Nexans sells Swiss distribution business

Edited by the Engineeringtalk editorial team Feb 7, 2006

Nexans sells Swiss distribution business to Rexel and sets up joint venture in Vietnam on back of increased sales.

Nexans' sales in 2005 were E5.45 billion euros.

Sales calculated at constant non-ferrous metals prices amounted to E4.26 billion compared with E4.08 billion in 2004 (at constant exchange rates), an increase of 4.5% (5.2% on a comparable consolidation scope).

Operating margin was E186 million, an increase of 40% compared with 2004.

Operating margin as a percentage of sales was 4.4%, more than a percentage point higher than 2004 (3.3%).

Net income was E108 million, including the capital gain on the disposal of the distribution business in Norway (E33 million) and a positive variation, before tax, in the fair value of non-ferrous metal derivatives (pursuant to IAS standards 32 and 39) in an amount of E33 million.

At stable non-ferrous metals prices, this item will be recorded as an expense of the same amount on this same line in 2006.

The figures for net income also include losses arising from discontinued operations (E45 million including E11 million of restructuring costs recorded under this item as opposed to under restructuring).

Net income per share (after dilution) was E4.46 compared with E2.55 in 2004.

Net financial debt, after applying IAS standard 39 (+E115 million) announced in June 2005, increased by E79 million to E374 million at 31st December 2005.

This increase is the result of the growth in business, the continued rise in copper prices (51% in one year) and includes the net proceeds from the disposal of group subsidiaries (E78 million).

Based on the strength of these results, the board of directors will propose to the general shareholders' meeting a dividend of E1 per share, double that paid in 2005 (E0.5).

The group continues to develop its value-added businesses and focus on those geographic areas that offer the most potential.

Accordingly, Nexans has announced the disposal, effective 1st February 2006, of its distribution business in Switzerland (Electro-Materiel) to Rexel for an enterprise value of E206 million.

The business generated sales of E189 million in 2005.

The capital gain from this disposal (about E150 million) will be recorded in the first half of 2006.

Nexans has also announced the signing of an agreement for the setting up of a joint venture in Vietnam, to be controlled 60% by Nexans.

Vietnamese Nhat Linh and its subsidiary LIOA Wire and Cable will own 40% of this joint venture to which they will contribute their cable activities (about E10 million of sales) dedicated to energy networks, equipment cables and industrial cables.

The deal is subject to the authorisation of the Vietnamese authorities.

In addition, Nexans has finalised the acquisition of the Swiss Confecta Group, one of the main international specialists in high added value cable harnesses for the railway industry.

The Confecta Group employs around 180 people and generated sales of about E22 million.

The group also operates in France and Germany.

Gerard Hauser, Nexans Chairman and CEO, said: "Despite the continued rise in raw material prices, Nexans' results are extremely encouraging".

"In addition to the benefits of restructuring and within the context of the booming energy markets in which the group has a strong presence, these results are the consequence of a clear strategy of redefining our geographical and product portfolio".

"These results will enable us to implement a significant E300 million investment plan over the next two years to support the development of our markets and accelerate our restructuring process".

"As a result thereof, we have increased our objective for our ratio of operating margin on sales for 2007 to between 5.2 and 5.5%".

"On this basis, for 2006 we anticipate an increase in sales of approximately 4% at constant consolidation scope, a further improvement in operating profit and a net financial debt end 2006 of approximately E230 million based on end of 2005 copper prices".

These forecasts are based on the assumption that the worldwide economic context experienced in 2005, particularly in developing countries and in the oil industry, will remain the same in 2006 and 2007.