

Thank you.

You're welcome.

Thank you. Just my first question sticking on projects.

I just wanted to think about the ramp-up of revenues over the next couple of years rather than just 2021. And, I mean, am I thinking about it in the right way that if the business today is about €1.4 billion, about half of that is from submarine, so a bit more than €700 million.

If we see this business go back to full utilization, should we expect another say €300 million on the submarine side to take that back to €1 billion? And then another say €350 million from the SuedLink projects to get us to €2 billion revenue number in total €2.050 billion for the energy projects business by 2022?

Is that still realistic, or is there something we're not considering in terms of where revenues for this business can go?

Okay. One step at a time.

First of all, the submarine, we are very keen in getting new orders for the extruded capacity we have, because we have capacity available. We have not been able to fill this capacity and we hope to be able to do it during the second half of 2021.

That's in order to be ready with 2022 at the full capacity, confirming consequently the billion you were mentioning. Can you repeat the second question?

Yeah. And when we think about the German Corridor projects, which are obviously zero contribution of revenue today, I assume that in 2022 we should be running at around €360 million contribution from those, which is €1.8 billion over five years or €360 million per year.

So is that again still a fair assumption?

Max makes sense, because the German Corridors are going to start July 2021. It will not be full year.

It will not be full speed. But for sure, second half 2021 and the entire 2022 and 2023 we'll be at full running rate for the German Corridors.

Okay.

So your idea of €300 million makes sense.

And I guess my second question is just then, kind of, how we think about margins in the backlog because, obviously, this year will be -- this year and next year will be Viking Link. We'll also have the German Corridor projects being a big contributor to revenues.

So should we be thinking about margins going back to that 15% level, or is kind of the 13% level more realistic of the shape of the backlog? I'm just trying to understand what a normalized margin would look like for this business at…

Do you prefer an honest answer or a marketing answer?

I'll take the honest answer please.

The honest is that to fill the capacity for HV submarine extruded, we have to react to the adversity [ph] of our competitors. What does it mean?

That the margins may be under pressure. But we do not intend at all to give up on our position on submarine.

Okay. And maybe just a final third question.

I mean, you mentioned when talking about Telecom that part of the effect we're now seeing is contracts that you're signing today being lower margin and that will put the business under pressure. I just wanted to understand, how much of your revenues today reflect the lower prices, so are maybe driven by spot markets?

And how much of it is driven by contract that still needs to feed through and reflect those margins? Where would margins be if the full business today reflected the pricing environment I guess is my question?

Let me be very clear as usual. It's true that our margins are going to be under pressure at least in the first year -- part of the year, because we are moving from contracts that we' re at a higher margin, higher prices to.

Two contracts that for the fibers are suffering the decline of the price of the fibers. That's -- we had -- we used to have quite long-term contracts that have been protected our margins until now.

Now -- and I mean in the first half of 2021, we are going to renew part of this contract. And most probably, we are going to be obliged to give up some margins in order to keep our position.

So I do not see our ability to compensate the decline of the prices that we have seen in the fibers with the cost. Partly if we are doing everything is possible, but obviously partly will go into our P&L.

And that's the reason for the scaling down arrow we put in the Telecom forecast.

Okay. That’s helpful.

Thank you.

Thank you to you. Next?

Yes. Good afternoon, Valerio, Cristina and Francesco.

And I have a couple of things to discuss. The first one is on projects.

So clearly when we look at you, you are still struggling with lack of capacity utilization where you still have some capacity that is available while your competitors are talking about increasing capacity. And one of them has even announced further investments on top of what they we're doing already.

And even if I look at your slide number 22, clearly you are a lot more positive on outlook for subsea and all and so maybe the question I have for you is that -- given you are already having some capacity issues and in terms of underutilization at what stage you will go for investments? And also to add to that point, do you need to have a factory in the US to qualify for some of the projects not the initial ones, but the later ones if there would be any local contained requirement?

Okay. Akash, thank you for the question.

It's clear that our decision to move towards a more determinate action to saturate our capacity is due to the fact that our -- some of our competitors are ready or have been ready to give up prices and contributing markets for volumes. Now they are thinking or they are acting expanding the capacity.

And now that the game is over, we don't want to get -- erode our market share and our position in that market. Reason why we are ready to fight on the margins and on the prices if needed.

Clearly, the party is over. We are the leader of the market and we wanted to confirm our leadership.

If that means to reduce our margins, we have to react on the cost side. But I do not intend to give up on our market position in this.

Yes. I mean maybe if I ask a follow-up on that.

Like I mean if you look at your slide 22 and if you look at the orders historically and what we expect from 2020 to 2030 onwards, I think it looks like everybody in the industry would need to increase capacity. And if I may ask what would be the trigger for you to consider capacity expansion?

And would that be Greenfield, or do you have scope for Brownfield investment as well? And then also if you can answer the question on US?

Thank you.

Akash, listen to be very clear, from the capacity point of view, we may not need to increase their capacity. If the market is moving towards US and I hope and I think that sort will happen.

Obviously, staying in Europe only will not be an advantage and we have to react. We -- yesterday in my trip in the car I was debating with Andrea Pirondini, our CEO in North America now, about the possibility to transform one of our factories in US into a submarine plant.

That will happen for sure. If the market for offshore wind will take off as expected in US, we will be there to serve our customers.

We'll do it. It will be quite a significant investment that obviously will be much or less -- more or less significant in terms of millions depending of the fact that it is going to be a Greenfield or a transformation of one of the existing plants.

If I may add Valerio, one more thing. I just want to tell you that we have the biggest capacity in the market.

So from our perspective, it is not necessary to add more capacity compared to our competitors. Their decision to go and enlarge their capacity is as Valerio said based on lower-margin business and for future expectations and not let's say the reality, which is in the market.

It is not that the market is completely as of today in a saturation mode. There are good opportunities in the future.

And we will follow the opportunities. But we will not invest before the market is going to depart.

On the other hand, don't -- we should also compare always the incremental capacity that they are putting versus our capacity which is relatively bigger than theirs.

Thank you. And my next question is on more medium-term performance.

So clearly, if you look at the group on a three, four year view, I think it's pretty clear that high-voltage projects would be a growth driver for earnings given we have support from SuedLink. And also once this capacity being saturated your earnings will go up.

But maybe if you can help me understand that outside of projects, what would be the driver for improvement in performance? Is there any self-help that you can come out and grow your earnings, or will the earnings growth in rest of the business would be depending on what sort of top line growth you may see in the next few months?

Akash, Massimo speaking. So as we said, voltage we covered.

Telecom, we are going to expand our capacity and follow the growth of the market in North America, which is where we don't see price pressure and also where we don't see any sort of volume decline actually, which is a stronger market opportunity. As far as the other segment, we are going to leverage on the rebound of the market.

Coming out from COVID season, we see strong growth in E&I, in power distribution, in T&I, in industrial cables. So those are the segments which we are building up a growth in 2021 and waiting for the additional growth to come in '22 from energy projects.

So that is our plan for 2021. And we have a -- we have to we are leveraging the footprint.

We are leveraging the portfolio. We're leveraging the strong customer relationship.

And we've already seen in quarter one this year, the stronger growth in our volumes, as we've seen from our presentation before in the E&I market, also in Industrial cables and so on. So this is where we're going to count – we're going to bank for the – for 2021 growth, short-term, mid-term growth in the business.

Mostly in energy subsegments.

Thank you. And my final quick one is on – if you can comment on what you have seen in terms of trading in the past few months of the year?

In terms of trading, yes?

Yes, how the trading has been in the first couple of months 2021?

As we said, we have seen volume back to the level of 2019 in energy products, so in E&I and in Industrial. Of course, there is some pressure also there in terms of cost inflations but we have also been working on – we've also been working on the strong efficiency actions in 2021.

So we see volume already running at a level of 2020, 2019 pre-COVID. So this is positive.

And that's why we are confident that the energy products division will outpace 2019, it will outpace 2020 and will reach a similar level to 2019 in terms of profitability.

The level of the volumes is good, is improving, going back, hopefully to 2019. The problem is the inflation of raw materials that we have to pass to the market.

And that will take three, six months as usual. The hysteresis process that absorbed in between of one quarter and two quarters before to be completed is also foreseen to give an upside when the raw material will go down, if will happen and the prices will not follow immediately.

It depends on the appetite of the competitors. But for our business, the raw material at a high stable level is the best solution including copper.

Thank you.

You’re welcome, Akash.

Hi. Thank you.

Good afternoon. I have three as well, but I wanted to start on following up on a point you mentioned, you were interested in getting consolidation in North America.

Also wondering, if you could give us some colors on which areas in terms of end markets are more interesting. As you know you're next on the set.

Industrial and Telecom for example are – they consider divesting. Wondering, which end markets are more attractive in your view?

Daniela, Massimo. This is Massimo.

We are looking at options to growth in North America – to grow in North America and consolidate other players. As Valerio said, we have to identify new targets.

New copper targets.

The copper targets from a product portfolio point of view and from an accessibility point of view. We believe that we want – the targets for us are in terms of business segments are power distribution or industrial cables.

These are the two areas where we might enjoy from a consolidation of the American market leveling on our scale already wide but becoming even stronger across all the customer base. We are not thinking yet any sort of Telecom opportunity in North America.

Daniela, the problem is that our debt is scaling down but it is still almost €2 billion. Consequently, we have to look at the targets in 18 months to go not tomorrow morning.

Okay. Very clear.

And my second question is more sort of on the project business. We know that for you to operate a perfect pass-through but for your customers I guess it is not and they have seen very significant copper price increases.

Do you think this at some point can kind of impact time lines and cause delays on the project side of the business as customers might wait for a more favorable copper price than what they – when they had signed the contract?

Daniela, my opinion is that in the project business, the copper value is not an issue. It's a really automatic pass-through needs some time.

The problem is vice versa on the less – more competitive market, so the PD and the T&I obviously has most outside of the hysteresis, I was mentioning before in terms of pass-through, needs some time in order to convince the customer that there is no other way.

Daniela, you were worried about customer making different decisions or delayed projects and I don't think this will be considered by customers. Projects have a longer lead time, longer development time and copper has never been hindering their decision for making or not making projects.

So I don't see this happening in the energy project business that the high copper will hamper the activity of customers no.

Assuming that the copper is going to be something like 20%, 30% of the value of the cable that is not the value of the product. The change of copper price will not kill the project.

Okay. Thank you.

That's clear. And then just a follow-up.

I know you belabored on this point a bit but I didn't – maybe I didn't understand the reply completely. On 2021, capacity utilization on high voltage, where are you going to be?

Like how big is the problem of underutilization?

Okay. High voltage is fully saturated, obviously with German Corridors, especially.

The high-voltage land is even oversaturated. The submarine high-voltage extruded is vice-versa 20%, 30% free.

And we are going to saturate it. Now the vineyard is really is going to take off by the last quarter.

It will change the picture in the last quarter of the year. But we have to create the backlog for next year.

All right. Understood.

Thank you very much.

You’re welcome.

Yes, hi, good evening. I have let's say four questions if I may.

The first one is on the Telecom. If you can let's say, if I understood well, first of all, you talked about the deadline for the antidumping investigation, let's say in maybe May or maybe October just to – if I understood well.

And the question is related to let's say, China. If you can maybe add an update on the recent tender in China, if you have observed any price stabilization or price improvement considering the collapsing prices we saw last year.

This is the first question. The second question is on projects.

Can you – considering all the factors you mentioned in this presentation, can you help me to understand where is the EBITDA recovery coming from? And then…

Sorry, Alessandro, I missed the question on projects. Can you repeat it?

On projects – just to – I saw the – let's say the add-on the positive side. So considering all the topics we are discussing, I understood that probably this year you will have more installation thanks to Viking.

So just to understand, which kind – which sort of improvement okay you are expecting on the project side considering that you need to fill also the underutilized capacity on the extruded side. So this is the question on projects.

Because of G&E you expect, let's say positive EBITDA data on projects. The third question is on – is probably just let's say, the technicality.

First of all, in your tax rate expectation for this year considering the extremely low level you got in 2020 financial charges. And then just a clarification on IFRS 16, I saw a sort of add- on the bridge on IFRS 16.

If you can give an idea on what happen on these items. Thanks.

Alessandro, let's take the first question. The first question is on the antidumping.

It's clear that the antidumping procedure is going forward slowly, because we are Europeans and we are not so fast. And the – of the Chinese has big struggles to introduce their anti-dumping tax.

The tender in China have been not improving yet, but not declining anymore. And that's a very – first very good step meaning that no one even in China has anymore the power to drop the prices without losing further money.

In a certain sense, it seems that the fiber price in China has reached the bottom. We have seen a very modest recovery in the fiber price in the market.

I don't know, if Philippe has something more detailed to add.

Yes, I could say – hello, Alessandro. I could say that, in the last China Telecom tender at the end of the last year, we saw prices that were higher compared to the prices of China Mobile.

China Telecom is smaller than China Mobile so the impact from the average price is lower, but still I think we can say that the prices in China are stabilizing. Now, we have to wait for the next China Mobile big tender that is going to come in the coming months to see what the real trend is.

I would expect it not to be down anymore at least to stabilize, I would say, because it's clear that the Chinese industry is suffering very much from this. Just look at the results of what you are seeing, I think it's clear.

So it's obvious that, there is an end to always reducing prices even in China. And it seems to me that we are close to it.

Okay. Alessandro, if I can answer to your questions on projects.

As you have seen from the arrow, the arrow is an upside. It's not extremely strong.

Why? Because we have – we are foreseeing an improvement of the HV land thanks to the second half 2021 upside coming from German Corridors.

And at the same time, we have a modest improvement of the submarine, because of the increase of activity on submarine, even if we as I already said we have 20% roughly of capacity for extruded that is free this unsaturated. But nobody knows, what's going to happen in the next quarter's maybe that we are going to be able to saturate quicker than expected.

It depends of the number of tenders that are coming in, because in the second half of 2020, we have not seen a significant tenders coming into the market. No one has seen.

Okay. Thanks.

You’re welcome.

And there are two questions for Francesco.

Yeah. I…

Francesco, would you like to answer to the questions, please?

Yes, absolutely. Ciao, Alesandro.

I'll start quickly with the tax rate. I think it would – realistically with the tax rate for 2021 maybe a few points above 2020 that you highlighted was particularly low.

So I would say, a range of maybe 31%, 33%, 34% something like this. And this should benefit by the way on the benefit of the rebound of some geographies in terms of profitability and profit before tax in particular in Europe, where we are seeing the rebounds of volume and the recovery of profitability from the low level of the central part of 2020.

It normally benefits tax rate pretty much. In terms of financial charges, I think we were in a slight cliff.

I would quantify the region over and over, excited, for a number of reasons. First of all, we are starting the 2021 year with a leverage above 2 – 2.1 times in terms of EBITDA in terms of debt on EBITDA, whereas the beginning of 2020 we were slightly below.

And this makes a few million difference in terms of impact that's due to our margin on the financing. Then you have seen the transaction that we have done on the Equity Link bond with the issuance of €750 million and with the partial payback of the existing convertible bond for €250 million.

Of course this creates in 2021 an overlapping of two installments providing a lot of liquidity which is not remunerated brilliantly by the market now. Of course we thought it was wise to pay this bill of a few million more interest expenses in view of profiting and getting advantage of exceptionally good conditions in equity-linked market.

So, it was a tactical move which -- where we need to affect an overlapping of the two instruments at least partially in 2021, which is creating a slightly higher financial charge, but nothing really material. And then your second question on IFRS 16.

This becomes from the way IFRS 16 is treated in the cash flow statement. As you know IFRS 16 is basically converting the monetary cost that before IFRS 16 were related to leasing contracts were monetary costs affecting negatively our EBITDA before IFRS 16 option is converting these monetary costs into depreciation.

I'm trying to simplify that. Of course by doing that it's boosting the EBITDA and the free cash flow is having a positive impact on the free cash flow is treating these monetary costs as installments in loans basically treating leasing financial and operating leasing as loans.

And when these leasings are due for renewal this renewal of course are increasing the debt. So, there is a kind of natural compensation between a higher free cash flow and the adoption of IFRS 16 is triggering.

But a component which is not the cash flow of a renewal and new rollover basically of operating and financial leasing which is increasing the level of debt. And this bridge -- you will consistently see this impact in the bridge for the coming year in the region of €60 million just to quantify.

Okay. Okay.

So, sorry because the line was not let's say perfect. So, coming back to the financial charges you are telling me that maybe €110 million is let's say the assumption for you considering all the cost factors.

Correct. Maybe a bit less.

I would say €105 million something like it.

Okay, got you.

Thank you. Good afternoon and thanks for taking my questions.

Firstly on Telecom, you said you worked on cost in 2020 so that ex-YOFC and ex-FX, the Telecom margin was stable in 2020. Can I just understand what is the magnitude of price pressure in 2021 over 2020?

Can we expect to see a good 300, 400 basis points of margin pressure ex-YOFC and FX? Just to understand the degree of pricing pressure that you're seeing in Europe on fiber this year.

Probably the better person to answer to the question is Philippe. But I give you just a wide picture.

Fibers were more or less at $9, $10 per kilometer. Today in the Chinese market are at $4.

Consequently, representing fibers usually 40% of the value of the cable. If this 40% has become half of the building, mainly is that the reduction of the price overall in the cable may be for sure to reach between 10% and 20%.

Philippe I gave a wrong picture?

Let's say a blunt picture because the prices on the spot market reached indeed $9 to $10, but it was not our average case. We were lower than this before the change in the market.

And the second point is that of course as everybody knows our optical business is approximately half our Telecom business because we are -- we also have the enterprise side the copper side and the specialties. So, I would say a few percents in the worst case, yes.

I think we can maintain the fact that in previous calls many of you will recall that we were always talking about 12% as a kind of a worst case. I would maintain that view today.

I think it could be a few percent margin. It depends also on the volume we get in the same tenders we are talking about.

The margin could be better with less volume or could be a bit worse with more volume giving us more room to improve the efficiencies. We are currently in a few important tenders process and we need to understand where they will land before we have a better view.

I think we will be able to answer much better to your question in three months from now in our next conference call.

Anyway Sean, Valerio speaking. I would remind you that the Telecom business has proven to be very fast going down, but also very fast going up.

Now, the question is the demand is growing. It may be the case that six months, one year from now are we going to be in shortage again?

Who knows? But the market -- the Telecom market differently from energy is extremely liquid going up and going down has gone down.

Maybe it's preparing itself for a rebound. That's the hope.

Very clear. My second question is on -- going back to slide 22, it's fascinating to see what looks like a clear structural change in market size.

And I think we've been talking about this for some time. And thank you for providing this 10-year view that we can anchor our thoughts around.

My question is really about the regional mix because obviously this has been really a European market. As we move to this new level of kind of €7-ish billion already in 2020, is this still all Europe?

If I look out then to 2027, 2030, how is that mix changing on your assumptions? Thank you.

It's a quite difficult to answer it for you for your question. Of course, the market is growing.

It's growing even significantly. But until we don't see the tenders in the market frankly speaking, they are expectations.

And they cannot be committed for results based on expectations only. So it's better to be questioned, to prepare ourselves and we are basically ready, but before to see the effect in the P&L, we need time.

I believe at least one year because in 2021 and 2022, a lot of big tenders should come into reality. And that's the reason why the market is going to ramp up from the €2.5 billion to the €7 billion.

But for the time being, there are a lot of constraints yet.

Okay. Thank you.

You are welcome, Sean.

Yes, good afternoon and thanks for taking my questions. Only two.

The first one is on the free cash flow guidance. You have this €300 million, plus or minus 20%, which is a pretty let's say wide range.

I was wondering, what are let's say the biggest and most important moving parts behind this pretty wide range for free cash flow? And the second one was still on M&A, I'm sorry.

But I was wondering -- I mean, I understand that you are just in a very early stage, but I was wondering if you have in mind what you could do. I mean, if you have bolt-on acquisitions or something bigger in mind and possibly if you have a -- possibly if you have any idea for what could be the commitment the five power you could commit on this M&A?

Thanks.

Okay. On the free cash flow, I leave the floor to Francesco.

That's for sure better than me on it.

Hi Gabriele, Francesco speaking. Very good question.

Thanks a lot. I believe we have two main moving parts.

One is back to the question that I think Monica Bosio asked and which is related to the impact structural or less structural impact on 2021 of the copper price, which is very uncertain because it's an easy assumption to assume that the copper price remain at US$9,000 a ton. But of course, it's a very uncertain assumption and the impacts are major.

And behind this of course the challenge to offset any impact with as I was explaining with an improvement of the stock level in terms of days of inventory which is not easy, which is certainly feasible but is something to be done. That's the first moving part.

And the second moving part has certainly to do with the project business and this related with the order intake with the order awards. This doesn't mean that we are not confident, we have a very good order intake and order awards because Valerio and the colleagues have been pretty clear on our commitment to establish our leadership and to maintain our market position.

But then, the timing and the actual awards in terms of months and quarters of the projects related on payments of course can easily shift from one year to the other. And these are amounts of tens and tens of billions for each role like that.

And this explained the reason, why we prefer to have a pretty high range in terms of free cash flow. And of course, as usual, we hope to be from a midpoint up let me say yes.

That's obviously a very clear advantage.

Okay. Thank you.

Gabriele, about the acquisitions, of course we are looking at many multiple opportunities. It is too early because a bolt-on significant acquisition similar to General Cable, we even don't have the balance sheet to manage it, because as you know we don't like to increase too much our leverage, taking risks for the future.

We have to look at medium-sized or even little-sized acquisitions that are creating a flow of transactions that can create something more solid for the future. That's the area into which we are looking for.

It's too early really.

Okay. Many thanks.

So be patient as we are.

Hi. Good evening.

I was just curious is it possible please to have an idea of the size of the project Eurasia or your Africa as you want to call it, both in terms of maybe cables and installation.

Okay, Eurasia. Eurasia is an over one billion project size, in cable and installation.

That's more or less the expected size. Now, if it's going to be really 525, maybe higher, maybe lower probably would be higher, but the way to go for the technology -- technological approval is definitely longer.

I understand the customer. As I said, they have Crete-Peloponnese that is, 525 MI.

Why not the Crete cycles noted to be the same or similar in terms of tension. Frankly speaking, the MI for our know-how is very, very heavy to be -- and very, very difficult to be laid at the 2,000 meters.

The extruded would be better, but no one has today, homologated or even near to be homologated the 525 D.C. excluded.

So, there is need of time for developing the product.

Got it. Thank you.

You're welcome.

Yes. Thanks.

So a quick follow-up on telecom, because we discussed a lot about margin it was probably for Philippe. Can you tell me what is your expectation on the demand side also considering that probably you will care about let's say, mix considering that demand is not so bad?

Sorry, Alessandro, I didn't really get your question. Can you repeat?

Yes. The question is on the volume, considering the price trend that we already discussed.

Okay. So…

… sorry. Okay.

Thanks.

Yeah. Yeah, no, I believe the volume is going to be back to growth in 2021.

In a relatively a strong way and that's what we see today. There is a rebound in volume in the market as Valerio said earlier.

In particular, I think we can say that the destocking effect that we've been talking about for many months now seems to be over. The COVID effect is an uncertainty of course.

But I think the volumes are back. And we are going to be back to growth in terms of volume let's say, high single-digit I would say in terms of volume, but that doesn't mean at all that we will have -- lets say the organic growth at the same level of course because it depends on the price pressure.

The price pressure as we said is going to be very significant. It's -- as I said earlier, I think if you ask the question again in three months from now we'll have a much better view on -- because we are currently too many in -- too much insight at the tendering processes.

So, there's a lot of things, I don't know yet for the year.

Okay, okay. Thanks Philippe.

Thank you very much. And if there are no other questions, I wish to all of you a very pleasant evening.

And I thank you all for the participation to our full year 2020 financial results. Thank you and goodbye.

Yeah.