Nexans SA

PAR:NEX

Earnings Call Transcript 2018-Q1

[Operator]

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Financial Information Conference Call hosted by Mr. Arnaud Poupart-Lafarge, CEO; Mr. Nicolas Badré, Group CFO and Pascal Portevin, Deputy CEO. My name is Emma, and I'm your Event Manager. [Operator Instructions] I would like to advise all parties this conference is being recorded for replay purposes. And now I would like to hand the call over to Mr. Poupart-Lafarge. Please go ahead.

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Hello to all, and welcome to this call. So this is Arnaud speaking. I will make a brief introduction and explanation on the main figures of our sales for Q1 and then quickly hand over to you for further questions. So in general, the level of sales for the first quarter 2018 is according to our broad expectations. And in the details, with some plus and minus that I will comment. The first striking fact is that some decrease in our High Voltage Project activity, so a 30% decrease. This 30% decrease was expected. It is explained half by the change of accounting [indiscernible] whereby we account more percentage of the project towards the end of the project rather than in the beginning, and that will have an effect to push some recognition of sales to the second half of this year. And the other half of the loss is regular -- less activity in installation of cables that we had planned for this year, whereby we could not use 100% of our fleet to install cables during the Q1. And as opposed to last year, which was exceptional, and we had 2 repairs of cables additionally during the winter period, additional to the installation of new cables last year, which explains also partly this change of planning. The other strong decrease, which is not good news, is the strong decrease on the Oil & Gas Sector. We have seen a slight recovery of the oil and gas activity, especially at our unit of AmerCable, which is selling to the [Shell] gas and [Chevron] activities in the U.S. That is recovering slowly, but strongly, in particular, in the end of the quarter, so with good expectations for the future. However, submarine part is still very much down. As I had mentioned back in February, the shipyards of Korea are continuing their trend downwards strongly. And in the same time, our deliveries of submarine cables for the oil and gas, both umbilicals and remote control vehicles, are at very low points.Outside of those 2 sectors, we are posting moderate growth for all our cable activities, so about 2% growth. And inside this growth, the building activity, because we had some questions about that, the building activity is up close to 5%, which is in line with what has been reported, in particular with our [indiscernible] clients. I mentioned in the comments this morning some points of disappointment. The first big one has been the strong impact of the ForEx. So the continued strengthening of the euro versus non-Eurozone currencies is costing us roughly a 6% of our activity, EUR 60 million of our EUR 1 billion of standard sales. And of course, that's [the automatic] consequence, which is going to last as long as the euro is continued -- is going to continue to trade at that level versus the USD. Second point, we were expecting a better performance in the U.S. on the back of a better economy in the U.S., especially for our LAN activities, which is traditionally our stronger contributor there. We have not had such strong contribution of the LAN activity in the U.S. Then the -- another point where we were not so good was in land high voltage. I would say that is not very new for Nexans. The land higher-voltage side is not our stronger contributor usually. But here, we have a soft order book. And so for the year 2018, the land high-voltage is probably not going to perform better than the year before. And for the rest, it's more or less in line. We had last year a very strong start of the year in the utilities. You may recall that we have posted an outstanding utility sales figure for the first half of last year. So on this base effect, of course, comparable figure is a little bit down compared to last year, but there's nothing very surprising there. It's a normal planning of the year of the different works of the utilities in Q1 which are traditionally lower for the winter period.So that's where we stand. So it has been effectively a slow start. As I said, overall -- the overall sales number is not very different from what we expected, but still is not very slow. Opposite to that, the real good news is about our order entry and the order book. Whereas January and February were soft on sales, the order entries during March and April have been good, and we have a strong order book starting now, which lets us think that we are going to have effectively a year with a strong imbalance, I would say, quarter-on-quarter. And we are going to be better in Q2 than Q1 and eventually in the following quarters than we just had. So that's the overall picture. And now I would like to just to hand over to you so that you can comment or ask your questions. Operator, you can take questions.

[Operator]

[Operator Instructions] First question comes from the line of Max Yates.

[Max Yates, Research Analyst]

Just the first question would be on margins. And I think you talk about some low utilization in your high-voltage plants in the second half because of the backlog. I know you don't guide explicitly on margins, but could you give us any indication of how you think that minus 10% in high-voltage will impact margins? Should we think of a sort of drop through, something in the region of 20%? Or just any kind of color you could give on how we should think about that affecting the margins of the business? That's my first question.

[Nicolas Badré]

Well -- Nicolas speaking. Can you hear me? Two comments regarding the high-voltage submarine part of it. We highlighted last year that, indeed, we would expect to have slightly less load, especially around installation and the comparable level of load in terms of manufacturing. And what I highlighted the fact that possibly this would cost us EUR 10 million to EUR 15 million. Regarding the terrestrial high-voltage where we say we are currently low order intake actually for the coming quarters, even if we have a better outlook for 2019, [indiscernible] because probably a handful of millions on top of that. So that's in a nutshell what we can.

[Max Yates, Research Analyst]

Okay. That's very helpful. Just in terms of the -- second one would just be on the project pipeline. You talk about a sort of healthy project pipeline. Obviously, the big project that we can all see is coming is the Viking link. I was just wondering sort of firstly what your expectations are? Whether that is a contract you would hope to be a part of? And secondly, if you could give us any other indication of where you think the real opportunities are in the market for Nexans to pick up contract wins in the coming sort of quarters?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Well, that's a question I cannot fully answer, Max. The Viking is certainly, effectively, the key project in the months to come. Although, effectively, the client has indicated that they are postponing the award by a few months. So it's probably only to be awarded during the second half of this year and not during the first half, as it was expected. For sure, as it is a major European project, we expect to be part of it. But we are also participating actively in a number of tenders today in Europe and outside of Europe. I may not give you the list of my preferred choice because I know that some of my colleagues may be on the phone as well. But privately, I may give you some hints, but we have the -- this tendering activity is quite strong today.

[Max Yates, Research Analyst]

Okay. And just the final question would be around acquisitions. Obviously, I understand sort of the transition process around Chief Executive is ongoing. But I just wanted to hear from sort of your perspective, having talked a bit more about acquisitions at the Capital Markets Day, how the pipeline had evolved? Whether Nexans were sort of actively working on opportunities? Or given the transition that's going on at the company, whether that had been put somewhat on hold?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Double answer to that. Actually, I mentioned that we were looking at acquisitions of very various sizes. And so we are -- we have a pipeline of small-to-big in size acquisitions, which do not require 100% time of the CEO and which are, of course, going on with the other transition period. As if you are mentioning maybe [indiscernible] there is no medium mergers ongoing. And so the very big acquisitions, there is nothing to comment on. And these are the ones, which would effectively be impacted by the transition.

[Operator]

Next question comes from the line of Akash Gupta.

[Akash Gupta, Research Analyst]

I have a few questions, please, and I'll take one at a time. The first one I have is on medium voltage business where some of the peers have shown little bit of better performance than what you have reported. So maybe if you can comment on what should we expect for the remaining part of the year? Should we expect growth in some stage in second half? Or maybe what you see in that market?

[Nicolas Badré]

Okay. Akash, maybe a couple of things. Nicolas speaking. When we look at the Q1, we highlighted some basic facts. You could see that we have a slight increase continuing in Europe from medium voltage cables that [indiscernible] is operating in terms of accessories. But the real base effect was in the Americas, where we actually had at the beginning of last year, significant, I would say, one-off contracts both in Brazil and North America that did not repeat in Q1. But the good news is in the case of Brazil, we took another big [overhead line] project at the end of month that will play positively over the coming quarters. And in North America, we will also secure a couple of interesting contracts moving forward. So the outlook globally is based on both an increased order book for utilities in Europe, which is good and which is indeed something we mentioned in the press release. So we expect, indeed, to see some good momentum coming for the coming quarters. Plus indeed, this [indiscernible] impact that we will see in the Americas. So globally, yes, we expect utilities to perform better moving forward.

[Akash Gupta, Research Analyst]

Then my second question is on LAN business where you have seen growth outside of North America. I mean, if you look at the comps from last year, when should we expect North American business to return to growth? And secondly, maybe if you can comment on the market share, how it is developing in North America? Whether you see any aggressive pricing by some of your competitors?

[Pascal Portevin]

Pascal Portevin speaking, maybe I will take this question, at least the first one, and maybe you may repeat the second part. But the first question was referring to the -- to our LAN business in North America. So we are facing a slow start, especially on the fiber side. On the copper side, we don't think we lose market share. We believe that there is some destocking, all this being -- well, the bulk of this business goes through 3 main distributor. So we expect, obviously, a recovery of this business in terms of [ bridge ]. In term of volume this market is down year-on-year, but we expect that the mix -- the fact that we -- the market will require more higher-value product like Cat 6, et cetera, will improve the value of this market down the road this year. For fiber, we expect the same upside in the coming months. But it's not yet -- we have a very short backlog in this activity. So the visibility is not very important, but we expect recovery in Q2 and Q3 and down the road.

[Akash Gupta, Research Analyst]

And my final question is on 2018 performance. If I look at the consensus, it is at around EUR 430 million on -- at the steady EBITDA compared to EUR 411 million you reported last year. Maybe -- the question I have is, maybe if you can talk about plus and minuses, like maybe about the bridge, like how should we expect about FX and impact of submarine? And then obviously the product business, which is growing. So maybe if you can help us provide the bridge from 2017 to 2018 in terms of operating EBITDA?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Well, you know that we don't give a guidance. So I'm not going to help you much bridge, but maybe to just -- to give you some indication. The ForEx where you see the impact on 1 quarter, so if you believe that the euro is going to stay at the same level similar versus the USD, you can easily derive the impact on a yearly basis. And there is no -- there is nothing to discuss about it. I think Nicolas, earlier, has given an order of magnitude of the changes on the project business. As for the cable, with all the plus and minus that we have indicated, we have no view today to change our view on the total year of 2018 for the cable business.

[Operator]

So next question then is from the line of Katie Self.

[Katherine L. Self, Equity Analyst]

I just had a couple as well. Firstly, I know you don't guide around margins, but I was wondering if you can give us any color on what you're seeing on pricing? Are you being able to pass pricing as normal? Have there been any changes in that area? And then secondly, just on the changes with the IFRS accounting standards, will we be getting any restatements for prior years? And what sort of impact should we expect on the cash flow development across 2018?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Okay. I will answer the first one and Nicolas for the second question. So for the pricing, actually is a good question, because as you have probably noticed, a number of raw materials have had some quite high volatility in their own prices in the past month. So there is a continued work of our sales force to pass through the different price increase, be it metals or plastics or [indiscernible] fibers to the customers. So this is a continuous work. I have no doubt that at the end, the margins are always a thought, but the question may be the transitory gap between one and the other. For the rest, Nicolas?

[Nicolas Badré]

So for the change of IFRS 15, as we highlighted in the full year presentation, the application of IFRS 15 to 2017 will have not resulted in any significant impact versus IAS 11 last year. But we also highlighted at the full year presentation that it would have indeed an impact, not so much in the total revenue recognition for the year, but in the way this revenue recognition will take place between H1 and H2. Because fundamentally, in H1, we have relatively less installation work, as was highlighted by Arnaud earlier. And when you base your recognition based on the cost incurred, you do have sort of accelerating effect of that. And as we mentioned at that time in the full year, we will have indeed a strong negative impact that we saw actually in Q1 that we will see to a lesser extent in Q2. That will reverse to large extent over as to in terms of revenue recognition and obviously, in terms of margin recognition, which by the way we highlighted as leading quite naturally to a strong end balance of events between H1 and H2 with a much stronger H2 than H1 for this business. Regarding the cash flow profile that we negotiate with our customers, it has no impact, of course, because it's purely contractual. So the fundamental message here is, overall, for the year, we will have a limited impact of IFRS 15 in terms of revenue recognition for the 12 months. As already mentioned, we will have a strongly negative impact over H1, strongly positive over H2. And this will not be only on the revenue line, but on the margin line. So fundamentally, I just repeat what we mentioned at the full year presentation, we will have a big change of profile between both semesters.

[Operator]

Next question we have is from the line of Daniela Costa Goldman Sachs.

[Daniela C. R. de Carvalho e Costa]

My first question is a clarification question from the first question you got in the call since we couldn't hear the amounts precisely. It's -- if you could repeat what you said on the high-voltage impact on margin, both submarine and land? Then I can ask my other questions. But do you mind just repeating those numbers?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Okay. So we said, Daniela, for the submarine part, we highlighted the impact that could be around EUR 10 million to EUR 15 million. And regarding the land high-voltage, [indiscernible] not clear to me, but possibly EUR 5 million to EUR 10 million.

[Daniela C. R. de Carvalho e Costa]

EUR 5 million to EUR 10 million, that's on margin. Okay. And then my second question, can you clarify sort of what is the backlog you have at the moment? How do we split between land and high-voltage? And how much for delivery this year? How much for delivery next year and onwards? And then I have a third question.

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Okay. So I'll take this one, too. So when we look at the -- I suspect you focus on the high-voltage part of it. So we talk about at the end of March, backlog that is close to EUR 1.2 billion, of which close to EUR 1 billion is in the submarine part of it and close to EUR 200 million is in the terrestrial part of it. By the way, in the terrestrial part of it, we have to bear in mind the fact that, as mentioned, it's relatively lower than anticipated for the coming 3 quarters. That would leave a better outlook for next year. Regarding the EUR 1 billion we have in submarine, we are highly loaded this year, significantly loaded in 2019. And we have some continuous execution forecasted up to 2021 within Nexans. And as mentioned, the critical point of 2018 is indeed the way we will secure as a completing big orders for the 9 months to 10.

[Daniela C. R. de Carvalho e Costa]

But how much of the EUR 1 billion is delivered this year? And then after, you can just say sort of this year how much for delivery?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

I would say from the bottom of my head something like 40% to 50% now. And the rest in the coming 2, 3 years.

[Daniela C. R. de Carvalho e Costa]

And then my final question, we've seen a lot of tenders and announcements on the wind farm side in the U.S. and in Taiwan recently. Have the cable tenders for these farms already started?

[Pascal Portevin]

So we are in pre-tendering stage for all these farms. We are more on the engineering design. So we have some engineering orders, particularly that we have been very active on the U.S. side. And we are not yet at the commercial tender stage.

[Daniela C. R. de Carvalho e Costa]

So it's unlikely to have any awards for that in '18, '19? Or you think in '19 some awards for that could already come?

[Pascal Portevin]

I think that in '18, it's unlikely. I think in '19, we could have some awards. But for delivery, much later.

[Operator]

Next question is from the line of Christophe Quarante, Societe Generale.

[Christophe Quarante, Equity Analyst]

Just coming back with 3 questions, if I may ask. First one, could you just come back on the impact you mentioned on the margin related to land high-voltage and submarine high-voltage? Just making sure also that you have taken into these numbers the ForEx impact, as I think NOK has also an impact to that. And if there is any, could you just detail? More specifically speaking on ForEx, if I remember well, at the time of the first -- of the fiscal year 2017 results you mentioned also a ForEx impact for the entire on the whole group to the current situation where you've seen in the first quarter. Has it evolved for the next quarter, this minus EUR 10 million impact that you mentioned in the first -- in your latest release? This is my first question.

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Okay. So regarding the impact of margins for high-voltage, you're right, Christophe, 2 different things. Regarding the terrestrial piece what I mentioned EUR 5 million to EUR 10 million because it's fundamentally located in Europe. So there is no additional foreign exchange impact. However, you're right. In the case of Norway, we have both the impact of lower activity, as mentioned earlier. And obviously, it contributes also to the negative foreign exchange impact. You're right to say that at full year, we said based on the rates at that time which was late 2017, we anticipated an impact that could be EUR 10 million-plus. Obviously, when I look at the 3 most important currencies for us, which are the dollar, the NOK and the CAD, actually, the situation have gotten worse over the first quarter. So I expect the impact would be more negative. Again with the caveat that I don't know where we will end at the end of the day. But if I look, the average quotes for the 3 first months of the year, it is marginally worse than what we had in mind. So when I mentioned at that time, I don't remember, EUR 10 million to EUR 15 million, I would say we are definitely closer to the EUR 15 million or above than to the EUR 10 million or below.

[Christophe Quarante, Equity Analyst]

Just -- sorry to come back on that, but just for being clear. It means also that the ForEx impact will be more important in H1 than in H2, which can you give more accuracy to what you mentioned earlier, i.e., a very unbalanced margin profile between H1 and H2? Does it [indiscernible]?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

In a way, you're right because we started I think a negative foreign exchange impact at the end of Q4 last year. So we actually had a slightly negative impact already in November, October, December last year. So in a way, you do not double count. But for sure, you do not double count when we compare with Q1, Q2 and Q3. So definitely, to your point, Q1, 2 and 3, will have more sensitive negative foreign exchange impact, respectively, to last year versus Q4. But having said that, when we look at the comparison between both semesters, you will have actually 2 driver for end balances. The first one, as mentioned earlier, is the LVTs; the second is the progressive recovery we see based on the current backlog we have in the cable activity.

[Christophe Quarante, Equity Analyst]

Okay. Just coming back to 3 other questions, if I may. First one is on building. Could you just give us what is the momentum currently, as it seems also even if your visibility is not so strong that the recovery is taking place? And how it could evolve in terms of profile of, i.e., sales and profit along the year? Do you want to have the other question, or I can...

[Arnaud Marie Herve Olivier Poupart-Lafarge]

No, no, I can answer. So in the building, we have, as you say anyway, we have a very short view because it's a short order book and we replenish the distributor. We have a strong order book at the end of Q1. We expect strong deliveries going on. Our experience is when -- is that shows also some confidence of the distribution network to have strong orders of the building industry during the season to come. Okay, I mean, based on history, I would say that, that would indicate a strong season that will cover Q2 and Q3 and until the end of October.

[Christophe Quarante, Equity Analyst]

Okay, Arnaud. Two other questions. First, did you see any impact on the general cable consolidation move with [indiscernible] or is it too early to say? And how do you see pricing evolving in the -- with regard to that, particularly in Europe?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

In Europe, so far nothing.

[Christophe Quarante, Equity Analyst]

Okay. On LAN, it seems to me that you have seen a slight delay, if I may say that way, with the continuous destocking. And you mentioned during this call that you have a better view on that. Could you elaborate a little bit more on how do you see also the other region in LAN evolving even if it's -- if their wave is lower than the U.S. one?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

In general, as I stated, the LAN business in U.S. is a very short backlog. So the visibility is limited. The only information we have is that we have access to the sales of our main distributor, which is the best indication that we have on the future of this market. And based on this, we expect this market to recover step-by-step. That, in volume, this market has been down last year. And this year, it's still let's say, eroding versus last year in volume. We expect that the value of each volume will mitigate this effect. For the rest of the world, the situation is very different. It has been softer in Europe because a lack of big project that is also beginning of the year. Same thing for South America. It's more a timing issue. We still see some good momentum, especially in China where we had, I would say, a strong position. So I think that outside of North America, we still see some significant growth in this business.

[Christophe Quarante, Equity Analyst]

Okay. And last question, if I may, just auto, which is recovering, could you explain what's going on there? And how do you see also the sales going on in the rest of the year?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

On the harness business, I think that we have had a rather good Q1. And the most important point that supports this growth is North America, which is starting very well.

[Operator]

Next question we have is from the line of Jean-Francois Granjon.

[Jean-Francois Granjon]

Just 2 questions, please. The first one concerns the oil and gas businesses. Could you explain why we have such a huge drop, more than [ 36% ] drop for the sort of [indiscernible] to the oil and gas businesses? And what would you expect next quarter? And the second question after the drop of the organic growth by 4.6% for the Q1, do you expect for the full year a positive growth for the order book?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Okay. So for the first question, I'm going to try to give some more follow up to what I said in the beginning. So in the oil and gas, we have different activities. We have -- so we are talking now upstream of oil and gas. That means exploration and production of oil. We have the land oil business, which is mostly served by our AmerCable unit. At the trough of the crisis, AmerCable position was about 1/3 of its capacity. We are now back to above 50%. So we went back from 1/3 to more than 50%. So in terms -- you see that there is a significant recovery from the low point. We are still not, of course, at the top level. But for sure, the trend is very positive. And that's for the land back. However, for the marine part, so this is all the opposite. So the marine part consists on one hand, the shipyards in Korea. And the orders of the oil industry to the shipyards of Korea are just nil. I mentioned that already in February. Our clients are most of them in bankruptcy procedures or equivalent. They are laying off by tens of thousands their employees. And so the new orders are -- the order entries is very, very small. We were recently, until recently, finishing old orders. And the new orders are not coming. So that explains that, that is where the drop is the most severe. And the other part, which is where we have a strong drop, is the submarine cables. So submarine cables, we have 2 types, the umbilicals, the ones that are below the oil platforms. Here, we have also less deliveries in those umbilicals. And another part, which we do not advertise very often, but which is sometimes a good add-on is the remote control cables for submarine vehicles for the oil and gas industry. And there, also, our orders are practically nil. So we've had a strong decrease. In opposite to that, I would say the downstream oil and gas, which we report here in the industry [indiscernible] more that is the petrochemical industry, continues to have a good level of sales. So that's the mix of [indiscernible] which to speak the numbers. So then your second question was on the full year expectation. So I think, I mean, the main message is that this year is very strange in its imbalance because it starts slow. And rather than other years where we had sometimes the H1 which was stronger than H2, this one is going to be the other way around. So I think given the order book that Q2 is going to be better than Q1, it's hard for me to tell you if Q2 is going to show where the total sales growth will be at the end of Q2 between high-voltage that will continue to be negative year-on-year and the cables that will continue to show a positive trend. And that will completely reverse in the second half where the full group evolution will be positive. The conclusion of that is that I expect to post at the end of the year, the type of sales growth I have already mentioned in the beginning, I mean, at the end of last year. That means low positive growth for the full group for the full year, but which will be a contrast between Q1 that is quite negative and the second half that is quite positive, and the Q2, probably not far from [view]. So that's the point on the sales. Of course, the imbalance on the EBITDA side, as I have mentioned to a previous question, will be even greater, more than proportionate.

[Operator]

Next question is from the line of Dennis Dinkelmeyer.

[Dennis Klaus Dinkelmeyer, Research Analyst]

One quick question. Could you please update us on latest of your search of a new CEO?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

The answer is no. The process is going on, but I'm not going to comment on it.

[Operator]

We do have another question, but the name hasn't been captured. So if you did ask a question, your line is now live in the call.

[Sean D. McLoughlin, Associate Director of Clean Technology]

Can you hear me?

[Operator]

We can, yes.

[Sean D. McLoughlin, Associate Director of Clean Technology]

Yes. It's Sean McLaughlin at HSBC. I had just a clarification on your guidance for submarine. When you say 10% sales decline year-on-year, is that purely on an organic basis?

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Yes.

[Sean D. McLoughlin, Associate Director of Clean Technology]

Yes, okay. Fine, good. So we obviously need to take then FX into account on top of that. In which case, going back to your 2022 targets, obviously we'll be starting 2019 on the submarine side from a lower base than we're starting this year. It implies a higher growth rate 2019 to 2022. I mean, how comfortable are you with your growth rates given what you're seeing in your deliveries this year?

[Nicolas Badré]

Well, actually, this is -- I mean, it's a good question, but it's totally independent because if you look into the 2022 plan, actually, 2018, we have run our capacity full, both in production and in installation. So we mentioned it was a kind of record production until we increase our capacity. And so which we are working on, and we have started the investment. But that will not deliver commercial activity before end of 2020. So we are at flat capacity for '18, '19 and '20. And so during those 2 years, in a way, we know that more or less what we can do at best is the same kind of activity. So for the submarine part and the land part, we have capacity. But for the submarine part, we are capped at this level. And then it's when the American capacity will kick in beginning of '21 that we will have a step change in our total capacity and that we will increase our deliveries, plus when we get the new boat in the same year '21 that we will increase the capacity of installation. So actually, whatever is the plus and minus for '18 or '19, does not impact the view that in '21, '22, we have the new plant in the U.S., and we have the offshore wind farms which Daniela was referring to earlier, which have delivery planning for those years.

[Sean D. McLoughlin, Associate Director of Clean Technology]

Got it. That's clear. If I can add a second question looking at Industry & Solutions, just a comment on the mix. We see the automotive in cruising mode, strong growth in railways, trains, strong decline in shipyards. North America better, but offset by the regions. What would you say -- comment on how that mix is versus previous quarters?

[Pascal Portevin]

It's very difficult for us to comment on this. I mean, it's true that the total basket of our activities is a global mix of very different markets and very different products. So having a general statement of if some -- I mean, what we can say is in general, the European economy is well oriented today. So we expect, effectively, as I mentioned, the positive trend in building in Europe, utilities in Europe. And for the big European OEMs, in particular those ones in transportation that you have quoted, to continue. I mean, there is not -- for the rest, we do not have better forecast than saying that the present situation goes on for some time. If you have a particular view on some zone, we continue to have good performance of the MERA region of the Middle East region and North Africa, which has been performing well for the past 3 years, is continuing to perform accordingly. Always, South America and Asia Pacific are zones where the local -- the economical conditions are not the most favorable for us. But that was already the case before, it continues to be the case. It's not that -- I don't see a very drastic change in the mix of environment that we are facing.

[Operator]

There's no further questions at this time. [Operator Instructions] No further questions coming through at this time.

[Arnaud Marie Herve Olivier Poupart-Lafarge]

Okay. Thank you very much, all of you, for attending our call. And we will talk to you again so for our H1 results.

[Operator]

So ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining, and have a very good day.