Prysmian S.p.A.

Thank you very much, and good afternoon to everyone. Full year results 2021, the financial results of the Prysmian Group.

Okay. Let's go.

Let's start with the highlights. We used to deliver at least to deliver in line with the commitment we have got with the shareholders.

Sometime, as in 2021, we even if able, are going to over-deliver. As you can see, the guidance we gave in March 2020 was a range between €870 and €940 EBITDA-wise and free cash flow of €300 million, plus or minus 20%.

In July, thanks to the reasonably good market conditions, we decided to upgrade the guidance to €920 million to €970 million and keeping vice versa the free cash flow in line with the original guidance. That's why, because in the meantime, raw materials and the inflation was ramping up.

The actual has been €976 million EBITDA higher than the upper side of the guidance, even if not dramatically €6 million only and €365 million free cash flow. So I would say, a satisfactory 2021.

Let's move to the next the highlights Page 4 of the presentation. The demand is strong, especially in certain regions with a good performance on all the businesses.

Most of all, in Q4, we have seen margins keeping sound with 8.6% EBITDA margin at current metal price -- at 2020, sorry, metal price. And the last quarter has been the strongest ever.

Projects. The projects backlog is extremely high.

As you know, the order awarded in 2021 of the company has reached €4.8 billion. The all-time record backlog is now over €4.4 billion with a considerable number of projects coming from the U.S.

market that has started. Just for you to know, we are -- have started now the execution finally of the Vineyard Wind project.

That has been the first we took almost 2 years ago. Cash.

There is no results if there is no cash. The cash fortunately or thanks to the market conditions and thanks to our management has been pretty good with a free cash flow of €365 million, a free cash flow yield of 4.6% and what comes most of everything is the net debt that dropped to €1.76 still a little bit high.

Last but not least, the commitment to climate change. A part of a lot of indexes and shows what I like is the number of tons of CO2 that we have been able to reduce.

That's the goal I share with my team. 192,000 tons of CO2 emission reduction is not so bad.

Obviously, we have still a lot of way to go to reach a more decent level of CO2 emission. So having said that and having seen the performance of the company, especially in terms of free cash flow, the decision has been taken to increase the dividend 10% to €0.55 per share, in order to share part of the results with all the ratios.

Okay. I move to the next, and I go to the financial highlights.

The sales closed at €12.736 billion with an organic growth of 11%. Good numbers.

Of course, the sales are significantly high, but never enough, but with an increase of the metal that is not negligible. Consequently, metals is a pass through, let me say, or the margins of metals are very, very limited.

The organic growth is pretty important and reached 11% solidly with 12.3% on E&I for the time being mainly driven by T&I, PD has still to come or we expect to come, but will not be as fast as E&I. Industrial network component grew 8.4% with a sound especially renewable growth round about 22%.

Finally, Telecom, driven by very good market has grew 12.7%. The problem of Telecom is that, that growth is mostly concentrated in North America.

That is fine but is not sufficiently fine. EBITDA-wise, €976 million, as I said, 7.7% EBITDA margin on the sales with the significant growth of the metals.

The margins have been resilient. You can see that the 8.4% -- 8.6% -- the 7.7% can be read 8.7% with the metals of the previous year versus the 8.4% in 2020 at the end of the percentages in our business have a limited value.

What [indiscernible] are the euros? What you can put in the bank and our -- even -- everything else is [indiscernible].

Adjusted EBITDA. Adjusted EBITDA has been pretty good over the level of 2019 that is our reference here for the time being.

And the significant result comes mostly from E&I energy business, [indiscernible]. That's despite a still negative Forex impact of €11 million.

That if we compare the Forex impact with 9 -- 2019, the negative impact has been €55 million, so very important. Free cash flow.

Free cash flow is the real bottom end of our activity. If there is no cash, there is no party.

€365 million free cash flow with the net debt at €1.76 billion. The free cash flow continued to deleverage, €226 million reduction of the debt in 2021 with a free cash flow yield of 4.6%.

The operative net working capital on sales improved to 3.5% compared to the 4.3% in December 2020. We have been able to reach better level of net working capital on sales.

But it depends obviously. Thank you.

I move to the next. By region and by business.

The organic growth, 2020 versus -- sorry, 2021 versus 2020 and 2019. The entire group, as I said, in the center of the chart, you can see 11% organic growth in 2020 versus 2019 -- sorry, in 2021 versus 2020 and at 2.7% compared to '19 consequently, the business is recovering, is now higher than 2019.

Geographically, you can appreciate that North America is pretty strong, 10.2% organic growth versus last year with 3.3% versus 2 years ago, who has the reason that has been abled mostly to recover compared to the previous year has been EMEA. EMEA that is '19 -- versus '19 has got only 1% improvement has been able to reach 9.3% compared to 2020.

Latin America is in a very good trend with the almost 24% organic growth compared to last year and almost 20% -- 12%, sorry, compared to 2019. Asia Pac is the weakest reason we have, but we have not -- from that region, we are present, but the size of Asia Pac for us is not big enough at least for the time being.

Going to the business. E&I, 12.3% has been accelerating most of all the other segments with even up plus 4.6% compared to '19.

Industrial Network Component, reasonably good, not so bad with 8.4% and versus '19 up to 2.3%. Telecom, telecom is the sole segment that has not yet recovered as the 2019 level.

that's make sense because, obviously, you remember the second half of '19 started the collapse of telecom prices. And that is translated into the organic growth of the telecom that, by the way, in 2020 has been able to recover largely rising the organic growth by almost 13%.

I flip to Page 7, the project business. The project business has seen outstanding performance in terms of order intake.

-- the new orders that we have been able to secure during 2021 have been €4.8 billion. The market is growing, definitely and €3.6 billion of orders are not yet in the backlog, simply because not in with agreed with customer notice to proceed.

This is the Tyrrhenian Link, the Commonwealth and Park Wind in US, the SOO Green and the Dominion Energy. Let me note that out of the €1.71 billion order for Tyrrhenian Link we have considered only €150 million, if I'm not wrong, that is a firm quarter as is an order with the notice to proceed, just for preparing the project.

Then we have the Sofia, the Saudi-Egypt, the Turkish Crossing and the Elba - Piombino plus some other minor projects. Overall, our order backlog is today €4.4 billion.

So at the current capacity and the sales speed is a pretty significant order backlog. On the other side, obviously, due to the market that today can be -- is considered something like €7 billion plus, we have to adapt our capacity because we are fully saturated.

You can see on the upper side of the chart, the new plant in U.S. How it was, the past picture with black carbon energy production site, as it is today, with the energy production site this month.

Technically, it's a piece of land or almost a piece of land and the future to years to go -- 2, 3 years to go, the project of the new plant in Brayton Point. This plant will serve the North American market.

In the meantime, we have to serve the North American market other than the European market. How to do it?

Increasing the production capacity in Arco Felice, Nordenham on a lesser extent and Pikka. Drammen is there because it's that we have -- We need from the drug acquisition.

We have not yet decided what to do with Drammen in the future, but is a minor -- is a very minor capacity. On the other side is the installation.

The installation today is based on the Leonardo Da Vinci a new ship that we are going to make the [indiscernible] shortly. The is the Ulisse; the Giulio Verne, the old big ship of the group; and the Cable Enterprise for ships for installing cables.

Let's flip to Page 9, the performance across of the business. And you can see that the projects have got -- have reached an organic growth of 10.2%, rising the turnover from €1.4 billion to almost €1.6 billion.

And an increase -- significant increase of the EBITDA from €186 million to €200 million. The EBITDA margin has closed at 13.2%.

Now it's clear that the projects picked up basically the last quarter. Not so much in terms of sales, but seriously in terms of orders on 1 side and margins on the other side.

So we expect projects to grow significantly in the next 2, 3 years. The execution has been outstanding, no problem at all.

And you can see at the bottom of the highlights on projects, the organic growth of Q4 has been 34.7%. Then 1/4 is as a limited sense.

We have to look at the full year. Energy.

Energy closed at almost €10 billion, €9.5 billion compared to the €7.2 billion of the previous year. Of course, inflated in terms of turnover by the metal price, but with a serious 10.7% organic growth.

That is not negligible for this business. E&I, as you can see, the organic growth has been even higher, 12.3%, whereas Industrial Network Component, an organic growth of 8.4%.

Not so that overall, let me highlight that the performance of T&I has been extremely good, especially in North America. The PD, the power distribution is improving, but with lower speed compared to T&I because T&I is a much more volatile and fast business.

PD has contracts, has contracts with the price of metals, but not automatically transferred in terms of other raw materials in the price. So it's a more complex business, more resilient when the market collapsed.

That's written in the stock. When the market collapsed whereas T&I is pretty faster to collapse to the power distribution is much more resilient.

In other network components, Strong organic growth, 8.4%, not at the level of E&I, honestly speaking. And in that segment, mostly the renewables have been rising significantly.

Last but not like least. The Telecom €1.585 billion the total sales for Telecom, with an organic growth of 12.7%.

Not so bad, not on the same line, the margins that have closed at 13.9% with €220 million EBITDA compared to the €214 million of the previous year. So the demand is very strong in U.S..

Unfortunately, in Europe is strong, but not dramatically picking up. Anyway, it is what it is.

Last but not least, YOFC contribution has closed at €14 million. So still pretty far from the peak of €45 million, €50 million of 3 years ago -- 4 years ago.

So overall, good results. Finally, the geographical view of those results.

EMEA. EMEA worked well and the EBITDA has increased from €197 million to €265 million, with an organic growth of the sales of 8.3% North America.

North America, North America has already reached a peak in 2020, €345 million, with sales that rose from €3 billion to almost €3.8 billion, an organic growth of 10.2%. T&I is in U.S.

outstanding renewals is suspending to. Power Distribution and not yet at the level of 2 years ago, 3 years ago.

We have to look for the expansion of the CapEx for [indiscernible] of utilities for the renewable. We have, not to forget that we suffered a Forex impact of €11 million during 2021 compared to the previous year.

Latin America. Latin America closed with a turnover of €1.60 billion coming from €723 million of the previous year.

Very strong organic growth of 23.8%. An EBITDA of €99 million, 9.4% of EBITDA margin compared to the previous year to €64 million, a very good performance, driven by construction market, renewable market and a negative impact of €4 million from the Forex.

Last at the end, but not least, Asia Pac closed at €1 billion coming from €0.742 billion with an organic growth of 9.6%. The results have been good, mainly driven by China with a positive Forex impact of €3 million.

Finally, in 2019, we closed at €1.007 billion. Today, we -- 2 years after, we are -- we have closed at €976 million.

Not so bad, not yet at the level of the record of 2019 but with €55 million of Forex negative impact. What has been our job -- we had a significant impact of raw materials in it.

You see the inflation that we have been able largely to pass to the market. You can see the column of the price and mix and the energy issue -- for energy, sorry.

That is almost equal to the cost increase in raw materials. The telecom doesn't go in the same direction because whereas the volumes have grew a little bit, the price mix has been negative -- sorry, the volume even has been slightly negative.

Overall, the EBITDA of the projects from '19 to '21 has been not positive yet with the sharp recovery in the last 2 quarters. Finally, the efficiencies and the fixed costs are helping to reach the level of €976 million.

The climate change. That's the chapter that is very important for our successors and our children's.

Thousand tons of CO2 emissions. We have been able to reduce.

You see from '19 that has been BTI verify it 870,000 tons down to 736,000 in 2020 and 678,000 in 2021, quite a reduction of almost 200,000 tons of CO2. We have to go further down.

We are investing. We are investing seriously, not held of money because there is a need of time to realize it.

But in 2021, we invested €15 million to reduce the CO2 emissions. Next year or the year 2022, we are committed that to invest the €12 million.

The target is to go to zero with Scope 1 and 2 by 2035. And those targets have been approved and are to be verified by NBTI every time needed.

Finally, the outlook 2022. We are back to the level of '19 where we think to go where we believe to be able to go for sure, over €1 billion with the guidance of €1.01 billion €1.08 billion and the free cash flow that is expected to be €400 million plus or minus 15%, plus or minus €60 million.

Obviously, there are certain assumptions behind this guidance, but that's not extremely challenged. Projects have to benefit from the backlog that they have enhanced and we are reasonably sure of what we do.

The solid execution and the capacity utilization that is in the number. What we cannot control is the pandemic, of course even if honestly, we see the pandemic scaling down not a day after day, but month after month as we see.

And the most important chapter today is the Ukraine [indiscernible] that may have a significant impact or not in the end. So the guidance is to overcome to reach a higher level than 2019 that has been the record year of the company, with almost €400 million.

With this, thank you very much. I leave the floor now to Francesco Facchini for the details of the P&L.

Thank you, Valerio, and good evening to everybody. let me summarize the main achievements using this profit and loss statement.

As Valerio said, organic growth very close to 11%. And pretty good across all the business lines and most of the geographies and what is even more important with a pretty strong Q4, which obviously marks a very good exit that for 2022.

Adjusted EBITDA set a record Q4, as Valerio anticipated, the €251 million in Q4 has been the highest Q4 ever, driven by a very solid execution in the project business. And top right, you see the kind of progression that the project business reported in the fourth quarter, €30 million above last year in terms EBITDA and a very strong progression also of the energy business, very consistent by way with €38 million in Q4 improvement over the last -- over the Q4 of 2020 after a very strong improvement already in the first 3 quarters.

And even in terms of margin, as Valerio already mentioned, the 7.7% reported EBITDA margin is indeed a very good margin because considering the huge metal inflation we had in 2021 and restating this at the 2020 metal price the EBITDA margin reached 8.6%, which is even a further improvement on an already very good 2020. Reported EBITDA benefited also of a reduction of restructuring charges.

Last year, we still had the restructuring charges, mainly in South Europe this year -- sorry, 2020. In 2021, decreased pretty significantly.

And also in terms of financial charges, we had an overall stability and also a decrease on some items driven mainly by the convertible bond issuance at the beginning of the year. Tax rate was a bit higher than expected, 34.9% hopefully, will decrease a few points, at least a couple of points next year has been driven up by some tax litigations, inspections and nothing, nothing particularly significant, but some of them, of course, that we decided very prudently to provide for.

And also net income, I'd like to mention this over €300 million, €308 million group net income almost doubled compared to the previous year. So overall, a very strong set of results -- of financial results.

I go to the following page with the statement of financial position, the balance sheet. Let me just comment the very satisfactory achievement of operative net working capital.

As you see, we had a very modest growth of operating net working capital up to €476 million from €432 million. It's a minor increase, €40 million plus increase despite the huge effect -- negative effect, of course, of the metal price increase on working capital, which accounts in the region of €230 million.

And on top the inflation of raw materials, it very significantly also our inventory level, which grew you by approximately €200 million, of course, offset pretty significantly by a growth of payable as well. We have been able to compensate all these bringing, as I said, the working capital almost flat, thanks to a project business, which took a lot of orders as Valerio commented, in 2021.

And the orders are very important also because they mean down payments. So they are very important to sustain and support our cash generation and as important as that, a very strong receivables management.

Just to give you an indication, despite the huge effect of the metal price increases were overall able to keep our receivable almost flat, which means a very effective improvement in terms of DSO in terms of overviews, which generated real cash and helped us to stabilize the working capital. And all this translated into a net debt reduction of €226 million that Valerio mentioned already, bringing the financial leverage, the ratio net debt on EBITDA well below 2x, I would say, around 1.7x, 1.75x, which is a pretty good improvement compared to last year.

But not enough.

Not enough, I was expecting -- I was going to said these as I made a mistake because Valerio. Sorry for the [indiscernible].

Cash flow flipping to the following page, €365 million, excluding the antitrust settlements and excluding, of course, the, let me say, minor acquisitions for €93 million that we have done last year and of course, also the dividend payment here it's very clear how we have been able to contain the working capital growth. You see a cash absorption of only €28 million and here we comment on this slide, of which impact of metal price increase, which is the €230 million, €228 million, to be more exact that I was mentioning before The guidance is certainly a good guidance, I believe that the guidance for 2022 midpoint at €400 million plus/minus 15% means €340 million, €460 million.

As you perfectly know, we are always focused on at least at the midpoint of this guidance. It's obviously challenging because unfortunately or fortunately, the raw material prices keep increasing.

So if we take our management plan assumptions of a couple of months ago, we have certainly higher copper price, much higher aluminum price, significantly higher [indiscernible] price, and this will need to be offset with very strong actions, further improving receivable. It will not be a peace of cake, further improving inventory management, but I'm confident that overall, we'll be able deliver this and delivering the outlook -- the guidance for free cash flow means, so just for you to have and ideas to have a net debt in the region of 1.6%, potentially even lower than €1.6 billion.

So another step in the right direction, but not enough Valerio is saying. And the poll is very important, in my opinion, I tried to give you a consistent view, a historical view of a stable and consistent cash generation of our group over the long term.

Sometimes I believe we are too focused on 1 year cash flow, which doesn't mean that much. What is important is to rely on stable and strong cash flow to deliver to continuously deliver because continuous deleverage is obviously a very strong driver of value accretion by itself.

And you see the numbers. You have top left -- on the left part of the slide, the picture of our cash generation post General Cable acquisition, the last 4 years.

You see that the average free cash flow generation was €350 million. On the right part, we took an even longer period of time to give you the sense of that.

11 years, which is the period after the Draka acquisition with an average yearly free cash flow before dividends, of course, of €290 million. If we take the 7 years period going from 2011 to 2017 before General Cable acquisition, the free cash flow on average was a yearly free cash flow of €250 million, which means that the scale that we acquired with General Cable acquisition, gave us ammunition to rise the level of cash flow by €100 million, which is a lot.

And let me also remark that this €350 million average cash flow in the last 4 years, came with total restructuring charges because, of course, we had to integrate our structure after the acquisition that you read in the third column of this chart, of €278 million, which is not a detail over 4 years is a pretty material restructuring charge. On the right part, let me also note that in the 11 years that I took here, again post Draka acquisition the total free cash flow of €3.2 billion was enough to fund all the acquisitions that our group has done after Draka, including General Cable, as you see, in total, €2.9 billion out of which €2.5 billion is General Cable, allowing us also to return to the shareholders, almost €1.1 billion cash, mainly in dividends but also in buybacks.

Let me flip now to the following and last page to just repeat and confirm what many of you anticipated. The decision to increase the proposed dividend to our coming -- upcoming shareholder meeting to €0.55, 10% up, 1.8% dividend yield, of course, to as a natural consequence, let me say, of the picture that I was showing you on the previous page and also as a clear signal of the confidence that we have on our dynamics both financial and cash dynamics and of course, business growth.

Thank you very much. I think we can...

Sorry Francesc, just to remind the audience that our cash flow includes all the CapEx, whatever CapEx are we talking about?

Thank you.

I had two questions, if I may. Firstly, on Telecom margins, you appear to have had a bit of a deterioration in Q4, I guess, reflecting these price cost challenges.

Could you give us some of your expectations on telecom margins going forward in 2022 also in light of the EU antidumping case? And my second question is if you could give us any indication on trading so far in the first quarter of 2022, that would also be helpful?

Yes. Thank you for the question.

First of all, the Telecom margins. The Telecom margins have been scaling down a little bit.

Why is that? Because differently from energy, especially E&I, the raw material cost increase.

We have not been -- we are not allowed automatically to pass into the sales. So all the other materials that are rising because copper and aluminum, if any, are separately treated, is not easy to pass, once you have a contract that covers some quarter or a full year, you are not entitlement unless the negotiation with customers led us to do it.

But I don't know if Philippe wants to add something about.

Yes, that's the essence of it. I would say we have 2 effects in Q4.

The first 1 is fact that we are fully with our new contracts that were negotiated during the year before the increase of raw material prices. And the fact that at the very end of the year, we had a sharp increase of our raw material costs that we were not able, of course, to compensate immediately in our P&L.

And energy -- for telephone, energy is not negligible, especially on the fiber.

So you have a double effect in Q4 that, of course, is going to be less visible in the coming quarters because we are actively working on correcting the prices now.

I'm sorry, the second question was related to the current trade. Current trade first quarter, let me say that the situation is in line with the Q4.

So it's going pretty well, especially in North America, but even Europe -- of course, now with Ukraine crises, we don't know where we are going to go. But for the time being, touching wood, the business is going very well.

Honestly, I've seen the February flash just today. And I cannot tell you -- and it's in line with the expectations.

Just my first question is around the Energy Projects division in 2022. And I wanted to understand sort of how much -- is your capacity fully covered for 2022?

And I just wanted to understand kind of where should we expect revenues to go based on sort of effectively the business being at full utilization because I would assume you have some visibility on that. And then the second part of the question, is there any major difference in mix around installations type of projects that you're going to be delivering in 2022 that will change profitability or change the look of profitability?

Okay, Max. Thank you very much for the question.

Let's talk about the situation of projects. The situation is pretty good, honestly.

The capacity is in the first quarter, let me talk about today is fully saturated. The problem is another.

When the project runs at full speed on all the line including the installation, the risk is to have a problem and to have a cash card in terms of effects. That's what we take care of most of all for the time being, but I leave the floor to Hakan to give you more details.

For the time being, I believe that we are saturated and until the capacity will not increase. We have already launched the investments to it.

It will stay very, very high saturation. Hakan?

Yes. For 2022, yes, we are fully saturated, but I have to tell you also that to be fully compliant, we are working some customers to give us the notice to proceed.

But for the 90%, I can say that we have approved in our orders in our hand and the additional 10% is coming. I mean, it's only a method of procedure.

Overall, I think that as Valerio was saying, the -- now we are entering into an era for the next 2 years of flawless execution, and we don't see any issues on the order intake. We -- the mix of the project at the very beginning I would not comment on the different project mix, but more on the, let me say, the project cycle, we are in the beginning of building the project.

So therefore, as you know, at the completion of the project, if we were successfully completing the project, then the mix will make it more significantly apparent in the results. So apart the different mixes of the project, it's more important if we are at the end of a project or at the beginning of the project.

And that is, again, related to what Valerio said, the domino effect, if everything goes right, we will definitely see better mix at the end of the life cycle of the project. But overall, yes, we are saturated, installation saturated also in terms of production and not only for this year.

So that I can say.

Okay. Okay.

Just my second question would be around energy costs, which obviously is a concern given everything that's happening. How much of your total costs is energy.

And could you talk about sort of how you're hedged and what sort of levels your hedges are negotiated at? And then maybe specifically on Telecom, do you have any kind of -- I know you have multiyear frame contracts.

Do you have any sort of price escalation clauses or how specifically in Telecom, does it work to actually pass it through to customers?

Okay. It's clear that energy counts in the total business of the group, roughly 1.5% of the sales.

Consequently, in average is pretty low. Then obviously, if the 1.5% is becoming [indiscernible] because of the price increase is 0.5 point lower profitability for the company unless we are able to pass to the market.

Most of all, the energy is dangerous for the fiber business because the fibers have a content of energy that is roughly 10% of turnover. And once the energy cost rose we have a problem in terms of profitability or in terms of cost, but your choice.

I don't know if Philippe wants to add something.

No, it's right. It's the fiber production is energy consuming.

And we produce a part of it in Europe, where that is more exposed than the U.S. from that perspective.

So yes, it's a question -- it's a point that we have to try and transfer to our customers, which we are doing as we said earlier. In your question about our contracts, we are -- we operate indeed, largely on multiyear contracts, but we have a good relationship with our customers, and we went to them to discuss that issue with them.

And in most of the cases, we received a good understanding from them.

Not a pleasant.

Of course never -- it's pleasant for nobody, but it's -- as a matter of fact, something we didn't choose we have to suffer from. And they understand this, most of them.

So we are -- we had discussions with them, and we are now -- you will see the effect of that in the coming quarters unless the raw material prices keep on growing. In that case, we'll have to continue that discussion with our customers.

But it was not badly received, I would say. It's such a global issue that everybody can see it in reality.

Let me add 1 thing, Valerio. The energy issue is that primarily a European issue, we don't suffer very much from energy cost soaring in LatAm and North America and other parts of the world.

Of course, in Europe, we have seen a doubling of the gas cost but gas is a very minor portion of our energy cost and increased by 57% of electricity only in Europe. And as Philippe said, we are trying not only in Telecom, also in energy to pass it through.

How much is it the total bill of energy?

In value is €170 million cost, which will increase by €50 million, '22 or '21. So it's €50 million, a problem that we Taco and a big chunk of this we already passed to the customer in the second quarter -- in the second half and quarter 4 last year, and we'll continue to do the same job in 2019.

Nothing different from what we've done last year.

Okay. And Valerio, perhaps just a very final quick question.

I think you've talked about the ambition of getting energy projects to €400 million to €500 million of EBITDA in the next 5 years. And my interpretation of that was that, that may result in about €3 billion of revenues by sort of 2026.

So I just wanted to think about with the capacity additions that you are making in Pikkala, Arco Felice and the new plant that you talked about in the U.S. Do you see a fairly linear ramp up towards that kind of number over the next few years or should we think in the period sort of 2022 to 2026 that, that will be more back-end loaded?

I know you've already started making investments. So just how to think about that capacity ramp up?

Of course it will be more back-end loaded because the growth of the capacity is not very fast. The demand is very high, and we are negotiating with customers even myself helping a can on how to be able to make them happy without breaching our historical reliability in terms of execution.

Okay. So we think about yes, more back end loaded.

understood.

Yes. My first 1 is on projects.

And I was wondering if you can share the time line of this Brayton plant in North America. When do you expect to produce the first cable?

Is it 2 years, 3 years or more than 3 years, give you the lead times in this market? So that's question number one.

Okay. Thank you, Akash.

I leave the floor to Hakan because he came from North America, Monday, just in case after the negotiation of the purchase of the land and is the most updated person in the group.

Thank you, Valerio. The plan, of course, as you have heard also from the communications is contingent on the firm.

So the speed of the format is going to be the driving factor in accomplishing the fastest possible time for establishing the plant. The permits and the procedure from 12 to 18 months, but we are not going to stay still during that period.

We will already take some precaution to accelerate the investment our parallel with that I can say that in 2.5 years, we will have potentially a plant ready to produce, but readiness is not going to be complete until we have the qualification perform. So therefore, I think it is something in the range between 3 years and 3.5 years, we can say that we will be able to complete the full factory being able to supply, let me say, cable.

Overall, the timing is difficult to give exact numbers, which had some also -- it's not dependent on us. Even if you have the cash, you have to have the environmental and the procedural part.

But we have a very supportive government. I have to thank them.

The Massachusetts government has done a tremendous job in helping us to come to that point. And from that perspective, I don't think we will face issues on the contrary, they will help us to go faster.

Maybe we can add that in the meantime, we'll use the European capacity to back up the order intake that we already won that we've already been awarded for non-American projects. So it's not that the U.S.

expansion in our footprint, commercial footprint will only rely on the factory in USA. So we will introduce in '23, the project that we won last year for [indiscernible].

And in the meantime, we are expanding the European capacity much faster and easier to do than a greenfield plant in Yesterday, just in case I was in Arco Felice and I came back to last night to negotiate with the local community, the expansion of Arco Felice.

And my follow-up question is on U.S. power distribution market.

I mean, that market was booming in 2020 and last year, we saw decline. And looking ahead, how do you see recovery in that part of market.

It looks like U.S. wind installation might be down next year in '23.

So do we need to wait until 2024 for recovery of that market or could it come before? And I don't know maybe if you can help us with exposure to your power distribution business in U.S.

between wind and non-wind like solar and other power distribution markets?

Akash, I ask to Massimo that has been enjoying the ramp-up of the power distribution U.S. 2 years ago to give you the answer.

Yes. Thank you very Rakesh.

The market has been strong since 2020 United States and the demand has continued in '21, '20 will continue in '22, and we see this continue for the next years for the future for at least 3, 4 years. We didn't perform in line with 2020 and '21 only because of the cost inflation.

We had some hiccup in transferring cost inflation to the market. But in terms of volume, the market has gone up as in '21.

We have approved the last year investment for capacity increase in United States, which will come into fruition in January 2023. So from next year onwards, you will see a stronger volume and stronger sales cost in our footprint -- our share of wallet has remained more or less stable, very high in the region of 50%, 55% in this power distribution business, United States, which is highly driven by the energy transition, which is hitting -- which is benefiting the high voltage power distribution, voltage, a big chunk of energy footprint in the United States.

So the demand is very strong. The level of price is still very high.

And now we have finally reached a good balance between inflation and prices. So you will see margin increases in 2022 as a result of these actions.

Okay. So you expect growth to continue in the coming years and marginally improving in 2022 in power distribution overall in the U.S.

Correct.

First question on the Projects division. Can you give us a flavor for how the profitability of the project like the German corridors would be like?

Just to understand the mechanics of such a large project, how are you booking your margins? Do you book a higher margin initially since the installation only comes at a later stage or do you essentially average it out?

And could you give us an idea of how much in this weigh on next year's profitability? That's my first question.

Okay. Thank you very much for the question.

Projects and German corridors in particular. At page 42 of the presentation, we posted some picture because the first barge in reality, even the second bringing the yields of the German corridors into the German territory has arrived in the German port .

They can see Okay. So our first 65 kilometers, if I'm not wrong, are already 87 kilometers, sorry, are already there ready for business.

Then when the installation will start -- that has to be verified with the local rules and the customers. I've been in touch with the customers.

They are confident that they get the approval from all the landowners. Of course, today, with disparity of energy in Europe, is even an accelerator to the execution of these projects and maybe of German corridors too.

We are happy with that. I leave the floor to Hakan talking about the margins you asked.

The margins are pretty good for the cable side. The installation, we don't know yet because we have to realize.

I can tell you about the forecast of the margins that are not so bad. I would say that the margins cable and installations are 60-40.

The German Corridor overall, the margin situation is no different than any other project in terms of the cycle project cycle. At the very beginning, it will be it relatively limited compared to the overall project because of the risks involved.

As you know, big projects have risks and also high margin. So this is always the balance.

But what we think that it's a bit beginning, we will produce the risk is relatively low. We have done a perfect industrialization.

And we have completed, especially on the P-laser side a major milestone in terms of production, flawless production, which were really also in the previous session has explained. Now from that perspective, we will enjoy higher margins, as Valerio said, but it will be further in the -- going forward because of the -- when we have flawless execution, then we will be able to realize the real margin, we will be more precautionary at the very beginning.

But I don't see any issues so far. We have a very good and experienced team.

And the first production, as you saw, has been already delivered on site, and we don't see any issues also of significant delays because currently, of course, everything has changed in Germany also the political structure has changed the world energy balances change. And these projects are the most important projects in Europe currently.

So -- and everyone is focused to accelerate rather than to delay these projects. This is what I can say.

Maybe if I can give a technical clarification. It's not that we book the let me say, cable production margin at the beginning and then when we start to install, we book the installation margin.

Project accounting works differently from this -- we have an estimation of the margin on the overall project, including both cable production and installation, which is constantly updated monthly, I would say, on a monthly basis. And of course, when installation will kick in, revenues will grow faster because you will have both cable production and installation and will drive a higher margin in absolute terms but not -- I would say, not in percentage terms.

In percentage terms is rather flat. Then of course, accounting -- Hakan is perfectly right.

At the beginning, we tend to be at the beginning of the execution of a large project, we tend to be a little bit more cautious, more conservative and then when we approach the final phase of the project, if we have some contingencies or cost, let me say, excess built in our budget assumptions in our margin assumptions, we release them. That's normal.

That's very good. And excluding the German corridors are you seeing margins going up?

Would you say that everything else equal, pricing of your recent tenders has improved? I remember you saying that a couple of quarters ago that margins in the U.S.

would be at a similar level as in Europe. I'm just trying to figure out what should drive your margins to a new level from here if pricing is relatively stable, as you said a couple of quarters ago?

Okay. Hakan, it's speaking again.

Of course, I mean, it's demand and supply and the demand is pushing upwards in these days. And we are talking about projects which are going to start in 2 years and 3 years, our customers are planning for the long term because the capacity -- the supply is going to be relatively short.

So from that perspective, definitely, the prices have an uptick. There is no question.

And if you look for our, let me say, from our perspective, you will expect also that there is going to be an increase but again, I will refer to what a Francesco said, we will see these effects -- the bigger effect at project completion rather than the very beginning. But -- you're right, there is a market which is increasing with an increasing price.

There is no question.

Increasing price doesn't mean 10%

No, of course, not. Just not at full competition.

We are in the cable industry, we will have, of course, from time to time, spot businesses which are exceeding the average. But overall, the trend is pretty consistent in cable.

That's great. And then my last question on Telecom and following the European Commission decision in your favor regarding the antidumping case.

What are you seeing now in the market? Is -- are your competitors immediately applying the tax duties and pricing?

Are you seeing pricing going up? -- can they actually appeal the decision?

Will this take longer to be finalized? And then can you talk about your other contracts that need to be renewed?

Do you have anything left to be renewed or -- and you don't have any other legacy contracts at prices much higher than what you're doing today?

Okay. It's Philippe speaking.

First, the antidumping measures were decided on November in late November of '21. So it's not long ago.

It's too early to see a real effect on the market. It's logical.

Those 2, 3 months is not enough to really see an effect. They are definitive measures.

There is no possible appeal. They are in-force at least 4 or 5 years.

This is the European laws. So we will have these measures in force for 4 years.

Whether we will see a change in the behavior of our Asian competitors. I don't know.

As I said, it's too early to say. What we also for sure is in case of what they call circumvention, trying to go around the measures, there are extremely tough fines and 1 could even be banned from the market in case of extreme behavior.

So the European Commission has also declared that they are going to look very carefully the practices of our Chinese competitors in that field, and we will see. It's a bit early to say.

But then on your last point, contract, yes. Now all our contracts are with prices that were fixed after the drop of the prices worldwide.

So this is now over. We do not have any price that is from before the telecom crisis.

We have we have to remember you that unfortunately, the antidumping case has been accepted against the Chinese fibers, not the Koreans nor the Indians. Consequently, competitors are still in the market, even coming from outside of Europe.

And cable fiber, of course. So it's a partial protection in any case, as we know, but it's a sign that Europe is able to defend a fair playing field and it might make the last we will see.

Well, my first question is on Telecom. And regarding the U.S.

market, you have been experiencing clearly very strong volume trends up to date. Some competitors were pointing to volumes up double digit over the next few years, also thanks to the impact of the U.S.

plan. Do you share this view going forward?

Then the second question, you have been talking about production capacity for energy projects. Could you give us an update about your current utilization of production capacity across the other businesses?

And then the third one, actually a very general question, given the new macro scenario with the war Ukraine and the high dependence on some countries like Germany, Italy and Russia and gas imports. Do you expect a further potential acceleration for energy projects in Europe?

Just to give you an example, an acceleration also for Eurasia award or like this?

Thank you, Renato. First of all, the Telecom question, I leave the floor again to Philippe.

The answer is simple, yes. We see the U.S.

market growing double digit in the coming years, yes, under the push of the incentives and the need -- is the real needs of the market. and we are well positioned.

We have not increased the capacity in U.S. significantly in the last 5 years.

Now we are launching 2 consecutive 1 already launched. The second one, going to be launched in the second half of the year to rise the capacity of U.S.[indiscernible] Your second question, Renato was saturation of the all the divisions projects we have been talking about.

E&I is relatively high, let's say, high compared to the traditional standard consequently, we are running at 70% of saturation. Whereas in the telecom, we are running at almost a full speed, depends of the regions.

What -- what I'm not very happy is that the telecom run very fast, but the margins are still pretty low. Philippe knows very well because almost every day.

Even from time to time more than once a day.

Last but not least, the Ukraine situation. The Ukraine situation is we have basically very limited relationship with Ukraine and Russia.

We have no activity in Ukraine. We have a plant in Russia.

Obviously, we have to see which will be the effect of the sanctions but I believe that there will be a minor impact on our P&L and cash. Overall, we have 1 plant in Russia that runs €120 million turnover with €5 million EBITDA.

That's it. The problem is not our activity.

The problem is the possible effect of these sanctions on our metals coming from Russia. That's the sole risk I can see.

Did I answer to your question, Renato?

Yes. I was also referring to the potential positive impact in terms of acceleration -- further acceleration of energy projects in Europe, given that some Germany?

Okay, Renato. I leave the floor for it to Hakan.

Overall, of course, related to the unfortunate Ukrainian situation there is going to be definitely an acceleration request on independence of energy production in all of the European countries. That's forgiven but taking the Ukrainian situation apart, there was already a big request for projects inside Europe.

The main problem that we are going to face is that all these projects are not -- it's not possible to execute all of them. And 1 of them you were mentioning or Eurasia, depending on the technology that, of course, our customer is going to choose to complete them at the which date is going to be from my perspective or our perspective, a dream because the capacity utilization is relatively high in all the industry.

So and to add new capacity as we are doing, as Valerio was mentioning in [indiscernible] region in Finland or in the U.S., this will create some advantages for the long term, but not for the next few years. So therefore, also, this should be also discussed among our customers, and we are discussing it daily.

It is over to wait until the last minute to do a project. You have to plan the project in advance.

Sometimes in 5 years advance, you have to plan big projects, especially the offshore winds, which are growing in 2 giga -- these are significant or the interconnect. So from that perspective, I can say that, yes, there is an acceleration, but you won't see that acceleration in the execution until the capacities are going to become -- clear.

I would say, Renato, if I may, that Ukrainian crisis and the gas prices, may drive really a trend of energy independency for Europe. And the energy independency for Europe comes from the renewable and the renewable comes mostly from the North Europe wind generation.

It may be that the offshore will have an acceleration in the next years. The problem is the capacity.

It's actually Daniela here. A couple of follow-ups.

First, I just wanted to ask regarding the high-voltage backlog, which you have now, which is at a very high level. How does the margin in the backlog now compares with the margin that you're reporting at the moment.

That's question number one, and I can ask the others as after.

Also, the margin is stable. We have not yet increased the margins of the projects, even if we have still a significant order backlog I don't know if Hakan wants to add something.

I mean, of course, the newly added project a bit of improved margins, but it's early to say without execution that the margins are better or worse. I agree with Valerio and the only thing is, as we had answered also before, if the prices go up, as the prices go up, it will reflect itself into the margin.

So this is our expectation.

Daniela, do not forget that at the same time, we are rising the volumes. We are even rising a bit the fixed costs.

related to the project. That's in order to have a proper and flawless execution.

Okay. that's very clear.

The second thing I wanted to ask you is regarding like your main competitor is increasingly focusing just in electrification, divesting potentially telecom, some of the industrial areas, you've been clear in explaining why you think being diversified is better. Would you be interested in looking into some of those assets, if you can comment?

Basically not. My answer is very quick.

That's good. And then that leaves me maybe place to ask 2 more things, if that's okay.

So what I wanted to ask was regarding like security of supply on metals. You talked a little bit throughout the call about it, but obviously not just the situation now, but I think we've been of people think that we're getting into a supply crunch regarding available copper and maybe now aluminum as well, you're probably 1 of the biggest buyer of these metals, which I guess is different to some of your smaller competitors, especially on the low-voltage segment.

Do you think this will have like tailwinds in terms of market share and pricing on the energy product side of things. How do you think about this?

Daniela, Massimo speaking. We are certainly addressing this possible shortage of material with a series we see these actions.

We believe that at some point, this will happen, and we are trying to manage it with additional stock that we are creating in Europe and also North America. So suppliers coming from the -- Russian suppliers are currently delivering in to Europe and to United States additional volume to help us whether this expected difficult times.

This will certainly add scarcity of cable in the market. And we believe we might leverage the discussing to cable, providing if we have additional capacity, thanks to the stock that we are creating to improve our service to gain maybe some market share and laterally to work on prices as well.

So we are working on this case. We don't want to disclose too much because people listen to this conference that we don't want to share our strategy to do.

And -- but we are taking care of these mysteriously .

And very quickly, just in terms of the new capacity additions in high voltage. I think obviously, the U.S.

one, but also the Arco Felice one that Valerio just mentioned earlier. Can you help us understand how impactful in terms of added capacity to the market they are in kilometers and incremental revenues?

We are simply adding in Europe 600 kilometers

Adding 700 kilometers in Europe, and we're adding an additional 800 voltage land an office in North America. So we're basically doubling the submarine capacity that we used to note added a significant portion with the 1 company -- of course, as we said before, this capacity will come on stream in the second half of 2023, and will continue in a linear way to 2024, 2025 and 2026.

And sorry, very quickly in terms of CapEx on the art because I think we know the U.S. one, but the Arco Felice one, what's the CapEx extra?

U.S. USD 200 million the brand new plant, excluding the value of the land and for high voltage for voltage for Arco Felice and Felice plant are another 100 million roughly.

Daniela in total, we have 500 million worth of capacity, what our CapEx approved under the deployment stage to increase the high voltage submarine up until the next 4, 5 years.

In order to reach the famous €400 million, €500 million EBITDA.

In 3.5, 4 years, we will be double in high voltage overall in [indiscernible]. As of today, with all the plans of today.

But I think the demand is going to be even higher than what we are in. So we may, along the way to get or we should think again.

I had a question on the midterm outlook on Slide 22. I know it's not a new view.

But just bonding on energy and sort of following up on the cash question. Is the view in energy, perhaps a little bit conservative in your view?

I'm just thinking in terms of structural drivers, things like the distribution network, trend electrification you're expecting relatively limited EBITDA growth. Is there any upside risk to that view?

Well, thank you for the question. Frankly speaking, I have to say that -- if I look at all the sentences and expectations, I agree with you.

But I prefer to be more careful in the expectation of growth. The market will grow, but for the time being, it's a pretty long trend.

Consequently, I do not want to create over expectations that may be in the market and ourselves, we will not be able to catch simply that I'd be happy if energy is able to keep the €400 million, €500 million EBITDA overall because it's very fast. Energy, especially T&I is extremely fast.

Going up, I've seen more than 1 cycle in my career. And [indiscernible] as well is fast going up is even fast going down.

And sooner or later, the E&I market may go down.

Just a couple of follow-ups really. I will go 1 at a time.

The first one, you were just mentioning, I think, that you had some metal sourcing coming from Russia. Can you help us understand a little bit here kind of the exposure you have to that considering some of the trade and financial restrictions, which are now being applied on to Russia?

Okay. I tell you very clearly the situation.

We are buying [indiscernible] basically, the aluminum and aluminum part of the customer. Overall, are we talking about 40,000 tons, something -- that's a

50,000 around number 50,000.

50,000 Tonnes. is that flow going to expire?

I don't believe maybe will have some difficulties. But we have some backup -- for instance, our OCI subsidiary in Middle East has the possibility to double the capacity of aluminum, we are thinking if to invest some dollar not million in order to double it.

The risk is that we are going to double, we are going to get the capacity output when the crisis will be over. And consequently, we are thinking about it.

Let me add 1 thing, Valerio, because I don't want you to be skewed by this fund, we are buying 50,000 tonnes from Rusal. We need to also bear in mind that Rusal and other Russian supplier are producing raw material for European rod aluminum rod and copper rod producer.

So should this function be effective 1 day, we will struggle to buy material from Rusal as well all the other European producer of rod aluminum and copper will start to source the raw material needed for this production. So the whole Europe will come to a halt in terms of lack of material.

So this will be a common product, all European cable makers.

The alumina that is the raw material for producing aluminum.

And the cathode, which is the raw material for copper will that are currently produced in Russia will probably become scarce in Europe. So the whole industry will suffer from this.

And so we'll be in the same situation. So we -- the more we prepare ourselves, the high will be the chance that we outperform the other it.

As we said before, we don't want to touch much more on this strategic topic because it's something we want to leverage in the coming months as an opportunity for us.

Okay. Understood.

And just maybe to kind of put into context the 55,000 tonnes that you just mentioned. Are you able maybe to say how much does that represent out of your total supply of metals?

2020, a volume that we use for our production.

Very helpful.

10% of the global one.

I remind that we can move metals from 1 affiliate to the others, of course, with certain costs, but we can.

Understood. That's very helpful.

My second question, you've spoken a bit about telecom and kind of the pressure you had seen around the price now antidumping or in place but not yet delivering. But in China itself, I mean, considering you were mentioning, I think the contribution from YOFC to be only €40 million for this year.

As you said, it was much larger before. What is your kind of outlook in terms of let's say, at least qualitatively, the next few years coming for YOFC because that also is a big contributor historically to the telecom profitability?

You see, you know very well that builds YOFC a listed company, we cannot anticipate anything about them. What I can tell you is that, obviously, after the crisis of the prices in China in '19, there market has not recovered yet, is improving, but not I don't know if Philippe , by the way, is a board member of YOFC can you add a bit.

Just 1 thing I could add, Lucie, is that YOFC will soon release their full year result, which has not yet been released. So we will know more when they announce it.

we cannot say much more than this.

But you're not seeing the market improving in China despite the better tenders that we have seen?

Prices have gone up in China, and the volume as well is much stronger than 1 year ago. This is, as a matter of fact, a reality.

What I don't know is whether the capacity that is installed in China is too big, too small or just the right 1 for this market.

Don't forget, Lucie, that the prices in China dropped dramatically 30% low

Even 50%.

And now a plus 10% is a marginal recovery of the losses.

Yes, I have two questions. The first 1 is related to the delta between adjusted EBITDA and reported EBITDA, I would like to understand, if you can, let's say, give us an idea of what's your expectation, let's say, inside this delta where we have a lot of items in last year?

So let's say for 2022. The second question is on, let's say, your -- you mentioned before that there is a situation of full situation.

I would like to understand if the company sees any possibility of some, let's say, bolt-on or external growth opportunities basically purchasing production capacity. And the third question is -- sorry, is on the telecom because I didn't catch the answer on the expectation on the profitability for this division in 2022 and the third question on telecom is considering that the pricing environment is not, let's say, amazing in Europe -- are there any possibility maybe to restructure some production capacity in Europe?

Okay. Provided that I did not understand the first question.

I don't to take.

Okay. [indiscernible] Alessandro, Francesco speaking, relating the EBITDA adjustments.

You saw that in 2021, we had €49 million, already decreasing from the €59 million of the previous year. This is mainly including restructuring costs and some other costs related to antitrust in principle, which were, by the way, pretty neutral this year.

The expectation for 2022 is a further decrease of this, mainly on the item of restructuring charges because following the general cable acquisition, we can well say that now restructuring is over, was already almost over in 2021 and 2022 will be definitely over. So we -- I would expect a further decrease in the region of maybe €15 million, €20 million.

Then we have also a component of costs related to the pandemic to the health crisis, and I expect that also this cost will start to decrease in 2020.

Okay. Your second question, Alessandro.

The saturation of the capacity it may drive some move in terms of acquisition, bolt-on acquisition for us. The answer is maybe.

Meaning that today, our capacity on the low end is not fully saturated, but may be reasonable and useful to consolidate a little bit more that market, even in Europe for having a higher level of presence importance to our customer, the distributors. So I do not expect to make any kind of acquisition similar to general cable or something like that.

but maybe that some additional bolt-on acquisition if the opportunity come, maybe we are looking for. Frankly speaking, today, everything is getting expensive and costly we have to be careful.

For the question on the telecom margin expectations. I leave the floor to Philippe.

Let's say that the trends are not bad. In particular, as we said earlier, in North America, where demand is growing strongly, and the price dynamic is good.

In Europe, we see a growing market in -- to a lesser extent compared to the U.S. And we also see a price trend, which is upwards after the 2 years of very bad crisis that we had.

The competition is still there and the cost of raw materials and energy are rising, especially in Europe. So all that tells me that, globally speaking, I'm not personally expecting an erosion further erosion the telecom margins.

Also because we are -- we keep on working on our cost base, as always. And -- but there is a certain level of in particular, on the raw material and energy cost side of things.

So here also, I would like to be a bit early to talk about the overall '22.

Your last question is Alessandro was about the capacity potential restructuring in Europe. We never say never.

Today is not in the agenda, but for sure, talking about telecom [indiscernible], what we named the Telecom Solutions, we don't see any reason for that. Talking about fibers, of course, with the cost of energy and the cost of labor and the increasing cost of raw materials, the fibers is not anymore pleasant business.

We have to look at the integrated markets, fiber plus cables because once you don't have the fiber, you cannot make the cable. Consequently, first of all, we have to make as much as possible the fiber business productive and efficient.

Then if that's not possible, we will see other alternative solutions.

Okay. Gentlemen, thank you very much, and thank you for having been participating to our full year 2021 conference call.

Goodbye.