Nexans S.A. (NXPRF) Q4 2023 Earnings Call Transcript

Nexans S.A. (OTCPK:NXPRF) Q4 2023 Earnings Call Transcript February 15, 2024 3:00 AM ET

Company Participants

Elodie Robbe-Mouillot – Vice President, Investor Relations

Christopher Guerin – Chief Executive Officer

Jean-Christophe Juillard – Deputy Chief Executive Officer & Chief Financial Officer

Nino Cusimano – Senior Corporate Vice President & General Counsel and Secretary General

Conference Call Participants

Daniela Costa – Goldman Sachs

Akash Gupta – JPMorgan

Sean McLoughlin – HSBC

Miguel Borrega – BNB Paribas

Bastien Agaud – Berenberg

Operator

Ladies and gentlemen, good morning, and welcome to Nexans Full Year 2023 Earnings Conference Call. As a reminder, this conference call is being recorded. You will have the opportunity to ask questions at the end of the presentation. [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.

Christopher Guerin

Thank you. Good morning, ladies and gentlemen, and thank you for participating in Nexans’ conference call. I am Chris Guerin, CEO of Nexans’. We are here with Jean-Christophe Juillard, Deputy CEO and CFO; and Elodie Robbe-Mouillot, VP Investor Relations.

I will turn you over to Elodie, who will go over the conference call rules.

Elodie Robbe-Mouillot

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 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 back over to Chris who will go over the 2023 highlights.

Christopher Guerin

Thank you, Elodie. So as you can see Nexans’ robust performance in 2023 were also again demonstrated once again, sorry, the scale of our transformation since 2019 when we delivered the record adjusted EBITDA margin, exceeded our normalized free cash flow generation expectation. All these were done despite our difficult stuff, as you know, in generation and transmission due to the ramp up cost associated with our unit in US on the termination of contract with low margin. This G&T business is still transforming under the new leadership of Pascal Radue and we look forward to his future success with strong employment already associated with the H2 result. Overall, the 2023 performance also confirmed the transformation of Nexans’ year-over-year into more profit-oriented, innovative and customers-centric group, thanks to our transformation platform. In parallel as well — we are very proud about it. In parallel to this profit generation, we have made considerable progress on our sustainability goals with a significant reduction of Co2 emission across the group. I’ll come back to that.

Let’s shift to page three to start this presentation with — I cannot avoid it, the recent announcement linked to the signing of a landmark agreement to acquire the iconic company called La Triveneta Cavi, an organization recognized for their excellence within the European medium and low voltage sectors. Based in Italy La Triveneta Cavi primarily manufacture low-voltage cable for building application on infrastructure as well fire retardant cable system and medium voltage cable for renewable application across 30 countries. The company is about 700 talented people and generated current revenue of more than 800 million Euro over the last 12 months. So, four main units. I know we mentioned as well the transactional terms, it’s a 5.6 multiple based on 2023 EBITDA pre-synergy and 4.6 level of multiple post-synergy.

Moving to slide five with the 2023 main highlights. As we mentioned in July we had like significantly upgrade of our guidance in 2023 for midpoints to reach a midpoint for 600 million Euro to midpoint of 630 million Euro. So despite the difficulties, as mentioned on G&T, the action we took to keep improving our profitability overall and cash flow generation through the year 2023, our year showing dividends of [Indiscernible] our business to reach this financial performance. So we have been able, as you can see, to reach the high end of the range at 652 million Euro EBITDA, including share-based compensation expenses. But as we mentioned last July to be comparable with peers we have adjusted for those elements and we are then concluding the year at the 665 million Euro adjusted EBITDA.

In terms of normalized free cash flow our profitability, productivity improvement lead to significantly improve our free cash flow conversion in all businesses. It’s not only a topic of down payment, as well a significant improvement on the working capital aspect in all sectors, but on top of that we had down-payment correction for some important project that exceeded our expectations. So as a result, as you can see, we’d reached a free cash flow of 454 million Euro. For guidelines that were around, I would say, 250. So as I mentioned, we’re very proud about it. In parallel to this profitability increase and free cash flow conversion, we have continued to reduce our Co2 emission at minus 36% supported by our E3 performance model that now systematically measure the efficiency of each individual businesses in terms of economics, environment and engagements on making sure that everything converges to the same direction.

Moving to slide six, let’s take a deeper look of the key highlight of the year in a broader perspective. As you can see, we are very — making serious progress advancing in our market leadership, strengthening our profitability, improving cash flow generation, even if sometimes we have facing lower demand environment in some region. So, as you can see, we reached double-digit EBITDA at 10.2%, very, very strong results compared to the legacy of the group, superior cash generation of effecting very strict working capital management. So, we have reached a 68% normalized cash conversion. Return on capital employed at 20.7% on the — I’ll come back to it, we will propose to the General Assembly a dividend of 2.3 Euro per share and we – JC will comment it, we have a very, very solid balance sheet, which is maintained. We — in terms of M&A for the highlight of 2023 So, of course is the acquisition of Reka at those 160 million Euro revenue, very solid backlog, 6.1 billion, and with all projects that have been confirmed and we received in the last weeks the recognition to be on the A List of CDP Climate.

Let’s go to the number on page seven. So, as you can see, we reached an EBITDA of 665 million Euro, adjusted EBITDA, at 10% profit, free cash flow 454 million Euro and return on capital employed at 20.7%, taking into account that electrification reached a level of 26%. Page eight, so as I mentioned, this E3 unique performance model empower our manager everywhere in the world to keep improving our financial on environmental indicators. This is why we are now calculating both of course the return on capital employed for each individual unit per customer on product but to ensure that the growth is not on — the growth of our businesses and revenue and profit are not detrimental to our carbon footprint. In addition, we calculate the return on carbon employed for each individual business plus of course reduced transportation, more and more local tool for local and reduced the carbon content of our product. This is the recent announcement of our partnership with Trimet or Alcoa that we just published with low carbon aluminum. So as you can see very great, I will say, success in the co2 emission because we are at the minus 37% Scope 1 and 2 and minus 36% for Scope 3.

A word on slide nine, you know the key levers of supporting the transformation of the group. It’s about that we established in 2021 during our Capital Market Day. All our strategic initiatives are outperforming, thanks to the deployment of repeatable offer in the renewable energy and amplify reached already 80 million Euro where the target was 50 million Euro at the end of 2024, so above the target of obviously overall but as well a year ahead. The same for the premiumization of our offer that — which really represent for us a structural effect on our margin improvement we reached shift prime at 47 million Euro incremental margin where the target were at 40 million in 2024. This is linked to the fact that customers are really happy and satisfied with our new offer.

On page 10, the evolution of our shift platform, both performance and prime, keep raising the bar on this result of EBITDA on cash flow conversion. Sometime we say a value burner for one could be a value burner forever, because we keep raising the bar every year. But of course you can see that we made significantly improvement on converting our low margin unit into profit driver as 20% of our electrification revenue have been converted into profit drivers, thanks to our unique transformation platform.

On to page 11, a word regarding our asset rotation. So I would not come back, we have made the disposal of our Telecom Systems in 2023, so Nexans has no connection at all or our link with the telecom business, at least on the long path. We have acquired Reka, 160 million Euro. And of course on this, I will not comment on what you know, but let me announce as well the level of synergy that has been incremental, we are plus 20% run-rate synergy at Centelsa, plus 50% run-rate synergy at Reka, as you can see, twice bigger and twice faster, because we reached in both case in the first year of integration, the total amount of synergy that was planned for the third year of pasta integration. So of course this M&A Blueprint integration that we have make very well structure, gives us a very high level of confidence for the new integration to come.

Let’s move on the next page, so page 12. Just a reminder that we are making significant investment. Halden plant expansion in Norway, that has been completed. We have started — we have qualified and started the first production of cable in this expansion, everything is running perfectly well. We have announced as well a third cable-laying vessel that will benefit us in terms of new revenues in 2026. I’ve signed an MOU with the American government last December for an opening of a new of a greenfield unit in Morocco in new south of Casablanca that will open in 2026 to support all the electrical grid of the Moroccan territory but as well African. And we keep investing in our usages business in terms of technology for more fireproof product on as well as implementing Industry 4.0 everywhere in all our unit in the world supported by our key partners, Schneider Electric.

In terms of shareholders returns, let’s go to page 13. So we will propose a dividend of 2.3 Euro per share, which is a growth of 92% versus 2021 and you see that constantly we keep improving, which gives us a dividend payout ratio of 40%. But we need to notice as well that the feedback that we’ve received from investor that in terms of total shareholder returns at the end of 2023, we are in the three year base, we reached plus 48%, but on the five years, based on the start of the management team, we reached 270% growth of our TSR.

Let me turn now to Jean-Christophe that will guide you to the business overview and the financial items.

Jean-Christophe Juillard

Thank you, Chris. So now, I’m moving to page 15. And if we look at evolution of the top line and the organic growth of Nexans, you see that at group level organic growth for 2023 is at minus 0.9%. But again, it’s always what we communicate, you know that part of that and you see that on the other segment. We have the strategy, the aim of reducing the metallurgy business and sales, external sales on the metallurgy business that was announced in 2021. So if you exclude these, I would say, objective of reducing those sales, which are down almost 18% in 2023, the group organic growth stands at plus 3%. When we look at the margin, group adjusted EBITA margin, it improved by one point versus last year to reach plus 10.2%. It’s important step for Nexans because it’s the first time Nexans is reaching double digit adjusted EBITDA margin on sales, number one; number two, if you remember 2024, we had the commitment to reach an EBITDA margin percentage between 10% to 12% by the end of 2024, so, we are seeing already within the objective a year ahead.

Now, if we look at different segments of business, I will start with electrification. So, electrification organic growth is minus 1.5%, I will comment in the coming slides basically, each businesses are very classification. Again, here we have announced that we would terminate the Umbilicals business, oil and gas offshore cables. So this is explaining part of the negative organic growth of the electrification and in G&T. If you exclude basically also strategic decision to get out of oil and gas, the electrification organic growth is plus 2.4%. On terms of margin, you’ll see that despite the issue we’ve had with high voltage G&T in 2023, the overall adjusted EBITDA margin of electrification is improving in 2023 by 0.5 points, 12.5% adjusted EBITA margin on sales, which is also [Indiscernible] electrification and I will detail where this is coming from.

Non-electrification had very strong positive organic goals at 13.7%, mainly explained by two folds; number one the Harnesses business that continued to go plus 18% organic growth on Harnesses, and 10% growth on the other industry segment ISP business, so quite strong, I would say, organic horse of non-electrification. And you see also that the margin on non-electrification is growing by 2 points to reach a record of 10.6% and that’s driven by different factors, but one to notice is tremendous, I would say, profitability improvement of the mining business in the US. And finally, I commented that other activity minus 18%, this is mainly driven by the sales of metallurgy that we purposely existed, as per our strategy.

Now, let me detail a little bit the evolution of the businesses and I move to the next slide on page 16 and we look at generation and transmission. You know that generation and transmission has been — it has been a difficult year and 2023. We announced in the first half of 2023 a low point in terms of margin of that business, despite the record backlog. We said that it would be a low point in H1 in the first semester, then we will gradually recover. This is what happened in the second half of 2023, you see on the graph that the margin improved by 3 points to 10.8%, which gives us a 9.5% EBITDA — adjusted EBIT on sales margin for the entire year. We will continue the improvement of the margin gradually in 2024 first half and then higher level in the second half of 2024 when we’ll start recognizing revenue on the recent award of the earlier contract. When we look at the organic goals, it’s plus 1%, but, again, if you exclude the umbilical termination of the business and course of G&T, top line is plus – organic growth is plus 17%. Then one word on the record backlog; we move from 3.5 billion at the end of December to 6.1 billion Euro at the end of 2023. This is a 74% growth of our backlog. Obviously, the two major project that was awarded to Nexans in 2023 was [Indiscernible] 1.5 billion Euro and the [Indiscernible] for 1.7 billion Euro.

If I move now to the next slide on page 17, and we have a look at distribution, distribution is — it has definitely be record [Phonetic] of the year for Nexans in distribution, both the top line increased by 5% organic growth plus 5% and the margin improved by 78% with a record adjusted EBITDA margin of 13%. Definitely this business has been performing extremely well in all of the region of the world where now we are in a situation where basically all utilities are realizing that grid replacement and investment are now a must. I would say that the margin expansion is mainly linked to this high demand and the price power that we are having, but also the successful development of our shift transformation.

I move now to usages on page 18. You see that on usages, we’ve had a negative of the growth of 6%, which we explained by the normalization of the volume. We’ve said that in 2022 we had abnormal level of volume in sales, mainly in North America. This has come to normalization in the second quarter of 2023 and third quarter of 2023, explaining the minus 6%; again, mainly in North America, if not completely North America. But what is interesting to notice is despite this lower revenue level in 2023 we continue to improve the margin of the business. Adjusted EBITDA reached record level of 14%, 13.5% to be precise and adjusted EBITDA on sales, which is a growth of 4% and this is coming again from what Chris explained on our shift transformation, stronger pricing and amplify solar power [Phonetic] offer. So, we are continuing to be very positive about the future of usages even in 2024.

Now, I would like to take you through the main financials for the year 2023. I will start on page 20 with a profit and loss. So again, record adjusted EBITDA of 665 at 10.2%, as I said, within the objective of 2024. I remind you that adjusted EBITDA since June 2023 exclude the IFRS 2 charge, which is a share plan basically. This amount was 30 million for 2023 and 16 million Euro for 2022. In this table for comparison purposes, we updated 2022 adjusted EBITDA reflecting that. You see from the bridge that the increase of adjusted EBITDA of plus 8% since 2022 is coming from the electrification business for 25 million, despite again, the generation and transmission issue we’ve had, plus 25 million and then from industrial solutions that vary — that outperformed and generated incremental EBITDA of 53 million. In 2022, we had a one-off gain of 55 million Euro for the sale of land in Europe, that was in the line other operating items explaining in 2022 the higher operating income. A word on net financial results that increased significantly due to the higher cost of debt, obviously, and some of the financing we’ve done at the beginning of 2023 on the mature of the bond, and we had also some adverse ForEx impacts. Income tax is lower in 2023, mainly due to a lower tax base and also to the [Indiscernible] deferred tax asset for 2022 minimum in some countries since business front of Nexans is improving and the visibility is better. Net income from operations stands at 223 million Euros.

I will now move to the next page, page 21, and we look at the net debt and the net debt evolution of Nexans. You see that the balance sheet of the company remain very strong, the leverage ratio payment remained flat at 0.4 times net debt-to-EBITA, and we have significant headroom on our covenant despite the acquisition of the Reka assets in Finland. Cash flow from operations stands at 511 million Euro and we continue to have a working capital improvement of very significant of 287 million Euro mainly explained by the high down payments received from G&T, which is a consequence of the big awards of 2023, but also continuous improvement, thanks to shift and our transformation on the other cable business segments that improved working capital by 70 million Euro. CapEx stands at 377 million Euro, including almost 200 million Euro of strategic CapEx, with the extension for 150 million Euro of the [Indiscernible] new lines of production, which are now in operation since the beginning of 2024, and also the first spending on the new third vessel of Nexans for 50 million Euro in 2023. After a financial interest paid, dividend payment and cash out from the acquisition of Reka, net debt amounts to 214 million Euro at the end of 2024, which is again a flattening debt despite acquisition of Reka and massive investment in our high-voltage business.

I move now on page 22 and we have a look at our liquidity, so very strong liquidity, strong balance sheet, cash on the balance sheet slabs versus last year in excess, above 1.1 billion Euros of cash, which gives us obviously tremendous maneuver to develop our expansion plans. Total liquidity of 1.9 billion Euros including 800 million Euro undrawn about that credit facility and you see here the maturity of our gross debt, total gross debt, of 1.3 billion and the different maturities we refinanced one bond as being of 2023, the next one is a 2044 bond, 200 million Euro you see on the bridge that will be refinanced in the coming weeks.

Now I moved to the page 23 and I just want to maybe spend a few seconds on having a look of where we stand, we are one year before the end of our equity story. So it’s a good time to start to have a look of where we stand on the different commitments we took in summer [Phonetic] of 2021 You see that for each of the commitments, we are whether in line or we exceeded the targets. Obviously, we are already within the commitments for EBITDA, for at the group level we are at the beginning of the range but electrification activity we committed 11% to 13%, we are almost at 13% a year ahead. And again, despite the issues on G&T, cash conversion has been outstanding at 70%, return on capital employed 26%, way above the target, and operating working capital again is at a record level almost 0% — 0.3%, so very strong performance, and leverage, as I explained before, remains very low.

Now moving to page 25 and have a look at what we will be guiding for this year 2024. So we will continue to improve, we will continue to deliver and we are committing to an adjusted EBITDA guidance range between 670 million Euro to 730 million Euro. This does not include the announcements of La Triveneta acquisition since by definition it’s not closed and it’s not part of the guidance, and normalized free cash flow between 200 million to 300 million, obviously taking into account the very strong level of down payment received at the end of 2043 and therefore explaining the bigger — part of the big achievement of cash flow in the year 2023.

This being done, I will now turn to the next page to Chris.

Christopher Guerin

Yeah, as you can see, we have a very solid guidance for 2024, but we know as well that we need for our main investors more catalysts with long-term projection, so this is why we configure our next Capital Market Day that would be held on November 13 in London.

Now let’s open for questions. Thank you very much.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Daniela Costa

Hi, good morning. Thanks for taking my questions. I mainly wanted to focus on two things. Regarding the guidance for this year, can you give us a bit of a color in terms of like the expected improvements on a divisional basis, particularly how much of it is just G&T recovering from some of the issues last year versus the more cyclical parts of the business? And the second point is related to that and it’s just regarding G&T and the situation in the US with some of the contracts still being re-tendered, EuroAsia coming in the back end of last year, what’s the sort of utilization that you model into this guidance for the first half and the second half and sort of what are the puts and takes on that, given the situation with some of the contracts? Thank you.

Jean-Christophe Juillard

Okay, good morning, Daniela. I will take the first question or the first part of the question, which is basically giving some meat around the guidance of 2024. So, definitely, as we always do, we are not betting or we are not putting our numbers on our guidance on more volume and growth in distribution and usages. So basically, we tune the same level of organic growth, zero organic growth, in fact, in those businesses for 2024, so we are quite conservative, but we continue to expand the margin like we’ve done in the past on distribution and usages. So that will be a contribution, basically that margin expansion will be a contribution into the increase of the adjusted EBITA in 2024, that’s one thing. We are seeing more normalization in industry, no more further industrial solution, no more further growth in terms of top line and in terms of margin, so more, I would say, continuity. And finally, the last piece, which is very important, obviously, for the guidance of 2024 is basically the recovery that started in the second half of 2023 on the adjusted EBITDA margin of the G&T business because, number one, the one-off we’ve had on the first half are behind us, we will not repeat themselves in 2024 by definition, and then the core part that has lower margins that were executed in 2023 will start to significantly diminish and have a lesser impact, I would say, on the margin of the business in 2024. And as you rightly said, we will start now to execute the core part [Phonetic], mainly starting the second half of 2024, which has a very strong margin level. So basically, yes, very — ramp up, I would say continuous ramp up, as we said, of G&T, and also in G&T there is a ramp up of the margin percentage, but there is also quite significantly step on the revenue because we have now the extension line producing revenue, so the top line will grow by about 40% in terms of revenue. So you will have both versus 2023, the improvement of the margins gradually, as I explained, and then the same time a bigger — much bigger revenue line due to the extension lines and the bigger backlog will start to execute. So that’s basically how we come up with this increased guidance for 2024.

Daniela Costa

Sorry, can I just actually — sorry, just a clarification on two things that JC just mentioned there. Distribution, you said no growth but given the hyper-cycle, seems to be surprised on that, given the commentary on the outlook on that.

Jean-Christophe Juillard

There is a little bit growth but not significant growth, it is a little bit, but we always prefer to be — Daniela, I think you know that we always prefer to be conservative and not assuming and distribution and usages a significant organic growth. Because obviously, by definition, we don’t know what will be 2024 but we have a uplift in margin, so margin will continue to improve quite nicely in 2024, as we said. A little bit of distribution growth, definitely no usages growth at all. Little bit of distribution growth but mainly margin uplift.

Daniela Costa

Thank you.

Christopher Guerin

The dynamic on the frame agreements for the medium voltage cable distribution are very, very positive right now. Regarding the second part of your question is an update regarding contracts in US; first of all, maybe you’ve noticed that NYSERDA in New York announced as well with new for auction coming up at the end of February. We know that as well that Sunrise [Phonetic] is in a re-bidding process [Indiscernible] with new submitted proposal. We should have — the customers should have a feedback at the end of the month. The only thing I can tell you is that Sunrise [Phonetic] is already under production on our side and we received as well advanced down-payment from the customer. So, we consider that it should be a positive catalyst for us, but we need to expect the final feedback from the customers. Regarding G&T recovery, yes, recovery point in terms of margin from one semester to another one keep improving in first half and second half, again an improvement. Overall, what we think in terms of utilization is fully-loaded situation in all unit, including the one that were most build for awaiting the larger project in Japan. So you should see very strong organic growth engine in 2024.

Daniela Costa

Thank you. If I may just quickly on EuroAsia, the advance you got seemed very low in comparison with the size of the contract; was that a trade-off on lower advances better margin, given what you just mentioned or how should we think about it?

Christopher Guerin

No, it’s not. We will receive the total advance payment of 15% of the contract values, so the rest will come in the coming months. I remind you that we are still — there is one milestone that needs to come, which is a financial close of the project. Despite the project is 70% funded by the European Union, there is a portion of that that needs to be funded. We will — but, however, we will get the remaining down-payment of the contract in the coming weeks and months, I would say the first, second quarter. The piece we got is part of the down-payment but it’s more reservation fee to lock the capacity for one [Phonetic] year, to lock the line and it’s a non-refundable reservation fee of 62 million Euro. That’s why we’ve received.

Jean-Christophe Juillard

And the notice to proceed.

Christopher Guerin

And the notice to proceed and so on but it’s a part of the down-payment which is non-refundable.

Daniela Costa

Okay, thank you very much very clear.

Jean-Christophe Juillard

Thank you. Thank you. Next question?

Operator

And we’re moving on to Akash Gupta from JPMorgan with our next question, please go ahead.

Akash Gupta

Yes. Hi, good morning, and thanks for your time. I have two as well. The first one is on portfolio. So you made a good progress on acquisitions with acquisition of La Triveneta Cavi announced last week, but maybe perhaps you can update us on where do we stand on the divestments and what’s the plan in terms of disposing the remaining non-core — non-electrification businesses. So that’s number one. And number two is on profitability of La Triveneta Cavi, if you can elaborate how does it compare and maybe also provide some rough split of revenues of 800 million plus between medium voltage and low voltage. Thank you.

Christopher Guerin

Hi Akash. Thank you for your question. I will start with the divestment — an update on the divestment. So now telecom is behind us, we have — I remind you, two blocks we want to diverse. The first one is Harnesses. Unfortunately, this one is not progressing that much due to the situation in Ukraine. Despite the fact we said we explained that we have duplicated the asset outside of Ukraine, so if the war was going to move further into the country, we would be able to switch production somewhere else and now we are basically — with that being done in 2023, we are now, I would say, restarting the process of divestment, but to be transparent with you, it’s not progressing that much. And I guess until the situation in Ukraine improve or changes a little bit and get more visibility, I think it will be it — Harnesses will be the last piece to be divested, and probably not in 2024. The second group of asset is the entire industrial solution block of 800 million Euro, so this one we are progressing well, we always say that it would be the last one to go because of the carve-out. We’ve completed, I would say, a big chunk of the carve-out. We are now attacking the — we started to attack at the end of 2023 the information system, ERP separation, which is well in progress. We shouldn’t be done by that, I would say, in the first half of 2024 and we will start disposal of the asset, I would say, end of first half, beginning of second half and hopefully get the asset divested by the end of 2024 or I would say first quarter of 2025. So that’s what I can tell you on the divestments.

Jean-Christophe Juillard

Regarding La Triveneta Cavi, so it’s a roughly 90% or 9-0 on the on low voltage cable. So, for various application on the raise, it is about medium voltage and solar but we have already a huge plant in Italy, in Japan [Phonetic], we are doing a medium voltage show, and there is a very, very low overlap versus what we have already. And one-third of their revenue is located in Italy, 20% in Germany, and another 20% in France, and rest [Phonetic] in various countries. We don’t disclose the profitability at that stage, but it’s a pretty good number.

Akash Gupta

And maybe a follow up on the guidance. So when I reconcile your comments that in usage and distribution, you are looking for flattish top line and margin expansion. And then in G&T, it’s 40% organic and margin expansion in both first half, second half. What is the implied for industry business, because it sounds like you are probably guiding for at the midpoint, big correction in profitability of industry segment? Is that correct or am I reading too much into it?

Jean-Christophe Juillard

No, industry will not go down in 2024. There will be slight improvement in top line, mainly driven by the continuous recovery of, I would say, Aerospace that is continuing to improve. We don’t know, obviously, all of the segments. What we are foreseeing is maybe a weakness situation in the first half due to automation backlog being low. So there’s probably going to be some impact on automation, which is one of the large parts of industry in solution. But we see a rebound in the second half. So overall, I would say that you have a moderate top line growth and the margin will also increase a little bit. But it will not be I mean that different than the level — extraordinary level of 2023, but it will continue to improve.

Christopher Guerin

Taking into account that the Aerospace is booming, you’ve seen the record backlog [Indiscernible] this morning. And we have more than 50% market share in that territory, fully loaded and as well as some business like medical which are very, very, I will say, positive.

Akash Gupta

Thank you.

Operator

Thank you. And up next we have a question from Sean McLoughlin from HSBC. Please go ahead.

Sean McLoughlin

Good morning, and thanks for taking my question. So I was just thinking about CapEx in 2024, given hyper-cycle, given I guess your growth expectations, just what should we be thinking about CapEx this year? And I guess, is that then a new normal level going forward?

Jean-Christophe Juillard

Yeah, thank you for that question. So the CapEx in 2024 will pretty much be at the same levels in 2023, slightly below but not that much. We will have the bulk part of the investment in the new vessel that started only at the end of 2023. The investment in the second half of 2023, last quarter of 2023 will have the full remaining execution on that CapEx in 2024. So that will kind of offset the investment that we did in 2023. So we’ll spend about 140 million, 150 million Euros on the vessel in 2024 and then we have basically maintenance CapEx that will be around 210 million Euros. So basically, we will be around 350 million Euros on the total CapEx versus 423, so slight reduction, but not yet significant. The CapEx normalization will really start starting in 2025.

Sean McLoughlin

Thank you and a second question just regarding the high voltage market environment. I mean, all the cable suppliers now have record multi-year backlog visibility. I’m just wondering how current market demand are, how transmission operators and offshore wind developers are looking at cable contracts going forward and what you expect in terms of new order intake in 2024?

Christopher Guerin

Yeah, I think we have still a significant tendering activity. You’ve seen as well, the evolution of the backlog of our competitors. We are certainly the one that still have some slots available in 2027 and 2028 that gives us in good position for future negotiation. But I will say we don’t see any slowdown in the tendering activities so far. All nations are waking up for energy transition on more interconnection, so I’m not concerned regarding future on new scene as well as in USA, new auctions coming up in New Jersey and New York. So it is kind of race between states in US between each other. On FTEs [Phonetic] as well, I am not seeing new offshore wind coming up in front. So the objective for us is not to show additional CapEx so far. Give us — we would like to get the returns of the CapEx that we really made, on the one that we already announced, but we are on the, I will say, evolution of full utilization ratio of our line, both in production and installation. So, very high confidence in that regard.

Sean McLoughlin

Thank you.

Christopher Guerin

Thank you, Sean. I know it’s a very busy morning with many, I will say, publication, maybe another question.

Operator

Okay. [Operator Instructions] And up next, we have a question from Miguel Borrega from BNB Paribas, please go ahead.

Miguel Borrega

Hi, good morning, everyone. Couple of questions for me. First generation and transmission, obviously, the margin remains below your expectations and just wanted to ask, you have two out of three impacts that will disappear essentially in 2024, so, just can you give us some color around the percentage of legacy versus new awards in the 2024 P&L? How much is that is legacy? How much is that is new award? Just trying to calculate the step up in the margin we should see in the second half and then also in 2025.

Jean-Christophe Juillard

I cannot give you the exact percentage. I will tell you that definitely we have some contracts that were executed in 2023 that will go through the first semester of 2024 with lower margin level, mainly impacted by — mainly coming from pre-inflation time and we need to complete execution on. So that will take — that will continue to at least the first half, second half of 2024 but diminishing in the second half. And then the second half, as I said, you have the [Indiscernible] revenue starting to kick in and the margin on that project is definitely at a different stage and much more accretive. So, you will see an improvement, it will be gradual, the bulk part of improvement will be in the second half and then it will be in 2025 and 2026, it will be back to the 17%, 18% target EBITDA margin. So definitely what we don’t have and you rightly to say we have had some one-off, pure one-off, like we took and liquidated damages in the account of the first half of 2023 that by definition it was on a contract configuring, this contract is finished, this one of is behind us, will not repeat itself. So this is why also H1 was – 2023 was a low point and from now on the manufacturing plant both in Charleston, Halden are functioning and manufacturing according to expectations. So, the question is just to evacuate, terminate the contract with lower margin pre-inflation, and then start the execution of the big backlog with a big contract that was awarded to us with much better margin and you will see the ramp up gradually coming up in 2024 and 2025 to reach a level of — in 2026 of 17%, 18% margin.

Miguel Borrega

That’s very clear. Thank you. And then, if we turn to usages, margins have now normalized. Where do you expect this to go in 2024? Is there further weakness that you’re seeing from the second half into the first half of this year?

Jean-Christophe Juillard

Oh, yeah, it’s normalized in North America, at least on our side. What we see is that based on usages because the level of predictability is pretty low there. Even if we believe that North America back to single digit growth in coming months and Europe may have a first semester very weak. But overall, we still have our transformation program that keep feeding our margin improvement, because we still have some unit at single digit EBITDA on sales that going into our transformation program in order to reach a 10% to 20% EBITDA surge in the coming year. So even if the year-end demand could be a bit lower and the effect will slow down, we are very, I will say, positive on the margin improvement in the coming months.

Miguel Borrega

Thank you and then just one last question on metallurgy and others. So this was 13 million EBITDA positive in 2023, can you give us some color on what this includes and should we expect a similar figure for 2024? Thank you very much.

Jean-Christophe Juillard

Yes, Miguel. So basically, this is the adjustment as IFRS 2 charge that went into the other segment. This number was 13 million. So in fact, this is why you see the number. This number for 2024 will be around between 18 million Euro to 20 million Euro and the highest is basically the metallurgy — margin of metallurgy business, which is, as you know, quite low, the margin on the metallurgy sales, offset by some copper head costs that are not recharged, lead copper head cost not recharged to the unit. So that’s basically the combination of those three and the reason of the increase is IFRS 2 recharge that we took out of the adjusted EBITDA.

Miguel Borrega

Okay, so 18 million to 20 million in 2024. That’s correct?

Jean-Christophe Juillard

Yes, that’s right. That’s right.

Miguel Borrega

Thank you very much.

Christopher Guerin

Thank you, Miguel.

Operator

Thank you. And we have a question from Bastien Agaud from Berenberg. Please go ahead.

Bastien Agaud

Hey, good morning, and thank you for taking my question. Regarding the acquisition of La Triveneta Cavi, when do you expect the transaction to be closed and to be taken into your account? Thank you.

Christopher Guerin

We have our — thank you, Bastien, for your question. Let me pass over to our General Counsel, which is Nino Cusimano, Italian.

Nino Cusimano

Hello there. Hello Bastien. Nino Cusimano here. As Chris says I’m Italian, so I’ve been very involved with the acquisition on La Triveneta. We’re all very proud of the transaction. We’re expecting — to your question, we’re expecting closing in June. There’s, you know, the statutory time that you have to wait for the antitrust and golden power filing but we expect everything to go smoothly. So June, we should close the deal.

Bastien Agaud

Okay, perfect. Thank you. So I have another question. If we, let’s suppose, expect the closing to be successful that means your new EBITDA guidance, which exceeds the acquisition should we definitely higher right, if we take into account this acquisition.

Nino Cusimano

Completely agree. Yes. You’re right.

Bastien Agaud

Perfect. Thank you very much.

Christopher Guerin

Thank you, Bastien. We have our last question.

Operator

And our last question comes from Akash Gupta from JPMorgan, please go ahead.

Akash Gupta

Yes. Hi, thanks for taking my follow up. I had a follow up on seasonality. Again, last few years, we have seen your first half has been a bit stronger than the second half. And just wondering this time around, given you are expecting stronger projects in the second half and also a bit of slowdown in first half in some areas. So, any commentary on how shall we expect the phasing of this guidance between first half and second half? Thank you.

Jean-Christophe Juillard

That’s a very valid point. You’re right that to say that typically we have a stronger half, again, like you say, with G&T, we foresee the improvement more coming in the second half than the first half. First half would be more at par with what we’ve done in the second half of 2023. So we will have probably a more balanced situation between first half and second half than we had before where it was stronger first half and weaker second half. But again, the backlog we are seeing today in usages, for example, we have a higher backlog at the end of 2023 beginning of 2024 than we were last year, so it’s plus 8% on the short term backlog, obviously, by definition it’s usages but we talked about the trend on distribution, which is very strong and we have already firm agreements for 2024 with volume that are much higher than before. We have usages backlog which is plus 7%, 8% higher than last year, being of the year, so the signal at least for the first quarter on usages are good. Distribution first half should be good. But the only one that will ramp up in the second half will be G&T, so yes, because of that we will have a more balanced EBITDA between first half and second half.

Akash Gupta

Thank you

Christopher Guerin

We have other question, no. Thank you for your attention and I wish you a very good day. Thank you.

Jean-Christophe Juillard

Thank you.

Operator

Ladies and gentlemen, that concludes today’s call. You may now disconnect.