Nexans SA

PAR:NEX

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, good morning, and welcome to the Nexans' First Quarter 2022 Financial Information Conference Call. As a reminder, this conference call is being recorded. [Operator Instructions] I would now like to turn the call over to your host for today's conference, Mr. Christopher Guerin, Nexans' CEO. Please go ahead, sir.

[Christopher Guérin, executive]

Thank you, sir. Good morning, ladies and gentlemen, and thank you for participating in Nexans' conference call. I'm Chris Guerin, CEO of Nexans. With me Jean-Christophe Juillard, Deputy CEO and CFO; and as well Élodie Robbe-Mouillot, Nexans' IR. I will turn you over to Élodie for -- that will go through the conference call rules.

[Élodie Robbe-Mouillot, executive]

Thank you, Chris. I would like to remind participants that statements made during the conference call, which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers and listeners are strongly encouraged to refer to the disclaimers, which are an integral part of our universal registration document, along with the audio replay of today's call that will be posted on our website, nexans.com.

I now turn you over to Chris, who will go over the first quarter 2022 highlights.

[Christopher Guérin, executive]

Thank you. So as you can see, Nexans started of the year with a very strong quarter 1 with many of the results ahead of our internal expectations, and we anticipate then a very solid performance through all the year 2022. This performance is supported with a broad-based demand for our innovative solution launched in 2021, driving solid double-digit growth across all business groups and as well supported by our SHIFT program.

If I want to sum up in 2 minutes the Q1 result, let me give you 5 main points: first, an acceleration of our value-driven growth, thanks to innovation development; point number two, the fantastic crisis management of the current situation by Nexans auto-harnesses, that in spite of circumstances have generated 16% organic growth and will be, even more in Q2, due to the high level of satisfaction of our key customers, willing now to bring us even much more share; point number three, first days of Nexans with the Centelsa Company, as you can see, Centelsa has generated more than EUR 29 million EBITDA, and thanks to our synergy program on SHIFT program, we aim to deliver EUR 12 million synergy per year; four point, our Industry 4.0 with Schneider Electric is well on track in order to enhance our tomorrow's competitiveness in electrification, I will develop this part a bit later; and last but not least, on ESG side, our ambitious 2030 climate targets have been validated this week by SBTi. [Foreign Language] for the main point.

If I go now to Slide 4. Before I turn to the call to J-C for the detail of our first quarter financials on the first -- as it is the first release of our winds of change, new strategic chapter, let me remind you of our value proposition. Our strategic intention is to become a pure player of electrification. We consider the next 10 years will benefit mainly to pure player not any more generalists in all sectors, because the pure player is focusing all its resource, capital, R&D into one single direction in order to enhance and accelerate value creation. This choice of becoming a pure player helps to simplify our process, our organization focusing on the key elements of transformation, amplifying then our impact, and of course, facing better potential headwinds coming from the market in the future. Our promise is to deliver benchmark results at scale for the electrification and become the most profitable company of the sectors while deploying an innovative and systemic company performance model around the 3 pillars: economics, environment and engagement.

Just in terms of macro perspective, if I go to Slide 5, why Nexans will accelerate into electrification. As you know, the demand for electricity will grow by 20% because the world population keeps growing, and we need to accelerate the momentum on electrify everything to accelerate the world decarbonation. In our view, we are at the beginning of a huge electrical revolution that will have the same magnitude than all investments made between 1950 to 1970 in the world because most of the generation of energy power grid installation have been good during that period. And still today, the generation of the world energy depends 80% from fossil fuels that needs to be replaced by decarbonated energy.

As you know as well, the average grid age -- the average power grid age in Europe is about 45 to 50 years and 45 years in North America. The old age of power grid in those regions is a concern as the network cable lifespan was estimated at that time in 1970 on about only 30 years. In other words, there has been significant underinvestment for the last 10 to 20 years, according to the region on the risk of power outages increasing month after month. Power grid is the backbone of countries' economy. The electricity go through millions of kilometers of cables every day, while infrastructure fare is not only direct asset damage, but the life stops. So due to the aging infrastructure and intensity of climate risk, each nation needs to massively invest to modernize and fortify its electrical infrastructure. Last but not least, usages require much safer, robust low-carbon cables to avoid the dramatic statistic of fire starting into a building every 2 minutes in the world, majority due to electricity and self-installation.

So I know that all of you will have some questions on the risk of inflation and potential recession. We know that the world is not linear and we will face higher complexity in the past, and as well, of course, risk as we can see for the last 2 years, sanitary, geopolitical and climate. But at least for the electrification, we are at the beginning of our hyper cycle of demand that we should not underestimate on any way. This will help Nexans to enhance its selectivity meter and drive significant value creation in coming years.

I will jump to -- just for a matter of time, I will jump now straight to Slide 7 with a word, of course, on Ukraine. The ongoing war in Ukraine is inconceivable strategy, and that has resulted in a massive humanitarian crisis. And my thought -- our thought goes to all the family those are affected. I would like to thank first to all our employees in Ukraine that keep working since day 1 of the invasion. Our unit ran in February and March around 80% to 90%, 85% load rate versus nominal capacity in average for Q1. Now we are back in April, back to 100%. As you can see, our quarterly organic growth for the entire automotive-harnesses business is about 16%, which is very impressive. I want to thank the management team and all the people in Ukraine because the way Nexans team managed this major crisis is just exceptional in all aspects. And we have -- you have to know that we have never ever disrupt any top customers over the period.

We -- since a few days, we received many congratulation letters for the agility and professionalism of the crisis management mode of Nexans team. And this customer satisfaction is followed by more business development and market share increase for the next months. At present, the only thing I can say -- because business is going well for us, the only thing I can say is that we hope for cessation of hostilities as soon as possible and the return to diplomacy in the country.

If we go now to acquisition, Page 8. Two weeks ago, with part of my team, we were in Colombia. We were in Cali to meet our new Centelsa unit, roughly a $340 million company generating an EBITDA today of EUR 29 million pre-synergy. It's a world-class asset. And together, we aim to deliver $12 million synergy minimum per year. Its core team has been put in place. 20 talent manager will focus on all traditional synergy levers. But as you know, we have as well the SHIFT performance program that will play a major role specifically on cash generation aspect and, of course, EBITDA. So of course, more information to come on Centelsa.

Now let me hand over to Jean-Christophe that will comment on the first quarter '22 financial. Jean-Christophe?

[Jean-Christophe Juillard, executive]

Thank you, Chris. So if we move to Page #10. So you can see that over the first quarter of 2022, our sales went up organically 6.1% from quarter 1 of 2020 with revenue increasing from EUR 1.5 billion to EUR 1.6 billion. However, what is interesting to notice, if we exclude the Metallurgy segment, that you recall, we purposely want to reduce to serve Nexans first and reduce the dilutive effect of that business, so if we exclude the Metallurgy segment, the sales of Nexans are strongly up with a plus 16.3% organic growth.

Where is this solid growth coming from? First, if you look at the electrification business, and I will come back to the electrification business later in the presentation. But if you look at that segment, electrification businesses are up 21.4% in Q1 '22, reflecting the global accelerated trend in electrification markets. The nonelectrification businesses, namely Industry & Solutions and Telecom & Data segments, are up 7.1%. And sales in what we call Other Activities, which are mainly related to the Metallurgy business, are down 26.3%, which is again in line with the continuous reduction in Metallurgy sales as per Nexans' strategy.

If we move to the next slide, on Page 11. You can see that consistent with our '22-'24 equity story presented last year, our business segments have been reorganized around 6 groups and electrification segment -- some electrification segments have been renamed. High Voltage & Project is now replaced by Generation & Transmission. Building & Territories segment is now split in -- in Territory, first, that we renamed Distribution; and Building, which is now called Usages. The segment, Industry & Solutions, Telecom & Data and Others, which is again mainly the metallurgy business remain unchanged. You can see that on this slide, Generation & Transmission, Distribution & Usages, which are part of the electrification group, have significantly increased in organic growth, plus 21.4% in Q1. And each of the segment piece of the electrification business have seen double-digit growth. This strong growth momentum is driven by solid underlying drivers, namely the robust electrification trend supporting all our markets all over the world and our innovation and premium offering beyond cables.

If I move to the next slide and we dig into each of the, I would say, subsegment of the electrification business. I will start first with the Generation & Transmission, formerly again, High Voltage & Project. If we look at Q1 2022, organic growth of that subsegment is up more than 47% in Q1 versus last year. Again, the main reason of this very high organic growth is the contribution of the Charleston plant, our unique -- very unique subsea high-voltage manufacturing plant in the United States; the contribution of our 2 cable laying vessels, namely Nexans Aurora and the Skagerrak, which had very busy installation schedule in Q1 of 2022; and of course, the growth of our backlog, our subsea backlog and also a very positive mixed contribution of project phasing.

Also a high-quality adjusted backlog, if we look at the backlog of this Generation & Transmission business, is at a record level of EUR 2.4 billion, which is a 50% growth versus the same period of last year. During this quarter of 2022, we booked significant orders like a turnkey contract for the Dieppe-Le Tréport offshore wind farm in France. and the installation contract for the Revolution offshore wind farm in the U.S. with Ørsted. Finally, as you may see on the right-hand side of the slide, Halden and Charleston plants are fully loaded for 2022 and 90% loaded for the next 2 years. With a project pipeline reaching over EUR 20 billion, we are very confident in loading our plants beyond 2024 with high-value projects.

Now if I turn on Slide #13 and we look now into the subsegment called Distribution, which is formerly Territories. The first quarter sales were up 14.9% with a sound demand consistent with the grid upgrade investment and market share increase through our platinum accounts. If we look at the region, North America was up sharply, thanks to a booming market and Nexans' solid position in that market. Europe was up, reflecting contract renewals and robust demand. In Asia Pacific, Australia and New Zealand delivered some growth, while China suffered from locally imposed lockdowns. South America remained stable while Middle East and Africa was up, thanks to a strong demand mainly in Morocco.

We kick-start 2022 confidently with a distribution backlog up 41% versus last year. As part of our Amplify program, we launched in Q4 2021 ULTRACKER. By using the Nexans ULTRACKER solution, users can optimize every stage of the drum life cycle from the date of delivery to the date the drum is empty, delivering substantial financial benefits. The solution has been deployed at scale in 20 countries and more than 40 -- 30, sorry, key users. For these client accounts, sales have been tripling compared to the nonusers. The accelerated sales growth witnessed with ULTRACKER users evidences the benefit of our strategy to offer products and services beyond cables.

If I move to Page 14 and we look at the Usages of energy, formerly the Buildings subsector. Sales were up 14.8%, thanks to robust demand, and this despite our selectivity on value and premium customers against pure volume. The performance of Usages segment is outstanding due to, number one, our continued effort for premium; and number two, the push for SHIFT performance and SHIFT Prime. The MOBIWAY and ULTRACKER offers, launched globally as part of the Amplify program, had strong momentum as clients increasingly recognized the value of leveraging innovative products and end-to-end solution. The group reached a new record with 17,000 ULTRACKER connected drums in the world. Across the various geographies, demand was quite dynamic in the Usages business, supported by a booming North American market, a solid demand momentum in Europe and Africa as well as in the Middle East. Only Asia Pacific was slightly down, again, due to the local lockdowns. Our backlog is strongly up 21% versus last year, also demonstrating the strong positive trend.

If I move to Page 15 and we look now our nonelectrification business, namely Industry & Solutions and Telecom & Data. Industry & Solutions performance was robust with a 5.5% organic growth in Q1, supported by sustained demand in auto-harnesses and automation markets mainly. Auto-harnesses is strongly up, as Chris said, plus 15.6% in the first quarter of '22. The strong momentum was supported by market share gains despite the war in Ukraine. Our 3 plants located in the Western part of the country have been producing, as Chris said, at around 85% capacity, and we are even back to normal in April. Automation, which is robotics, had solid growth in sales, 15.6% organic growth, boosted by strong demand in Southern Europe and Asia. In transport, aerospace continued to recover from COVID-19, and the Rolling Stock was challenged by a slowdown in demand mainly in Asia. Telecom & Data with a 14.3% organic growth showed sound improvement in telecom infrastructure, thanks to good fiber deployment in Europe and the sustained demand in special telecom where the backlog remains strong. LAN sub-business was down amid greater selectivity following the implementation of the SHIFT performance program.

If I move now to a key topic, which is basically the cost and raw material access, which are obviously the hot topics of this beginning of 2022. I just -- we just want to remind you with this slide on Page 16 that about 80% of our direct costs are pass-through or hedged. So we have no impact, I would say, in terms of margin or cash about 80% for direct cost. The remaining part is mainly managed through active pricing management from Nexans. We want to draw your attention on our solid inflation mitigation measures embedded in our operations and to the fact we are balancing successfully supply chain and raw material challenges.

I will conclude with Slide 17 with the 2022 guidance. So we confirm our 2022 guidance as presented in February during our 2021 financial presentation. I remind you that this 2022 guidance excludes acquisition and divestment. So Centelsa acquisition we just closed on April 1 is not included in this guidance. So EBITDA is confirmed between EUR 500 million to EUR 540 million, normalized free cash flow between EUR 150 million to EUR 200 million. These assumptions, of course, are based on the current macroeconomic environment, and we're assuming no material impact from further impact from COVID. Last, as mentioned in the full year result, we will propose at our May 11 general assembly a dividend of EUR 1.2 per share, which represents a 71% uptick versus last year. Now I will turn back to Chris for the conclusion.

[Christopher Guérin, executive]

Thank you, Jean-Christophe. Let's move to Page 19. Here is just a snapshot of all our transformation platform. All our strategic initiative and transformation initiatives continue to yield very good results. And what we found out, the more we are digging to is the potential for Nexans remains huge in terms of yield. We have 2 type of transformation program. The 2 first which is about Amplify and SHIFT Prime is all about the value creation, thanks to innovations, branding equity, new services supported by all our new organization around Design Labs and focusing only on platinum and gold customers. I remind you that those 2 initiatives are supposed to bring EUR 90 million of EBITDA contribution by 2024 just for the scope of electrification, and we should make a significant progress already in 2022. Of course, we will give you more highlights on their impact with the financial of H1.

The deployment of the Industry 4.0 on the procurement performance is helping as well to reduce the price cost squeeze effect, and we aim to make an improvement here, net improvement of EUR 15 million after a price cost squeeze effect. So we are well on track there. Of course, there is the strategic CapEx of Halden and Charleston, which is ongoing, and in terms of EBITDA contribution will materialize in 2024. Just a snapshot on 2 new levers that -- or one new lever that we developed. But first, we had one on SHIFT project execution, specifically for high-voltage business. You know that we have already have the SHIFT project modeling which is to making sure that we are choosing the right profile of project for our future high credit growth. We discussed about it already over the last 2 years. It is implemented -- starting to be implemented in 2020. But now we are launching a new SHIFT project -- a new SHIFT program dedicated to a project base. It's about risk management, variation orders, cost optimization within the project execution in order to keep improve our high-voltage performance ratio.

And last but not least, we still have -- because we are raising the bar every year in terms of average of EBITDA. So we have still some units lagging behind in terms of return on capital employed, specifically in the industry sectors and usage sectors. So we will open up SHIFT performance workstream again. And the value burners of yesterday are not the same of today, of course. And once again, we believe that we can drive much more performance, which is not yet embedded in our 2024 objective, thanks to this focus on those units. More to come in H1.

If I go to Page 20. Let's focus on the Industry 4.0 journey. I would say that in 2021, it was the kind of work in progress with 2 European plants as a pilot to assess the digital transformation potential. What we found out is presenting a huge potential that will benefit the entire company. So 2022 will be marked by the transformation of those sites into factories 4.0 and the launch of a massive digitalization project to further improve the efficiency of production lines through dashboard, real-time monitoring of our lines, collaborating -- collaborative tools. The second aspect is predictive maintenance based on sensors and data analytics and as well energy monitoring. And we know that energy monitoring and analytics will be key enablers to reduce the cost and, of course, our CO2 emission. So this aim is really to accelerate the transformation of Nexans into business driven with clear the transformation and improved performance in all our units. And of course, we are making significant progress, thanks to the fantastic team of Schneider Electric.

Page 21. So as you know, we cannot manage the company in a silo mode. And we have to take into aspect into consideration the deployment of all 3 pillars, which are the economics, the environment and the engagement on this across the entire organization. So we have introduced the E3 tool during our full year '21 results. Since then, we have launched more than 3 pilots in electrification that will be deployed all the years. And of course, we have incentivized, short term and long term, all our top managers in this E3 way of doing. As a responsible player aware that natural resources are limited, we are accelerating as well our action to improve the circularity of our business, means recycling. And that's again why we have invested in our recycling joint venture, one of the key leader of recycling in France, for example, to increase the recyclability of our plastics.

Last but not this before closing, to conclude this presentation, I'm delighted to announce that Nexans greenhouse gas emission target has been fully validated by the Science-based Target Initiative. So I remind you that our commitment are to reduce our Scope 1 and 2 emissions by 46% by 2030, our Scope 3 remission by 24% by 2030 versus 2019. This validation further confirmed Nexans is at the forefront of the shift toward a new area of safer, sustainable, renewable and decarbonized electrification accessible to everyone.

Now let me open for questions. Just a quick word before we start with the first question. Let me remind you on Page 23, all our upcoming investor event and as well that we will organize an investor event in U.S. in our Charleston unit, including, of course, a tour of the unit as well as a climate day as with great experts in -- great American experts in New York on the 21st of September in New York.

Now we can open the Q&A session. Thank you very much.

[Operator]

[Operator Instructions] And the first question comes from the line of Miguel Borrega from BNP Paribas.

[Miguel Nabeiro Ensinas Serra Borrega, analyst]

I've got a couple, if I may. The first one, just on Building & Territories. Can you maybe shed some color on volumes and prices? How much of the 15% organic growth has been purely driven by volumes? And then how much pricing have you put on, on top of the typical copper price movements? My second question, just on your disposal process. Given your exposure to Ukraine in the auto-harnesses business, do you see interest in that business coming down given the risk exposure, even though it's performing well? But do you think you now have to wait a little bit longer for you to sell that business? Or is that still in the cards for 2022? And then my last question, on supply chain challenges from the war in Ukraine. Are you seeing any changes in the way you source metals apart from higher commodity prices, maybe some more competition, any disruption to highlight from supply chain?

[Christopher Guérin, executive]

I propose J-C you start by the important question on Ukraine regarding the potential disposal of our harnesses business, which is the question #2 of Miguel.

[Jean-Christophe Juillard, executive]

Yes. So in terms of -- definitely, I mean, as we said before the war, the harnesses business was the first business we likely to be divested from Nexans, mainly due to the fact that it's a very different business than the rest of the organization, the rest of the cable we are manufacturing. And it was quite, I would say, already very much stand-alone in the organization. We were, I would say, moving in the very good direction in terms of progressing to divest that business. And the objective, as we said before the war, was to divest it in the first semester of 2022. Obviously, with the situation, the current situation, this process is on hold. Difficult to say that when it will restart. But it's still -- I would say it's not over, finished. It's just on hold until there is better visibility on the situation. So I would say, the strategy to divest that business within the next 12 months remains the objective of Nexans. And as soon as basically we have better visibility, we will be able to restart that process. So I would say we have just put on hold on the strategy, but not stop on our agenda.

[Christopher Guérin, executive]

Miguel, regarding your first question on utilities on building. I will say that the -- we have to decouple both of them because -- and this is what we are doing now in terms of presentation, because they will not have the same, I would say, drivers. So in Territories, I will say that it's today 80% driven on volume, thanks to new contract signs and new market share development, and 20% is off of value, mix effect, price effect on the value creation. Whereas in Building, this is the reverse and this is the old benefit of our Amplify, SHIFT prime approach. Building, I will say that it's about 80% of value-driven growth, so mix effect, price effect, innovation, services development and 20% of pure volume in tons. And this will keep on amplifying in the future. So -- and that's really the goal, Miguel, because our aim -- we know that, that will potential -- there will be some potential downturn, slowdown even the recession in some areas of the world because of the boost of inflation everywhere. And this is why we want to be a key leader in terms of value creations because we know that we will not be able to generate the same creation of margin with pure volume development. And this is why we are putting a very, very strong initiative on all incentives on services, on innovation development in order to improve our price power. And back to your question #3, can you repeat it again? Sorry, Miguel, which is a mix of metals in Ukraine.

[Miguel Nabeiro Ensinas Serra Borrega, analyst]

Yes, if you're seeing any changes to the way you source metals, maybe some more competition from the war in Ukraine. Any disruption that you wanted to highlight?

[Christopher Guérin, executive]

Yes. Yes. We have not seen any major change in terms of copper, to be honest, except that the fact that you -- as you can see, we are focusing our Metallurgy asset on our own means mainly. So that's important. And it's maybe to -- it's really to prepare potential shortage that will come on copper in the coming years. What happened with Ukraine is, of course, it's putting a very, very big pressure on aluminum. You know that aluminum is a different process of transformation than copper. The aluminum is coming from the mineral called the bauxite. From the bauxite, you are creating a powder, with transforming a powder which is called alumina. And from alumina, you are generating aluminum. Most of European countries stopped to produce alumina over the last 5 years because of environmental reasons, and they have let Russia take the lead on alumina production. And so the European countries are extremely dependent on alumina coming from Russia, Ukraine and other countries, taking into account that the biggest alumina production was in Ukraine, in Nikolaev. And this production stopped since more than 2 months. So we see that there will be pressure on aluminum that, no doubt. It's not yet materialized. And this is the feedback that we give to our customers, that we may start to miss some aluminum for some of them in the coming months. So as also again, Nexans is really driven by a very high level of selectivity of the customers on the volume, we don't see any material impact on our gross generation in the coming months.

[Operator]

Our next question comes from the line of Poppy Boyd-Taylor from Goldman Sachs.

[Poppy Boyd-Taylor, analyst]

I was wondering as you just went through for Buildings & Territories, if you could give a bit more color on pricing versus volumes for the other divisions or on a group level as well. That would be really useful. And then on the pricing point, I was wondering if you see any risk within the different end markets of demand destruction due to the high inflation. I know there's been some sort of rising concerns about that across the sector so it would be useful to hear your perspective.

[Christopher Guérin, executive]

Thank you, Poppy. Yes. So once again, 2 sides way of reading. The first one is on territories. Territory, so what we call Distribution right now, it's the utilities business. The majority of our contracts are indexed on raw materials inflation. So it's a 100% pass-through mechanical effect. So we do not need to reenter into any kind of negotiation because of inflation. Regarding Building, it's more, I would say, a quarterly base price management, depending on the region. Obviously, there is a region where we see a very, very high level of inflation, which is namely U.S., where we are -- we have not exposed, at least for these sectors, we are exposed on high voltage, but not on the building market, where we potentially see a slowdown in H2 because of very, very high level of inflation. Regarding Europe, I will say the inflation impact is more modest, and we don't see any kind of slowdown so far because of it. And once again, it's -- that's all about what we are doing, Poppy, in Nexans is we don't want to have a price strategy that benefit from GDP evolution but which is much more robust than that, and that can remain even in a slowdown market, supported by innovation, service, solution. And that's the reason that we are deploying and scaling up all the innovation that you have seen last years in our financial presentation, which is today, having a very great success for all our platinum accounts. We are reinforcing our selectivity. We cannot serve everyone. So we are dedicating our capacity to our platinum and gold account, and that's again a major driver of margin improvement in the coming months. So we are very, very confident for 2022 at least.

[Operator]

Our next question comes from the line of Akash Gupta from JPMorgan.

[Akash Gupta, analyst]

I have a few questions as well, and I'll ask one at a time. The first one I have is also on price and volumes. And maybe being more precise on that, if I look at your Q1 growth, you had 16.3%, excluding Metallurgy business, and this is in constant metal prices. Out of the 16%, can you say how much is driven by volumes, pure volumes? And what is the rest that could be price and others? And then I'll come back with other questions.

[Christopher Guérin, executive]

So Akash, I just answered the question -- same question on Miguel. I said that territories, utilities is 80% driven by volume, due not to a specific extra demand, which is a one-off effect, but due to renewal of contracts where Nexans grab new market share. So on that, those contracts have been signed for the next 3 years. And to be honest, because of the power grid renewal, we are not able to take all the demand of our customer, because they have a huge demand and we cannot go above what we have contracted. So utilities, territories is mainly driven by volume on market share at 80% and 20% of mix effect on the choice of the customer that -- on the SKUs that we would like to manufacture. Whereas in building, sky is the limit, Akash. And I think you need to understand that the SHIFT program is a fantastic weapon in terms of value creation, is the complexity reduction that we have done in that sectors. The innovation, the price power, the service and solution is generating a fantastic growth, which is value-driven, 80% base. And 20% is really new volumes coming from more tons. And that's why we are very confident in our future development. And that's why we consider that Nexans will be at the rendezvous of its financial year-over-year because even if there is a slowdown, we are shifting to a value-driven mode, supported by innovation. And our customers consider that we are one of the top leaders in that sector that really can make a change. And that's the reason that it's only the beginning.

[Akash Gupta, analyst]

My second question is on Latin America business. So you say on Slide #8 that the combined business in 2020 was around $800 million, and you have 8 sites. Maybe if you can give us a breakdown of which are the major countries you are exposed to here, like how much is Brazil, how much is Colombia? And which are the key end markets that we should be looking for when we are tracking this Latin American business after acquisition of Centelsa.

[Christopher Guérin, executive]

Yes, sure. So the exposure in terms of market is only distribution on usage. So there is no high-voltage type business there. Plus as well, we need to adopt -- in addition to utilities and building market, we have to add up some renewable project that we are following in all the regions, wind offshore farm and the solar farm development. Regarding the composition, I will say that in average, $700 million is about Andean countries, Colombia, Chile, Peru, this is our position. And now we are a clear leader in this region. And you have roughly about EUR 100 million in Brazil.

[Akash Gupta, analyst]

And the final one is on strategic CapEx for this year. I think at the Q4 results, you talked about EUR 210 million strategic CapEx and taking the group CapEx to this year. Any change to that figure or that guidance still valid?

[Jean-Christophe Juillard, executive]

No, the total -- yes, I'll take the question, Akash. Thank you. The total cap strategic CapEx remains the same for the 3 years of the equity story to about EUR 260 million. For this year, it will not be EUR 210 million. The number is more in the range of EUR 180 million. It's just a fading thing, but not that much different.

[Operator]

[Operator Instructions] Our next question comes from the line of Jean-Francois Granjon from ODDO BHF.

[Jean-Francois Granjon, analyst]

The first question concerned the trend for the organic growth. So after the huge strong performance for the Q1, I know that it's not the strategic target for you in terms of growth. But nevertheless, do you expect a similar growth for the coming quarter? Are you more cautious regarding taking into account the macro environment, so in terms of growth for the organic growth for all the group? This is my first question. My second question. So I have a question regarding the session of the RNA business, you answered previously. But regarding the M&A and order acquisition, do you consider that probably due to the context, we should see some delay for other sessions or other acquisition for all the group?

And my third question concerns growth for the RNA business. After the very huge performance by 16% growth for the first quarter, what do you expect for the RNA business for the coming quarters? And my last question, could you give us some more color about the mix margin for the backlog. You mentioned EUR 2.4 billion for the high batches businesses. But for all the group, could you give us some more color? Do you see an improvement for the mix margin for all the backlog of the?

[Christopher Guérin, executive]

Thank you, Jean-Francois. So a lot of questions. Let me start by the -- your last one, and I will let J-C develop the others. No, I will take it. Regarding the -- your last question any development of the margin into the backlog, the margin keeps improving in all business. So high voltage, you know that we have a method in terms of selectivity. So we already mentioned that everything which is in the backlog, if we have good execution of the project, we generate between 18% to 20% EBITDA on sales over the period. So this is in the backlog already. So no, it should not be any kind of surprise. Regarding the other sectors, namely industry, the backlog we have more than the 3 months backlog, and we see an improvement of margin and as well in all the other sectors, namely building and market and the utilities market where the margin that we have in the backlog is at the minimum at the average of Q1 or even better in -- for Q2 and Q3. So we know that we are presenting only the sales report right now, but no bad surprise on the margin, even pretty good surprise on the margin development. JC, you want organic growth in Q2?

[Jean-Christophe Juillard, executive]

I will talk -- yes, just about organic growth in 2022 in general. So obviously, you've seen the very strong organic growth of Q1. But you've seen that when you look at the detail of the presentation, a big chunk of that is due to the Generation & Transmission, which is high-voltage project business. And part of that -- a big part of that, I would say, of that growth is due to the fact that we added capacity because now in 2022, we have more capacity than last year, definitely when you compare the first quarter. So I would say this is a mechanic, I would say, part of the organic growth. So -- and also in Q1 of last year, we had very low volume on high voltage and project, Generation & Transmission, mainly due to the fact that we had a phasing that was not favorable. So there is a double, I would say, a double impact on Q1 this year versus last year due to, again, the mechanical effect of the added capacity, the 2 vessels in Charleston and to the fact that last year first quarter was very low. So that's distort, I would say, a little bit the percentage of Q1 this year versus last year in terms of organic growth. We will continue to have, obviously, due to the mechanical effect on high voltage, a very good year in terms of volume compared to last year and about 10%, I would say, organic growth on that business due to the mechanical reason of the added capacity. So that's one part.

The second part is for the, I would say, more cycle part of the business, which is Usage and Distribution. We know that Q2 will be strong. We are already at the end of April. So we would be at a similar, I would say, at least on the Usage part, which is the largest part of Nexans, quite a little bit lower than the 15% we showed here, but a very good dynamic in Q2. So that's guaranteed. And it's a little bit more uncertain in the second part of the year on Usages, I would say. And for the rest of the business also, we will...

[Christopher Guérin, executive]

We don't have the backlog yet.

[Jean-Christophe Juillard, executive]

We don't have the backlog. We have shortened backlog. It's only a few weeks backlog. So obviously, it's difficult to predict what will be beyond Q2. And for the other part of the business, we are also quite comfortable through June that the organic growth will remain good and it will be in line with what we've seen in the first quarter. So really, for H1 for the first half of the year, we should report very good positive organic growth from Nexans, a little bit more uncertainty in the second half due to the lack of visibility, mainly in the more cyclical part of the business.

[Christopher Guérin, executive]

Regarding the harnesses for Q2.

[Jean-Christophe Juillard, executive]

So in terms of harnesses growth in Q2, it will be also quite strong. We are aiming at a double-digit organic growth in Q2 for the harnesses business. Definitely the fact that we have been producing almost at full capacity in Q1, we have gained -- like Chris said in the presentation, we have gained some market share with other cable makers, harnesses makers that were more in the center of the Ukraine. And basically, we are not able to produce, and we have benefited from that. So we continue to see a good trend in harnesses in the second quarter.

[Christopher Guérin, executive]

So on tooling with your question regarding M&A, Jean-Francois. So of course, the disposal of harnesses is not currently in the pipe, and we have to have a more stable situation. Even if we see a lot of improvement over the last 3 weeks, and specifically, regarding the visibility of demand on the strategy of our customers in regards to procurement and supply. So of course, as soon as the war will stop, we are able to be back to some actors we were discussing with regarding divestment. But the divestment process on some of the business is ongoing. So, so far, we are not in standby. We are progressing. We are progressing. We are a bit more vigilant on the acquisition because we believe that the inflation and the potential slowdown that we can see in 2023 will affect some of our competitors. So we don't want to buy a high price if there is a material change in the market in the coming months. So we remain, I would say, vigilant.

[Operator]

Our next question comes from the line of Sean McLoughlin from HSBC.

[Sean McLoughlin, analyst]

I had a question on Metallurgy on the other business. You're scaling this down. You can see clearly from a sales trajectory this is fading. And you plan to scale this clearly down further. I'm just wondering how we should think about this. I mean, will this scale down as you sell business? Is this tied to supplying your own cyclical parts of the business? And clearly, I expect that scaling down Metallurgy will have a margin-positive impact in the long term. So how should we think about that dynamic?

[Jean-Christophe Juillard, executive]

Yes. So I'll take the question, Sean. So it's really part of our strategy as we presented last year. The objective that we have -- we are the only cable maker having our own metallurgy business. If you look at our competitors, they do not. That was a strategic choice some years ago from Nexans. Definitely, there are pros and cons about having that Metallurgy business. In the past, it was quite dilutive business, and we were doing about EUR 1 billion to EUR 1.3 billion every year of sales. Half of that was selling rods -- copper rods to our competitors at a low margin, the business was about less than 2% margins, so quite dilutive on the margin of the group. So I mean, we've had that for quite some time now. We are now quite happy with what's happening in the world right now and the scarcity of copper and the prices on raw material and mainly copper.

We are happy to have the direct access to the mine and being able to serve ourselves and have basically a better situation in the future if copper again becomes quite tough product to get. We will be much better placed. But we -- so we want to keep that business. But instead of serving our customers the way we used to do it, about half of the sales, EUR 500 million, I would say, was for external sales, we will refocus on our internal needs. So by doing that, we will diminish the sales of that business from about EUR 1 billion to EUR 500 million by '24. We will do that progressively, obviously. We'll want to make sure that we pace this decrease. And the impact on the margin would be about 50 to 75 bps Nexans' margin by 2024 accretive due to the mixed effect favorable. So this is really the intention of doing that, but we're very happy to have this business with us today.

[Operator]

We have no further questions in the queue. So I'll turn you back over to the speakers.

[Christopher Guérin, executive]

Yes. Thank you. I think we can hand the call because I know it's a very, very busy morning for all of you in terms of financial release. Thank you for your attention, and stay tuned for our H1 results that will be certainly fantastic. Thank you very much. Bye-bye.

[Operator]

Thank you very much for joining today's call. You may now disconnect your handsets.