Prysmian S.p.A.

Thank you very much and good afternoon to all the audience. Welcome to the nine months 2021 report of Prysmian Group.

Okay. Let's go immediately to the Page number 3.

The key highlights of the first nine months. The performance has been good with a solid organic growth of 13.2% with a significant recovery across all the business.

The margins have set again at history increase as well 7.8% adjusted EBITDA margin versus the 9% of 2020. But if we consider the metal price that has been inflated – has been inflated our top line, the real margins could have been 8.6%.

Record backlog and order intake in the quarter. We have a €4 billion order backlog.

Let me remember that the part of it is coming from the US market that has taken. With regards to three important projects in the US market, the SOO Green HVDC, there is $900 million.

That is the biggest single HV project in years. The Dominion Energy we bought just a 12-week ago with a value of €630 million that is the largest product ever awarded in US to submarine.

Last but not the least finally the Vineyard Wind offshore wind farm got the notice to proceed and all the related authorization by the government. So we are going to start the execution.

Let’s flip to Page 4, sales. Sales reached €9300 million with an organic growth of 11.4%.

The related EBITDA has been €725 million with an adjusted EBITDA margin of 7.8%. You have to consider the effect of the metal price in that percentage.

But those counts at the US are not the percentages. The sole not extremely positive note is about the free cash flow because of the weight of the working capital due to a very high level of cost of raw materials.

So going back to the organic growth. Organic growth very good, especially in E&I and T&I.

The industrial and network component business as well Renewables was very well and the telecom too. The telecom lines posted a 13.5% organic growth.

On the adjusted EBITDA point of view, we can say that the nine months adjusted EBITDA is at the same level of 2019, if we exclude the ForEx effect. And the Energy business adjusted EBITDA is better than the pre-COVID level but yet a little bit down not sufficient.

We expect in the last quarter to see a strong ramp-up of the energy projects, thanks to the order we got in the last year. Free cash flow.

Free cash flow, we are seeing that the problem of free cash flow is related by the strong increase of raw materials and consequently the operating working capital that could be quite a lot. We're working on it.

Let's move to Page 5. Page 5, the order intake.

We saved €2.3 billion of order intake year-to-date in the first nine months. With the two big projects in the US, Dominion and Sofia and other various projects.

The Sofia first of all, the offshore wind farms in UK, the Gode Wind, Turkish Crossing, the Saudi-Egypt, the Gruissan offshore windfarm there is the EBITDA. So our numbers of our actual intake of order intake to which we are still resuming the king of the project that is at least for this year with [Indiscernible] expected to come in the last quarter.

Let's flip to page 6. Yes, 6.

Let's compare quickly the organic sales above pre-pandemic level in terms of volumes and in terms of sales. North America and we try to compare the volume of the sales of the first nine months 2021 with 2019, because the reference here for us is 2019 is not anymore 2020, because it wasn't affect largely by the pandemic.

As you can see, North America we have a plus 1% organic growth compared to 2020. In EMEA, plus a modest plus 0.4%, and if obviously the comparison with 2020 is much higher it's 11%.

Latin America, Latin America posted a plus 14.1% compared to 2019 and plus 32% compared to 2020. Obviously, Latin America is not a giant market is up pretty good market that is growing and EMEA able to develop pretty well.

The sole negative comparison through compared to 2019 is Asia Pac, why? Not so much because of China, but much more because of Asian.

In Asian some of the customers have closed the orders and that's the reason for the minus 2.5% you see in the chart, compared to 2019. 2020 obviously there is comparison and it's a plus 11.3%.

By business, by business E&I is the first driver of the growth, 3.3% compared to 2019 and 12.3% compared to 2020. My opinion that is in the energy, let's say, because the same is for or similar is for industrial is the medal the gold of medal of resiliency in term of performance even in a difficult condition market.

The telecom for the quarter if we compare, whereas compared to 2020 has posted a positive organic growth of 13.5% versus 2019. The performance is negative especially cumulative in the first half of the year.

You may remember that in 2019 the volumes were extremely high, due to peak in December 2019 then the market collapsed and in the first nine months we are suffering of COVID. Moving quickly to slide 7, the performance in energy and telecom, having the projects on the left side that is not yet at full speed, I have to say that, the projects – sorry, has posted an organic growth that is 1.3%, but in the third quarter, posted up 11.1%.

And that's the picture or anticipation of the results that we expect to come in the last quarter. So at the end the EBITDA that is what comes is very similar to the nine months 2020.

But the last quarter will be the real indicator for next year. E&I.

E&I, the sales grew 12.3%, in the last quarter 16.8% and the result of the EBITDA of the division went up from €224 million to €220 billion, with a very good ramp-up and up pretty good margin 5.7% that with cost – with metal of 20.20 as bps driven to 7%, both the margins are really growing in energy. Industrial and network component moved from 132 – sorry, posted 9.2% organic growth, and in the last quarter, 8.9%.

Consequently is stabilizing with a pretty good organic growth around about 9%, and a pretty good EBITDA margin, moving from €130 million to €150 million in the first nine months 2021. Finally, Telecom.

Telecom has posted an organic growth nine months of 13.5%, with a last quarter of 9.7% rising the sales from €1.047 million to €1.204 million sales with EBITDA that moved from €162 million to €178 million and the margin that went up if we consider the trade payable from 15.5% to 14.8%. The 14.8% in reality if we use the metal base because there is a lot of MMS multimedia solution our stable so that has in the side of the backlog can be reviewed as 15.4%.

The volume has been good in the US especially and the contribution on YOFC has been almost stable. You can see that €11 million compared to €12 million in the nine months 2020.

So overall, sales went up from €7.5 billion roughly to €9.3 billion with a growth of 10%. But in the last quarter the acceleration is clearly there with 12.9% organic growth.

The result true because it moved from €647 million to €725 million after €19 million of ForEx negative effect. Let's flip to Page 8.

Let's have a look at the last two years cumulated. The reference here as I was saying before, we have to reconsidered 2019 when we reached €1.07 billion EBITDA.

Today we have to consider that there is a certain ForEx effect that is roughly €50 million just to simplify. And other than that, there is a very strong increase of raw material costs and distribution cost increase.

Those effect -- negative effect has been partially compensated -- modestly compensated by the volume but very much by the prices. Consequently, that demonstration that especially with energy it able to transfer the cost increase to the customers because there is no way or players are going to transfer it quickly or ongoing in this market.

The volume in the telecom segment has been a little bit negative and the price mix in telecom has been pretty tough you know because obviously compared to 2019, the price went down mid of 2019, the price yes. And the volumes went down and the price too.

The project has been still suffering a little bit. But we are sure that the last quarter the result of the projects will recover completely -- began -- we closed completely.

Finally the efficiencies and the fixed costs have helped us to reach the guidance and probably in the upper side of it. Let's flip to Page 9 by region.

By region we can say that sales-wise EMEA was reasonably well. Let me say that North America has suffered more than EMEA and that's the value of the geographical differentiation.

You remember that last year we were commenting the first half ramp-up of the North America. Today we are here telling that vice-versa in EMEA to drive the game in terms of absolute revenue.

And Latin America too you can see that Latin America grew 32% in terms of sales. With an EBITDA that grew from €41 million to €73 million.

So Latin America gave us an outstanding performance whereas North America suffered a little bit of the decline of the very strong power distribution business we have seen last year. Last but not least Asia Pac the will problem becomes for not very big amount €54 million with an organic growth of 11.3% compared with the first nine months 2020.

The results are pretty solid and the COVID-19 is over already -- is now over. At the end our total group grew 11.4% in terms of organic growth with a very significant improvement from €647 million to €725 million EBITDA with the projects still late at recovery, but I guarantee you that the last quarter will be significantly better.

And the business in the regions vice versa went very well. Let's move to -- sorry to Page nine -- to Page 10, the guidance.

The guidance is confirmed €920 million to €970 million I can tell you that we will be not so far from the max of the guidance. That's not the same comment for the free cash flow.

Why? Because whereas the guidance for free cash flow was €300 million plus or minus €60 million.

The max of the guidance will not be easy to be reached. Why?

Because in the last -- in the first nine months, we suffered a loss -- the increase of raw materials. And that obviously, are going to absorb cash to us reason why our today's guidance is more in the middle of the range than in the upper side.

Last but not least Page 11. On the Page 11, you can see the trend of the last five years.

In 2017, €940 million, in 2018 €932 million, in 2019 €1.07 billion, 2020 €840 million because of COVID. And this year let's say something like €960 million or around about €960 million.

Now what happened that the energy business is the blue line. We enjoyed the acquisition, of General Cable rising the light blue line, rising results.

And for the next years medium term in five years, we expect as in the past to be lower. The other two key businesses, telecom and projects, are expected by us to grow why?

Because we have telecom after the peak of 2018 and 2019 went down in 2020 because of the price in 2021 has started to recovery and -- despite the very high volatility of this business, we believe that there are no reasons to expect another worsening of the telecom business, in terms of EBITDA. The projects are really in the ramp to the telecom.

Why? Because after three years of difficult market.

Finally, we have an outstanding order book the problem is our or maybe only the execution, but we are totally focused on the execution risks and we are quite sure that the projects will ramp up in terms of performance, starting from the last quarter this year. Let's have a look on the lower side of the chart, about the coherence between the performance of the business and the budget the CapEx allocation we make.

You can see that in the -- I always said that our CapEx were around about €250 million after the acquisition of the General Cable and that has been the history. You can see very clearly, the very big increase of telecom CapEx in the years 2017, 2018, 2019 and the green chunk of the comp.

Starting from the second half 2019, we dropped the telecom CapEx because of the prices, we have seen in that market. And we started to grow the CapEx, the green that green CapEx that are the ones related to projects.

Now what about the ship. We see a slight increase -- and slight further increase for the next three years of the CapEx.

Why? Because we have to put our power, to follow the project the project.

And you see that the dark green chunk of the CapEx are going to be the largest part of the CapEx itself at least for ships. And those CapEx is included into submarine America as well as in the CapEx of the last three years 2019, 2020 and 2021.

We have been able to include also the new ship that I already mentioned, that is completed and already working. Working moreover with very good performance.

The cable ship -- the cable and ship has been able to lay or the revising the first chunk of banking with very good results. So we are very happy with the investments we did.

The next big investment is going to be the new plant in US. Thank you very much.

I leave the floor to Francesco before to move to the Q&A session.

Thank you, Valerio, and good evening to everybody. As usual I start from the consolidated profit and loss sales of about €9.3 billion affected by pretty huge effect coming from the metal prices worth more or less €1.3 billion for the nine months.

As already explained, organic growth was extremely positive compared to 2020. Here by the way you see organic growth including also the projects, which is year-to-date 10% better than the half year organic growth of 8.5% improving in the third quarter.

And even more importantly I would say, Valerio explained the level of organic growth or organic sales is above the pre-pandemic level of 2019 in the energy business for approximately 3% above and even not too far from the pre-pandemic 2019 for the telecom business. So these are extremely positive signals and indications.

Adjusted EBITDA, €725 million a very good margin, 7.8%, which however restated to account for the copper price increase is 9%, up from the 8.6% of the previous year, so a quite strong margin increase in particular in the energy business and in particular the T&I business. The third quarter was pretty strong, €255 million at the same level more or less of the second quarter.

The -- excluding the more or less €50 million, €46 million ForEx effect accumulated over the last two years. This level of EBITDA is totally comparable with the 2019 EBITDA pre-pandemic level, once again in my opinion, in our opinion a very good indication.

And for all these reasons as Valerio mentioned, we are quite confident to close the year in the very high part of our EBITDA guidance or very close to €970 million. You see on the box top right, the comparison quarter-by-quarter of the EBITDA with the prior year in the previous year broken down by business, so project, energy, telecom, excluding share of net income and share of net income.

Let me just make my remark. It's pre-dividend out the very strong Q2 and Q3 is supported by the very significant and positive progression of the energy business.

You see that the deviation, the positive deviation compared to the previous year is growing quarter-after-quarter from €13 million in Q1 to €20 million in Q2, €35 million in Q3. Even as by the easing of the ForEx effect, the ForEx effect is €19 million year-to-date for the first nine months and you see that was particularly negative in the first quarter, relatively negative in the second quarter and even slightly positive in the third quarter.

This, of course, will also support the full year EBITDA and the full year closing. Adjustments below the adjusted EBITDA line, meaning mainly restructuring costs are decreasing, down to €25 million as totally as expected, the cost of South European footprint of 2019 and 2020.

The special items, which are basically non-monetary items not affecting the cash are also very low. Last year, they suffered from a pretty sizable impairment in South Europe.

This year we are not having this negative effect and this is of course in the end driving up our net income. Good news also from financial costs or financial charges, you see €10 million down compared to last year even if I have to say that real net interest expenses are quite stable, whereas, this positive effect is mainly coming from a one-off effect related to the issuance of new convertible bond back in late January, beginning of February.

Tax rate is also decreasing, down to 32% despite some negative one-off one for all for instance the tax rate increase in UK. But despite this we recognized a four percentage points tax rate decrease.

And in a summary all this is boosting our group net income up to €255 million which is almost doubled compared to the previous year. Let me now go to the following slide, the balance sheet.

Let me start from the stability. Obviously, disappointing of the net financial position of the net financial debt at €2,663 million substantially stable from September 2020.

Also in this case Valerio anticipated that the reasons for this in a very clear way. And the substantial reason is a major impact coming from raw material prices from a huge increase of raw material prices.

Just to mention you -- a couple of numbers over the last 12 months so September to September, we are counting a negative cash impact, working capital impact from metal prices approximately 320 million -- €320 million. It's much more difficult to estimate the non-metal raw material prices increased much more difficult to estimate.

I would estimate these at least €80 million. So all-in-all we can count a €400 million impact on our balance sheet and operating working capital coming from the raw material prices.

Of course, we have tried our best to compensate this was not very easy. I have to admit.

We benefited from a pretty good reduction of working capital from power link, pretty strong cash flow from power link over the last 12 months. Of course, we suffered on the other end from a necessary restocking or stock rebuild also to follow the good volume trend and to follow in principle the market recovery is a good volume trend.

And I think we achieved a very good reduction of working capital both on the front of receivable and front of payables and these allowed us to partially compensate the raw material prices effect. Let me finally go to the cash flow following page.

And here we have the usual bridge of the debt showing the debt stability from September to September. You see here highlighted a 12 months -- last 12 months free cash flow of €202 million.

This reconciles with the €282 million taking into consideration the €80 million tied for us cash settlements that we had over the last 12 months and ending €282 million is the number which is consistent and coherent with our year end guidance at €300 million plus/minus 20%. And this means that overall we anticipate fourth quarter in terms of cash flow pretty much in line with the previous year maybe slightly better allowing us to grow €282 million at least to the midpoint of the guidance to the €300 million.

I think I'm over with my part of the presentation. We can go ahead with a Q&A session.

Thank you very much.

Hi. Good afternoon, gentlemen.

Thanks for taking my question. First I need to apologize if maybe I ask something that you've already mentioned, but my line is very poor this afternoon.

So I couldn't follow everything with a lot of details. But my first question was around the free cash flow performance after nine months.

And how do we bridge that to your guidance of €300 million for the full year? Because it would imply a quite significant kind of reversal maybe of working capital or a lot of down payment coming through.

So can you help us understand how do we bridge the free cash flow at nine months which I think is a heavy negative to the €300 million positive for this year?

Sure. Hi, Lucie.

Francesco speaking. The drop of the working capital and the huge cash flow generation in the fourth quarter is pretty normal.

However, it is related with two factors mainly with the seasonality factor number one. And with -- normally with order intake and also milestone delivery in the project business, which are very cash generative in the last part of the year mainly in the fourth quarter.

If you allow I prefer maybe to start to at least take out of the picture one of this factor of the seasonality to start from the last 12 months free cash flow as of September, which is the well-known €282 million and bridge this say with the €300 million that we target. It's not a big change.

We will certainly benefit of an improvement of EBITDA compared to last year coherently with our guidance. We may also benefit of the metal price or some metal price effects, because the copper price flattened in the last period even decreased a little bit.

So in the fourth quarter we may benefit. And whereas in the fourth quarter last year you remember that there was a start of the metal price increase.

So the two trends are quite opposite, it should be quite opposite. Of course, we are assuming the stability now of the metal price.

Yes, go ahead.

If I may add my consideration – hi, Lucie Valerio speaking. There has been an effect that is transition we expect with when materials becomes cost that everyone is running behind additional materials.

And that has been our mistake -- the mistake of our team in several regions. This is why we gave a very strict control on the orders of raw material, because when something we can start you remember you may remember the five vessel in 2019, which is six months 2019, you are surely proceed the raise behind the raw material in the first nine months, first six months, especially of this year and that has been the effective debt reduction good enough.

This is why the raw material reductions at lower price so much. And this scarcity of raw material perceived by some of the markets.

We made the mistake to run for higher volumes in our stock. That is going to be compensated, because we are acting pretty strongly in our supply chain.

And a matter of fact what Valerio is saying will mean some recovery in working capital specific for the stock in the fourth quarter last year. So this will be a positive sector, whereas we will have certainly a higher level of CapEx of the €248 million of last 12 months CapEx will grow to €290 million, €300 million and this will be on the negative side.

Like also the fact that last year was a particularly strong cash flow of the project business in the fourth quarter, this year is much more distributed. As I said, we had a very good dynamic of cash flow from products in the first nine months -- in the last 12 months and compared to last year, I think we will have a less positive contribution still positive, but less positive contribution from projects in the fourth quarter.

But all-in-all, all these factors are substantially compensating each other to deliver a full year free cash flow in the region of €300 million compared to the €282 million last 12 months September. So the bridge in principle is not very material.

You have a lot of see a compensating effect plus and minuses, but the reality is that our full year free cash flow should remain pretty stable from this last 12 months as of September. I don't know if I was clear Lucie.

Yes. Thanks very much.

Thank you for all the color. My second question was around the order pipeline.

And I was just kind of wondering how do you think about the awarding in the next few quarters in terms of large contracts. And whether you see yourselves keeping your share, because effectively you've had a very strong momentum in order already year-to-date.

It was quite clear from your slide. And if you think about 2022 in terms of execution you have a backlog of €4 billion.

If I also add some of the US project and the Middle East project, which is not yet apparently in the backlog, it's nearly €6 billion. How much of that backlog do you expect to materialize in 2022?

And you mentioned in the past capacity utilization of different technology XLPE and MI, how should we think about that into next year considering that enormous backlog you have?

Lucie, you're trying as usual to anticipate next year. But what I can tell you is that the orders are here.

And we expect in the last quarter that will help probably on to the cash flow with the advanced payment, we expect to materialize some more quarter of which the biggest one of the history that this going to be different, which is going to be our share of this project that cannot participate, why? Because we are under the silent period.

But I'm quite confident. For next year, already that's a trend that we are reasonably confident to be able to catch.

So next year projects will hopefully confirm the trend of the last two quarters and will grow significantly. Did I answer to your question?

Yes. I mean, I guess I was maybe hoping a slightly more precise kind of conversion rate of the backlog if you had in mind, but maybe it's a bit too early to ask.

I know we are only in November.

Let's wait when we are going to give the guidance for next year.

Okay. And then maybe last question on the CapEx, you are mentioning the step-up.

You had already mentioned that before, but just as a matter of update for the submarine project or the submarine plant in the US. What is the current situation?

Do you have a site? Do you have a time line that you can maybe share with us?

And also, how much capacity do you expect to add to the market or maybe versus your current capacity? I mean you have about 40% market share in the market.

So, is there anything you can share on that at this stage?

The answer is yes. We are pretty clear what we have to do.

Besides this identified but not yet secured consequently in the next weeks we have to be able to secure the property of the site in order to start the construction beginning of next year that's the way [indiscernible]. The total value of the investment will be about €200 million.

Thank you.

You’re welcome.

Good evening, everyone, and first of all I apologize because also my line is quite disturbed. The first question is on the Tyrrhenian Link.

Should we expect some news flow by year-end/ And in this case, in case of a potential award of a large part of the link, is it the Tyrrhenian Link already included in your CapEx guidance or the Tyrrhenian would require additional CapEx on top of the one that you have already announced? And my second question is on -- for Francesco.

I know it's premature. But considering the performance of the energy project for the next year, and on the other side still challenging cost scenario, would you view as feasible an improvement of the free cash flow year-on-year up to €400 million, or would it be more prudent to be below this level?

Thank you very much.

Okay, Monica. I'll try to give you an answer on Tyrrhenian.

As I said, we cannot, as of now, clarify completely the position on Tyrrhenian. We are confident to be able to catch at least a significant chunk of it.

Investment and CapEx related to the execution of Tyrrhenian are not in. Why?

Because are not foreseen. The capacity we have to manage the Tyrrhenian and confidently there will not be an additional CapEx to manage Tyrrhenian.

That’s -- to be clear no additional CapEx?

No additional CapEx for Tyrrhenian.

Okay. Thank you.

You’re welcome.

Monica, regarding the free cash flow question. If I understood well, obviously you referred to 2022?

Yeah.

Well, in principle, if we think how much the raw material prices affected the cash flow this year, I think should be -- shouldn't be possible to be feasible the level that you mentioned €400 million. Of course, as usual, we have a target to improve our results, that's the first component there.

Then of course we shouldn't suffer from these major raw material price increase. Of course, on the other side, we will have the kick-in of the higher level of CapEx that Valerio has mentioned.

So -- but all these -- so in all these the most material component is definitely the raw material price increase and it will not further penalize next year I think the level you mentioned should be -- but of course, let's take some more time to give a more -- a more precise indication on the full picture of the guidance profit and loss and cash flow when we will publish our year-end results.

Okay, got it. Thanks very much.

Thank you.

Yes, hi good afternoon, Valerio and Francesco. And thanks for your time.

I have three questions as well and I'll ask one at a time. My first question is on slide 11 and first of all, thank you for giving some medium term picture on EBITDA.

But looking at this slide and if I look at the dots for projects business, it looks like you are indicating substantial increase in project's EBITDA in the medium term, which could be above €500 million if I just measure this bar right? And can you confirm that?

And can you say -- when you say medium term, is it 2025 or is it 2026 that we should read here?

Akash good afternoon. You are asking me something that is too much precise.

I already gave the indication that we expect fourth quarter and I can confirm the ramp-up of the sales -- the project sales and the margins going to reach by 2020 -- within five years, let's say, something like in between €400 million and €500 million. So, it's more than doubling the results.

Is that clear with your question?

Yes. No, I think that is in line with what I was expecting.

And then the second one I have is also on projects. I mean you have said explicitly that you are going with a new plant in the US, but I wanted to ask about the UK.

I mean especially after Brexit there is a very high focus here on getting as much local supply chain as possible for offshore wind and government has come up with some kind of support for local supply chain. I'm just wondering I think you have a high-voltage factory here but -- and do you have any plan to have you succeed factory in the UK for offshore wind?

Honestly, I mentioned also some people from UK government about it. I cannot say no, but I cannot say yes as of today.

Also because it makes no sense to pollute the world of the submarine plant. Submarine plants are very expensive and very difficult to be managed and we cannot have 10 subscriber.

The priority we choose is the US. Later we are going to subsea.

Never say ever but it depends on the development of the market. We have capacity in Finland, we have capacity for the medium voltage in Germany.

We have capacity for the extra voltage in Italy for the time being reasons.

Thank you. And my final question is on price cost going into 2022.

So, I think you mentioned early on that you were able to recover some inflation through better pricing. And as we go in 2022, we are talking about labor inflation which may be higher than what we have seen in recent years.

And just wanted to know your thoughts on could that be a headwind for the bridge in 2022, or do you think that this better pricing that we are seeing in the market will allow you to pass this additional headwind coming from labor inflation on top of supply chain and component?

That's a very difficult question. I understand perfectly.

What I can tell you -- it's difficult to tell because the labor cost -- the total labor cost of the company is like €1,200 million. Obviously, if we are going to see a 5% level of cost increase, it will not be easy to be passed on to the market.

So, of course, debt labor cost increase and the related rate is different country-by-country and region-by-region. I would say that there shouldn't be an issue in our P&L if limited to single mid-digit.

The goal I give you to the HR and to the local is to control and to keep under the level of 3%. That obviously depends on the development of the market.

But just a clarification you just said that you are aiming to contain this inflation in single-digit million euros. Is this what you said?

I said 3% salary inflation is the theoretical limit I want to be able to reach. It depends country-by-country market-by-market which is going to be the effect of the quarter revenues.

Thank you, Valerio.

You're welcome.

Yes. Good afternoon.

First question is on telecom. If you can provide an update on pricing on the competitive environment.

We have seen also the last China mobile tender. So an update on that side also in European market?

The second question is on your new submarine cable project in the US Coastal Virginia Offshore Wind. Can you provide any more color on that about the -- yeah, the competition you are experiencing in the bidding process?

It's the first balance supply and t contract and you expect more contracts strategies also in terms of profitability? Can we assume a similar level of profitability of the similar projects in the offshore wind segment?

Then third and last question is still on your CapEx plan in North America. So basically, you have announced €100 million plus €85 million for the telecom segment and your investment in the energy project for the new plant in the short term.

Can we assume these are the investments you plan for the North America or maybe necessary to think about more investments going forward? Thank you.

Okay. Let me start from your last question.

The North American investment is going to be something like €200 million at least. And that is already in the number I presented to you.

If I'm not wrong, I already told that we were going to raise the CapEx level for the next three years 2022, 2023, 2024 around about €300 million, €300 million up to €350 million why? Most of all because the shift is over but the US plant is current.

And the US plant will be something like an average of €70 million per year cannot be absorbed by the other CapEx overall. We are going to consider that at least quite clear in the line that we have to indicate some millions to the decarbonization that's is our game that we have asked and we expected to execute.

And once we say yes, we do it. We are planning a number of CapEx not very huge to reduce the level of emission of the company, Scope 1 and 2.

The other two questions the US submarine okay.

Project margin in US market.

The US market is -- I don't know if Hakan that he should be on the line.

Yes, I'm connected. I'm connected.

Okay. I guess the question is that you can answer, Hakan.

Okay. The question was about Dominion, the balance of plant and the pricing in the US.

So if I comment on the Dominion, the Dominion is the first balance of plants offers that we have made together with DEME. And in an environment like the US where offshore wind is just emerging, sometimes customers prefer to buy the whole system including transportation of the poles and also installation of the poles together and the balance of plant approach becomes an important element.

So we have done the first time a partnership with DEME to approach that new way of business. So I think -- the important thing here is that the pricing definitely is relative to the risk that you're taking.

And we can say that it's comparable to the overall offshore wind projects that we have. And I cannot say that it's extremely high.

It's extremely low, but it's in line with the expectations and in line with the risk that we are taking. And it is not going to be the first one and the last one.

We foresee to have more -- especially when the wind farm market is growing to utilize also external installers apart our own fleet in some projects and we are expecting that to continue. And I can say that let me say, it is more complicated to have a balance of client approach, but it is also I think a good approach for our utilities or for our TSOs to reduce the risk overall of the project splitting it into pieces.

I don't know if I answered your question if you have any further expectation.

Yes very clear.

Okay. Thank you.

The last question was on telecom, yes.

Yes. The third question we went back from the last to the first.

I leave the floor for the telecom to my friend Philippe here around the table to give you the numbers about the pricing and the environment in telecom business.

Okay. Good evening Renato.

First on the volume, the telecom market is back up. It's growing after two years of recession, and is growing very strongly in the US.

It's now also growing very strongly in China. The China Mobile tender showing a growth of 20% year-on-year.

It's also growing in the other regions to a lesser extent Europe -- countries, and the rest of the world is also growing. So there is a global trend for the volumes to be up.

And as far as prices are concerned you have seen also that the China Mobile tender ended up with more than $1 increase in price, which means -- which was expected because the previous prices were definitely too low for the industry. I think this will drive the prices globally to be on an upward strength.

We already see that in the inventory prices. So both trends; volume and prices are up and both growing with different speeds depending on where we are.

I don't know that answers to your question.

Last but not least, growth to consider that the Anti-Dumping Procedure Act, we cannot disclose that. In the next quarter, I believe it will be possible to discuss.

The deadline for the European Commission to announce the Anti-Dumping Duty is the 24th of November. So it's not coming in the next two months, we will see what the outcome is.

Okay, thank you. Thank you very much.

You're welcome.

You're welcome.

Thank you. Just my first question was around the evolution of the projects business in the fourth quarter.

So I think when I look back at this business, good quarters of revenue are typically around sort of €450 million, €460 million of revenues. So is that a good indication for where this business could get to in Q4?

I think so. I think so, €400 million maybe a good indication, maybe even a little bit more.

Okay. And I mean similarly then on the margins, I mean you talked about an improvement in the margins and that being a good indication of where we might be for next year.

So I know you've historically talked about wanting to see this business get back to 15% margins, maybe that's a little bit aggressive for Q4. But do you think again good utilization.

This division has done 14% in recent years. Is that a sensible assumption?

Let me give you a different way of reading. Our forecast for the last quarter is telling us that this year-end margin is going to be over 13%.

The year-end margin in energy projects is going to be above 13%?

Yeah, yes. Then the last quarter, I don't have directly but it would be slightly…

Yeah, because you're at 11.6% year-to-date. So that would be…

Yeah. 2% of margin in one quarter.

That's the forecast. Then I like the afterwards.

If I can say one thing, let's always keep in mind that in project business, what is very relevant is the full year margin because if you take -- if you go back many years, you will always find a very significant difference in margin between the first part of the year and the second part of the year. So I wouldn't think this [indiscernible] Q4 as the compound calculation is 16%.

I wouldn't use this for 2022. I think we should use the 13%, 14% of course with the growth of the business we have operating leverage and -- but not certainly the Q4 used for the following full year.

Sure, understood. And I guess is it right to think the reason that you might get to 16% is because you're closing on projects and those sometimes have some provision releases in -- yeah -- which is why that margin can be so strong just so we understand it a bit better.

Is that correct? Yeah?

It is correct.

Yes, okay. That's helpful.

So my next question is just on this sort of €400 million to €500 million sort of project EBITDA number that you've talked about? And I mean we get asked about it quite a lot.

So the thing I'd like to understand is we're talking about EBITDA kind of in energy projects nearly doubling. So adding about €200 million and if we think about kind of what that means in terms of revenues we'd need to add assuming it's a 15% margin sort of somewhere north of €1 billion of revenues in order to achieve that.

So…

Okay.

So I guess -- I guess, what I'm trying to understand, when I look at your CapEx and you're spending €200 million on a U.S. facility but I'm struggling to see where the CapEx in the current assumptions is to get that kind of revenue growth.

So in less kind of in the next couple of years we're going to see a real step-up in CapEx on top of what you've just announced. Can you help me understand how spending sort of €200 million to €300 million on a new plant is going to get you €1 billion more of revenues, or where would your current capacity set up that kind of step-up in revenues is achievable from?

Okay. Let me give an answer in a different way.

In terms of installation capability and capacity, we are already there. We need some additional CapEx are foreseen.

And honestly speaking, we have authorized an additional CapEx in Finland to be executed this year. We have already outlined and is ongoing the CapEx for capacity increase in submarine.

We are missing the still the U.S. plant.

So -- and we have already authorized also the U.S. submarine expansion for the submarine.

So at least in the medium-term we should be not so far from the acquiring capacity by the markets with the investment that I already told you. The level…

Okay. So …

The level…

Yeah. Sorry...

The level reported in page 11 is a really reasonable level. Then maybe that some other opportunity will come and we are going to follow the traditional networks.

Okay. So that's clear.

Just so I really understand that. So you can potentially do an energy project about €3 billion of revenues based on the CapEx that you have laid out in slide 11.

Just to make that crystal clear.

Yes.

Yeah. Okay, understood.

And maybe just one -- just a final one for Philippe, so I mean I sort of appreciate the sort of comments on the volumes getting better the pricing sort of maybe having reached a bottom. So should we also translate that to your sort of telecom margins also having bottomed?

Because I know there's been this effect where your contracts get renegotiated that can have a delayed impact on margins. So I'd love to understand whether based on the pricing of volumes we feel like margins have reached a bottom, this year or whether there is still that delayed effect that may need to come through in 2022?

Yes. Hi Max.

It's certainly in the quarter three, we are having the full effect of the new contracts as we discussed in the last quarter. So we now have the full effect of prices of the price reduction in our efforts.

The second thing that we have in the -- is of course the impact of the increased raw materials and transportation. And of course as you know we are permanently working on our costs in general.

I would say, if you take the quarter three isolated you are at a level that is can be unless we have surprises on the raw material prices it should be sustainable if we do not have any big change in the mix of geographies.

I'm sorry to add a consideration that my opinion is quite important. If you look at the inflation on the transportation cost, that is very helpful to us, because our industrial presence all over the market is very well.

Whereas the indifferences of the [indiscernible] will have a much higher problems or much higher costs to export to the other markets we don't and that is helpful. We are seeing business in the U.K.

market where the Turkish were a significant exporter of energy vehicles. And today, they are suffering a lot the availability as well the cost of containers.

So the transportation cost increase is not totally negative to us. It's a double effect.

It's more expensive also for us, but we are, I think, at least I can scope for my business, I think, we are the most local of the global players. And any types seeing [Indiscernible] whatever.

Okay. Valerio, could I just check, because I struggled to hear during the presentation you didn't make -- did you or did you not make a comment on 2022 margins in telecom?

Did I hear a comment on 2022 margins in telecom, or do you not?

I did not. I did not, honestly.

You did not. Okay.

Perfect. Thank you very much, all.

I also like this result right now about the margins of the next year. It's a little bit difficult.

Understood. Thank you.

You’re welcome.

Good afternoon. Thank you for taking my questions.

The first is coming back to slide 11. Could you just talk a little bit more about what you mean by climate change in digital in terms of CapEx allocation.

How should we think about this? How are you enhancing your product?

And how can we think about profitability, new products in climate change and digital?

I leave the CapEx to Massimo Battaini, our COO, because what I mean, I start the answer. Then, I leave the floor to Massimo for more detail.

Obviously, in order to catch with our sales base -- share-based target commitment, we have to bring our revision, and to do that we need some CapEx. For instance, the revamping of all our factories are already ongoing.

But there are other CapEx, other -- not significant CapEx, but other efforts that we have to do. There is someone that has the line open.

And consequently, we need to foresee some investments, some medium, little size CapEx in order to reduce our CO2 emissions in the next five-year. That's the reason for the climate change in digital CapEx.

More climate change, the digital is something much more stable than positive. Massimo, do you wanted to be more --

Yes, yes. Simply, that in line with our commitment Sean, the net-zero by 2035, we have allowed some €100 million in CapEx over 10 years to be deployed in our factories to make this plan a solid and achievable.

And this is what is climate change is about. We also are working on the moving some SF6 gas which are very contaminating in our footprint, the one that we use, us and our competitors for high voltage in industrial cable testing.

And this requires some additional CapEx and so, this is, Sean, the problem to discuss before the climate change and sustainability target.

The climate change we take very seriously. If we start something and we have to finish it.

That's our style.

Understood. And how should I think then about the digital part of that?

Because surely that is going into new product areas?

No. The digital is a perhaps quite important chunk of investments.

We every year are implementing in order to improve our digital structure, mainly the IT systems that includes the General Cable business versus now we are implementing the new SAP. The new SAP S/4 in the entire perimeter.

Right now we are doing it in North America and it's quite expensive CapEx. Did I answer to your question?

Yes. That's very clear.

Thank you. And if I may just one follow-up.

Just to be clear on the project CapEx, we know about the US facility. I'm just thinking about the split between submarine and high voltage.

I guess the ship is obviously a summary specific, but can I assume there is complete overlap in new capacity in the projects for both submarine and underground high voltage?

Yes, of course, I'm not sure to have understood very well your question, but the CapEx we are referring to are the total CapEx including the HV land and the submarine.

Now, of course, the share of the incident to the high voltage capital lending, high voltage capital to the total energy project is lower than the summer of most big chunk of this CapEx will be deployed in the summer in capacity more in the voltage capacity in the range of probably 30% to 70%, 30% being land and 70% being submarine especially in light of the US and new plant in the submarine space.

But you have to consider that the CapEx required for German corridors are almost totally done. The CapEx for submarine are under execution are partly in the numbers surely in the numbers of 2022.

What we missed today is part of the CapEx for submarine unless some other big land projects we can.

Okay. Thank you.

You are welcome.

Hi. Good evening.

Thank you for taking my question. I am Prathamesh.

I work with Daniela at GS. I had two quick questions.

My first one was like you seem to be winning a lot of projects in the US, without having a US submarine plant. I was just wondering that do you still need a US plant, or is it possible to just produce all the cable that you need for U.S.

from your European facilities? And I can ask the second one later.

Yes, it's possible. It's possible that the transportation will be expensive and over the local content comfort whether is something appreciated by the customers in the US.

Meanwhile having no additional capacity or available capacity for the US market in Europe, being also the European market is expected to cater to we have decided to move into the market. Let me remember you that we have been the first to build the HV brand in the US followed by our competitors.

Now, we are not the first -- summer in HV we wanted to be the second and not more than the third.

Also -- it is also likely balance our capacity versus the demand. We will have a situation in which we produce from Europe and deliver to US, even if we have a plant in the US and also deliver around because it will be difficult to guarantee a full set ratio of our assets only sit in one geographical area in the Europe.

So the second -- the plant in the United States will have a separate full plant across the world and respond from to the market demand.

Thanks a lot for that. And my second question was around telecom.

I don't know if you have already answered this, but the telecom PPI data seems to have moved up, but your commentary around pricing was still challenging. So, how much time do you think it will take for the telecom pricing to reflect the PPI data?

No, the question is about, how much a project to go back to pre-pandemic margin in telecom. I would say with prepandemic second half in telecom in reality is not the main event.

The main event was the slowdown of the Chinese market in February 2019 which was one year before the pandemic. And since then prices went down by something like 30%.

But there is suddenly and they stayed down and even went down further forward. We are going to be back to these levels, I hope one day, but I don't see it yet.

What I see is something like half the gap being fulfilled in the coming 12 months, something like this. But you have to take that really as a good feeling, the good feeling of someone knowing the market and having filling the profit.

It's not scientific at all.

The volatility of the telecom market is unfortunately PPI. Consequently, now we are worrying what's going to happen in the next 24 months is difficult to predict this.

The trends are on the one side.

Thank you. Thank you for taking my questions.

Okay.

Hi, good afternoon, everyone and thanks for taking my question. Listening to some of the commentary across the wind energy sector recently, the industry has clearly struggled with logistics and raw materials cost inflation.

I just wondered, if you've seen any changes to pricing dynamics or contract structures and conversations with customers within your wind and offshore wind exposure? Thanks.

Okay. The energy business is a pretty steady business in terms of volumes or slightly growing let's say, it is growing with digitally.

Now the raw materials increased and the transportation increased we have been able to transfer to our clients. And that's very good, because at the end once we transfer the capital price increase or the insulation material cost increase, something remaining in your pocket, especially if you are able to negotiate properly.

Now – sorry, so the growth of raw materials in our business is positive, if the demand is good, because we can pass it to the market, to the customers. If the demand is not good that's another problem, it's a very big problem.

But usually, it doesn't happen. In the last 20 years that, I'm in the business, I've never seen.

So in the offshore, as you were asking for the offshore, you mean the projects. In the projects the metals is fixed in advance, once we get the order we fix the metals for the entire quantity of the project.

We cannot fix vice versa the derivatives on the ethic that is the base, what we were looking for the compound. And there we may suffer a little bit with the margins.

But it's not a number that is going to kill us. So the raw material cost increase is usual passing to the customers.

For the projects of course, the time line to execute the project and to realize the cable is longer than the move of the raw material price. And the contracts do not foresee an adjustment of the price due to the raw material fluctuation, if not for the current.

And sometimes be it, but it's not going to damage significantly the margin of the projects. Hakan, I don't know if you wanted to add something about the project margins front.

Yes. Valerio, you explained very well the project part.

I can only add that it is very project specific to adjust sometimes also raw materials, other than metals. If the customer is an agreement that we can escalate with an escalation formula, the price according to the indexes of other raw materials, we are taking that into consideration.

In case, we are not in agreement and the customer wants to keep a fixed price in the projects other than the metals, then we include some inflation into our project that cover partially the -- or let me say, the normal increases in the market regarding the raw materials. But of course, if there are short-term significant fluctuation they are not covered by the let's say, by these adjustments.

However, we do not see such a situation lately especially when we signed the contract after the raw material price increases that has happened we are already including all the updated raw materials and also expected increases going forward. So as Valerio said, we from time to time are affected but it is not changing the profitability of the project significantly.

Thank you very much for the color on that. Thanks.

Okay. If there are no other questions?

Yes. Of course.

Hi, good afternoon. Can you hear me?

Luigi De Bellis from Equita.

Luigi De Bellis, just one….

Yes. Just one question on the energy.

If you can you elaborate -- I can -- sorry for the line but it is very disturbed. Can you elaborate on the speed of organic growth and volume for the coming quarters for the energy infrastructure industrial division based on your visibility and backlog?

Thank you.

Speed of organic growth in the project business. Listen I have to be very honest with you.

I rarely have seen energy business especially T&I growing up sharply. Considering our forecast, I tell you the truth is, to be able to -- the volume of energy.

That would be already a success after the very big increase, we have seen in the last three years. Massimo, do you want to comment?

Yes. Volume will remain conservative, but we are very positive about what we've done this year in terms of passing cost inflation to the market and price right.

So you would see an organic growth. Now related to volume and more or less to price than anything else.

So this is something that we foresee lasting for the first six months of next year. And beyond that, we don't have visibility but we are confident that we do next year the same control that we did this year.

Thank you very much

So thank you very much to all of you, it's been a pleasure to have this conference call with you and goodbye, till the next one.