Nexans SA

PAR:NEX

Earnings Call Analysis

Nexans Sees Steady Growth Amid Strong Backlog and Strategic Investments

Nexans began Q1 2024 with an organic growth of 2.8% from last year, rising to 4.7% excluding declines in the Metallurgy business. Key growth drivers include a 34% sales boost in the Generation & Transmission segment, thanks to capacity expansions in Norway. The company's backlog expanded 10%, reaching €6.7 billion by March. Nexans expects to maintain revenue growth, forecasting €670-730 million in adjusted EBITDA and €200-300 million in free cash flow for 2024. The acquisition of La Triveneta Cavi, valued at €800 million, is on track and expected to close by mid-2024, bolstering future earnings.

Company Overview and Financial Performance

Nexans, a global leader in cables and cabling solutions, reported an organic growth of 2.8% year-over-year for Q1 2024. When the declining Metallurgy business is excluded, the organic growth stands at 4.7%. Notably, the Generation & Transmission (G&T) segment saw a significant sales increase of 34%, largely driven by new production lines in their Halden facility in Norway, and a robust backlog reaching EUR 6.7 billion .

Strategic Moves and Capacity Expansion

During this quarter, Nexans expanded its capacity and backlog, fully booking production through 2027 and securing visibility until 2030. The company has also launched production on a third vessel named Electra. Moreover, they successfully completed the acquisition of La Triveneta Cavi, an EUR 800 million revenue company, expected to be accretive by high single digits to EPS .

Generation & Transmission Prospects

The G&T segment is projecting a top-line growth of 39%-40% in 2024 compared to 2023. The segment is also seeing margin improvements as old legacy projects are completed and new, higher-margin projects like the EuroAsia Great Sea Interconnection come online. Nexans expects the profitability trend to improve significantly when this project is fully recognized in the summer .

Market Dynamics in Different Regions

While Europe saw positive demand in the Distribution segment with a 3% year-over-year organic growth, North America displayed mixed performance. The residential market in North America showed weakness, while the commercial and industrial sectors, including data centers, presented some growth opportunities. Nexans is cautiously optimistic about a mild recession in 2024 with better-than-expected conditions in these sectors .

Impact of Raw Material Prices

Rising copper prices have been a point of concern, with potential impacts on working capital if prices exceed $11,000 to $11,500 per ton. Nevertheless, the current level of copper prices has had minimal impact on cash flow. The company is also monitoring the aluminum market closely, particularly with recent geopolitical developments affecting supply chains .

Ongoing Challenges and Future Outlook

The company is facing challenges in the Automotive and Automation sectors, which are currently at a low point in demand. However, Nexans remains hopeful about a long-term rebound driven by advancements in Industry 4.0. The company is also focused on digitalizing its offerings and improving fire safety in products, expecting these innovations to bring higher margins in the future .

Guidance for the Year

Nexans has reiterated its guidance for 2024, expecting an adjusted EBITDA between EUR 670 million to EUR 730 million and a normalized free cash flow ranging between EUR 200 million and EUR 300 million. They are maintaining a cautious yet optimistic outlook, based on strong market demand and strategic expansions .

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good morning and welcome to Nexans' First Quarter 2024 Financial Information Conference Call. As a reminder, this call is being recorded. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions]I would now like to turn the call over to your host for today's conference call, Mr. Christopher Guerin, Nexans' CEO. Please go ahead.

[Christopher Guérin, executive]

Thank you, and good morning ladies and gentlemen. Thank you for participating to Nexans' conference call for this first quarter. It is Chris Guerin, CEO of Nexans; with me Jean-Christophe Juillard, Deputy CEO and CFO; Nino Cusimano, General Counsel of the Group and Elodie Robbe-Mouillot, VP, Investor Relation.Let me turn over to Elodie for the conference call rules.

[Elodie 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 URD, 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 highlights.

[Christopher Guérin, executive]

Thank you, Elodie. So if we jump straight to Page 3, we can mention a pretty good start for the year for group sales organic growth of 2.8% year-over-year, pretty much an increase coming from the Electrification businesses that J.C. will comment. It's mainly from our Generation & Transmission business linked to our capacity expansion.In the course of Q1, we as well issued a new bond of EUR 350 million. You know that we have doubled our capacity in our flagship in Norway, Halden plant for the high voltage business. We have been able to turn some firm orders into our backlog to reach a EUR 6.7 billion as of today, but still a very, very strong pipeline ahead. We are fully loaded up to 2027 and get ready for potential new awards this year.Nothing new. We already announced the acquisition of La Triveneta Cavi in Italy worth EUR 800 million revenue. Maybe a quick jump on the next page on Page 4. It's -- let me remind, it's a 700 people company. We took over this company at a multiple of 5.6x pre-synergy and 4.6x post-synergy, financed by a mix of cash on debt.Maybe as Nino you're following this case every day, can you give an update to the audience regarding where we stand regarding the closing?

[Antonino Cusimano, executive]

Sure. Thank you very much, Chris. Nino Cucimano. So I think we can start with some good news on the process. As you know, it's subject to what we define customary closing conditions. The main 2, the most significant 2 are the antitrust and the Golden Power.We have received the Golden Power clearance, so we're halfway there. We are in line to get the full clearance from antitrust and that's expected, as we've anticipated, towards the end of May, beginning of June.So everything is in order for another closing and we're all looking forward to that.

[Christopher Guérin, executive]

Thank you, Nino. And in the meantime all our integration team of 15 people is ready to move that into action. Thank you.Page 5, nothing new from what we have announced except that, of course, we are now running production of the new lines in Norway that has started in the last weeks. And as we already mentioned, part of our strategic CapEx, we have launched the production of a third vessel and the name of this vessel will be Electra following Aurora.On Page 6, before I turn over to J.C., very proud about this achievement on the engagement part. We have done our Nexans Living Voices survey to all our employees in the group. We reached a record participation ratio of 90%, which is just fantastic.And as you can see, the employment -- sorry, the employee engagement rate keeps improving year-over-year. We are making significant effort at all levels of the company. And our objective -- my objective is to reach 80% engagement rate by 2025.Last word regarding a new Board of Directors member, it will be Tamara de Gruyter. Tamara has a very, very strong experience in the marine industry, because she is President of the Portfolio Business of Wartsila. So Wartsila is a global leader in energy storage on marine solution. So she's joining the Board of Director of Nexans in coming months.Now maybe, J.C., comments regarding the sales?

[Jean-Christophe Juillard, executive]

Yes. Thank you, Chris. Page 7. So as you -- as Chris highlighted at the beginning of the presentation, we had a good start of the year. Organic growth for the group for Nexans, Q1 2024 versus Q1 2023, plus 2.8%.If you exclude, as we always communicate on that, the other activities, which mainly includes the Metallurgy business, as you know we have the objective of reducing the external sales of that business. So if you exclude that decrease of the Metallurgy business, the organic growth of the company for the first quarter of '24 is 4.7%.Also interesting to note is that if you compare on the quarter-to-quarter versus Q4 '23 versus Q1 '24, organic growth is plus 5.4%. When you look at the split, the breakdown of this organic growth, you see that we experienced a very strong growth in the Electrification businesses and I will explain that on the coming slides, but very strong 6.7%. And I would say a flattish top line for the non-Electrification business, plus 0.3% year-on-year and as I mentioned decrease of 8.2% after our strategy for the other activities.Turning to Page 8 and having a look at the Generation & Transmission activities of Nexans. First of all, the backlog have reached after the high level, the record level of December '23, EUR 6.1 billion. We continue to see an expansion of our backlog, plus 10%, EUR 6.7 billion at the end of March '24, again mainly coming from different sized small orders that are complementing existing contracts in the backlog.In terms of organic growth on the sales, plus 34%. It was expected as we communicated at beginning of the year 2024, the new extension of the 2 lines in our Halden facility in Norway would start production and execution of the high record level backlog. So plus 34% mainly coming from these 2 new lines in Halden, the rest of the activities in the G&T segment is progressing as planned.Moving to Page 9, having a look to on the Distribution segment. That was one of the highlight, if you recall of last year, very strong performance of the Distribution business both in terms of volume, but also in terms of margin.We continue to see that very positive trend with a year-on-year increase organic growth of plus 3%. And if we look on a quarter-to-quarter basis, plus 1.8%. So definitely driven by a strong, I would say, demand in Europe, where in other region of the world was more stable, slight decrease in North America, in Canada for us, but Europe has been growing significantly and this is the largest part of the Distribution business of Nexans.Moving to Page 10, looking at Usages. We've seen a normalization. I remind you that if you compare the -- so it's a minus 2% organic growth in Usages, Q1 '24 versus Q1 '23. We had in 2023 a normalization of the volumes mainly in North America for us and that started mainly in the second half of 2023.So when you compare the first quarter of '24 versus a still very strong quarter of 2023, we see [Technical Difficulty] that normalization that occurred during the third quarter and fourth quarter of last year.So most of the this again is coming from North America. Europe has been slightly decreasing, but I would say more or less stable, and strong growth in other regions of the world, mainly Middle East and Asia. And looking also on a quarter-to-quarter basis, Q4 '23 versus Q1 '24, we see a plus 11% growth on Usages.And now I'll turn to the last page of the presentation, Page 11, and we with a good start of the year of '24, we confirm the guidance that we announced in February, beginning of the year, with an adjusted EBITDA EUR 670 million to EUR 730 million and a normalized free cash flow ranging between EUR 200 million and EUR 300 million.That will conclude -- yeah, that will conclude the presentation. Again, the following slide on Page 12 is again the confirmation that we'll have our next Capital Market Day on November 13 in London, announcing the next equity story of Nexans for the next 4 years.Now that being said, I turn now back the floor to operator and Chris for the Q&A.

[Operator]

[Operator Instructions]. We will now take our first question from Daniela Costa of Goldman Sachs.

[Daniela Costa, analyst]

2 questions from my end. So the first one, maybe just an update in terms of G&T on 2 topics, actually. EuroAsia and sort of the situation in terms of time line and when do you expect to start execution there given some of the news flow we're seeing around the contract? And then more broadly, big tenders, which we should watch in 2024?And the second point, just an update on the divestment processes, if you could talk us through that?

[Christopher Guérin, executive]

So we have started the production for EuroAsia based on the down payment that we received at the end of 2020 and 2023. But of course, it's not a full down payment. It's just a partial down payment. And we're expecting the financial closings of all the terms in by July.But meanwhile, of course, there was some recent news flow which is not something that we mastered between Cyprus and Greece. Maybe Nino you want to comment?

[Antonino Cusimano, executive]

Sure. Thank you, Chris. First of all, I'd like to say that, as Chris just mentioned, the project is very much operating, it's alive. Everything that we are doing on this project, the customer activities that we do on any project of this magnitude, of this nature, it's one of the largest project -- it's certainly the largest project we ever had.The activities, like I said, are the standard ones. So we're meeting the client. As you know, we received the confirmatory deposit. All the activities are going as you would expect.We have also seen the news flow. So we are, like everyone else, we've seen the news flows. And those are, I would say, activities that you would expect, exchange that you would expect for a project of this -- again, of this magnitude with these geopolitical footprint.So it's happening among our customer. But from our perspective, from what we're seeing from the -- on the business standpoint, activities are as normal as you would expect for a project of this nature. So nothing to report.

[Christopher Guérin, executive]

And regarding the second question, Daniela, on the divestment, a lot of progress regarding the -- have been achieved right now regarding the carve out of our industry business, which is almost over, and we will launch very, very soon in coming weeks the process of divestment. So nothing more to report than that.

[Daniela Costa, analyst]

And regarding the key high-voltage tenders for '24 that we should watch?

[Christopher Guérin, executive]

I will not -- there are many, but I will not mention them, because we are in a tendering activity. It's too early to say for the moment.

[Operator]

And we will now take our next question from Alasdair Leslie with Bernstein.

[Alasdair Leslie, analyst]

So maybe just first question on Distribution. I mean, we're seeing a number of U.S. utilities really significantly high CapEx spend. So I was just wondering maybe if you could expand a little bit on what you're seeing then in the European markets developments there, perhaps expand on how many more of these larger framework opportunities you see out there similar to, I suppose, to the agreement you struck in Italy?And linked to that, I suppose, what do you think the real growth potential here is over the next 5 years? And I know you still include the reference to third-party forecast there around 4% growth to 2030. But, kind of, be interested in how conservative you think that maybe now is and how much, I suppose, Nexans could potentially outperform that?

[Christopher Guérin, executive]

Yes. So regarding the utilities market, I think we were one of the top first companies to talk about it in 2021 that there will be a significant investment in that medium voltage area supporting as well the development of high voltage. You know it's a -- you have to take it as a complete value chain between high voltage, minimum voltage and low voltage. You cannot invest on one side of the value chain and not investing on the other side of the value chain.So I think the forecast could be a bit of 4%, could be a bit I would say conservative. What we know the recent study show that the world needs to shift from 85 million kilometers of cables to 140 million kilometers of cable just because of urbanization demand or new emerging demand coming from different businesses. But in the meantime, you need to replace potentially an equivalent of 40% of what is already installed. So, yes, I think the 4% is -- it's conservative.Our equipment is fully saturated. We keep investing in that area. But growth doesn't mean systematically profit. So this is why we are extremely diligent and selective on the business and the type of customers, the type of product that we will inject in our process to make sure that we remain extremely productive in the output of production, but as well in terms of lead-time for our customers.But no magic, I will say, situation is what we say. We are entering in the hyper cycle of demand for the Electrification business and that's only the beginning.

[Alasdair Leslie, analyst]

Excellent. Could I ask a quick follow-up question maybe on the industrial solutions business? I've sort of some quite encouraging comments there about the divestment process. But maybe just on Automation, I think you said at the last call that you were kind of sort of hoping to see a second half rebound in that business. Are you sort of still confident you can see that? Is that still your projection?And then just in terms of kind of potentially a divestment. In terms of where we stand in that cycle, any limiting factors, I suppose, across either Automation or any of your other sort of businesses within industrial solutions that might just have a sort of limiting factor in terms of the timing of divestments?

[Christopher Guérin, executive]

I think nothing will affect the time of divestments. What -- there is plus and minus in that business. Shipbuilding industry, containership is back to very, very high level of demand. We are fully booked there in parallel to cruise boat, unfortunately, for the planet if I may say.On the second, we -- in our Aerospace business is as well booming. We are the main suppliers of Airbus, and Airbus is benefiting from the difficulties of Boeing. But that's right, to go back to your first point on Automation, we are still at a very low point of demand for Automation. I think mainly driven by the difficulties of the Automotive business.What is the projection for H2? Still too early to say. We don't see a strong rebound happen. If you look out your -- the VDMA Association latest report, again in the Automation sector, they say that 2024 will be a transition year with minus 2% overall for the European market. I think we are suffering for more than minus 2%. But we are talking about Automation, we are talking about Industry 4.0.So I think it's linked as well with the economical sentiment that we have potential recession on many companies that -- with exception of Electrification, have slowed down drastically their investment in the last 6 months. But I'm confident on the long run, because everyone needs to renew its robots, its machines for the next 20 years. So I think it's just a temporary downturn of demand and positive of the rebound is the rebound happening in H2 or Q1 next year, I don't know yet.

[Operator]

And we'll now move on to our next question from Miguel Borrega with BNP Paribas Exane.

[Miguel Nabeiro Ensinas Serra Borrega, analyst]

A couple of questions. In Distribution, first, obviously, you had those new framework agreements that are boosting your sales and profitability. Just want to understand how long these usually last, whether you think you'll have more? And so any expected reacceleration of growth? Maybe some color on why pricing of these new contracts is so much higher. Is it supply that is constrained? And why now? Because it doesn't seem that volumes are that much higher. Correct me if I'm wrong, but isn't pricing stronger versus a couple of years ago? And is it because of less competition or anything else? Just some color on the margins would be great.

[Christopher Guérin, executive]

The color on the margin, you got it already at the -- Miguel, at the full year result 2023. A lot of analysts, not you, but considered it was again an exceptional year. My remark is the following.Don't consider what is structural to be exceptional. It's structural. There is, of course, a very, very strong dynamic. All nations are waking up at the same time. Some nations have a very, I would say, less obsolete grid than others. But today our growth cannot go faster than what our equipment can deliver. We are extremely selective, as I mentioned, on the question before on the type of customers, on the type of demand, the batch size of the order.What I can tell you is that, many frame agreements of that size about 6,000 to 10,000 kilometers that we've signed in the last 2 years, the kilometers of cables have been consumed 1 year ahead before the end of the frame agreements. I think it's only in the beginning. We have a lot of meetings with DSOs right now, talking about CapEx, more lines to be open to follow the demand.The market suffer from an overall capacity in that business from 2008 to 2000, I would say '20. Now it's changed completely. You have as well a lot of Turkish player that are close to bankruptcy that are not part of the equation anymore. We don't see any emerging competitors from China arriving in that market.So -- and there is as well a question of lead-time, on the qualifications, quality of the product where the -- at least the European DSO play the European, I would say, game with their suppliers. And of course, it's just a price dynamic where you are fully saturated and you can choose your customers and your business. Of course, it's more accretive for the margin. But let me remind that for the last 10 years these sectors have heavily suffered from low demand on low prices.

[Miguel Nabeiro Ensinas Serra Borrega, analyst]

And then secondly on high voltage, can you detail what was the organic sales growth if we exclude the impact of the sale of Umbilical? And can we now assume that you're now on full capacity? So kind of to reach the full revenue capacity for the full year, I think you said last time, about EUR 1.2 billion. And if we look beyond that, how do you see that EUR 1.2 billion without more capacity being added? Do you think you can do more, that's basically on higher prices?

[Christopher Guérin, executive]

Hello, regarding -- J.C., you want to?

[Jean-Christophe Juillard, executive]

So, yes, just to answer the question on Umbilical, it's very marginal. So Umbilical revenue are very small in the first quarter. So it won't make that of a difference on the organic growth of the business. But definitely no change.

[Christopher Guérin, executive]

Yes. Now we will run on full capacity, but please keep your question regarding further adjustment to the Capital Market Day. I will not answer any question that are linked to the next 4 years trajectory of the group. Miguel, sorry for that.

[Miguel Nabeiro Ensinas Serra Borrega, analyst]

That's okay. And then if you allow me one last question on M&A. If I recall, you presented the big M&A plan a few years ago. So far, you've done 3 key acquisitions, none of them in the U.S. So just wanted your thoughts, Chris. How do you think about the U.S.? Now you don't have to say if you're going to buy or anything.But -- and whether that is of interest or why haven't you done anything yet there? Is it a question of price or available assets? And I would be interested in getting your thoughts on what would be an expensive multiple for you in Electrification, low and medium voltage?

[Christopher Guérin, executive]

That's a good question. A tricky question, Miguel. Let me try to -- of course, North American market is -- it was part of our investment thesis and it's a very, very attractive market, obviously, because it's the size of Europe, but only one norms of product. So the scalability of the offer is bringing, of course, a significant advantage.But it's as well -- its -- Nino is looking at me. It's a good news, but there is a kind of consolidation already there in that market. There is a company -- a fantastic company that, unfortunately, the financial market have no access. It's a company called Southwire, roughly a $12 billion company in the medium and low voltage businesses, doing great. The key, key leader of that market.I would say, yes, we are always looking at that business, that geographical area, but not at the level of multiple that we have seen recently. Of course, I know very well Encore Wire. I know very well Daniel Jones, the CEO of Encore Wire. He's one of the top CEO of the sector, believe me, a fantastic, great leaders that knows all the business by heart, specifically residential market, doing a lot of kind of shift methodology that we are applying in Nexans.I would say sad to see that this leader will leave in the future. But I will not pay -- of course, we I'm not sure that J.C. -- I'm looking at J.C. that will allow me to make a check of EUR 4 billion for a company in U.S. --

[Jean-Christophe Juillard, executive]

No.

[Christopher Guérin, executive]

- in low voltage into account that with the same amount you can buy Nexans with a different level of synergy. But, of course we remain, I would say, attentive of what's going on in North America because we are present as well in Canada. But we want to be extremely selective in the asset that we are buying. And you have seen the range of multiple that we achieved in Italy. This is what we want to achieve with the others. Not more. Okay? Next question?

[Operator]

We will now take our next question from Lucas Ferhani of Jefferies.

[Lucas Ferhani, analyst]

Just wanted to ask on an update on what is happening in offshore wind when it comes to the projects you are executing and the one that are coming and especially on Empire Wind?

[Christopher Guérin, executive]

Well, we'll say, we had a very, very strong news flow last year with negative and positive. So far no major change from the latest announcement. Empire Wind 1 has been confirmed. We are working actively with the Equinor team. So, I would say nothing new.

[Operator]

And we'll now take our next question from Akash Gupta with JPMorgan.

[Akash Gupta, analyst]

I have a couple of questions as well. The first one I had was on La Triveneta Cavi. So thank you for giving us the EPS accretion in high single digit. I'm wondering if you can also comment about EBITDA contribution that we should expect, which we have assumed in this high single digit EPS accretion.And also for modeling purposes, this EUR 800 million is in current sale. What would be the corresponding number in constant metal price that you use for the business? So that's the first one to start with.

[Christopher Guérin, executive]

Yes. Thank you, Akash. Regarding the EBITDA, I'm sorry I understand your question, but we cannot comment anything before closing. So we'll revert to you as soon as it's done.Regarding, standard -- the shift from current sales to standard sales, you can consider that EUR 800 million of current is converting to a EUR 630 million to EUR 650 million in standard -- with our standards.

[Akash Gupta, analyst]

And the second one I have is on Usages. So when I read your commentary by geographies, it sounds everywhere you have positive development with exception of Canada where you were down 21%. So I'm wondering if you can give us, excluding Canada, what was the growth in the business?And when we look forward, when do you expect this decline in Canada to normalize? I mean, I think you said earlier that it's the mid of last when this normalization happens. So is it fair to expect some sort of contraction -- a big contraction in Q2 as well before it is leveling out in the second half of the year?

[Christopher Guérin, executive]

I will say contraction, I'm not sure. [ Rebound ] neither. I think North American market right now is more at the low point. Of course, it's difficult to be precise because it's a mixed picture between the residential market, which is really down versus commercial and industrial infrastructure that are up as well as some data centers demands that are encouraging there. But I think it's a low point and will remain like that for Q2 from the perspective on the feedback that we received from the key distributors present in that sector.Regarding the questions on your organic growth without U.S., our team is computing. Team?

[Antonino Cusimano, executive]

We'll get back later in the call. But it will be -- it should be positive without the normalization of Canada, but to be confirmed.

[Christopher Guérin, executive]

0 plus, yes.

[Antonino Cusimano, executive]

0 plus, yes.

[Akash Gupta, analyst]

And my final word is on copper price movement. So in the last month or so, we have seen a big jump in copper prices. I'm just wondering how it may impact your free cash flow guidance, because it might increase the value of your working capital as you need to do mark to market on copper.And is there a level where we may see some sort of risk, which is pure mechanical risk than anything else. But just wanted to talk about what should -- how should we think about impact of copper prices on your free cash flow guidance?

[Antonino Cusimano, executive]

So we I mean, as long as, I would say the copper price does not go above $11,000 per ton or $11,500, it would be meaningless in terms of impact to our working capital. We've reached already the $10,000 level last year and it was not that significant.You're right, it has a little bit of an effect in impact, but you know that our working capital is so small right now, it's -- our working capital on sales is close to 0%. I mean, slightly positive. So it has a little bit of an impact, but it's not material and we need to see a higher -- much higher level of pricing -- prices before it's really impact our cash flow?

[Christopher Guérin, executive]

Well, I think it's a fundamental question for the long run, Akash, because now we can say from the information that we have from -- over there that the Chinese energy transition has started. We've seen a very high demand for copper supplier in China those times. That generates some ups on the copper price. That's only the beginning.I think the big topic will be in the next 2 years to 3 years when copper price will be between $12,000 to $14,000 per ton. Here there will be, of course, an important impact on the free cash of the cable manufacturers, because of the scarcity of supply versus very, very high demand. It's what we say since 2 years now -- for 2 years and that start to be confirmed from the latest forecast.I'm a bit concerned as well on the aluminum in different aspect, because aluminum have less -- I would say, have more reserve in terms of capacity of extraction of the bauxite on the alumina. But the recent news of the European Commission to ban the aluminum of Russia, even if we have been able to divert our supply from Russia to different countries, will create a potential shock of supply in coming months.So the natural resources topic will be fundamental for the next years both in terms of supply, but as well in terms of value that will -- that may impact the free cash of the cable manufacturer.

[Antonino Cusimano, executive]

So -- and just to rebound on the impact, the mark to market. So there's no -- there's very limited with no impact on the cash flow at today's price level, as I mentioned earlier, where you will see an impact like you said on the mark to market in our P&L below EBITDA in our net income. Definitely, if copper price maintains at the level it is today, as for the end of the quarter, the second quarter, definitely when we do a mark to market in our half year closing, we'll have a positive impact to our net income.

[Operator]

And we'll now move on to our next question from Luigi De Bellis with Equita SIM.

[Luigi De Bellis, analyst]

2 questions for me. The first one is on the Generation & Transmission. So can you elaborate on the expected improvement in sales EBITDA for full year 2024 if the plus 40% is confirmed? Elaborating on the expected contribution of EuroAsia for 2024. And if profitability trend as of today is in line with your initial expectations?And the second question on the Distribution and Usages. So you are seeing a very encouraging trend considering the tough comp. So what is your outlook for the coming quarters for volumes and prices? And can you elaborate the trend in margins as of today?

[Antonino Cusimano, executive]

Yes, I will take the first part of the question or the question which is related to the margin on G&T. So we remain on --

[Christopher Guérin, executive]

On the growth of the sales.

[Antonino Cusimano, executive]

What's that?

[Christopher Guérin, executive]

On the growth --

[Antonino Cusimano, executive]

On the growth of the sales. So definitely the growth of the sales is happening because of the high backlog and the additional capacity. And you see that in the first quarter and that will continue, obviously, through the end of the year.And I remind you that as you rightly mentioned, we have 39% to 40% top line growth when you compare -- it forecasted for '24 versus '23 on that business.In terms of margin themselves, we continue to have the legacy project that, as I said, would be executed in 2024. Then we'll exit the backlog by the end of the year beginning of '25, which means that in the first half of 2024, we will have been at the lower level of margin we've experienced in the second half of 2023.And then when EuroAsia, Great Sea Interconnection, which is name of the contract now, is finally confirmed and signed, financial close being done, which is expected, as Chris said, sometime over the summer of this year. Then we should basically recognize the margin -- the revenue and the margin on the contract, which is very -- which is quite accretive, I would say, to the P&L of the business and therefore margin will go up.So this basically is a story that the way we foresee 2024 in margin evolution for that business and we have not changed our view since February.

[Christopher Guérin, executive]

And then the questions on medium voltage. On low voltage, for medium voltage, I think we have very, very strong sales. The difficulties of our customers is access to labor to install the cable and making the junctions. But no concern on the medium voltage. Already extensively answered that question before.Regarding Usages, we were ready for a big drop a few months ago because in case of recession. I will say that, first of all, different dynamic per region, a low point in North America that will be unchanged in the coming quarter. A strong rebound in Oceania, Asia -- Asia-Pac overall. But in Europe, of course, we suffer of lower volume, but not as we could have expected in the case of a recession on the downturn. So we believe that 2024 will be, I would say, a mild -- potential mild recession in that sector, a bit better than expected.But I'm remaining [ prudent ], Luigi, because our visibility on the order book is limited. So we will be extremely, I would say, attentive of what the main players in that sector would say like Legrand or Rexel in their quotes.

[Luigi De Bellis, analyst]

If I may, just have a quick follow-up on the consolidation in the sector, because we are seeing an acceleration from the market leader from you. So do you expect an improvement in price dynamics in Distribution and Usages, generally speaking, as a result of this consolidation in Europe and in North America?

[Christopher Guérin, executive]

I would like to answer, but my General Counsel is looking at me with very dark and big eyes. So I think you have the question in your answers. But it's not only a matter of margin, which is a matter of medium sized companies start to have difficulties of access of raw materials, specifically copper, because they don't have the fire powers of procurement that the big names have. So that's start to be a big topic for them.The second big topic as well is the digitalization of the offer. We are very, very active on that demand at the request of our distributors like Sonepar, Rexel, and Wesco. And it requires significant amount of investment both in materials, but as well in terms of skills and competence. And that's what medium sized player, family owned business, I would say, have difficulties to cope with.So this is why that, I had a question recently said, yes, there is a good trend in the Electrification, so why you're selling? I think it's what we saw with that segment is access to copper, digitalization accelerations, new investments required to follow demand -- the demand. It could be a bottleneck for, I would say, this kind of company and this is why that we need to be a bit stronger as cable suppliers. But we need as well to mention that our customers are getting bigger and bigger as well. So I would say we are just following the consolidation of the value chain in this specific part of the business.Nino, are you satisfied with my answer?

[Antonino Cusimano, executive]

Perfect.

[Operator]

And we will now take our next question from Bastien Agaud with Berenberg.

[Bastien Agaud, analyst]

Bastien from Berenberg. You've experienced a double-digit growth sequentially in low voltage. Should we assume that it is coming from better pricing or higher volume for the whole division?

[Christopher Guérin, executive]

It's coming from both. You have a volume effect, you have a price effect, you have a mix effect that contribute to this ratio.

[Bastien Agaud, analyst]

Okay. Perfect. So we should assume that the end of the margin normalization that happened in H2 2023 should probably be over in H1 2024?

[Antonino Cusimano, executive]

Sure. Confirm.

[Operator]

And we'll now take our next question from Eric Lemarie of CIC.

[Eric Lemarié, analyst]

I got 3. First, could you remind us the sales generated with fire safety cables today at Nexans, including with La Triveneta? And what could be your midterm objective there?I got a second question on copper. You mentioned this issue, I think. But could you remind us the percentage of recycling copper used in your processes today? And again, what would be your objective?And last question, I don't know if you can answer. But would you -- do you consider that you would need further strategic CapEx in the next years to deal with your current order book?

[Christopher Guérin, executive]

Okay. Regarding fire safety, there is -- in La Triveneta some part of fire safety, but I will say the most of their production is in PVC cable. So that, of course, our aim is to shift to fire safety kind of polymers for a matter for premiumization, and that's part of our synergy road map. Regarding the -- but I will give more detail in the Capital Market Day. So I don't want to go further on that topic.Regarding copper, we are close to 12% to 14% of ability to use recycled copper in our output today. And today, we are working on making additional investment to turn this 12% to 14% into a 50% -- 5-0 in the coming years, and we will be able as well to offer to customers a new generation of cable that will be manufactured by 100% recycled copper and 100% recycled polymer. And that, for us, will give us a green advantage, if I may say, versus competition.And regarding strategic CapEx, J.C., do you have other strategic CapEx in terms of demand?

[Jean-Christophe Juillard, executive]

No other strategic CapEx.

[Christopher Guérin, executive]

Not for the moment. Only the vessel, which is...

[Jean-Christophe Juillard, executive]

Yes, only the completion of the current vessel, which will be ready by '26, where we still have about EUR 150 million of coming CapEx between this year and next year.

[Operator]

We have a next question from Jean-Francois Granjon with ODDO BHF.

[Jean-Francois Granjon, analyst]

Yes. First question, do you expect to integrate La Triveneta during the second half this year after the closing? And can you confirm the accretive impact for the next 6 months?The second question concerns the harnesses business. You mentioned growth. Could you give us the percentage growth of this business during the first quarter?My third question concerns the Usages business. You mentioned some value-added products. What is the percentage of high value-added products currently on the Usages business?And my last question, within the high voltage business. What is the percentage of the legacy or old contracts with some lower margin on the current backlog for the high voltage.

[Christopher Guérin, executive]

Thank you, Jean-Francois. So regarding La Triveneta, you know, I booked my flight for June, so waiting to get the keys. What can you say, Nino, specifically?

[Antonino Cusimano, executive]

Like I said, we're -- the only obstacle between -- right now, where we are in closing is the clearance of the antitrust. And like I said, we're expecting that for the end of May, beginning of June, everything is in line for an orderly closing after that.

[Jean-Christophe Juillard, executive]

So right now, what we've done in our forecasting, we have included revenues and margin contribution starting July 1.

[Christopher Guérin, executive]

There was 4 questions. So harnesses, gross ratio of harnesses for '24, for Q1.

[Antonino Cusimano, executive]

Growth ratio for Q1, it's slightly up. It's not -- not to the magnitude of what we've seen in 2023, that is [Indiscernible] growth rate in harnesses for the first quarter.

[Christopher Guérin, executive]

And regarding Usages, your third question again Usages value-added. So we are very active on what we call shift time, which is a big work on premiumization of the product, shifting to fire safety, higher brand product plus as well, as I mentioned, digitalization. Once again, I don't want to elaborate more because that will be a cornerstone to our Capital Market Day. And regarding the question was on -- the last question was about G&T. Do we have a sufficient capacity to run the backlog? The answer is yes.

[Antonino Cusimano, executive]

So I think the question was -- how much of legacy project we have in the back half -- so it's around 10%, 10% to 12%.

[Operator]

And now we'll take a follow-up question from Akash again from JPMorgan.

[Akash Gupta, analyst]

I had a clarification question to what Eric asked on G&T. So Chris, when I look at the statement, you say that you are fully loaded for 2027 and expecting potential award this year. When we look at the statement, you say you have strong visibility for manufacturing and installation extending through 2030. I'm just trying to get -- are you hinting that you are open for further increasing capacity as some of your peers are doing, if you get the orders or you are not on that path and you want to basically utilize your existing resources and still not do further capacity expansion?

[Christopher Guérin, executive]

Yes, I will take the -- because I had -- yesterday, when I was reviewing the material I had the same comment. In fact, 2027, we have almost 100 percent of the revenue of the backlog. Today that takes us to the end of 2027. This is why we're saying fully booked until 2027.The visibility point is that we have some of the recent projects that we just booked into the backlog in '23. That will take us through revenue recognition through 2030. This is why we talk about visibility through 2030 and about full booking until '27. So we do have indeed capacity available starting in 2027.And as we said earlier, as of today except for the completion of the existing vessel, we are not planning on spending any further CapEx -- new CapEx, I would say, for capacity growth.Thank you, I think it's ending now. The question is --

[Operator]

There are no further questions in queue. I will now hand it back to Christopher for closing remarks.

[Christopher Guérin, executive]

No closing remarks. I wish you, everyone a great day and I think very busy week with all the publication on going on. Thank you very much for your attention.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.