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Nexans Full Year Results 2008

19 Feb 2009

• Net sales at constant metal prices ⁽¹⁾: $NZ11.737 billion
• Organic growth in the cable businesses ⁽²⁾: + 6%
• Operating margin ⁽³⁾: $NZ1049 million (8.9% of sales at constant metal prices)
• Solid financial base

Paris, February 12, 2009 – The Nexans Board of Directors chaired by Gérard Hauser, which met on February 11, 2009, has approved the accounts for 2008.

• Net sales in 2008 totaled $NZ16.709 billion, compared with $NZ18.216 billion in 2007. At constant non-ferrous metal prices and exchange rates, sales amounted to $NZ11.737 billion, compared with $NZ11.524 billion in 2007. 2008 net sales include consolidation of two recent Group acquisitions: Intercond on August 1, 2008, and cables activities of Madeco on October 1, 2008.
  
  Organic growth of cable businesses totaled 6%.  
   
• Operating margin totaled $NZ1049 million, an increase on 2007 figures despite the severe economic downturn in the fourth quarter of 2008. Operating margin also rose as a percentage of sales from 8.5% to 8.9% at constant non-ferrous metal prices, allowing the Group to see additional improvement in profitability.
• Income before taxes stood at $NZ332 million in 2008, compared with $NZ691 million in 2007. This sharp drop was largely due to a write-down for a non-cash expense of $NZ406 million, under IFRS guidelines, which produced a temporary gap between the cost of copper used (based on the average cost due to the fungibility of stocks) and the actual cost of copper for customer orders.
  Application of the same accounting principle led the Group to post cumulated non-cash revenue of $NZ727 million at December 31, 2007, based on the increase in copper prices. Nexans’ hedging strategies neutralize any impact on operating margin (which reflects the Group’s operational performance for the period).
• As a result, the Group’s net income totaled $NZ202 million in 2008, compared with $NZ464 million in 2007.
• The Group’s net financial debt stood at $NZ1317 million at December 31, 2008, compared with $NZ713 million at December 31, 2007. This growth was largely driven by the acquisitions of Madeco’s cables activities and Intercond ($NZ858 million). The Group’s financial ratios are solid (net debt/EBITDA* of 0.9). Nexans produced free cash flow of $NZ715 million in 2008, compared with $NZ676 million in 2007, buoyed by a drop in working capital requirements unrelated to the fall in the price of copper.
• In late January 2009, the European Commission, as well as competition authorities in Spain, Japan, South Korea and the United States, launched investigations against Nexans and other cable producers relating to alleged cartel behavior in the sector of submarine and underground energy cables, and associated products and services.
  At this stage, the Group is not in a position to evaluate the possible outcome of these investigations. Nonetheless, given the level of fines imposed by American and European authorities in recent cases and the possible direct and indirect consequences of this type of investigation, it is possible that these investigations may have a material adverse effect on the results of operations and consequently the financial condition of the Group.

Commenting on the 2008 results, Nexans Chairman and CEO, Gérard Hauser, said: “In 2008, Nexans has steadily and successfully continued its reconfiguration despite an unfavorable economic climate through geographical redeployment by completing the integration of the cables activities of Madeco, the cable-market leader in South America, and strengthening its presence in the special cable market for industrial equipment through the acquisition of the Italian company Intercond. Finally, by signing a strategic partnership with Japanese firm Sumitomo, we have embarked on a new stage in our telecoms strategy, with a focus on Fiber To The Home (FTTH) applications."

“Nexans met its financial targets for 2008, achieving organic growth of 6% in its cable businesses with an operating margin of 8.9%, again showing a strong positive cash flow position."

“As the prospect of an economic slowdown began to emerge, we took a number of steps to improve our cash flow and keep a tight rein on costs. Since 2001, we have been working to provide a solid bedrock to allow the Group to successfully weather the storm while creating growth drivers over the medium term. Despite the current climate of uncertainty, we have chosen to concentrate all the teams’ efforts around an operating margin of 6% for 2009, based on our assessment of the situation.”

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