Bloomberg News

Nexans Curbs Spending in Precautionary Plan as Growth Continues

October 27, 2011

Oct. 27 (Bloomberg) -- Nexans SA, a French maker of cables and wires, is curbing inventories and being more cautious on hiring and investments as it adapts a to potential fallout from Europe’s debt crisis, the chief executive officer said.

“Since Sept. 1, we’ve introduced precautionary measures,” Frederic Vincent said yesterday in an interview. “We’ve asked staff to be extremely vigilant” on spending, hiring and working capital, he said. No “heavy measures” such as restructuring are planned for the time being, as the latest figures point to no change in trends from the first half, he said.

Paris-based Nexans, the second-largest cable maker after Italy’s Prysmian SpA, is bracing for an slowdown induced by Europe’s sovereign debt crisis. That’s after growth was held back in the first half by turmoil in the Middle East and fighting in Libya that delayed contracts and interrupted work.

Vincent reiterated Nexans’s annual target for organic revenue growth in the range of 5 percent to 7 percent, as like- for-like sales grew 3.9 percent in the third quarter. He’s seeking an operating margin of about 5.5 percent in 2011, up from 4.8 percent in 2010.

“If there was to be a change in trends, which is always possible as mentioned by some companies, that would become a problem for 2012, not for 2011,” Vincent said. “We forecast to end the year in the same line as in the third quarter.”

Car Boom

Deliveries of harnesses to carmakers show no sign of slowdown, as German automotive customers remain “very positive,” the CEO said. Sales to German and Italian machine- tool makers grew strongly in the third quarter, and demand from Korean shipmakers picked up, Vincent said.

Demand from construction companies in Canada, Australia, France and Northern Europe advanced and “showed no pressure on prices, nor on margins,” he said.

High-voltage cable sales in the Gulf are “slowly picking up,” and sales in Libya should resume in 2012, the CEO said. Sales of undersea cables in 2011 won’t grow as much as previously expected because of delays in deliveries that will slip into 2012, he said, adding that the backlog in submarine cable remains “as strong” as before.

Markets such as energy infrastructures will continue to grow in 2012, regardless of a economic slowdown, Vincent said, adding that it’s too early to make a forecast for the company as a whole.

“There will probably be tensions on access to credit,” the CEO said. “Access to credit isn’t an issue for Nexans today, given its risk profile.”

He reiterated that the company plans to trim its net debt to about 300 million euros ($415 million) by the end of the year, from 366 million euros at the end of June.

--Editor: Benedikt Kammel

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.


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