Nexans' half year results : Operating margin holds up well despite a fall in sales

Paris, July 22, 2003 - At its meeting of July 21, 2003, chaired by Gérard Hauser, the Nexans Board of Directors reviewed Nexans' financial statements for the first half of the year.

• Against the background of a continuing deterioration in market conditions, sales in the first half of the year were 1,992 million Euros. At constant non-ferrous metal prices and exchange rates, sales were 1,945 million Euros compared with 2,007 million Euros in the 6 first months of 2002 (a fall of 4.4% compared with the first half of 2002, at constant consolidated scope but only 3.4% lower than the second half of 2002).

• Operating profit was 20 million Euros at June 30, 2003, 4 million Euros lower than at 30 June 2002. Despite the fall in sales, the operating profit margin rate was close to that of first half 2002 (1% compared with 1.2% ).

In line with earlier announcements, income from operations in the Telecom business was close to the breakeven point (-1 million Euros).

• Net income was -2 million Euros compared with -11 million Euros at  June 30, 2002.

• In line with its targets Nexans has maintained very considerable downward pressure on working capital and investments, thereby limiting net debt at June 30, 2003 to 142 million Euros, despite the 38 million Euros in expenditures on acquisitions, share buybacks and dividend payments of Nexans.

Gérard Hauser, Chairman and CEO, commented: "While the economic environment continues to worsen and industrial investment is slow to pick up, Nexans has given priority to rigorous management of its operations, which should enable it to consolidate its leading position in the Energy and Telecom infrastructure markets and to be better placed to profit from economic recovery. In view of the restructuring that has been undertaken in the cable industry as a whole and future needs for plant and equipment throughout the world, the company's prospects remain favorable.

For 2003, we believe we can maintain our operating profit margin rate for the year as a whole at a level close to that for 2002. However, our net income, which has risen compared with the previous year, is likely to remain negative".

1.     Consolidated results:

Sales for the six months ending June 30, 2003, were 1,992 million Euros, versus 2,228 million at 30 June 2002. At constant non-ferrous metal prices, sales were 1,945 million Euros, a fall of 4.4% compared with the first half of 2002, on a comparable basis and at constant exchange rates.

Operating profit was 20 million Euros, compared with 24 million Euros in the first half of 2002. Nexans' performance was boosted by the return of the Telecom business to a breakeven level and the outstanding results recorded in the high-voltage power cable activity.

Provisions for restructuring expenses amounted to 9 million Euros, consistent with the overall restructuring budget of 130 million Euros spread over 2002 and 2003.

Net income is close to the breakeven point (-2 million Euros).

2.     Results by activity:

(1)  Sales at constant metal prices and exchange rates

• Energy:

Sales in the Energy Division of 1,033 million Euros, were close to those of the first half of 2002, after taking into account the inclusion of Kukdong and energy cable subsidiary of Furukawa in Brazil in the Group account which impact this figure by approximately 25 million Euros.

Operating profit was 24 million Euros, compared with 34 million Euros at June 30, 2002. This result reflects very different situations, ranging from the excellent performance of the infrastructure cable business to the weakness of low-voltage cables for building, which was due largely to a fall in prices.

• Telecom:

Sales in the Telecom Division were unchanged from the first half of 2002 at 278 million Euros. This followed four consecutive half-years of declines.

At ?1 million Euros, the operating profit came close to the breakeven point. This reflected mainly the positive impact of the vigorous restructuring plans the Group has been implementing since the end of 2001, which have led to a reduction of 6.3% in indirect costs compared with June 30, 2002.

• Electrical wires:

Sales in the Electrical wires division came to 494 million  Euros, compared with 539 million Euros at the end of June 2002, a fall of 8.3%.

Operating profit is at breakeven, which represents a decline compared with the first half of 2002 resulting from the weakness of industrial investment in the winding wires sector and the negative impact (3 million Euros) of the restructuring in the USA.

3. Outlook for 2003

The economic environment in which Nexans operates is likely to remain difficult in 2003 and will continue to have an adverse impact on sales. However, the recovery in the telecommunications cable business, the prospects for an improvement in power cable sales in the second half and the continuing fall in indirect costs mean that the operating profit margin for 2003 is likely to be close to that achieved in 2002. The Board of Directors has decided that in the full year accounts at December 31, 2003, the provisions of CRC regulation 2002-10, which allow for the calculation of various depreciation periods depending on the composition of the assets, will be applied. This should have a positive effect on shareholders' equity and on operating profit, which could then exceed that recorded in the previous financial year.

• Publication of third-quarter sales: October 15, 2003

The full set of accounts is available on Nexans' Web site:  www.nexans.com

Appendices :

1. Income statement
2. Balance sheet
3. Cash flow statement

Consolidated income statement

in millions of euros

Consolidated balance sheet

in millions of euros

Consolidated statement of cash flows

in millions of euros