Based on the strength of these results, the Board of Directors will propose to the General Shareholders' Meeting a dividend of 1 euro per share, double that paid in 2005 (0.50 euro).
*To neutralize the effect of variations in the purchase price of non-ferrous metals and thus measure the underlying sales trend, Nexans also calculates its sales using a constant price for copper and aluminium.
** Accounting aggregate which excludes variations in the fair value of metal and derivatives, restructuring costs and other revenue and expenses.
Continued refocusing on core businesses and key countries
The Group continues to develop its value-added businesses and focus on those geographic areas that offer the most potential.
Accordingly, Nexans has announced the disposal, effective February 1, 2006, of its distribution business in Switzerland (Electro-Matériel SA) to Rexel for an enterprise value of 206 million euros. The business generated sales of 189 million euros in 2005. The capital gain from this disposal (approximately 150 million euros) will be recorded in the first half of 2006.
Nexans has also announced the signing of an agreement for the setting up of a joint venture in Vietnam, to be controlled 60% by Nexans. The Vietnamese Nhat Linh Company Ltd and its subsidiary LIOA Wire & Cable will own 40% of this joint venture to which they will contribute their cable activities (approximately 10 million euros of sales) dedicated to energy networks, equipment cables and industrial cables. The deal is subject to the authorization of the Vietnamese authorities.
In addition, Nexans has finalized the acquisition of the Swiss Confecta AG Group, one of the main international specialists in high added value cable harnesses for the railway industry. The Confecta Group, based in Switzerland, employs around 180 people and generated sales of approximately 22 million euros. The Group also operates in France and Germany.
"On target to achieve our objectives in 2007"
Commenting on the 2005 results, Gérard Hauser, Nexans Chairman and CEO, said: "Despite the continued rise in raw material prices, Nexans' results are extremely encouraging. In addition to the benefits of restructuring and within the context of the booming energy markets in which the Group has a strong presence, these results are the consequence of a clear strategy of redefining our geographical and product portfolio.
These results will enable us to implement a significant 300 million euros investment plan over the next two years to support the development of our markets and accelerate our restructuring process. As a result thereof, we have increased our objective for our ratio of operating margin on sales for 2007 to between 5.2% and 5.5%.
On this basis, for 2006 we anticipate an increase in sales of approximately 4% at constant consolidation scope, a further improvement in operating profit and a net financial debt end 2006 of approximately 230 million euros based on end of 2005 copper prices."
These forecasts are based on the assumption that worldwide economic context experienced in 2005, particularly in developing countries and in the oil industry, will remain the same in 2006 and 2007.
Sales 2005: growth exceeding expectations
|
(in millions of euros) |
At constant metal prices |
At constant metal prices and exchange rates |
| |
|
IFRS Standards |
|
| |
2004 published |
2004 |
2005 |
2004 |
2005 |
| Sales
Energy
Telecom
Electrical wires |
4,159
2,593
570
985 |
4,005
2,604
561
829 |
4,263
2,865
630
758 |
4,080
2,653
566
850 |
4,263
2,865
630
758 |
Following strong growth in the second half of the year, particularly in the last quarter (more than 7%), full-year sales for 2005, at constant non-ferrous metal prices, totaled 4,263 million euros, an increase of 5.2% at constant exchange rates and a consolidation scope comparable to 2004, evidence of particularly strong growth in all the Group's cable businesses (+8.6%).
Income by business sector
|
(in millions of euros) |
2004 |
2005 |
% change |
|
EBITDA* |
222 |
281 |
+ 26.6 % |
|
Operating margin:
Energy
Telecom
Electrical Wires
Autres |
119
17
7
(10) |
171
25
6
(16) |
+ 43.7 %
+ 47.1 %
- 14.3 %
(+ 60 %) |
| Operating margin |
133 |
186 |
+ 40 % |
|
Net income (group share) |
58 |
108 |
+ 86.2 % |
|
Earnings per share (in euros) |
2.55 |
4.46 |
+ 74.9 % |
|
Net financial debt (after IAS 32 & 39) |
295 |
374 |
+ 26.8 % |
(*) Operating margin before depreciation Analysis of sales* and operating margin by business sector
(* Sales at constant metal prices and exchange rates)
Energy cables: growth in all segments
Sales in the Energy sector, boosted by the development of energy markets worldwide (the interconnection and protection of the world's major energy networks, infrastructure development in developing countries, the rise of alternative sources of energy), increased by 8% compared with 2004, to 2,865 million euros. Sales grew in all market segments (infrastructure, industry and building).
Operating margin rose from 119 million euros in 2004 to 171 million euros in 2005, an increase of 44.6%. During 2005, orders for High Voltage and Umbilical Cables increased by more than 80%. Cables for industry also saw a significant turnaround with operating margin rising from 0.7 million euros in 2004 to 22.4 million euros in 2005. This is attributable to the marked improvement in industrial performance in Germany as well as the high demand for top-of-the-range automotive cables. Finally, Nexans has strengthened its positions in the building cables market, particularly in the USA. Operating margin in this segment increased by more than 47% compared with 2004.
Telecommunications cables: increased profitability
Telecom sales increased by 11.3% to 630 million euros.
Operating margin was 25 million euros in 2005, which represents a 4% profit margin on sales compared with 3.1% for the previous year. This margin comes close to the Group's objectives thanks to the high level of activity in certain segments of the infrastructure and private network cable markets in the USA.
Electrical wires: a challenge for the future
Sales in the Electrical Wires sector were 758 million euros in 2005 compared to 850 million euros at December 31, 2004, i.e. a 10.8% drop. Following the disposal to Superior Essex, the Group's winding wires activities are now residual but profitable.
Operating margin amounted to 6 million euros compared to 7 million euros in 2004, under the combined effect of falling external sales of wirerod and bare wires and strong pressure on prices in this sector.
Analysis of sales and operating margin by geographic area
|
(in millions of euros) |
2004 |
2005 |
| |
Sales* |
OM |
OM/Sales |
Sales* |
OM |
OM/Sales |
|
Europe |
2,909 |
84 |
2.9% |
2,988 |
108 |
3.6% |
|
North America |
726 |
31 |
4.3% |
753 |
42 |
5.6% |
|
Asia |
232 |
10 |
4.3% |
247 |
11 |
4.5% |
|
Rest of the World |
213 |
8 |
3.8% |
275 |
25 |
9.1% |
|
Total |
4,080 |
133 |
3.3% |
4,263 |
186 |
4.4% |
(*) at constant metal prices and exchange rates
Nexans' sales have risen noticeably in all geographic areas.
Europe: growth in specialized products
Sales were 2,988 million euros, an increase of 2.7% compared with 2004, while operating margin rose by 28.6%. Europe has benefited from the initiatives put in place to reduce losses, and from the performance in specialist sectors such as high voltage and umbilical cables and top-of-the-range cables for the automotive industry.
North America: growth across the board
Sales totaled 753 million euros compared with 726 million euros in 2004, reflecting improvements across all activity sectors.
Operating margin reached 42 million euros compared with 31 million euros in 2004. The Group is well positioned in the booming North American market and has won significant market share as a result.
Asia: a calculated e and measured approach
Sales continued to grow in 2005 (+6.5%) reaching 247 million euros.
The area's operating margin also increased compared with 2004, reflecting Nexans' ability to resist in a fiercely competitive market subject to very strong pressure on prices.
Rest of the World: operating margin tripled
In line with the forecasts contained in Nexans' strategic plan, operating profit for the Rest of the World area this year was three times that of 2004. This outstanding performance is attributable to particularly strong growth in certain regions and countries (for example, the Middle East, Morocco and Brazil).
Increase in capital reserved to Nexans employees
Nexans has announced an increase in capital reserved to Group employees by the issuance of a maximum of 400,000 new shares with a nominal value of one euro each, at a price that will be discounted by 20% compared to the reference price (subject to compliance with local regulations). It is Nexans objective to strengthen relations with its employees, both in France and abroad, and to implicate them in the future development and growth of the Company.
Employees will be provided with the details of this program, called “Act 2006” and which the Company expects should be completed before the Annual Shareholders’ Meeting on 15 May 2006, after the relevant information has been made available to employee representatives.
Financial calendar
