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Nexans SA
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Ladies and gentlemen, good morning and welcome to the Nexans’ Half Year 2022 Earnings 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 call, Mr. Christopher Guerin, Nexans’ CEO. Please go ahead, sir.
Thank you. Good morning, ladies and gentlemen and thank you for participating to this n Nexans’ conference call. I am Chris Guerin, CEO of Nexans. With me Jean-Christophe Juillard, Deputy CEO and CFO; Jérôme Fournier, Corporate VP Innovation; and we have as well Ragnhild Katteland, Executive Vice President of Generation & Transmission Business; as well Élodie Robbe-Mouillot, Nexans’ IR, I will turn over now to Élodie that we’ll go over the conference call rules.
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 half 2022 highlights.
Thank you, Élodie. So, as you can see, Nexans keep raising the voltage, if I may say, H1 was a strongest ever semester for Nexans for the last 20 years and as you have seen already Q1 was already ahead of our expectation, and Q2 continued to be extremely positive on following that trend.
Our transformation is as well running full speed for many units into electrification business as a well-off industry, but what is important for us is that the third energy revolution has started with the acceleration in the development of renewable energies. The urgent renewal of electrical grid and the electrification of the daily usages. So, the secure trend towards decarbonization and digitalization will benefit us as a pure player of electrification.
I know that you will have a lot of question in regards to 2023. On the risk of recession, what is important first is not to – in order not to be dependent on growth only on economic or cyclical, cycle sorry. Our transformation platform enable us to deliver sustainable results combined with [favorable contract sales] [ph] effect like you will see, but more importantly, structural on outstanding financial output. This first semester result leads us to a 2022 guidance upgrade that JC will comment later on.
So, among the highlights that you can see on Page 5 of the first half are, of course, the closing Centelsa acquisition. I remind you the €300 million revenue. We have been as well, announced as a preferred bidder on the jumbo project, EuroAsia, that when it will be awarded, we'll secure a very high level of activity for the years to come.
Another important pillar is, of course, sustainability and our responsibility towards the planet, so we are very proud to announce our carbon neutrality commitment have been validated by SBTi. Some highlight as well. We have launched our 10th Employee shareholding plan, which more than 4,500 subscription among our employees across 25 countries. It's a big uplift versus all the others [indiscernible] as well the confirmation that not only investors are confident on Nexans’ structure, but of course, our employees.
Let me remind as well some key events before I forget. Nexans will all – sorry, a climate day event on the 21 September in New York with key American leaders and experts regarding world decarbonation. Nexans will be as well in the course of that same week, platinum sponsor of the New York Climate Week. On the [22 of investor] [ph], we are organizing an investor event in our unit in Charleston, South Carolina.
Let's move to Page 6. So, you can see that in this slide, EBITDA reached record €308 million. Electrification businesses contribute at 90%, 97% of this EBITDA performance year-on-year with a comparable breakdown between structural and contractual effect on as well the addition of the [Centelsa asset] [ph]. If I can say with a [remark] [ph], and when you start to do in six months in margin, what you did in one-year almost in 2018, it's already, of course, a good sign of progression.
So, let me outline again that our EBITDA margin grew by 200 basis points, thanks to the deployment of SHIFT and Amplify in Usages business. Our new capacity in Generation & Transmission provided by our Charleston plant and as well Aurora vessel. Normalized free cash flow, if you remember, is our new KPI. We decided to neutralize the effect of strategic CapEx. And as you can see, our level of cash flow is very [healthy] [ph]. We will enter, of course, in more details with GC.
ROCE, return on capital employee continue to improve, thanks for the improvement of our EBITDA, and as well very fact working capital management. So, you can see also again record in terms of returning capital employed. We reached 17.4%. If we move on Page 7, we have to be fully transparent as well that there is of course the structural effect that we are working on for the last three years that are raising the level of performance of Nexans, but there is as well some concern to all effect.
So, we wanted to split the results. So, I would say that if we take the H1 2021 result at €222 million you need to add up €43 million that come from structural initiative, and I will comment on them, but we benefited as well in some areas, specifically usage in North America, mainly a good on uplift the contractual effect of €42 million. So, the main topic will be to transform this contractual effect into structural.
So, let me comment this [indiscernible], of course, on the line. We are committed to amplifying our customers' experience and bring more innovation. And this is why Jérôme is with us today. What is important is, we have more and more digitalization inside our offer. We are very proud to announce that we have now connecting more than 35,000 objects on our product to our business. And of course, this number will keep increasing and it would bring today and in the future recurring revenue, thanks to a subscription model.
SHIFT Prime, this is the add-on of SHIFT performance for those of you that are not yet familiar with the program. It's a methodology designed by us to convert innovation marketing services into free cash flow. So, no blah-blah. It's not only doing very fancy things that have no results, so everything is processed in order to monetize everything we offer to turn it into free cash flow.
So, we have benchmarked ourself with other capital goods company that are much ahead than us on this topic and we’ve learned a lot from them. We have been through shift from this recipe to scale innovation and to move to this empirical commodity business into a premium market, mainly in usages, this is where SHIFT Prime is running fully.
Net cost improvement from [indiscernible] industrial performance we will continue to streamline our cost base and improve our initial performance to cope with salary and energy inflation.
Now, if we turn to Page 8, I will not comment so much because [indiscernible] there. She will answer all your questions. But of course, we run our program course sheet project monitoring to make sure that we are converting business that are healthy in terms of margin yield, healthy in terms of contractual term exposure that will not jeopardize Nexans future and as well that's fits – project that fits perfectly between our technology coal production and installation capabilities.
So, on these three pillars, we have determined a list of platinum project to be awarded. And this is what we are following. And of course, EuroAsia is part of it. We will comment about it. We have been announced as preferred [indiscernible] for the entire project, and that's a great news to be converted in the coming weeks. BorWin6 offshore wind farm, it's of the coast of Germany, an amount of €360 million revenue. And as well, we have converted the installation of the Revolution Project for [offset] [ph] in U.S.
We add in the [indiscernible] production supply only now we have production on installation. I propose that to turn on to Jérôme to explain as well the third pillar of our announcement in terms of electrification initiatives. I remind you that we have made the opening of our Charleston U.S. plant last year. The unique subsea plant right now in U.S. for offshore wind farm. We have had the [prestaining] [ph] of our overall [indiscernible] and now we have as well make a major opening that Jérôme would comment. Thank you, Jérôme.
Yes, indeed. A few weeks ago, we were very pleased to inaugurate our new international innovation center. It is called AmpaCity, based in Lyon, France. It does represent a €20 million investment for a 6,000 square meter, 20 laboratories dedicated – 100% dedicated to decarbonize electricity. Like our [Techno Center] [ph] for high-voltage solution in Norway, this is an important pillar for our innovation portfolio with 100 permanent people, it will be an open structure to welcome our customers and our partners.
I'd like to remind you that the group, the global group R&D expenditure is in the order of €80 million. We have 1,800 patents and the global R&D innovation community is made up of around 800 people.
In AmpaCity, we will innovate to address tomorrow's challenge. Challenge number one is to increase the power. And we are very proud of this key achievement this year. The qualification of the 525kV 3,000-[meter depth] [ph]. This is a world first. The second challenge is the sustainability and to reduce CO2 emission. [SF6] [ph] is well-known to provide excellent electrical insulation, but it is an extremely important greenhouse gas, equivalent of 20,000 time the effect of CO2.
We have been successful this year in the replacement of these gas by G3 gas in partnerships with General Electric. This is a world first. The third challenge is a more [reliable power] [ph] and superconductivity is a key technology. I will come back later on superconductivity. But digital solution, as mentioned by Chris, also does help – they help to increase the efficiency and reliability of installation.
And we are reaching 3,000 connected projects that include geo-localization and inventory managements, like our solution, ULTRACKER. Obviously, we also will work on easier installation. It's not rocket science, but it's very, very useful for the installation like MOBIWAY solution or [ink stack] [ph].
Now, let's focus in the next slide on superconductivity cable, that is a breakthrough technology. The main performance is a huge quantity of power 3 gigawatt, which is 3 nuclear reactor in a 20 centimeter diameter space saving cable. So, it does allow minus 90% of civil works and minus 70% of energy loss. We have a mature and successful track record on developing and installing this technology in power system. It stopped 20 years ago with R&D then we set up the first worldwide installation in New York [indiscernible], that was 2003. Then in 2014, it was the first superconductive cable in real grid in Germany [indiscernible].
We improved the performance, thanks to the Best Paths projects reaching those 3 gigawatts. Last year, we've been very pleased to install one superconducting cable in the [indiscernible] connecting two substation in real life, and this year, we are very proud of this worldwide superconductive cable in Paris, Montparnasse train station.
Once again, this innovation makes the electrical grid more reliable connecting train station to different substation. So, we believe that this technology will play a key role in the modernization and the power supply of very dense and urbanized areas like big cities, railway station or airports.
Thank you, Jérôme. Let's move now to business overview Page 12. So, you can see that the organic growth of the group is 5.1%, without excluding metallurgy is about 13%. I think the most noticeable information is that our electrification business is up 16.2%. The majority of this organic growth is made of value, more than volume, I will come on that. And that's why you see a very strong uplift in the EBITDA ratio. We move from 8.8% to 12.1%.
Let me comment already start right now the Page 13 on Generation & Transmission. So, Generation & Transmission, formerly said as High Voltage, you can see an upswing in terms of sales of about 24%, but of course, the margin is, you can see plus 51%. We are continuing to be on the ratio of 18% EBITDA on sales and once again I don't say this is by luck. This is by big work of the team, and we will continue to be in the range in the coming years between 17% up to 24% of EBITDA.
So, first of all, the upswings come from the new capacity that we have been with we –we launched, plant in U.S. [indiscernible], the additional sales of our plant in Charleston, JC will comment. The second impact which is important in terms of margin generation is the quality of our backlog, both in terms of mix, much more interconnection projects subsea than land with a great margin on the limited contract for this quarter.
So, that's the reason that we are extremely confident in the margin trend in 23 and 24 for these sectors and that will not suffer from any recession because the backlog is very impressive. We have almost 2.5 years of visibility. This backlog does not include EuroAsia project that when it will be awarded, we'll reach a four years of visibility with an extremely good mix of – in terms of profitability on margin yield. So, as we are extremely confident now, it's just a matter of execution for the Generation & Transmission business from now on up to 2024, even if there is a recession.
Page 14, a distribution formerly territories business This is mainly medium voltage cable. Growth year of 14%, this explains by the urgent renewal of the grid on our successfully conversion of framework agreement with last year. So, like any descent tenant. So, we have a very, very high demand and certainly lacking capacity to cope with all the demand. In that sector, 70% of this organic growth come from value only, and 30% from volume because we really want not to play volume, but to improve the margin generation of these sectors.
And you see already that with a 14% growth in sales, we have been able to generate an upswing of EBITDA of close to 70%, 9% EBITDA versus 6%, It’s this EBITDA improvement reflects the benefit of offering of [bundle cable] [ph] solution between cable and accessories and as well the successful launch of ULTRACKER that Jérôme mentioned part of the connected projects.
A word on Page 15 on the usage. So, of course, this is the sector that can suffer from a recession if any next year. So, that's the reason that our strategy is profit first before volume. We are extremely focused on giving our capacity, our free capacity to the best part of the portfolio, means in terms of customer on product profile.
So, what is important is that you see that we have an increase of sales of 14%, upswing in EBITDA of 75% moving from 7% to 11%. What is important is, we did a major work on complexity reduction in many, many units that generates structural performance, but we have as well some positive contractual effect that we need to transform or to convert into [structural] [ph] next year.
So, we are working in second semester plus we have a pretty clear visibility on the second semester. So, this is why the guidance increase, but we are working with all you need to equate them in terms of recession to keep their level of financial performance.
What we can say on Page 15 is on the industry. So, we are still very strong demand in automation. I believe that we will see some slowdown starting Q4, depending of the economical trend. Transport is recovering. What we have to say is that Rolling Stock is still very weak in China because of the economical situation in China and as well because Rolling Stock is not back on track.
Aerospace is improving, but remains below pre-pandemic level. So, we believe that those two sectors, Aerospace and Rolling Stock should improve significantly in 2023. We need to give a tribute to our team in automotive harnesses because I was not as confident and as you can believe in the first quarter within vision of Ukraine and by Russian, but they have made an outstanding performance both in terms of financial performance management business, but the way they manage the crisis with their team in Ukraine, our units are running fully.
They have an improvement of mix because 54% of their sales improvement is coming from electromobility, so shift to electrical vehicle. And our customer recognized highly all our effort in terms of crisis management. And this is why we will announce new awards to come for automotive [analysis] [ph] in the coming months. So, very impressive crisis management from our team.
Telecom is, I would say, okay. It's not as shining and electrification. LAN cable has pretty good momentum all over Asia and Europe. European activities in Telecom Infrastructures is – has a sound business with a great momentum in UK offsetting a pretty soft start in France, which is start to be equipped in terms of fiber optic.
On Special Telecom, Subsea, where we have reduced amount of backlog because we are consuming this extraordinary backlog that we had a year ago and we try to normalize now the load because we run at more than 100% of our capacity in the last month. So, now we chose a matter of normalization, but the business is still a very healthy and very promising for the year to come.
Now, JC, I'll let you comment the financials.
Thank you, Chris. So, I will start with Page 18 with the profit and loss statement. So, you, as Chris explained, I mean, we've had a fantastic first half of the year. You can see on the main figures, organic growth, I will not repeat what was said, but strong organic growth, even stronger if you remove metallurgy, that you know is our strategy to decrease and has a positive mixed effect on our margin. And also the organic growth of electrification is extremely [indiscernible].
So EBITDA at €308 million, margin on EBITDA at 9.1% 200 basis point increase versus same period of last year, mainly through the [two-year impact] [ph] – really impact of the transformation, as well as I would say a very good momentum in our businesses, mainly usages, but also the addition of new capacity necessarily in high voltage.
Operating margin following the same time of increases. What I would comment is we still – we had an impact below EBITDA, a positive impact due to [COGS] [ph] because the copper price in the first half average price continued to increase about €600 per ton in the first half of the year 2022, which generated for us a positive 25 million impact. The start of the decrease of the copper price started really at the end of the semester in June, so did not impact really the semester.
One, I would say one-off in our P&L also and in our cash flow is a divestment sale of one land we had in Germany in Hanover, where basically we dismantled the plant a few years ago part of our restructuring, we still had the land that we had to clean up and we sold that land and there is again on the P&L and also a [positive] [ph] in our cash flow of about €55 million on the period.
And I will conclude on the [general thing] [ph] that our income tax remains quite flat versus last year, despite the increase of earnings of profit before tax. This is mainly due to the fact that some of the profit are now generated in countries where we have different losses and therefore we did not pay taxes on those profit and therefore basically show that the similar tax income level versus last year. And all of that concluded to a record high, I would say, net income level of almost €200 million, €199 million, significantly higher than last year at first semester and even higher than last year full-year.
If you look at the waterfall on the Page 18, you see that the contribution of course of the electrification business is in the increase in EBITDA is exactly significant. I mean, represent, I would say, all of the increase in EBITDA for the period [indiscernible].
I will now move to the next slide on Page 19, and you remember in our equity story, we explain how we will grow value and how we will expand EBITDA over the three years of our new strategic plan. We explain each of the levers of that growth and we committed that every six months when we present our results, we will show progress on each of those levels. So, this is what you see on this Page 19.
You see that basically the contribution of all of our transformation is €48 million basically. This €48 million can be broken down between Amplify €17 million, SHIFT Prime everything, which is again driven through innovation, new launch of innovation. A strong phasing in Generation & Transmission, high-voltage with a good mix and a stronger, I would say, project phasing, €23 million incremental EBITDA from that.
Of course, the Scope effect, which is mainly in Centelsa acquisition that we closed April 1. Globally speaking, inflation for the semester was higher than before expected, about 60 million, 63 million impact on inflation on the semester, 40 million of that is pass-through, as you know through the mechanism we have mainly with raw material. Most of the inflation that was not passed towards an salaries, but we were able to basically mitigate most of that through industrial savings and you see that the net impact is 7 million that you see on the beginning of the bridge here.
So, quite limited impact, I would say, globally speaking from inflation in our financials. And I will conclude on that bridge importantly to say what Chris explained. We have a conjunct – while we say conjunct total impact of €42 million, which is a situation where we had market that we are extremely booming in the first half of the year, definitely booming at level never seen before and we want to be remain quite precautious and cautious and make sure that we isolate that, I would say, from our transformation initiative and we call that conjunct all impact to obviously to monitor if this impact will continue in the future.
So again, a very strong performance and all of the levers of our transformation has been evenly contributing to the interest in value of our company. If I move now to the next slide on Page 20, and we look at our cash flow generation, we had a slight increase of our net debt. We moved from 0.2 net debt on EBITDA leverage at the end of December last year to 0.4. This is mainly due and you see that on the bridge here on this slide, it's mainly due to the M&A, and the acquisition obviously of our Centelsa Columbia asset, €259 million.
If you put that aside, which is obviously a one-time effect and you look at the other pluses and minuses, I would say that our net debt would have remained stable over the period. Thanks to the strong contribution of our cash from operation that we are big enough, significant enough I would say, to pay for the high level of CapEx, €126 million, I remind you that we continue to have strategic CapEx, which are quite high, 82 million out of the 126 CapEx for the period are linked to strategic initiative as part of our equity story and also with the dividend and I would say share buyback of transaction operation, we did €96 million.
So, those two high elements were I would say offset by a good cash from operation. And globally, you can say that if you put them another side, leverage remains flat and remains anyway quite low for the group. So, a very low leverage situation from balance sheet. If I move now to the slide, on the next page, just a quick word on our operating working capital, you know that we are focusing a lot of diligence from company management and making sure that we monitor very tightly working capital.
We had a slight increase in working capital and a slight negative change, I would say, in working capital from December 31 to end of June. This is, two impact to that, I would say. First of all, it remains quite low because we are at 6%, and we always said, I always said in the past that 4% of the past semesters were quite, I would say, abnormally low in terms of ratio of working capital on sales. 6% is what I think is a normalized level for our company, and we are not targeting to have this ratio getting worsening in the future, but remains probably around 6%.
The slight increase you see from the 4% to the 6% of the past semester is mainly due to two things, the copper price increase I mentioned earlier that impacted a little bit working capital. And the second thing, we had a little bit of delays in the phasing of the down payment on high voltage that will come in the second half based on the contract that Chris explained where we are preferred bidder and one was awarded BorWin6 only in July, so it's not part of the June financials. But despite that, I mean, working capital remains very much under control and continues to be the key focus of the company management.
I move to balance sheet on the next slide very quickly. Not much to say on the balance sheet. It remains quite healthy balance sheet. You have the growth of the different lines of the balance sheet is also impacted by Centelsa acquisition, obviously that contributes to grow the balance sheet figures.
Working capital, like I explained, net financial debt, I explained as well, [indiscernible] are decreasing a little bit due to pensions, had you turned to increase of discount rates, and that's about it, I would say, equity is increasing. Thanks to the very strong net income performance of the semester. On our two [indiscernible] for covenant, obviously, are slightly increasing due to the net debt increase, but remains quite well below the threshold of the government and we have a lot of headroom, I would say, on those covenants to continue the strategy of the group.
I will conclude on the financial presentation with a [live] [ph] Slide on Page 23. With liquidity, we continue to have very healthy liquidity of the group. We have 1.1 billion almost of cash on the balance sheet at the end of June, which is, I would say, an improvement versus last December. If I add to that, the untapped [evolving] [ph] credit facility, total liquidity of the company is at €1.7 billion, you have the maturity for different debt levels, mainly bond levels, nothing to declare for 2022, the first one to be – to be refinanced will be 23, with a – yes, with a [€3.75 million] [ph] bond maturity in [August 2023] [ph].
So, very strong liquidity level, very strong balance sheet, I would say, for Nexans. And I will conclude with the outlook on Page 25. So based on the very strong performance of our results in H1, we have decided to raise our guidance on our two KPIs on which we guided in February. First one, EBITDA, we increased EBITDA from €500 million to €540 million to a new range of €560 million to €590 million. This includes obviously Centelsa in – I would say, Centelsa in the second half of the year, two quarters of Centelsa in the second half of the year.
And we also upgrade our normalized free cash flow generation from €150 million to €200 million to a new range of €200 million to €250 million, [needing to] [ph] say that we are extremely confident in our ability to achieve those targets.
Thank you. That would conclude my financial presentation.
Thank you, JC. That concludes the presentation. Now, we can open for your questions.
[Operator Instructions] Our first question comes from the line of Daniela Costa from Goldman Sachs. You're now unmuted. Please go ahead.
Hi, good morning. Thanks for taking the questions. First, I wanted to ask just a very quick clarification to make sure we understood something right in the beginning. I think when you were talking about the Generation & Transmission business and you were mentioning the continuation of good margins, did we hear you correctly on saying 17% to 24% margin? I mean if you can comment there on whether that's what we heard the right thing or the wrong thing, and anyways, what is the long-term margin potential that you see in that business?
And then number two, wanted to check on the change in guidance, just to also clarify the changing guidance in free cash flow, now that copper prices have been declining, how much of a tailwind for working capital of that increase in free cash flow, how much is just the potential tailwind in the second half from copper or maybe less bad situation on copper than you’ve foreseen earlier in the year? And then just yes, has put an update on the portfolio actions and like where do you stand on telecoms, industrial, harnesses, etcetera, if we could get a bit more color there? Thank you so much.
Thank you, Daniela. Good morning. And let me take the question number one and question number three. Question number one, no it is exactly what I said. We have modernized all our backlog to free cash flow generation. I told you it's very, very healthy. So, it's lower range of our EBITDA is 17% and the higher range is 24% on the Generation & Transmission. It's just to confirm because some of your colleagues believe that our 18% was reached by a good mix.
Last year, no, this is not what [we said. We said] [ph], the structural margin on the sectors is very different between interconnection projects, subsea, offshore wind farm and interconnection land. The mix of our backlog is mainly subsea, so that's trigger higher margin and the way we [modelize] [ph] and we select duly each project in terms of margin yield, contractual term exposure and our capability to execute it properly because as well this is part of the margin, give us the confidence to be in that range between 17% to 24% up to 2024.
Regarding the second question, regarding copper?
Yes, definitely on copper. If prices of copper continue to decrease as they started at the end of the previous semester and end of May, June there will be a positive impact on our cash flow by reduction of our working capital. While we've seen part of the degradation of the working capital in the first half, part of that is due to in case of copper, basically about 25 million to 30 million is due to copper.
If this basically increase of the first semester reverse itself in the second semester, we will again basically this impact of 30 million, so I would say that basically, we can count on depending on the level of [election] [ph] I would say €20 million to €30 million of cash flow improvement if copper hard prices continue to decline in the second half.
Regarding the third question, Daniela on divestments, we are making some progress on divestments. Certainly, we should announce something before the end of the year. Automotive harnesses was very, very well advanced, but we put everything on hold because of the invasion in Ukraine, but given the outstanding performance of the business, I'm sure that the partner we discuss with are back on the table. We need to see what will be the evolution, of course, in Ukraine in the coming months before to start back our discussion.
Regarding acquisition, I would say that we are a bit holding the topic for the moment because if recession is confirmed that can give us better opportunities in 2023. But what is important, Daniela is that whatever the perimeter of Nexans by 2024, Nexans is confirming its ability to reach its financial ratio as mentioned in the capital market even at constant perimeter.
Thank you. Can I squeeze in a very quick one, actually. On the situation around like chemicals and PVC, obviously, you used a lot of PVC, I guess you don't have like massive operations in Germany and you're not on the German corridors or anything, but a lot of like chemicals I guess in Europe come from Germany. So, how do you mitigating for those potential risks with the gas situation around chemicals in Europe?
We are not exposed on German supply. We had a lot of [suppliers] [ph] issue last year and now it's very, very smooth. We have diversified our suppliers not to be, I will say constrained by a monopolistic situation. So, it's a big work that we have done over the last two years. So, we don't see any specific issue on the supply chain signed in second semester.
Thank you.
Thank you, Daniela. Next question.
Our next question comes from Miguel Borrega from BNP Paribas. You're now unmuted. Please go ahead.
Hi, good morning, everyone. Just have two questions. One on Slide 7 for the additional EBITDA contribution from structural initiatives. I just want to make sure I got that slide right. So, you've got the 150 million total EBITDA contribution and there are still 110 million to 120 million to be delivered in 2023 to 2024. So, those percentages apply to 2022, right? And then the rest to be delivered within the next two years?
That's right. That's right. With the exception of – Miguel, good morning Miguel. The exception of shift performance, you can see a TBA. Here is our buffer in case of recession. We have still €2 billion revenue in the usages on the distribution market that have not been through our shift performance program. So, this €2 billion revenue remains today roughly at 5% EBITDA, so very below average.
We are working on them right now to bring them back to a higher number closer to our average and that would be a big, big buffer that we are activating in case of recession in 2023 to keep bringing a significant financial performance in 2023.
And then just on the 17% to 24% margin that you mentioned, obviously, there's the issue of cost inflation and typically these contracts are not – they don't have any escalation clauses. Can you just comment on your confidence to insulate yourself from cost inflation in the high voltage market?
That's a good question. Let me pass on to Ragnhild.
Hi, and thanks for the question. So, what we're doing at our tender states when we are reviewing the contracts, we are course, reviewing all the terms and conditions, including also potential risk for cost increases, etcetera. And we are making sure to put in measures so that we are able to index those cost increases in case of that happening. So, we are very sure of the figures that Chris mentioned.
So, the 17% to 24% in the next years to come [indiscernible] that we now see in our backlog and that we are now targeting through the shift modeling and through the shift execution.
So, it's under control.
That's great. Thank you. And then just on M&A, what are you seeing, obviously scope for opportunistic M&A or given the recession risks you prefer to stay put for the moment? Thank you.
We are advancing discussion with some players, but I think we had the Board yesterday and it's not the right time to take over any company at the peak of revenue, peak of margin, peak of multiple. So, we have to remain prudent.
What is important is the message that we keep bringing to the Board of Directors even if we have to delay acquisition by a few months because of precision that will not jeopardize our financial target for 2024. So, we will do it at constant perimeter. So, that's the main message. And we don't want to make acquisition at any cost, just because we want to make acquisition, but we are making some great progress for the moment, but we remain vigilant.
That's great. Thank you.
Thank you, Miguel. Next question?
Our next question is from Akash Gupta from JPMorgan. You're now unmuted. Please go ahead.
Yes. Hi. Good morning, everybody, and thanks for your time. I have a few questions as well and I'll ask one at a time. The first one I have is on your margin rebounding usages and maybe if you can provide some more color on what is really driving it? Is there any shortages of copper or something that might be or maybe if you can also provide a split of revenue growth between volume and price? And maybe if you hire, how do you see sustainability of these high margins given, I think, double-digit margin and usage is something that we have not seen for the whole segment in the past. So, maybe if you can also comment on sustainability of these high margins? That's question number one.
Yes, it's an important question Akash on usages because we know that in case of economical downturn, this is certainly the sector to be impacted. Generation & Transmission will not be impacted. Distribution is so late in renewal of the electrical grid that I don't see that being impact in 2023. So, of course, all the focus is on usages. So, first of all, first answer, 100% of organic growth is made of value. First time ever in Nexans, whereas in the past 100% were made of volume. So that's an important message.
The second message is, how is divided or spread this value between structural and [the control] [ph]. It's more or less what you have on Page 7. It's 50% structural. It means our new offering supported by digitalization that for us here is just at the beginning of its penetration. We have launched, you've seen in the last quarter, and it's just the result of our innovation launch in the last quarter with MOBIWAY, ULTRACKER, VIGISHIELD. Those inhibition are not for free, so – and they have a very well reception from the customer because it is a really distinctive offer. And we know that everything we do digital is we are alone.
So, we have a very strong appetite from our customers to keep deploying those offer on that structural recurring revenue. So, event utilization will be there and we are continuing our penetration ratio of this offer. The other part is conjunctural and more focusing North America, I would say, more than Europe. A conjunctural effect is due to a hyperinflation in U.S. that all sectors on all our competitor benefits from in the last months. And it's still very strong in Q3. We will see what happened in Q4.
So, I will say that, the usages performance, conjunctural effects is really, really focused on North America, not in Europe. Europe is very structural effect. And our team is incentivized on the structural effect, not the conjunctural effect.
Thank you. My second one is on high voltage where you are 90% sold out on capacity through 2024 and demand is still accelerating. The question I have is, are you already having dialogue with customers to further raise capacity has processed to gain to decarbonize this gaining momentum in Europe in light of [indiscernible] and you also said in your remark that there is one of the major headwind for renewable deployment or accelerating renewable deployment. So, are you familiar with…
Sorry Akash, can you repeat – we had a cut of the line. Can you repeat your question? I'm sorry about it.
Yes. No problem. And the question is on high voltage where you are 90% sold out on capacity through 2024. And you said demand is still rising here. Are you having dialogue already with your customers to further raise capacity given now we are seeing in-light of Russia, Ukraine, momentum to decarbonize in Europe is gaining and it is like one of the major headwind. So, any comment on capacity that when you might come out with next leg of capacity increase given the accelerated decarbonization in Europe?
Thanks for the question. As you know, we are already investing in Halden with the two additional [extrusion lines] [ph], so we are adding capacity from [24] [ph], actually doubling our capacity for [indiscernible] cables from Halden, and they’re as well adding some smaller adjustments in Charleston and also adding capacity in Charleston. So, as such, we are answering to the market of this need – more needed capacity.
But what is important is, we have some questions from investor Akash, to say why don't you keep doubling your capacity every year? I say we have to be careful because first of all, we have a €25 billion pipeline in front of us, but thanks to our modernization, we know that not project are all equal in terms of margin yield technological fit or contractual term exposure. So, we have to be careful. It's not all good.
I will say that one-third of this €25 billion is for us considered as platinum projects or top notch project, but you have another one-third that we don't want to touch, because of the risk exposure. That's the first element. And we know that the demand is accelerating. We know that the demand is secular because it's a third [electric revolution] [ph], but what we have to take care is not the demand, it's the offer on the scarcity of raw materials. So, what we have to do is to make sure that we manage our capacity in front of raw material access.
Thank you. And my final one is on superconducting cable that you test upon earlier in the presentation, can you give us a bit more detail on how big the market opportunity here and how does the margin look like in this part of the business, compared to the group average or your 10% to 12% target for electrification in 2024?
I think Jérôme can answer this question because Jérôme now joined in competition with Ragnhild in terms of new market development.
Yes. I'll start with the margin because the supercomputing technology project are very similar to a high voltage submarine project. I mean, there is a lot of engineering installation, is like unique projects. So, we are targeting the same level of margin as high voltage submarine and the same way to manage those projects. In terms of markets, we believe – I mean, we'll start like – if we consider two big cities with a project of 10 billion that's – the next few years is €200 million as a [BEU] [ph], but we guess that total market will be in between €3 billion and €5 billion and we expect after 2030 to reach our 1 billion per year.
And this is due to the fact that the categorization of the building, you need more and more power on square feet and you can maybe replace the advantage of superconductivity versus HVDC cables in a very dense urban environment Jérôme.
Absolutely. I mean, today when we come to supercomputing, there is no other solution. There is no way that you can have civil works downtown in New York, Paris, or Singapore, Hong Kong. So, the only way to bring a lot of power with the tiny places of civil work is a superconductive cable. And that's going to be the case with train station, with big areas and cities.
We really believe and it's dramatically increasing with the global warming, but there's going to be a lot of local blackouts, blackouts in cities and maybe some big blackouts. And that will accelerate the modernization of the grid in megacities.
Akash?
Thank you.
Okay for you. Okay. Next question?
Our next question comes from Sean McLoughlin from HSBC. You're now on mute. Please go ahead.
Good morning. Thank you for taking my question. Firstly, just to understand a little bit better, this 42 million of conjunctural and one-off, first of all, does this include the gain on the 25 million gain on the German plant? And secondly, is this mostly usages in North America from what I've understood or is this broader? Could you maybe just dig into a little bit where, you know which markets were booming and you don't expect to be booming anymore in the second half? Thank you.
Yes. I'll take the question, Sean. So, no, the sale of our land in Germany is definitely not in EBITDA, it’s below, so it’s not part of the €42 million. Really what we couldn’t control is when we have analyzed, it's only coming from usages building, and when we have analyzed basically the performance of our transformation, the past volume over the years, the demand and the supply and so on and we see like extraordinary situation where volume and prices have been going to the roof since now a few months, we call that conjunctural because by definition, when you look on history and a long period of time, this never happened before. And we believe that it will – one day or the other, whether it's in one month, two months, six months, who knows, but likely go away.
So it's usages, it's unique, it's made of pricing and volume, a combination of both. It's fueled by inflation for sure and it's really related to North America. So, that's what I can tell you about this piece here.
Understood. So just thinking about then, kind of margin progressions in the second half for usages. I mean, if I were to split, you know to take out the 42 million, I mean, should I be looking at, I mean, presumably much lower organic growth and kind of margin compression in the second half?
So, it's a very valid question. What we've assumed in the new guidance in the new range of EBITDA is that basically most of this conjunctural one-time effect, we call one-time effect will vanish, go away. So, basically to answer your question, yes, in that usage part, if this is the case, organic growth will be lower than what it was in H1.
Now, what I can tell you is we are already in July and we start to have visibility on Q3 and Q3 seems to be still very strong. So, it's extremely difficult obviously to predict what will be the end of Q3, what will be Q4. We took one assumption in the range. We might be a little bit conservative.
We'll see in the coming weeks. But to answer your question, yes, if there is a recession or if there is [strong turn] [ph] slowdown in usage and building activity it can have a very quick impact in our financial results and organic growth and margin will obviously reduce because of this conjunctural or one of that will not repeat itself. But again, while we see in Q3 right now being at the end of July, it looks still very strong. So…
And we are working in [indiscernible] our unit to shift this conjunctural into structural in next year to come, specifically next year.
Understood. Thank you. I just wanted also to understand go back to the 17% to 24% margin range, does this also include land, high voltage that you have in backlog or is this just a subsea range?
It's all the business. Everything altogether included.
Which is remarkable considering that your land business was loss making when you became CEO. So, I'm wondering how much, again, is this fundamental improvement in industry conditions and how much has this been kind of Nexans internal driven?
I would say that we have significantly, yes, that's right, there are two answers. So, first sequence we have a turn heavily negative of [indiscernible] into positive in the last years. That was the first sequence of fluctuation, the closure of Hanover. The improvement of the operational performance, but as well, the margin split over the sectors between interconnection subsea, offshore and land is a very high spread. And I will say that 85% to 90% of our backlog is made of subsea project.
Yes, the loan portion really reduced significantly between 18 and 25 and even today, so the dilutive impact is much lesser than it was before.
Thank you.
Next question?
Our next question comes from George Featherstone from Bank of America. Now please go ahead.
Hi, good morning, everyone. Thanks for taking the questions. I just wanted to follow-up a little bit on the margins for the electrification businesses in aggregate. Clearly, you've made some very strong improvements. So, just wanted to see what the potential progression or how we should think about the pace of margin improvement progression from here? And perhaps if you could maybe discuss in this, the margin at aggregate level in the backlog, compared to current levels?
Good question. So, at least for – I will let JC comment, but at least for Generation & Transmission, we have answered. I will give you – I think we cannot do better to say that the margin between now and 2024 would be between 17% to 24%. We keep improving on distributions, formerly utilities, but by keep bringing more complexity reduction, simplification our portfolio and more bundling innovations, but JC, can you give us some perspective regarding the result overall of the electrification?
Yes. So, globally, what we see in electrification, it's – we are today at a – we are seeing 2022 as a EBITDA margin on electrification will be around 12% and so very accretive for the group and when the average is the average of the [indiscernible] we see that about 9%, so very accretive and much more accretive than the rest of the non-electrification businesses. And what we see is basically we are gaining every year about half a point additional margin on the electrification total every year.
So, by 2024, we will – this electrification – our electrification business will be about close to 13.5% EBITDA. So, there's two reasons for that. The ones that we discussed about generation and transmission, mainly the phasing of the project, not the phasing, sorry, the mix of the project with a very significant interconnected object coming to the backlog with higher margin than the average. I'm talking about EuroAsia, for instance, so Crete-Attica today and they are other one in the pipeline. That's one thing.
The additional capacity, which brings that the Generation & Transmission business move basically from a business that was a business of less than [a billion euros] [ph] of sales, about €900 million sales to a business by 2025. That would be €1.4 billion of sales. So, a very, I would say, bigger business, thanks to a full Charleston or plus the additional CapEx. So, overall, this business running at 24%, like we said, with a bigger size, improved the total margin of electrification as well.
And then we continue the transformation of our shift program, shift time and so on with usages getting 1 point or – 0.5 point to 1 point every year. So, really the momentum on the two electrification business is very stronger diving the electrification business profitability significantly up over the next couple of years.
And why we are confident on those numbers, obviously is because a part of the €2 billion revenue that I mentioned that are still at 5% EBITDA, a big part is still in the electrification field in usages. So, we are running SHIFT now in those units as well in some others. That we bring continuous improvement of our EBITDA over the year.
Okay. Thank you very much. Maybe one more just turning to usages. You mentioned already on the call, but this would perhaps be the area of the business that would be most sensitive to any short-term downturns, but so far, it doesn't sound like in Q3, you see anything like that. I just wondered in the guidance now, do you expect that you would start to perhaps consume your backlog in usages as you get towards the end of the year rather than adding to it?
So, the order intake still is very solid right now versus the backlog. So, our backlog is not reducing. We have – we know you don't have a long visibility on the usages, but we have all our customers, our platinum customers, they consider that Q3 is there in their backlog. So, we don't see any down turn in that regard. We – on that part of the guidance, we remain vigilant on what could happen economically in terms of economical trend in Q4. That's all, but I would say that if everything stay like that, the guidance, we are more on the upper part of the guidance than on the lower part of the guidance.
Yes. And our backlog for usages, for instance, is almost €260 million, it's significantly up versus June last year and even versus December. So, like you said, it can change quickly because it's short-term, but at least we end up the semester with a very strong backlog, higher than past closing.
Okay, great. Thank you very much.
Thank you, George. Next question?
Our next question is from Massimiliano Severi from Credit Suisse. You are now unmuted. Please go ahead.
Yes. Hi, Christopher. I just had a couple of questions, quite quick ones. The first one would be on the capacity that you have in the high voltage space. Clearly, EuroAsia is an MI project. I was wondering, right now what is the split between MI and XLPE? And what will be the split once you complete your capacity expansion plans? And if maybe you could comment whether you see any margin difference between XLPE and MI projects, generally speaking?
No, we don't give the split between our capacity between MI and XLPE. Everything I can tell you is that all investment we are doing right now is to expand our XLPE capacity. There is no main difference between the two technology in terms of margin. The difference come by the nature of the project, by nature of the project. Is it an interconnection subsidiary offshore and [indiscernible] interconnection line?
So right now, we are with today's capacity where when a word will be confirmed in coming weeks from [Russia] [ph], we will be fully loaded, but we still have room because we have the expansion of Halden running right now to be ready for 2024 and we still need to sign contracts on the negotiation right now to fill in this additional capacity in XLPE.
Thank you. And in terms of the capacity that you have in in your vessels, if you keep winning the installation projects for Ørsted in the U.S. would the current two vessels that you have been enough to meet the demand or would you perhaps need a third vessel on top of [indiscernible]?
That's a good question. I need a good answer, but that's why we have decided they want to keep us [indiscernible] because we knew given the very huge momentum on this sector that we will need to research, but Ragnhild, please.
For the vessel part, it's slightly easier than for the manufacturing when it comes to capacity. So, for the vessel part, what we are doing is that if we do need additional vessels, we will do subcontracting as we have done in the past, and that will also be done in the future to take the, kind of the hits if I may use that word, if we have more need than two vessels.
So, for us, it's really just to optimize the use of these two vessels, plus adding third party vessels when needed.
Clear, thank you very much. And maybe if I could squeeze in a very final one. For H2 in the high voltage division, clearly, H2 2021 was a great quarter, would you expect to be somewhere close to that level of margins or perhaps due to phasing we could see margins slightly down year-on-year in H2 and then improving over the next years in the 17% to 24% range that you mentioned?
No, margin would be similar. There's not much difference between H1 and H2 in terms of margin this year.
Okay, perfect. Thank you very much.
Thank you. Next question?
Our next question is from Luigi De Bellis from Equita. You're now unmuted. Please go ahead.
Good morning, Luigi.
Yes. Hi, good morning. I have two questions, some questions, sorry. The first one is on the high voltage. Can you elaborate on the main projects in execution in 2023 for the voltage and the additional sales expected for the division for 2023, compared to 2022 in-light of your backlog? And if you may, can you give us more colors about the timetable of delivery of EuroAsia and [indiscernible] quantified impact that you expect in 2023 in particular? And always on the high voltage related to the EuroAsia, can you help us to understand how much is the complexity of the projects considering the 525 kilovolts MI technology that you have to use if I understood correctly? Thank you.
Well, I think I will let Ragnhild answer, but regarding the financial statement of 2023, I don't want to give any number right now because this is not the purpose of the call. But I think there is legitimate question regarding the complexity of EuroAsia and as well what are the main projects into execution from second semester on the 2023 [Ragnhild] [ph]?
Yes. So, to start with the massive [indiscernible] MI correctly, yes, the Thyrrhenian Links, is coming in into play. We have Attica-Crete ongoing as we speak. So that will be, of course, continue to be a good contribution – a contributor for H2. Then we are following with Thyrrhenian Links and as well EuroAsia. EuroAsia will last until 2027, assuming with the preferred supplier for both [the locks] [ph]. So this will really fill our capacity.
For EuroAsia and Thyrrhenian and also South Africa, we are using the MI technology. It's a well proven technology that we have used for since the 70s for all interconnected projects. There is no added [indiscernible] cable itself, it's a proven technology. The new thing with Eurasia is, of course, the water depth, 3,000 meter water depth. And here, we have already proven that we are managing this with this type of cable and the technology that we have on deepwater.
It's a long length, but long length interconnectors, 525, that's also something that we have proven with the North Sea Link project that we installed and completed on time three years ago. So, for EuroAsia, yes, it is a complex project. It's a very, very large project, but [indiscernible] technology that we're using, which is a proven technology with all the proved technology also on the installation, reducing our new state of the art Aurora, which is also made for laying in very deep waters.
We are 100% certain that EuroAsia is a very, very good fit project for us as well as Thyrrhenian Links. And the other question was related to the backlog, what type of projects we have? So, I mentioned now MI. We are, of course, completing this year, the Seagreen project, as you probably know, we have already also the more advanced project in our pipeline that we will work on.
Attica-Crete, we have mentioned. We have mentioned also earlier that we are working on like the Empire Winds like the revolution, like [South Fork] [ph]. So we have quite a strong backlog, not quite strong and very strong backlog, full backlog with ongoing projects in execution today and that will continue to next year.
Thank you. If I may on the full-year 2022 guidance, two quick questions. The first one is on considering the strategic CapEx, how much is the net debt expected by the end of 2022? And the second one always on the guidance, can you elaborate on the implied EBITDA for telecom industry division in the second half compared to the first half or your indication of margins for this division for the second half, compared to first half? Thank you.
I will take the last part of the question and I will say still a big question mark on China because we had a very, very high deficit of demand in industry in China for earnings stocks. So, we know that some fixtures are ramping up in China like the automotive, but not yet the Rolling Stock. So either we remain stable, either we see an uplift, definitively on automotive businesses with [indiscernible] that we have in January and February, specifically February [indiscernible] in Ukraine, a very, very strong demand in Automotive harnesses in second semester is working.
Regarding telecom, there was a slow start in some countries like in France, and that should improve in second semester. So, I will say that dentistry and telecom dynamics should improve in second semester. Regarding net debt?
Yes, net debt, so basically on the strategic CapEx, we have about, I would say, balanced first semester versus second semester and we spent out of the 126 million of CapEx on H1, we spent 82 million for our strategic CapEx, expansion in Halden. The figure for the second half would be about the same €80 million, so the bulk of the expanding of the CapEx will be in 2022.
However, with a significant down payment, we are aiming to receive, we [indiscernible] we mentioned for the [awards] in the second semester, our backlog in high voltages should be growing quite significantly if you add those two projects that are not in the backlog in June and down payment coming full. Our net debt will significantly reduce versus what it is at the end of H1.
So our [market] [ph] is targeting a net debt close to €200 million versus [340 million] [ph] I presented to you for H1. That's the way I see in net debt evolution in the next semester.
Okay. Thank you very much. Very clear.
Thank you. Perfect. The next question, please.
Our next question is from [indiscernible]. You're now unmuted. Please go ahead.
Yes. Good morning. You have already answered some of my question, but nevertheless two quick questions, please. The first one, to be clear regarding the guidance, the new guidance includes the contribution of [Centelsa] [ph]. If that's right, it was not the case for the previous guidance. The previous guidance does not integrate Centelsa. So, do you confirm that for the new guidance this includes the contribution of Centelsa’s efforts second half? And my second question concerned the high voltage Generation & Transmission division. To give us the mix between production and installation for the first half and what do I expect for the full-year and for next year? Thank you.
So, I will take the first question. So, the first question, you're right, completely right. The first guidance did not because we specifically said at the time that we will not include M&A into our guidance in M&A and divestment. So when we announced – when I announced the guidance at the beginning in February, we didn't have any, I mean, we were in progress of closing the Centelsa, but it was not closed, so it was not included.
We closed the acquisition April 1, so now it's an asset of Nexans, fully asset of Nexans. So, it's included in our new guidance. So, I confirmed just to give you some financial information, contribution of Centelsa. In the first half is €7 million, the second half should be around €15 million or total I would say, a controlled contribution of about €20 million for the full-year, the new guidance of the range of EBITDA, and for our cash flow, you should think about the [same proxy] [ph].
And for this split, if I understood your question correctly, for the split installation, manufacturing, we don't really do that split as such, what we are doing is to ensuring that we are fulfilling all our capacities, both manufacturing and installation. And please remember that our approach is full turnkey project. That means also including engineering, manufacturing, installation, protection, afterworks, etcetera. So, also all our margin is coming from the turnkey project whether or not it's manufacturing, it's engineering or if it's [Technical Difficulty].
Yes, this is the trend that we see, [indiscernible], in the Subsea sector, it's all projects turning more and more turnkey because of their risk and complexity and that means that the entry barriers for competition is raising and that’s good for us. For big project of interconnection now you see only two main players because of – you need as well a very solid balance sheet. It's only Nexans on our Italian colleagues, mainly.
Okay, perfect. Thank you.
Thank you, [indiscernible] Next question?
The next question is from Eric Lemarié from CIC. You're now unmuted. Please go ahead.
Yes. Thank you for taking my question. Just got two. First one, to check a number. Could you share with us the value and volume impact on sales in Generation & Transmission. I think you gave us the figure for [indiscernible], but not for GMT unless I missed it? And I got a second, a naive question actually, you explained to us that you can reach your financial mid-term guidance without any further acquisition of disposals at constant perimeter, as you said. Then I was wondering, is it really necessary to implement this asset rotation policy or is it really necessary to become a pure player in electrification? Because after all, you are already both performing very well anyway today with your current parameters?
Thank you, Eric. So, we don't – regarding your first question, we don't split this logic of value or volume for the generation and transmission business because it's a project driven business on our entire [indiscernible] is to make them turnkey and that's the most important one to execute it rightly.
Regarding your question on why becoming [pure player] [ph], it’s because it's not only a financial strategy. It's not only a financial strategy. We believe that if we remain [genealogists] [ph] covering 34 subsectors, de risking our capital allocation to 34 subsectors and 70 factories, asking Jérôme’s [8 engineers] [ph] to work on 34 subsectors, you are de risking your effort, you are de risking your impact.
We believe the world of tomorrow is much more complex, facing now big risk on the higher level of crisis that, I will say, beginning in addition together, either climatic, either around climate, around geopolitical or [indiscernible] or whatever, that means that the winner of tomorrow are the pure players. The one that will allocate all their resources, management one with R&D effort in one single direction to create distinctive offer.
So, if we want Nexans to be strong even in down-down times, if we want Nexans to be a great leader in the electrification play field, we have to be focused and we have to quote a very well-known [guru] [ph] in U.S. we have to get the profit from the core business. So, focus on your core business and reallocate all your efforts on that direction. And this is what we are doing. And the advantage that we are doing that in the electrification play field is that we are entering in the third electrical revolution that will imply massive investment.
And this is why that we need to put all our effort in one direction. We don't say that automotive is a bad business. We don't say that telecom is a bad business, but you cannot be everywhere. If you are everywhere at the end, you are nowhere and you will see your market share sector by sectors reducing every year because in each sectors you have pure player. To give you an example, to make it short, in telecom, we are small players and we are facing company that we are not talking about during our conference call calling, this company is a pure player entirely focused in Telecom.
The chance for calling to win in the future versus Nexans is much higher because they put all their – I will say, means in the same direction. So, this is what we are doing in the electrification play field. The generalized model is over from what we see in terms of market trends. It's a strategic question.
Thank you. Can I ask a follow-up one?
Sure.
Yes. On distribution and usages, so you mentioned you had very, very strong growth in North America for both divisions of 77% in North American in distribution and I think 57% in North American and usages. Could you tell us if it's, I suspect it's mainly due to conjunctural reasons, but could you give us maybe an idea of the value effect in North America for this two division? And maybe share with us the level of revenues you're generating in North America in distribution and usages?
We don't go in much detail than what you have.
Okay.
Sorry for that. We have our [indiscernible] I think you have enough details to compute your model? Thank you, Eric.
Thank you.
Next, last one, last questions because we have to run into Roadshow, I'm sorry about that. Next question?
So, our final question comes from the line of Rajesh Singla from Societe Generale. You are now unmuted. Please go ahead.
Hi. Rajesh.
Hi. Good morning, everyone. Thanks for taking my question. Just one question maybe with technical in nature. So, on the one hand, we are seeing very strong demand for high voltage cable going forward and it might accelerate even further. And on the other hand, we have a little bit of this macroeconomic issues, which we might be facing for the low voltage or medium voltage cable. So, my question is how flexible are manufacturing facilities, specifically the medium voltage cables? Can we convert them to feed the demand, which we are seeing in the high voltage segment basically make the manufacturing facility more flexible to basically feed whatever demand is strong at that particular point of time? So is it easy or is it technically difficult?
No. The answer is negative. I know that cable looks, I would say, same cable for each business. Now, it's the level of complexity from high voltage to low voltage is nothing to compare. If you want to enter in the high voltage field, you need minimum two years of qualification on pretty massive investment. This is what we see in Charleston, for example.
So, I think I cannot comment more, Rajesh, I invite you to come in Charleston unit in September 2022 to understand the complexity of manufacturing high voltage cable.
Sure, sure. Thank you. And maybe one last question would be on – if I heard you correctly, you said that your targets are on-track, the 2024 targets are on-track and you will be able to meet them despite any weak demand challenges, which might come on our weight during the next, say, 6 months to 12 months?
Yes. It depends, of course, how deep will be a recession if it comes because it's like, [indiscernible] I cannot predict the world economy in 2023, but if it is a downturn, a slight downturn, we are very confident in achieving our results. For what I say and I think this is the major information because we had a lot of discussion with the board and with our investors. No one wants to see us making acquisitions versus for the sector to make acquisitions. So, we don't want to make a dilutive acquisition just because we commit to make acquisition.
So, what is important is that we are unleashing the full potential of the group to make sure that we will not disappoint the market and we will be at the rendezvous of our 2024 target, whatever is the portfolio at this time. And I think it's important for all your model as well. I know that you're walking on a 10-years basis, but there is beginning 2019 a big swing in terms of management teams, a new – completely new spirit, very innovative metrology in terms of company transformation, and we are making a very bold strategic move.
So, the Nexans that we are talking about now and in the future does not compare at all with what you've seen between 2009 and 2018, and believe me, I was in the company here, it's a completely new phase that we have in front of you. Do you have another question, Rajesh?
No, that's pretty much from my side. Thank you. Thank you very much.
Perfect. Thank you. Thanks a lot. We have a very high level of audience this morning. So, thanks a lot to be connected. Looking forward to meet you all physically. If we can, also for the one that will enjoy some great summer break. Enjoy your break. Thank you very much.
Thank you for joining today's call. You may now disconnect your lines.