Prysmian Aktie

Good day, and thank you for standing by. Welcome to Prysmian Q1 2026 Integrated Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Massimo Battaini, Chief Executive Officer of Prysmian. Please go ahead, sir.

Thank you. Good morning to everyone, and welcome to the earnings call of quarter 1, '26. We're very excited to share our quarter 1 result that is well ahead of our expectation. And when I say well ahead, I mean, almost EUR 50 million upside over what we budgeted for quarter 1, '26.

But what is mostly starting is that the growth in EBITDA between quarter 1, '25, '26 has been mainly achieved organically. If you take this EUR 80 million increase and you harmonize and neutralize the ForEx, this will lead to EUR 120 million growth in EBITDA, out of which Channell represented only EUR 40 million of this EUR 120 million.

Also outstanding is the EBITDA margin in the quarter, 14.2%, 1.1 percentage point higher than what we recorded for last year. So with this set of results can confirm that we are well on track to achieve the 2028 Capital Market Day target of EUR 3 billion plus and also very confident to be able to hit the upper part of our guidance for 2026, namely well above the EUR 2.7 billion of the midpoint.

Before moving to the usual business by business review, I'd like to share with you some exciting news about the further expansion that we can have in the data center space through striking long-term agreements with hyperscalers. These agreements are going to be finalized in the coming weeks and instrumental and fundamental to achieving this agreement is our footprint in terms of products and assets that we have in the U.S. We are among the few fiber plant located in U.S. with multiple optical cable plants located in U.S. We're also very satisfied of being the only player worldwide that can offer data solution and power solution to hyperscalers. The demand has grown to the roof in terms of fiber and optical cables, not only coming from a strong data center expansion, but also coming from the famous and well-known case of military fiber utilized for drones application.

So we are well positioned to take advantage of the growth of the market in terms of volume, profitability and long-term supply agreement that will confirm how sizable this opportunity is for Prysmian. Being unique means also that we participate in all the steps of the data and power flows of cables to feed optical solution and electricity data center. You see that all our business Transmission with submarine telecom and submarine power, power grid with medium voltage enhancement to the grid, electrification cables and finally, digital solution cables are intercepting -- will intercept opportunity with data center.

And the last one that we want to capture is to be a player, not only with the long-haul connection, connecting data center campus and cluster of campus with other cluster of campus, but to be a player also inside the building, inside where the racks the service are, which is where most of the volume of cables and fiber is going to be deployed due to the AI expansion.

Let me move to the business review. Transmission supported the quarter 1 with EUR 22 million upside over quarter 1 2025. The organic growth is not that visible. In fact, we had flattish organic growth, but made of 2 components, strong growth in the cable space. So the capacity coming online that bring additional volume to this business. We had lower installation, third-party installation in quarter 1 than we -- due to the phasing specific project. And bear in mind that we have also a tough comparison to quarter 1 '25, where we had a 60% organic growth in that quarter.

But look at the EBITDA margin. We are consolidating for the second quarter in a row, 20% plus EBITDA margin for this business. I confirm that we will see between 20% and 21% EBITDA margin in 2026 full year, which is well ahead of the target we set for the Capital Market Day, which was 18 -- a range between 18% and 20%. More importantly, I confirm our commitment to achieving at least EUR 170 million, EUR 180 million incremental EBITDA in 2026 over 2025, confirming that we are well ahead of our trajectory for achieving the EUR 1 billion goal for 2028.

Moving to Power Grid. We have an exceptionally and extraordinarily high organic growth driven by volume and price. In terms of EBITDA margin, you see what we anticipated last quarter. We still have Midwest premium and cost inflation that we are passing on to the market because we have formula across all the agreements. But bear in mind, those formulas are structured in a way that give us an upside only after a certain time lag. So there's a time lag for the implementation of the formula, whereby the cost increase today in the market in our production is something we can pass on to the market in basically 3 months.

This is for the time being, is preventing us from restoring the 15% EBITDA margin that we achieved in the past quarters. But don't worry, the market is buoyant in Power Grid, U.S. and Europe. There is no price pressure at all. And also should the cost inflation soften in the coming quarter, you will see the positive benefit of this time lag related to the cost price adjustment formula.

Moving to I&C. Here, we had a significant performance in terms of EBITDA, EUR 196 million in the quarter, which is EUR 20-plus million over last year. If you add the ForEx impact that is EUR 17 million. This is a EUR 40 million increase quarter-over-quarter. North America drives the growth. Certainly, with the nonresidential business also and mainly, I would say, with the data center expansion. We have been reported as the #1 leader, #1 player in electrification data center in quarter 4 last year and quarter 1, 2026.

And the EBITDA margin that you see at 13% is well ahead of what we had in quarter 1, 2025.

Specialties, we see a little rebound in EBITDA and EBITDA margins. We finally disposed the 2 factories that we had in Mexico in quarter 1, '26. There are 2 more factories to get rid of in the coming quarters. We still suffer the softening of the automotive business for the remaining market and [indiscernible] in U.S. is particularly down due to the, I would say, continued crisis in the residential market and some oil and gas softening is what caused this EUR 10 million reduction in EBITDA over last year. We consider that EUR 4 million out of EUR 10 million came from the ForEx.

Digital Solutions is our new driver of growth. First of all, we hit a 20.6% EBITDA margin in the quarter. And now we see head-to-head competition between the margin of Transmission, the margin of Digital Solution. And let me remind you that before the Channell acquisition, the best margin seen in this space was 14.5%. So we are now running at a different level of profitability. This quarter in itself doesn't show yet the opportunity and the upside associated to hyperscalers. It is EUR 88 million versus EUR 42 million of 2025. ForEx hit the result by EUR 7 million, while you see was in '25 or EUR 4 million, EUR 5 million. This is not the case for '26. But you see this number growing significantly in the coming quarters on the back of this pricing power that has increased, more volume opportunity and the long-term agreements.

I'd like to conclude the section of the business review and the overall company review with 2 outstanding breakthrough in terms of innovation. Yes, you see on the left of the social and climate and innovation KPIs. But in terms of innovation, what we've done in this quarter is amazing. We delivered the first cable, able to run 20% more power than the standard 525 KV solution. This will give customers a unique opportunity to invest in a connection whose cost is similar to the original 525 technology, but again allowing them to transmit more power. So the cost per megawatt transmitted is enhanced by 20%.

Big contribution to make the energy transition financially more sustainable. And also we created unique in the world one cable, aluminum cables, aluminum metal cables whose carbon content is negative. So vis-a-vis the standard regular cable, the sale of carbon that we do -- we generate with this production always -- outweighs the carbon included in the production itself. So we have a negative footprint in the sense that we create negative carbon emission with these cables. Solution that will be certainly well appreciated by those among our customers are more keen in having green solution. And those are hyperscalers by default.

Let me now hand over to Francesco for more details in our financial results.

Thank you, Massimo, and good morning to everybody. Let me start from the top line. As Massimo said, very good growth, 5% organic growth with revenues growing up to EUR 5.2 billion and a very remarkable growth in -- particularly in Power Grid, in I&C and in Digital Solutions. This 5%, by the way, has been reached despite, as Massimo commented, a flattish organic growth in the Transmission, which is only temporary, only due to phasing of the installation activities.

And in Transmission, we see a very strong ramp-up both of the top line and even more, I have to say, the EBITDA in coming quarters. Adjusted EBITDA for a good expansion of margins, you see at standard metal up by 110 basis points from 13.1% to 14.2%. Here the important driver are certainly in Transmission certainly in Digital Solution including the accretion coming from the inclusion and the consolidation of Channell.

As Massimo commented there was some temporary adverse effect on margins of Power Grid due to the lagged pass-through of the gross material increase in the Midwest premium increase that we are very confident and we expect to recover starting from the second quarter. You see the bridge from Q1 '25 to Q1 '26. As I said, important to remark the good growth, the very good growth of Transmission, but this growth is definitely expected to accelerate a lot in the coming quarters.

So this plus EUR 23 million will be much more sizable starting from Q2, Q3, Q4, in line with the indication that Massimo gave for the full year. Power Grid is basically flat as a result of strong growth and the temporary margin adverse effect that we have commented, even very good progression of I&C in particular and an outstanding result of Digital Solutions as a combination of the inclusion of Channell, but also the very stronger organic growth in the business.

Unfortunately, a quite adverse ForEx effect for EUR 36 million, so close to EUR 40 million. But Massimo in this case, this ForEx effect is expected to decrease to attenuate in the coming quarters because you remember that last year, the dollar was very strong in the first quarter then started to weaken progressively throughout the quarter. So we will have a much lower effect than this EUR 36 million in the coming quarters.

I have to say that it was also an outstanding Q1 in terms of net profit up to almost EUR 250 million, also in this case, definitely above our expectations, and this is an excellent start to achieve our targets also in terms of earnings per share for the full year. We can move to some other pretty outstanding achievement that we had in the first quarter. I'd like to comment once again definitely above our expectation, which is a free cash flow last 12 months very close to EUR 1.2 billion and even above the already outstanding free cash flow that we have achieved in full year 2025, which was EUR 1,170 million. You see that also the leverage of our net debt is massive. We go from March '25, which was EUR 4.9 billion down to EUR 3.8 billion despite having executed acquisition, you see the first bar for EUR 1.2 billion, obviously, mainly funded by the issuance of the hybrid bond for, say, EUR 1.943 billion.

And this massive deleveraging was achieved through the last 12 months free cash flow. But as you see also from the disposal, in particular, of our YOFC stake. We target a net debt by year-end, let me say, between EUR 2.6 billion, EUR 2.7 billion. And that's a very strong message that I want to give because it means that year-end, our leverage will be below 1 in principle. This is definitely faster than we thought, for instance, when at the Capital Market Day last March in New York. Excellent. Back to Massimo.

Thank you, Francesco. Let me complete presentation with some important remarks. We have a strong driver of growth comes from Digital Solutions and Transmission with the number we mentioned before. Power Grid remains solid in volume. We will see the rebound in profitability in the coming quarters as the time lag will allow us to increase price more effectively in the market.

Digital Solution opportunity is a big one. You cannot imagine many customers reach out to us to ask we are available to expand capacity to support long-term deals, and we are working hard to make this happen in the coming weeks. And this will definitely allow us to add another important driver of growth to the North American growth and the transmission growth that we had already and showed in the last few quarters.

So for the time being, we confirm the guidance, of course, we have a much positive view about where we will end up with in terms of guidance, but we have to wait until July to see the full power of the upside that we have in hand and to confirm the trajectory of opportunity that we see coming in the next quarters. Positive also the free cash flow guidance, and we might see upside also there. Thank you for your time. We can now move to the Q&A session.

[Operator Instructions] We will now take our first question from the line of Daniela Costa of Goldman Sachs.

I have 3 questions, if possible. I will ask them one at a time to make it easier. But first, just wanted to start on fiber and to ask you to detail the dynamics we should expect over the coming quarters because obviously, we have seen spot fiber prices raising significantly. You do produce a large quantity of your own fiber and the inflation, I guess, on the inputs is a lot smaller than what we see on the spot, but you have frame agreements.

So how long will it take until we kind of start seeing spot reflected on your frame agreements? What is the tailwind by the fact that you produce your own fiber? So how should we think about margin expansion over the rest of the year and into '27?

Daniela, we will see the benefit of the long-term agreement over time because we will lock capacity and part of the capacity is not in place. We have to expand the capacity. So the vast majority of the volume uptake will happen in '27 and beyond. But in '26, you will see certainly significant margin improvement as result of the fact that the current fiber price in the market is at least $10 per fiber kilometer. Only 6 months ago, it was half of this price in the market.

So we are renegotiating all our agreement. We are shifting volume from low profitability customers to higher profitability customers among the higher profitability customers are hyperscalers. We already are significant players in the long-haul connection between the data center. So we already have a relevant partnership and connection with these hyperscalers, not really related to volume capacity, but really related to our innovation capabilities. They need very high-density fiber for the long-haul distance. So this strength, the strong relationship is what we are leveraging to add volume commitment and pricing improvement across the board of our solution in the telecom space. So we will see some volume uptake in quarter 2, quarter 3, quarter 4 as we unlock some of the short-term capacity, we will see certainly pricing benefit in the coming quarters.

Got it. And then switching to electrification and the topic we've been talking since the summer about potentially the copper derivatives on the Section 232. Two points, I guess, do you still think that will eventually come and when? And do you see any shifts in competitive positioning from the recent kind of changes on Section 232?

I think we don't count much on the copper derivatives not because they will never happen. They might happen, but there is not much import of copper in the U.S. What is happening on the contrary in the last few months, there's been a significant change in the 232 tariff for aluminum cables. Before mid-February, the rule was importers had to apply 50% the 232 tariff on the metal content of those cables.Of course Metal content of the cable were declared by importers. And there's been a lot of cheating on this one. So a lot of way of circumvent this rule by declaring less lock copper content and pay the tariff.

Now the administration in light of this and in order to fix the situation, shifted from 50% applied to metal content to 25% applied to the cable value. And the cable value is transparent. It's something that we have to declare the customers. So I think now we start -- we will see some real benefit coming from tariff because those players will be charged with 25% across the whole cable value in full transparency. There will be no way to circumvent the rules. And I think we can say mildly because these are first signal coming from the market that in April, we've seen pricing or margin improvement in aluminum device space that we haven't seen in the last 6 months.

Got it. And then just finally, I guess, several things that you have been mentioning for a while like Transmission margins, now the new contracts in digital that are kind of things that weren't necessarily there on your last CMD. As your thinking on when it would make sense to revisit the 2028 targets changed versus the last quarter?

In our ideal world, we would like to review the Capital Market Day target for 2028 in combination to the next M&A. Of course, should not we lend any M&A for the next 2 years or 1.5 years, we will have to review the Capital Market Day target anyway. But we are pretty confident that the original plan is what we will be able to stick to. So in the next 12 months, an M&A will give us the opportunity to revisit the 2028 target as well as to provide a long-term target like 2031. That will be our approach, Daniela in these regards.

We will now take our next question from the line of Chris Leonard of UBS.

I'll maybe ask 2. Could we start on the hyperscaler long-term contracts that you've mentioned? And could you update us in terms of what the sort of time frames these could be over, which you're speaking on currently with your partners? And could you also confirm that this will be across your portfolio of low and medium voltage cables alongside fiber? Or should we just expect it to be within fiber optics? And maybe I'll ask a second question after that.

Yes. Thank you, Chris. This is an opportunity that will be deployed in Digital Solutions. The rest is already covered by agreement and by specific projects in the electrification of power space. So this is specific to digital solutions as an opportunity. The time frame could be something between 3 to 6, 7 years duration of contracts with conditions that I cannot disclose, of course, until we sign a contract, which are supporting significant expansion of capacity in our fiber and optical cable footprint in U.S. So these are the ideal condition that we had mirror from Transmission business where down payment help us fund and finance investment in the expansion of capacity. So this would be the same model applied to optical opportunity within Digital Solutions space.

Okay. Sure. That makes a lot of sense. And as a follow-up, could you just confirm currently what your sort of contract duration is in fiber if these contracts are going from 3 up to 7 years, what is the current level?

In the current market, we play a role in fiber-to-the-home and long-haul connection for the data center. We have some 2, 3 years agreement in terms of frame agreement with fiber-to-the-home customers. We have no long-term commitment with any of the hyperscalers in the existing setup. And so it's a significant shift in terms of customer commitment, what we see today and what is we're going to see as an opportunity for the coming years from spot business or project-related business to long-term agreement with solid commitment to withdraw the volume when the capacity will be coming online.

That's really helpful. And the second question was on I&C margins in Q1 coming down off the Q4 levels. And could you maybe comment in the U.S., you saw good organic growth in the geography. Could you comment if you're seeing any pricing pressure in the low-voltage vertical? And if so, is there any way you can alleviate that for the rest of the year? And is M&A going to be a key target for you in this segment in the U.S. for this year?

Thank you for your question. No, in North America, we've seen the opposite. The margin in quarter 1 were 1 percentage point up on the margin that we reported in quarter 4. So the market in U.S. is particularly strong, continue to remain strong. And again, driven by this rebound in nonresidential, also supported by this fantastic rate of growth in the that data center. So don't forget that to be a player in the data center space, and we are the #1 now in U.S., you need scale and service.

And we have all the conditions in place to benefit from these 2 important features. We don't intend to expand with M&A our capability in U.S. in the I&C space. We already the #1. What we will do is organically, we'll add more capabilities to this plant in McKinney. You know that we talk about medium voltage expansion of capacity which is complementary to the low voltage capacity that we have already in this location. So we will become even more relevant by adding the rest of the portfolio that is needed to electrify data center space.

But just as a follow-up on M&A. So in the U.S., it's your key target geographies as you've highlighted before, but we shouldn't expect that this will be across the low voltage, and we shouldn't expect potentially across medium voltage. Am I right in understanding that?

So Chris, we can't really tell much about the opportunities. I think the opportunity is in the electrification space, but I cannot be more specific than this. But in terms of cable, we have exactly what we need. Maybe there will be something else beyond cable that can help us complement the cable portfolio and sell more solution also in the electrification space. But forgive me if I cannot go beyond this because we are in interacting with different targets, and I don't want to disclose it to the market yet.

We will now take our next question from the line of Vivek Midha of Citi.

I have a few questions. The first is around Digital. Just looking to understand the potential scale of the ramp-up in fiber capacity you may be considering. Is there any sort of indication you can give us? And is your strategy going to be to fulfill the longer-term supply agreements for data centers? Or could you also build some further spare capacity in particular, just thinking about you've highlighted the potential submarine telco, which is essentially coming from very small volumes, but you're building up your capabilities there.

Yes. The capacity allocation to the percentage opportunity will be twofold. In the short term, we redirect existing capacity from low profitability customer to hyperscalers because we want to bridge the 2, 3 years' time that we need to bring the new capacity online. The new capacity addition will be in the range of 40% increase of what we already have in the cable optical space worldwide. And this probably gives you enough information to appreciate the scale of the opportunity. Submarine telco is what we are strengthening with Xtera.

Now we can be a provider of long-haul connection, optical submarine connection. And this is another way to interact with hyperscalers and support the growth of hyperscalers. Now we see the data center market expansion relies a lot on Prysmian, thanks to our global and comprehensive portfolio of products and solutions.

That's great. My second question is a follow-up on Power Grids. You've guided for an improvement in the second quarter. Could you maybe give us a little bit more flavor on how much you expect the margin to improve in the second quarter? Is that already at the 15% or so standard metal price margin? Is it a little bit below that and then improving to that level in the second half?

Vivek. So there is a catch-up situation due to the formula. The 3, 4 months, 2 months time lag depending on different contracts allow us to increase the price. But if the costs continue to increase, you will see the benefit of the price increase in the coming quarters. And so we expect as we stand today to have at least 100 percentage point increase in the margin of quarter 2 vis-a-vis quarter 1.

Things can do even better should we see a slowdown in inflation rate or at least this will be the minimum baseline improvement of 100 basis points over quarter 1. But more importantly than focusing on the specific margin by quarter is that there is no pricing pressure in the market at all. There is no one that is willing to renegotiate existing contracts to reduce the price. There is no softening in demand because both in Europe and North America, this is remaining -- those 2 markets are remaining strong market in terms of demand. Europe in power distribution and high voltage, North America, again, medium voltage and medium voltage power distribution and high voltage. So we will restore the 15% EBITDA margin. But more importantly, we would like to show continued growth as we've shown in quarter 1 in terms of organic growth.

That's great. And my last is a follow-up on that point because the comparables for organic growth get stronger as you go through the year by the second half, you're already growing double digit in Power Grid. So how long will we likely to sustain these levels of organic growth? How do you see the midterm growth as you go forward?

I think part of the organic growth is volume related, part of the organic growth is price related. And despite you are correct, last year second half, we had significant organic growth, but we still see this double-digit growth for the remaining of the year, driven by volume and price. Don't forget there will be additional capacity coming on stream. And also look at in quarter 1, '27, there will be a significant impact of additional capacity in the medium voltage space, partly in I&C, partly in Power Grid. So certainly, we see continued growth in the coming quarters as we expand capacity and as the market remains buoyant in terms of prices.

We will now take our next question from the line of Akash Gupta of JPMorgan.

I got 3 as well, and I'll ask one at a time. The first one is also on Digital Solutions. Maybe is there any way to quantify how large these investments is going to be given when we look at some of your competitors, they are spending north of EUR 1 billion mark. And then could you also talk about the payback period for those investments? And how should we think about the phasing of incremental revenues in the next couple of years? That's the first one.

Thank you. I'm very sensitive information, but because we would like to sign the agreement and first for them to disclose the size of the revenues upside and the EBITDA margin, the EBITDA upside and all the rest. But yes, more or less, I can tell you that the size of the investment is massive, as you also said before, is north of the EUR 1 billion investment. This is across the fiber space with a specific investment in U.S. and the optical cable plants, 3 plants out of 4 in U.S. would be affected by this expansion and European plant will also be affected by the expansion.

Payback varies depending on the size of the down payment that is still under negotiation, could be very short, could be worst case 8 years, but something that will anyway create value for the company in terms of additional EBITDA in terms of net present value of those investments. We were never committed to expansion that large with having a solid customer commitment and the confidence that the payback and the IRR are in the right place.

And when it comes to funding these investments, is it fair to assume that like we saw in Transmission early on, not just at Prysmian, but also at competitors that customer gave nice down payments that act as a funding instrument for those expansions. So could that possible with hyperscalers this time around?

Yes, it is possible with our customers. I cannot name the customers, but it's exactly what we are targeting. This is exactly what is being offered. So this is a copy and paste of the model that we applied to the Transmission space successfully in the last 5 years. And the marketing Digital Solution allow us to achieve the same. Bear one thing in mind that those customers want to have U.S. fiber, and we have a U.S. plant. So we are unique in this sense alongside Corning and Furukawa.But we are among the 3 that can benefit from this opportunity because of our existing footprint.

And my second one is for Francesco. When I look at your P&L, nonmonetary items in this quarter was just EUR 2 million against EUR 72 million. So there's a significant reduction there. Can you talk about what is driving that? And what does that change for full year in terms of what shall we expect the amount?

Thanks, Akash. The only driver of that is the fair value of the metal derivatives that we use for the hedging. Last year, due to the dynamic of the metal price was negative. This year is fairly positive. And this is basically, for instance, compensating the other cost items that we have in this line, which is related to the share-based compensation, for instance.

We will now take our next question from the line of Uma Samlin of Bank of America.

My first one is on the M&A opportunities. So I see that you have recently given the authorization from the Board to potentially raise up to 10% equity, which I guess now equate to almost $4 billion of extra firepower. Does that change the thinking you have for the size of M&A you can do? And what will be the focus areas there in terms of the target you're looking for?

Thank you, Uma for your question. This is not changing the size of the target that you have in mind or give us more -- just giving us more flexibility in terms of how we can manage the financing of the deals. So it's time beneficial. It's not really any impact in our aspiration and ambition in terms of M&A opportunities, which are well defined and very clear and related to sizable acquisition in geographies and business where organic growth opportunity are strong and related to assets like Encore Wire asset with good potential to create additional synergies.

That's super clear. My second one is on the sort of the pricing opportunities in the fiber optic cable space. So I guess you mentioned that the prices have increased massively in the last couple of months. How should we think about the proportion of pricing benefit you can see in the coming quarters? Would you be able to see the full pricing in line with what you see in the market? Or is there any difference in terms of the contract structures you have?

We've seen already in quarter 1, some pricing power because our EBITDA margin in quarter 1 in Digital Solutions has gained 150 basis points over quarter 4 last year. So there is already signs and the tangible signs of this pricing power. Of course, the full potential of this pricing power will be certainly visible in quarter 3, quarter 4. But also in quarter 2, you will see more benefit coming from the pricing power. We are renegotiating across the board.

In some cases, it's an immediate price when we talk about spot business, where we have a frame agreement it takes a little bit longer. But most of the business is new business, new order intake. So we have some backlog to flesh out in different summit of optical cable geographies. But again, this will be steady growing over the next 2, 3 quarters. And the full potential, I believe, will be quarter 4, quarter 3, '25, '26 lets say.

That's great. My last one is on the Transmission demand. Given the conflict in the Middle East and sort of the need of further electrification in Europe, have you started to see more demand in the Transmission space? And how should we think about the capacity expansion plans beyond 2028, especially given your backlog remains at a very high level?

We haven't seen yet project coming on stream. It takes longer, but we see very active dynamics within our customers in different countries, to work on the interconnection business to create more autonomy and independence in the different countries. And of course, to shift more business in order to achieve this independence and interconnect, one important asset opportunity that one is to rely more on wind offshore.

So those discussions are happening, they are very active, and we count on this for additional opportunity in the coming quarters, years in terms of market demand. We will work on capacity expansion and capability expansion. We want to add more capability or more capacity in the 525 space. So we are going to expand the 525 kV capacity in the coming years to be ready to face the full shift from the old technology that was 320 kV to the 525 and also to the 525 90 degrees, which is the brand-new technology qualified 2 months ago, which provides more power to the interconnection network for our customers.

We will now take our next question from the line of Sean McLoughlin of HSBC.

Just wanted to touch on media comments related to the U.S. listing. Just to understand that would this -- I guess, given the pivot increasingly to the U.S., this is back on, first of all, and remains a priority. And secondly, would the timing be actually related or tied with M&A?

This is always a hyper joy for the company, never has it been different than this. We had only timing issue in the past 12 months due to the conflict with other activities of the company. I think your comment about M&A is pertinent. We will certainly take advantage if things goes in the right direction of our next M&A to couple it with the U.S. listing and create additional value for investors.

And you've also talked about kind of additional opportunities inside the data center. And I suppose is this -- how could this grow organically? Or does this require M&A?

Sorry, is about the organic versus M&A? Now this is an organic opportunity for sure because we have all the conditions to take advantage of this market growth expansion with existing assets in terms of factories, in terms of portfolio of products. So we don't need to rely on anyone else.

Here, it is a matter of finalizing striking this contract, agreeing the famous down payment that will convince us to invest a massive amount of money to expand capacity by 40%, 50%. And all of this is organic, which is the beauty of this. We are in full control of the decision and the execution of the growth plans as we had full control in the execution of the growth plans in plan in Transmission. So similar model, similar structure of frame agreement, long-lasting benefit and opportunity to further strengthen the relationship with those customers.

Yes. Very clear. And one last question, if I may. Just thinking about customer behavior in fiber. If we look across power equipment suppliers for data centers, I think the integrated suppliers tell us that being able to provide a broad portfolio is something that is well received by the hyperscalers. And I think it sounds like you're making a similar argument that you have a unique offering as a bundled fiber and power player. I mean your main fiber peer in the U.S. has already announced significant framework deals. I mean where would you see yourself? Or how much of an advantage does this bundled offer give you if you look across the hyperscaler procurement over the next 12 to 24 months?

Interesting and very relevant questions, Sean. In the past, we thought that in data center, we could only play a role by interconnecting data center with long-haul long-distance cables, where we have strength in terms of innovation, capability of making very compact fiber. We don't forget, we are the first that invented the 160 micron fiber vis-a-vis the 200 micron that is the standard market.

Recently, we realized that we can be a player also inside the building, which used to be the space of the likes of Corning, CommScope and AFL because they could package optical cables with connectivity. In reality, there is a big room open by the further acceleration and expansion of data center. And we have the opportunity to enter the space without making any M&A move. So by simply organically connect with some of those customers.

So we have the opportunity there in the optical space to expand the business inside building, which is where most of the volume will grow, which is where the growth is going to be the highest in the coming years. Alongside this opportunity in Digital Solution, differently from Corning CommScope, AFL and the other, we also play a significant role in electrifying data center.

And by the way, the size of the revenues in electrification of data center through I&C business, power grid and transmission is currently threefold of that we have in Digital Solutions due to the value of the cables and the quantity of cables needed to bring that much energy electricity to data center. So in this sense, we are unique. So the expansion of data center without arguments, I can say, relies on Prysmian ability to offer the full portfolio from power cables across the board or the segment of the energy cables and the Digital Solution.

We will now take our next question from the line of Lucas Ferhani of Jefferies.

So the first question is on Transmission. Can you come back on the new capacity that is expected to come online this year? Maybe should we see that over the next quarter? Is it more H2? When do you expect that phasing to come through after kind of the flattish organic growth in Q1?

Thank you, Lucas. The new capacity, basically 2 additional lines came online in quarter 1. The effect was not fully visible because as I said, we had phasing in installation, whereby the installation activity was in quarter 1, '26, specifically lower than what we had in '21 in quarter 1 '25. The new capacity we continue -- the expansion in new capacity we continue in quarter 4 with a new vessel joining in our fleet. And there will be one more additional line bring additional cable capacity in 2027. That's why you will see 25% organic growth in '26 over '25 in light of this cable capacity expansion and installation capacity expansion.

It defines the increase in the EBITDA, the organic growth will be double digit in the full year.

And the EBITDA growth will be 25% in the full year. I think I said this before, EUR 180 million increase in EBITDA is what we're -- we commit to achieving in '26 over 2025. A sizable amount on this. Today some of our competitors is the size of what they make in 1 year. They increase...

Perfect. Super clear. And the next one is on Power Grids on that margin recovery. Given the tight kind of supply-demand situation, you're saying demand is buoyant. I'm wondering whether -- how come you're not may be able to push those price increases or go back to the customers to kind of ask for the Midwest premium to be reflected, there should be some bargaining power there. And also given the aluminum is still -- we're still seeing inflation, there's a supply risk also with the Middle East. This is likely to continue. So does that bring risk in your ability to get back to a normalized level if inflation continues and then they slide?

Thank you the talking about the EBITDA margins Power Grid is really simple -- very simple. It's related to frame agreements. In the past, we didn't have clauses to adjust the cost and reflect the cost increase to the price. We made this long journey of including those formulas in all agreements across all utilities worldwide. Now we have agreement in place. So in spite of the cost increase, the cost increase happened today, we still have to recognize the value of the formulas.

So in some cases, the customer formula, the contractual formula is that we can pass the average of the last 3 months cost to the price of the new orders. You can appreciate that when you take formalities, you have at least a 2, 3 months' time lag between when you incur the cost of a business that you deliver this month and when you can really reflect the cost increase in the new orders. So it's a pure effect of time lag, which is kind of depressing our margin when cost inflates.

But on the contrary, when the market gears towards a softening inflation, you see the opposite. You will see us holding the price higher than what the cost will entitle us to do. So this is the effect of the time lag, slightly negative in the growing trend in the soaring cost situation, super positive when costs take the other direction. This is for the contractualized business with agreement. Then, of course, in the high-voltage business, we win projects on a project basis. And so in that sense, in that business, we can be much bolder and direct in passing or setting price to reflect the current cost. I hope I gave you the proper dynamics of the different businesses in the Power Grid space.

Yes. And just the last one, I think is coming back on Sean's point. So in Digital Solutions, there's, let's say, normal kind of fiber and optical cable business. But in the slide, you talk about the kind of new capabilities and driving that through partnerships. So just coming back on that, why are you looking maybe -- and is that partnership more like a JV or reselling somebody else's product? Or is it more kind of M&A to develop those new capabilities?

No, no...

Those are inside the data center.

Sorry, I didn't mean to cut across. No, so we are not talking about M&A opportunity in Digital Solutions. These are simply organic growth opportunity, which we will have full control of and they are related to long-term agreement with customers. It is cables, of course, with some connectivity because also don't forget that after the Channell acquisition, we also play a role in connectivity in fiber-to-home, also data center. But we are talking about organic growth of fiber capacity and cable capacity to provide solutions inside the building. Inside the building matters a lot because it's a new space to us, and it doesn't require M&A as we thought in the past to enter the space in the current market. Allow me to be really more specific in a few weeks after we struck contract agreement with those customers.

We will now take our next question from the line of Alessandro Cecchini of Equita

Yes.

Okay. So I have just one question for you. Just considering the tariffs that probably are supporting your business in the next quarters also due to the change in the regulation. And I mean this kind of agreement, potential agreement with the hyperscalers. So just to understand in the high part of the range that you stated that you are confident to reach this year for the EBITDA. So how much is, roughly speaking, included this agreement or I would say, the positive impact of tariff?

The confidence in hitting the top of the range is behind -- is supported by the Digital Solution upside. This is, as said before, partly coming from additional volume that we can immediately unlock, partly coming from the more pricing -- higher pricing power that we have in the current market. is also benefited from what I said at the beginning, EUR 180 million increase, EUR 170 million, EUR 180 million increase in EBITDA of Transmission was not in our original budget or our original guidance. So there is a combination of this. Certainly, Digital and Transmission are the 2 major components to this upside of the guidance.

Tariffs are not included as an upside. So because we count on tariffs as we see margin improvement in I&C. So we are not betting on the tariff upside at all.

We will now take a next question from the line of Nabil Najeeb of Deutsche Bank.

I've just got a quick question and I guess, sort of a follow-up on Lucas' question on supply chain risks. Just wondering if you have seen any stress on your supply chain from the war in the Middle East, which I guess has gone on for a little while now. Are you really not being impacted at all from any shortages in aluminum or plastics, for example?

Yes. Great question, and thank you for it. There is a lot of stress on the supply chain coming from Middle East situation because many suppliers in the broad aluminum space or compound space have their plants there and for logistics distress. Luckily, we are not relying on this supply chain. We had the full self-sufficiency in Europe with the European players who used to have years ago some flows of aluminum rod from Middle East, which we disconnected years ago.

So we see no impact whatsoever coming from the supply chain and logistics disruption that happened in Middle East. There is an overall inflation in the world due to the additional energy cost, the oil and gas price, as you know, very well went through the roof, and this is a reflection of an impact on the raw material cost.

But again, in the flow business, we have immediately reacted and priced it accordingly and pass on the cost increase to the market. In the frame agreement business is what we mentioned before. There is a time lag, but everything we have clauses and formula indices to pass this on to the market with this 2, 3 months time lag. So we feel highly protected against possible cost inflation. In terms of supply disruption, we don't suffer from it at all.

[Operator Instructions] Our next question comes from the line of Alessandro Tortora of Mediobanca.

I have, let's say, 4 questions, okay, very, very brief question. The first one, sorry, if you can just come back to the Digital Solutions space. You mentioned in the call that historically legacy business was at best reporting this 14.5% EBITDA margin, from the margin expansion in Q1, you should be already there basically by year-end. So the question is, first of all, if this is, let's say, something correct because we have a Channell, not expanding margin not for the whole division. Just a comment on legacy business.

And second, clearly, the U.S. market is driving this margin expansion. But can you comment a little bit about the pricing environment in Europe also because strangely, we see Chinese fiber price, non-Chinese fiber now more expensive than the one we have in Europe and the U.S. so this is the first, let's say question.

Thank you, Alessandro. Yes, we see this pricing power happening as we speak. This will have an impact across the board. This is not just for hyperscalers. Of course, hyperscalers are the ones willing to pay more to avoid that the shortage of cable in the market hampers their speed of expansion. But also in the normal fiber-to-the-home business, as I said before, we used to buy fiber from the market at $4, $5 1 year ago, even 6 months ago.

And now the cost is much higher. We have our supply chain secured through 2028. So the supply we need from the market is at the right price because we signed this agreement months ago. And so we should have the full potential benefit of the new level of price in the market, both in U.S. as well in Europe but also in LATAM and Chinese players are busy serving the local demand of data center, military applications with the capacity in place. They are not invading Europe any longer because they don't have spare capacity. So the environment has completely changed in a positive way, if I may say.

Okay. Then let's say the third question is on the CapEx side. I understood that there are the ongoing negotiation with some hyperscalers. So if we, let's say, take this almost, let's say, around EUR 300 million CapEx for this year should we think about, let's say, over the years that this is probably something that is going to stay at the level for everything we are discussing. So this is, let's say, the third question.

And sorry, the fourth one that's just to conclude, just a question on, let's say, this line I see on the restructuring cost for items, which is, let's say, pretty high, EUR 24 million in the quarter. Can you comment a little bit what is it because I don't have in mind on top of, let's say, automotive any significant restructuring, okay?

So I take the first the CapEx level for '26 will increase over '25, partly to reflect the fiber opportunity. But also, as I mentioned before, we have a series of investments that we're going to deploy in U.S. in Transmission and other regions to support the organic growth across regions and business units, which will maintain this level of, let's call it, almost EUR 100 million and go beyond EUR 100 million per year CapEx in the coming years. I'll leave to Francesco to cover the restructuring of cost item.

It is actually mainly related to the -- Hi, Alessandro, it's actually mainly related to the disposal of the plants of the automotive business, particularly related to stock devaluation and inventory devaluation that we took as a result of these disposals.

Okay. So let's say, in the coming quarters, we should think about, let's say, much...

A lower run rate than this '24, definitely much lower, I would say.

[Operator Instructions] Thank you all very much for your questions. I will now turn the conference back to the room for closing comments.

Thank you very much for attending these earnings calls. I wish you a good rest of the day, and see you next time. Thank you all.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Welcome all, and thank you for taking your time to attend the earnings call for 2025 full year results. I would like to highlight the main achievement '25. You see a record results across all KPIs, strong performance in EBITDA with EUR 2.4 billion, which is itself a EUR 500 million growth in terms of EBITDA over the '24 performance. A strong net income, EUR 1.3 billion, of course, supported by the disposal of the YOFC share, but still remain an outstanding net income result. And our cash generation with a 50% conversion vis-a-vis EBITDA, EUR 1.2 billion, again, a record result in free cash flow generation. EBITDA margin growth over 2024, depreciation, we wait for the next slide and strong growth in EPS also with 18%, which is well above the range that we committed to achieving at the Capital Market Day that was 15%/17%.

I will jump to the next one to deploy to display the significant acceleration in our performance. You see stability with slight growth in '22, '23 and a first step up of EUR 1.9 billion EBITDA and EUR 2.4 billion this year. This EUR 500 million a significant hike in EBITDA, mainly coming from perimeter change, the full recognition of Encore Wire impact in '25, the new acquisition Channell and the strongest ever performance came from -- that comes from transmission with EUR 200 million growth in EBITDA. To be honest, there is another EUR 80 million benefit in terms of organic growth in the '25 result that is hidden by the ForEx that was EUR 80 million, EUR 75 million to be specific adverse in '25 versus '24.

I will not comment on the guidance now, but you see that EUR 2.7 billion already position us, I would say, slightly ahead of what is the target that we have to achieve by 2028, considering that we still have 2 years to go. Free cash flow, similar trend, significant acceleration. EUR 1.2 billion is a very good conversion rate for the current EBITDA. 1.350 is again another step up. This definitely position us ahead of the target of 2028. Let me move to the important contributors to the growth of the company in the last 18 months. This is an 18-month worth of effort in reshaping our portfolio, making it more suited to our goal of become a stronger solution provider. You see in '24 in electrification, Encore Wire gave us the access to electrification space in the United States. And thanks to that access, now we have a unique asset and a unique opportunity to leverage the expansion of data center. We followed this with the digital solution expansion portfolio with connectivity with Warren & Brown in '24 in Asia Pac and Channell in U.S. and also outside the U.S.

And lately, we had this 2 important acquisition, although small, The Xtera and The ACSM. Xtera gives us access to the submarine telecom long-distance connection, helping us complement the strength that we have in the submarine energy business with submarine telecom opportunities. ACSM is again an important step-up in verticalizing our capabilities and in sourcing one of the most critical phase of the execution of the project, the survey assessment and the route preparation, which will help us become more efficient on the one end, but even also able to stand the possible risk that start -- that comes from the [indiscernible] that always rely on customer survey and not our own survey.

We also work on our portfolio in terms of disposing shares of YOFC, which is not considered any longer a crucial asset for us. And we made a couple of actually factory reduction in the automotive perimeter to help us avoid the dilution coming from the difficult time that automotive is living worldwide. Also outstanding remarkable achievement in the -- I mean the new one on the sustainability journey. Our newly defined target is to move to sustainability linked revenues. So the revenues that are associated to low-carbon products, sustainable solution, 44% is the target is the achievement for '25, our target for '28 that we declared at the Capital Market Day is 55%. So more than EUR 11 billion, EUR 12 billion revenues in '28, and who knows whether this will be EUR 11 billion or EUR 12 billion or more depending on the perimeter change, will be solutions that can offer benefit to our customers in terms of sustainability.

Significant hike in the recycled content from 16% to 21%, and we continue our consistent journey of reducing Scope 1, 2 and 3 to achieve and meet our commitment to be net zero by 2035. We are also particularly proud of this record 50% achievement in share of our employees that hold shares in the company, which is a sign of consistent and growing confidence in the future of our company.

Yes. Let me start with the start of '25. there are many KPIs, but I will draw your attention to the right-hand side of the page, 30% organic growth, which equates to almost EUR 800 million of revenues in 1 year in terms of capacity expansion and execution of the projects. Second, EUR 582 million EBITDA, EUR 220 million additional to 2024. The step increase is amazing. And third, the EBITDA margin, 18.3% full year '25, supported by 21% in quarter 4 explains and give confidence and actually show that we are going to beat the target that we set for 2028 that was set at 18%, 20%. We are already there in '25 with an exit speed that goes beyond the range that we set for 2028. Amazing also the growth of the backlog, EUR 17 billion with EUR 2 billion worth of projects being awarded to us. They are not in the backlog because they are waiting for the not to proceed that will come in the next few quarters.

Power Distribution, we continue with a sustained growth in the quarter was pretty strong, 13% in the full year, still very strong, 8% certainly supported by 2 large regions, U.S. and North America and Europe. EBITDA margin full year is slightly down on 2024 because the quarter 4 is slightly down year-over-year on quarter 4 '24. Again, the same point that I mentioned last time, there is this Midwest spike in cost due to the tariffs, unfortunately, that we could not pass to customers in the overhead transmission space in U.S. because this is a fixed price business.

Now we are moving to different -- we're trying to define different solution. But until we have flushed out the whole backlog, which was set when the Midwest was lower than this, we will suffer some contraction in the overhead transmission line that has a repercussion on the total power grid space.

Electrification is showing a sluggish I&C growth overall, but with a promising growth in quarter 4 in North America with almost 6% year-over-year growth, which is supported by what we see already in quarter 1, 2026. So we suffer a lot in terms of organic growth in '25 in the space in North America because the whole market with the exclusion of data center, so the residential and the nonresidential market was 6% down in 2024. This is a public number of the spend occurred in U.S. in Construction business. The expectation, the outlook for '26 is much more promising and the start of the year as well as the exit of the last month of 2025 are extremely promising. The EBITDA margin full year grew by 900 basis points over '24. And this is again the level and the value of the accretion due to the acquisition of Encore Wire in our perimeter, full perimeter.

Specialties is nothing that was not foreseen, but it is still disappointing. We have full year '24 reported EUR 110 million EBITDA and now EUR 280 million. There is a EUR 10 million ForEx headwind, of course. But besides this, there is a weaker demand in automotive, in Elevator, U.S. and in Oil and Gas. So contraction of margin in this business has caused this let me say, EUR 20 million organic decline. The rest is the ForEx effect. The profitability full year remained pretty consistent with the past. And we have finally disposed the asset that we want to dispose in automotive towards the beginning of this year, January and February. So we should not see any longer the dilution coming from automotive, and we hope to see the rebound of the business in the rest of the verticals that we play in the different regions.

Digital Solutions speak for itself. It's a significant growth organic, 7% full year, supported by the rebound of business in the United States with stability in Europe and other countries. And then there is a perimeter change that inside the EUR 268 million equates for more or less EUR 100 million is the Channell. You see how accretive Channell is with a quarter impact, which brought the EBITDA margin 5 points higher than what it was 24 and overall EBITDA margin at 17.3% for the full year. Core Channell will continue. It will also, as we did in the optical business, U.S. benefit from the rebound in the market. And now we can finally work on the integration and leverage the bundling of connectivity cables and leverage the synergies that we have to achieve, thanks to the cross-selling opportunity.

Let me hand over to Francesco for more insight into the financial details.

Thank you very much, Massimo, and good morning to everybody. I'll be quick the profit and loss statement. As Massimo said, EBITDA closed at EUR 2.4 billion, exactly in the midpoint our guidance with a great margin expansion at standard metal price and expansion of 130 basis points up to 14.2%, driven inorganically by the full year inclusion -- the full year effect of the accretive Encore Wire acquisition in terms of margin and also by the inclusion of Channell acquisition since June 2025, organically, mainly driven by the outstanding margin expansion of the transmission business on a full year basis around 400 basis points, 4 percentage points. drawing your attention on the right part of this slide, you see the bridge of our '24 to '25 adjusted EBITDA with a total growth of close to EUR 500 million, EUR 470 million despite the adverse ForEx effect worth EUR 75 million. Business by business, transmission was the strongest part of this growth, almost EUR 230 million, driven by an almost 30% organic growth and as I said, an excellent margin expansion.

Power Grid also performed well, EUR 24 million growth, of course, clean of the ForEx effect, performing very well in power distribution and in high-voltage AC across all the regions with only an adverse effect in North America overhead line business. But despite this performed a significant growth also top line organically grew by around 8% on a full year basis. Electrification grew by EUR 176 million, of which I&C contributed more than EUR 200 million, whereas specialties dropped driven by weak oil and gas, elevator and automotive. As Massimo mentioned, a very promising exit experience start of the year in the I&C business in North America after the challenging first half, the first 2 quarters with pretty tough market conditions.

Digital Solutions, up almost EUR 130 million. Obviously, here, we benefit of the inclusion since June of the Channell acquisition, but I'd like to stress that also organically and mainly in the U.S. EBITDA grew significantly on a like-for-like base. The little adverse perimeter effect of YOFC. We gradually exited in the second and third quarter. And as I said, the ForEx effect. The other outstanding achievement is obviously net income close to EUR 1.3 billion. Of course, this includes the gains from YOFC net of tax in the region of EUR 345 million, but still taking out this effect, the growth from 2024 is really outstanding. And by the way, the EUR 3.31 a share of EPS, growing 18% since last year that Massimo already mentioned, I want to be very clear, is totally cleaned of the YOFC gains effect. So it's a normalized growth of our earnings per share.

We can move to the cash flow generation and one more outstanding achievement of this 2025, close to EUR 1.2 billion free cash flow generation. This was also benefiting of some extraordinary low level of paid taxes in U.S. benefiting of a couple of positive one-off effects. But as you see, we performed really well in terms of working capital changes, down by almost EUR 200 million, mainly in the transmission business and despite the adverse effect of the rising metal price that unfortunately may be there also for this year 2026 impacting our cash flow. You see that we deleveraged down to EUR 3.1 billion debt with the acquisition, which is almost entirely or entirely the acquisition of Channell, including the earn-out of EUR 1,069 million, which is almost fully covered by the issuance of the hybrid bond close to EUR 1 billion. And you see here totally taken out from the free cash flow, the effect of the disposal proceedings, EUR 675 million, out of which EUR 565 million are related to the YOFC disposal.

That's it. Back to Massimo for the outlook.

Thank you, Francesco. The outlook is pretty straightforward, and it is actually very outstanding in terms of confidence and commitment of the company to make it happen. EUR 2.7 million (sic) [ EUR 2.7 billion ] midpoint in the EBITDA guidance, which sets EUR 300 million EBITDA increase over the ending point of '25. But in reality, considering there is EUR 80 million perimeter adverse impact between -- sorry, the EUR 80 million ForEx effect adverse. It is actually a EUR 380 million EBITDA increase. if you neutralize the ForEx. You see on the right-hand chart that the bridge explained that there is a significant organic growth. On top of it, there is a perimeter effect that is more or less EUR 80 million. So by coincidence, is that size that needs to be in place to offset the ForEx impact. I think it's very -- I would say brave, but we are very confident to achieving it. It's much better than what we've seen across the other peers, not necessarily in the cable space, but in general. And we are very committed to achieving it.

The free cash flow even stronger. Again, 50% conversion rate, EUR 1.3 billion, EUR 1.5 billion well ahead of what we need to be or where we need to be in '26 to underpin the 2028 Capital Market Day target. So we're confident to achieving both and continue the journey with organic growth and the M&As. The sustainability-linked revenues will move from 44%, 25% to 48% midpoint. One important remark in our EBITDA, there is not any possible benefit, any coming from the tariff situation. We haven't seen it yet in the past months. As I told you, we will take a little bit for the importers to change behavior in the market and allow us to gain share. And we didn't want to build any speculative benefit coming from the tariff situation, which has changed in a certain extent, but not much at all. We will see upside possibly coming from tariff in the coming months or coming quarters.

Having said so, I close saying that we confirm the strong drive in transmission business also for 2026. The China integration is a successful integration, considering that after concluding the earnout payment that we have paid this company with a multiple of less than 7 and the synergy will kick in, in '26, adding additional accretion to the Digital Solutions EBITDA margin. The outstanding cash generation in '22 will -- '25, sorry, will be supported in '26 with additional cash flow. The dividend will increase from EUR 0.80 to EUR 0.90. And of course, this is what we see organically, but you know that we keep working on the M&A. When this will happen, we cannot tell you yet, but there will be something happening in the next short term, let me say this.

Thank you for your attention. I'd like to move on to the Q&A session.

[Operator Instructions]

We are now going to proceed with our first question. And the questions come from the line of Akash Gupta from JPMorgan.

I have 2. The first one is on guidance. At the midpoint, you target roughly EUR 300 million increase year-on-year in EBITDA. I guess EUR 140 million of that could be coming from transmission to get to EUR 1 billion by 2028. And I think you said EUR 80 million is coming from perimeter. So maybe if you can talk about how should we think about the remaining EUR 80 million between the 3 segments, Grid Electrification and Digital Solutions on an organic basis? And same on guidance, your free cash flow guidance imply 50% FCF conversion at the midpoint, which is higher than what we have seen historically. So any color on that? That's the first one.

Thank you, Akash. Yes, you're right. So let's call it EUR 300 million net, but organically. In terms of the offset of the ForEx, it EUR 380 million. So EUR 150 million, yes, more or less will come from transmission. Remaining is EUR 80 million. And so this brings us to EUR 230 million, and there is another EUR 150 million organically coming from the rest of the business. So there is some organic growth in Digital Solutions because we will continue to leverage on the strong demand in the United States which is driven certainly by broadband deployment, but even more by data center expansion. They are desperate for additional volume, additional supply in optical space, likewise in the energy space.

And there will be strong growth in power distribution. So despite the dip in EBITDA margin that you've seen in quarter 4, which was totally anticipated, the market demand in U.S. for medium voltage and high voltage is extremely strong. We can't cope with this demand. If you have more capacity available, we would sell it. And luckily in January 27, we will have the first wave of new medium voltage capacity coming on stream in the Encore side. this will be a powerful combination, the service level of Encore with the power of medium voltage cable for I&C, industrial construction, Power Grid. So Power Grid will also grow. And electrification, as I said, we exit quarter 4 with a strong rebound in I&C North America, not followed by Europe. Europe is pretty weak in I&C currently. But North America rebound in quarter 4 is what also we noticed in quarter 1. I don't think that has nothing to do with the tariff. If anything, it's due to the contraction that the market suffered in 2025 that finally is resulting in a surge in demand in 2026.

So to cut the story short, there will be organic growth trend in our EUR 2.70 billion coming from all businesses of course, with much more visibility in transmission, but with strong market demand in I&C North America, in Digital Solutions North America and in Power Grid Europe and United States. I'll leave hand over to defer to Francesco, the answer on the 50% conversion.

Yes. Thank you, Massimo. No, definitely, let me say, an ambitious, still totally realistic target on which we are very confident. Let me, first of all, remark that already 2025 is very close to the 50% conversion rate. This improvement in free cash flow at the midpoint is around EUR 180 million versus the 2025 actual. We come, first of all, from the additional EBITDA. So if you take the EUR 300 million additional EBITDA net of tax contributes around EUR 220 million, EUR 230 million. And then we will certainly have higher cash taxes. I mentioned that 2025 was kind of supported by a particularly low level of cash taxes in U.S. This will come back in 2026. And this means that we are committed to further improve our working capital.

As I said, in 2025, most of the improvement came still from transmission. This will be a little bit different in 2026. And we should think that in 2026, we have pretty significant room to recover and to gain efficiency in terms of working capital. And this will be key in order to deliver the EUR 1.35 billion free cash flow guidance.

And to give you a little bit of more nuance, there is not any reduction in CapEx that support the free cash flow generation. If anything, '26, we continue with a strong CapEx deployment across all businesses because this time, we continue with transmission, we continue with Power Grid. We need to add digital solutions. We are at capacity in fiber and cables. And so we will maintain a level of EUR 800 million CapEx also for 2026 to support the organic growth across all the 3 businesses that I mentioned.

Let me also add one point that I missed that the debt with this kind of cash generation in '25 and expected for '26 our net debt will be in the region of EUR 2.6, 2.65, including, by the way, the 2 already announced acquisitions, which are worth an effect, increasing our debt by EUR 210 million to EUR 220 million. And this means that year-end 2026, our leverage will be lower than 1 based on the midpoint of the guidance. And that's really a great situation to be in, and I would say, a better situation than we expect.

Much more better than expect.

We are now going to proceed with our next question. And the questions come from the line of Daniela Costa from Goldman Sachs.

I have 3 questions. I'll ask them one at a time. The first one, just wanted to ask on power grids and on this, what you call the temporary metal headwinds. Should we -- maybe can you quantify how much the hit was? And then should we expect that they will no longer be there from 1Q onwards?

Thank you, Daniela. Yes, the temporary effect is temporary because due to the Midwest spike and translation where the margin -- sorry, where the price is fixed. Yes, I can't tell you the number was for the full year, but basically impacted quarter 3 and quarter 4 was a $30-plus million worth of cost or margin contraction. the hit is visible at the group level because you know that Power Grid in North America accounts for, let's say, 2/3 of the total EBITDA margin of the group. It will be there also in quarter 1 because the Midwest keep increasing, and we still have significant volume associated to backlog that we landed in quarter 1 and quarter 2, '25 when the Midwest was pretty low prior to the time.

So we see it in quarter 1 and milder in quarter 2. Gradually, we will come out because what we are reporting today, the project that we are landing today for execution in quarter 3, quarter 4 have a fantastic margin, as you can imagine. But until we flush out the order backlog, we will be in the same situation. That's why we call it temporary.

Got it. And then just on -- I think you very clearly don't have in your guidance the tariff benefits. We have already seen, I guess, on the market data in copper wire and cable imports into the U.S., like the November data was down massively on the imports. We don't see very strong growth in your U.S. electrification business yet in Q4. Can you explain, is it because it's a different mix, maybe you're more indexed to things which haven't been included in the codes which haven't been included in the tariff yet? Is it just timing with distribution? Sort of how should we think about that data versus what you are printing in the U.S.?

Yes. To full answer, in the copper space, there are no tariffs at all. The tariffs are applied to metal and not to the derivative products. And this seems not to be the intention of the administration. So the market is still free as it was before. Everyone is bearing the extra cost of the copper. The cathode premium and the copper comments and the market is the same as before. So this is the space where we never expect -- where we didn't expect to have any potential gain from the tariff. On the contrary, in the aluminum wire, we still have this 232 tariff to the metal content of cable imported from importers. But for the time being, we haven't seen a real change in behavior. They -- basically is volume the cost of the 50% in their margin, their price, the importers, the distributors importing cable from overseas. That was my point. I don't know how long they can continue with this margin contraction. They haven't increased significantly the price. Yes, it is true, they have increased a little bit the price, but we still have a significant price gap like 5%, 10%, 15% between our price in the U.S. and their price coming in.

And so maybe they will not be able to bear the current margin pressure for too long, which is what we hope. But as why we didn't speculate on the possible advantage coming from the tariff. We have seen, to be honest, in the last 2 months, a different trend in the aluminum building wire space inside [ Encore ], whereby we've been able to raise prices, we didn't lose volume, and we didn't lose share of wallet. So this is a first sign of possible advantage, but again, give us 2, 3, 4 more months to see if this trend materializes as a strong trend.

Got it. And then just on some of the recent M&A you did. It seems like you've been -- these 2 deals, bolt-ons on submarine telecom cable or submarine fiber cables, which is an area you weren't very present on in the past. Can you talk through about sort of the synergies you see on that area, the potential for growth there is out there? Why -- yes, maybe give us a bit of context of sort of like how relevant it might become in the future in the group.

Thank you, Daniela. Interesting question. The space we were in, in submarine telco was only the regional connection without repeaters. And the market is -- made the market 100, only 10% of the market is confined into regional short distance connection. So without repeaters, we cannot play in the big market, so the long-distance connectors. The market has grown a lot on the back of the expansion of data center and AI buildup. So we will, with the repeaters provided by Xtera, be able to amplify the optical signal in our cables and be a player also in the long-haul connection. So we have access, thanks to this technology to a market that was before forbidden to us. We have all the rest of the know-how, the cable we have, the installation capability we have. This was the piece that we needed to be considered a player in the market. And we will -- so today, we make not big number, we make EUR 100 million revenues in this submarine space, telecom space without repeaters. The addition of terra will help us grow significantly this scale in the submarine telco.

We are now going to proceed with our next question, and it comes from the line of Vivek Midha from Citi.

I have 3, and I'll go one at a time. So the first question is just a follow-up on your comments around the aluminum cable business in the U.S. potential for upside there driven by tariffs. Some of the press reporting from the Financial Times had suggested the U.S. government had been considering rolling back some of the metal derivative tariffs given the difficulty of implementation. In your conversations with the administration, do you get any sense that the current situation could change?

No, we have no sign of possible changes to the current discipline as far as the 232 tariff is concerned. The only change would be the reciprocal country tariff, as you say, due to the Supreme Court ruling. And -- but this will have a minor impact to our competition and also to our situation in U.S. So I think we're still positive about the fact that being local with a strong asset in terms of capacity and also lead time. And bear in mind, I'm not saying this for the sake of saying it, data center requires significant service with scale -- large scale capacity. If you could take share in the market of the others is because we can respond, thanks to the spare capacity we have in McKinney to this demanding data center requirement in terms of volume and service.

So we are really not worried and we don't care much about importance. First of all, the aluminum middle wire is a small space in the total I&C space in the United States. Secondly, the strength that we have, thanks to acquisition are unique. that no one inside the United States, any of the players in the United States can copy nor anyone from our side.

Very clear. My second question is around the very healthy demand in the U.S. for fiber, particularly from data centers. Could you give us an indication of what you expect the potential growth in the U.S. could be? And also just a view on where you stand versus your capacity? Are you capacity constrained in the U.S. given that you're investing in capacity right now?

Yes, the demand remains as strong as it was in 2025. So we continue with the same pace. And if anything, we see even more demand from data center because now they are worried about the ability of customer or suppliers to supply energy cable and optical cables. And we're entering into some deals with those hyperscalers to provide security supply and receive some down payment in return. Energy demand is strong in cable demand for energy cables is stronger. Cable demand for optical cable is even stronger. We are about to unlock investment in fiber capacity and cable -- optical cable capacity because we, as everybody else in the United States are at capacity.

If you search -- if you wanted fiber in U.S., you don't find it. If you wanted fiber inside the U.S., you don't find it either. not only from U.S. player, but also from Japan, from China, from anyone. So the market is extremely tight. And this is the best condition for us to leverage on the one hand, pricing power and also technological leadership that we have in the optical space, which is well recognized by the hyperscalers.

Very clear. My final question is on the technology side, again, the data centers. Do you have any more views or color on the potential implications to your business from the transition to 800V DC architecture? Any sort of views around the impact on the length of cable required, the value of the cable and so on?

Yes. It's a technology that we developed already, the 800-volt direct current solution. Yes, it is true if there is shifted from AC to DC, which is kind of a no-brainer because they will save a lot of losses that the current AC solution incurred. There will be a reduction in volume. But at the same time, the growth of the data center is so large that even if specifically per megawatt, we see a reduction, there will be more compensation coming from the additional demand.

Anyway, we own this technology. We were one of the first to develop. So we'll be happy to see and to participate to this conversion, which will never be deployed at scale, by the way.

And the questions come from the line of Monica Bosio from Intesa Sanpaolo. I hope you can hear me.

I have 3 questions. Sir Massimo, Sir Francesco and Cristina. The first question is on the data center revenues. Massimo, you anticipated that the weight of the data center revenues will achieve 10%. But what is the time frame do you have in mind for this weight? And what kind of margins should we figure out for the data center? This is the first question, and then I will move to the other.

Yes. So yes, we achieved already in '25, a level of EUR 1 billion direct sales and EUR 0.5 billion in direct sales. We believe that at the current pace, we will hit the EUR 2 billion target in so 10% of the total revenue. Yes, the margin is a bit of a complex situation. It is very high margin in digital solutions with a sophisticated optical cables. It's also very high margin in medium voltage, so powerful cables to interconnect buildings and connect data center campus among them. It's, of course, lower margin in low-voltage cable, but it's lower revenue to medium voltage. In electrification with assets like Encore, we supply low-voltic cable to data center, and we make 15%, 16%, 17% EBITDA margin. So it's a very accretive margin in one word.

Okay. And if I may ask, maybe I didn't get within the I&C U.S.A. business in the fourth quarter, can you outline the margins in North America because the exit speed was strong, but I didn't manage the margins?

I didn't mention the margin, I believe, but it was as strong as quarter 3. Quarter 3 was particularly strong due to the spike of tariffs that played in our favor when the copper tariffs were removed. But given the strong demand in quarter 4 and despite the normalization of the copper price due to the tariff removal, we still have -- I mean, when I say high, it means in the high teen digit numbers.

Perfect. And the very last, it's more qualitative. Let's say that the consensus is close to the midpoint, even a little bit higher to the midpoint of the new guidance. What are the main assumptions behind the upper part of your guidance range that could move towards the upper part?

Are 2 strong variables that in a way or the other have an impact on our results. One is the ForEx. Should it strengthen, we will have, of course, more chance to beat the midpoint and go beyond even the top of the range. And second, more organic growth, which is what we think is what we see in January and February. But as I said before, I mean, 2 months doesn't tell us the whole story. So we have to wait a few months to see if there is a stronger growth continuing in the coming months. And as I said before, we didn't bank on any tariffs. So if that came in, we will be in a different scenario. If the tariff benefit, as one imagine, I think some of you imagine hundreds of millions of benefit from tariff, and I think this is a bit ambitious as a consideration. But if tariff were to impact the business in U.S., there will be significant upside beyond the current guidance.

We are now going to proceed with our next question. And the questions come from the line of Uma Samlin from Bank of America.

My first one is a follow-up on your tariff comments earlier. I think if I heard correctly, you said that you haven't seen much of behavioral change from the imports, but you have started to raise prices without losing much market share there. So what's your strategy going forward in terms of the balance between market share and pricing? And if you are raising prices without losing market share, then can we expect a margin tailwind here?

We sit today on a very good margin in I&C in North America. This margin is split between different segments. Copper business is extremely high regardless of tariff. In the aluminum business, it was not that high in quarter 4. As I said before, we raised the prices and the market follow, and we didn't lose market share. This all depends on the balance between price and market share depends on the market demand. The market demand has said rebounded. We foresee talking to our customer and talking also to data center customer, a stronger outlook for 2026. So all the conditional there for us to benefit from a continued strong growth with high margin in the -- across the board, all the I&C segment of business.

That's super clear. My second question is on M&A. I guess you're interested in doing a bit more deals in the next year or 2. And what are the types of targets you're interested in? And what are the key markets you have in mind?

We have explored and we are still assessing different geographies and different opportunity in 3 main regions and start from priority 1, U.S., priority 2, Europe, priority 3, LatAm. Different size of business, different size of opportunity in which businesses, I mean, we have electrification is, of course, interesting space in U.S., but equally also power grid. In Europe will be also electrification and Power Grid and LatAm is pretty much the same. So the businesses that are involved in this M&A are the ones that I mentioned. Then priorities are not priorities, we have to find the right one. and proceed with the negotiation on the rest, but these are the areas where we focus on business-wise and geography-wise.

We are now going to proceed with our next question. And the questions come from the line of Sean McLoughlin from HSBC.

My first is on transmission. The margin trajectory continues to surprise. You're already over 18% in 2025. I mean what kind of -- well, first of all, what is driving it? Is this just execution? Is this just better operational leverage on your increased capacity, what kind of further improvements can we expect in '26? And how far ahead could we be coming versus your 2028 targets? That's the first question.

Thank you, Sean. You mentioned 2 key factors, certainly the operational leverage and the execution, which is an important driver of margin increase. The third one is the projects margin that we have in our backlog is better than what we executed in '25 or '24 or '23. And so we will continue leveraging the 3 factors. And yes, where we could be in '28, I mean, at a certain point, we will go up with a new Capital Market Day, not because we organically want to change '28, but because hopefully, there will be a perimeter change. At that point, we can -- we will unveil and reveal the expectation for this EBITDA margin in transmission business.

But of course, as you said, if you achieved already the, let's say, 20-ish level of EBITDA margin in quarter 4 2025, the expectation that we go well beyond what we committed to at the Capital Market Day. And by the way, there's another player here that in Europe mentioned very ambitious margins in transmission by 2030. So we want to beat that player, just to give you a sense of the ambition.

Fantastic. And if I could just continue on transmission. Just if there's any sign of change from your transmission customers in terms of absorbing the 30% increase in copper prices over the last 3 months, thinking out over the next years, if there's been any change in terms of CapEx ambitions, project time lines as a result of that?

I think the transmission -- TSOs, transmission system operator has to digest the wave of order and the significant surge in order intake orders that they sent to the market in '23. So we don't see a slowdown in itself. We see that for the next 5 years, we are flat out in terms of capacity and we are flat out in terms of delivery of the backlog and the level of market we see will remain around this EUR 15 billion in the coming years. And of course, project cost has increased due to the copper, but also some projects are in aluminum, I don't get me wrong. I think the point is we are all focused on the execution and the transmission system operator. And that's why we don't anticipate to see another wave of EUR 30 billion market intake as the one we've seen in 2023.

But if the market continue with this EUR 15 billion per year, we will be able to read beyond 2028 with sustainability of EBITDA margin, sustainability of EBITDA and possibility to further expand the capacity to absorb this continued demand in transmission business. You never know to cut across, one day, we might have more transmission opportunity also in U.S. I appreciate that the wind offshore is off the table in U.S. But thanks to data center, transmission interconnectors are becoming the key priority to spread the electricity capacity across different network and allow data center expansion to continue.

Just lastly on M&A. I saw a press quote earlier where you were quoting saying you're ready for large targets. I guess higher free cash flow is driving this ambition. Just in terms of -- is this a change maybe from previous communication, you talked about deferring large M&A out for the next couple of years. So should we infer that you're now a little bit more ambitious on larger targets sooner?

Yes. Good question. To be honest, yes, for sure, it's a change, but we have many factors making us open to this change, like the disposal of YOFC that has been a particularly successful operation. Second, the performance in EBITDA in 2024 -- '25, sorry, and the performance in free cash flow. So we are deleveraging faster than anticipated. And so as you know, as we delever faster, we have more power ammunition to address large M&As. Larger, as we said, as we always say, is something similar to Encore Wire. I don't think of something that is like a cost of acquisition.

And so we are ready. We are ready and also be aware that between starting the M&A and having the opportunity to come on stream will take 6, 8 months, but we are ready to go for that one. Sorry, I said CommScope to say -- CommScope is a large M&A that we had analyzed 1 year ago, but was too large. And so we will not go for EUR 10 billion M&A, that's to clarify. But the EUR 3 billion, EUR 4 billion M&A is something that is within reach.

We are now going to proceed with our next question, and the question comes from the line of Chris Leonard from UBS.

Two from me as well, please. And starting on the M&A point. Could you -- I know you said Europe was maybe second in line in terms of geographies of priority for you. Could you maybe comment if you can see the opportunity for margins to improve and expand across the power grid and electrification business within Europe without M&A? Or do you think M&A and the consolidation in the market that M&A could offer would be an important driver for you to improve that European margin?

I think your comments are correct. Now organically, we can do a lot in terms of increasing the EBITDA margin because the demand is so strong that we are working in expanding capacity. So there will be pricing power, more pricing power, there will be more efficiency and more operational leverage. Of course, the M&A remain the main catalyst to -- for a significant step change in profitability. because when you combine 2 companies, there are plenty of synergies, cost synergies and commercial synergies that will help the EBITDA margins enhance pretty fast.

That's really helpful. And just the second one was a follow-up on the fiber market and optical cables in the U.S. Can you speak maybe about -- I know you're investing more here, but could you speak about any kind of metric for what your capacity is today in the U.S. and what you're seeing in terms of what the potential increase could be?

And secondly, I think historically, you said you're -- in the data center market, you're slightly different to Corning here in the U.S. And I wonder because now there's a lot of capacity booked out, is there scope for you to maybe win share to move inside the data center? I think previously, you said you were more outside the data center on the fiber business. But yes, any color there would be helpful.

Yes. So we will not share much about our capacity and the increase. But definitely, the market has grown by a factor of 30% between '25 and '24, and we would like to maintain our share of wallet. So you can derive what will be our capacity effort increase to meet and maintain the market share. Data center is not that we are not in the data center. We are not in the inside building. So we are -- we deploy a lot of optical cables to connect the individual buildings of a campus among them. Inside the building, there's a lot of connectivity, less cables. In that space, there is -- there are basically 2 players Corning and CommScope/Amphenol and AFL. We have opportunity to grow in this space, but not in hyperscale data center, but in enterprise data center.

We are now going to proceed with our next question. And the question comes from the line of Alessandro Tortora from Mediobanca.

I have 3 questions, if I may. The first one, if you can come back a little bit to the, let's say, profitability expectation on the Digital Solutions business considering that in 2026, we will have the full consolidation of Channell, but also the synergies that you mentioned also because now you were expecting also some organic improvement into, let's say, the legacy business. The second question is related to your comment on the approach that discussion you're having with the U.S. hyperscalers. So we also saw in the past the recent past, some deals signed by [ Meta ] with Corning. Is it something considering your product portfolio that you could do in the sense, do you see, let's say, the same business possibility for you for just signing some multiyear frame of agreement? So this is, let's say, the second question.

And the third question is on the perimeter effect. Can you just, let's say, tell me exactly because if I understood well, you will have the consolidation of Channell, then ACSM, the Spanish one, also Xtera should be there. So just to understand the perimeter, how the contribution, let's say, between the acquisition you made.

Okay. I take this. The first one on profitability of Digital Solutions for 2026. Well, it's not only Channell. Certainly, Channell will -- is a great accretion. By the way, Channell obviously will impact on a full year base on 2026, having 5 months to the 7 months of 2025. But we definitely expect a growth organically also driven by the very strong U.S. market that we are seeing, which is not only volume, we expect also pricing to improve. So we have a double dual component of this profitability enhancement that we expect for Digital Solutions. And of course, the synergies also coming from the Channell deal. which are definitely interesting in terms of cross-selling opportunities. Maybe this is more potential expansion of our top line than margin accretion on the synergy side.

The second one on U.S. hyperscaler. U.S. hyperscaler, I think that certainly for the inside the data center, we would need to strengthen our product range. The discussions that we are having is more for outside data center. So driving basically all the fiber connections to transmit data to data center. But this is also the so-called long-haul business. This is also a very strongly growing business. So not only inside where definitely to improve our product range, we would need maybe also a perimeter change, but we are organically mainly focused on long-haul growth, also talking directly with the hyperscaler.

As we are going to have -- we are having discussion about frame agreements or capacity reservation fees or kind of the stuff down payment to provide security supply to the hyperscalers customer. Not necessarily only in the optical space as correlated with -- by the way, was Meta, not Microsoft and -- but also the energy [indiscernible].

Okay. And yes, sorry. And on the perimeter effect, just if you can help me, let's say, to reconcile the contribution you expect this year?

So your question is about the split of the 3 components okay. It's -- I don't know, the Channell is pretty simple. You take the EUR 100 million we mentioned for '25, 7 months and you extrapolate it to full year, you will basically end up with -- I give you the answer, EUR 60 million additional EBITDA coming from Channell. And then there is a kind of EUR 25 million coming from the combination of the 2, ACSM and Xtera, also take into account another change of perimeter adverse, which is the YOFC disposal, which accounts for EUR 10 million. And so you end up with a number that we mentioned, EUR 80 million plus from Channell, 25 from Xtera, ACSM minus the YOFC share.

Okay. Okay. Sorry, because I forgot, let's say, one point to ask. Can you help me, let's say, to understand the level of pricing effect we are going to see this year in, let's say, in the power grid I&C due to the recent increase in copper prices because I see some wire now mentioning basically every week raising prices. I recall that you have some kind of price set in the field. So just to understand if you're talking about a high single-digit price component at top line level for you in this division.

Price is difficult to say because it depends on the cost. So we have a formula in the power grid that distribution the cost effect to price. So given -- but in terms of demand, we see strong power grid demand in North America as well as in Europe. And so the level of pricing will be pretty robust, not only due to the cost pass on, but also due to the demand. I&C, as I said, is still weak in performance of Europe. We see stable in quarter 1, '26 over quarter 4, '25. But in I in United States, the market is pretty buoyant. As I said before, there is a combination of 2 factors, the rebound of the nonresidential business in U.S. compounded by the strong demand in data center, making the I&C and medium voltage business for I&C customers in U.S. very strong.

We are now going to proceed with our next question. The questions come from the line of Jean-Francois Granjon from ODDO BHF.

Just one question regarding the CapEx. Could you mean an update on the CapEx spend expected for 2026? You have communicated on the accumulated CapEx until 2028 to EUR 2.6 billion. So what will be the range on the CapEx expected for 2026? If would you expect an average between EUR 6 million to EUR 7 million or a different amount for the CapEx expected in 2026?

I didn't capture exactly the question about '26 or the future, sorry. EUR 80 million Sorry, Jean, if you want -- if you can repeat the question, the number for '26 is EUR 800 million, which is a slight increase over 2025. '27 number would be pretty much the same. We will probably exceed a little bit given additional organic growth needs that we see in these 3 years, the Capital Market Day overall cumulative numbers because the demand in transmission is stronger than expected in Power Grid equally. And in telecom it's definitely -- Digital Solutions is definitely much stronger than anticipated in the original CapEx commitment for the Capital Market Day. If that hold the sense of your question, sorry.

Thank you. We have no further questions at this time. So I'll now hand back to you for closing remarks.

Thank you for attending this call. It was a very -- it was a pleasure to share with you the exciting results in '24 and more importantly, the outstanding commitment for the 2026 target for our company, which we ensure we will honor and we commit to achieving and possibly, let's wait a few months to understand how the market will respond in the United States, especially. And for further update, we'll meet you in the end of quarter 1.

Good day, and thank you for standing by. Welcome to the Prysmian's 9 Months 2025 Integrated Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Massimo Battaini, CEO. Please go ahead.

Good morning, everyone, and welcome to the earnings call of 9 months 2025. I'm very excited today to share with you this fantastic success. Quarter 3, EBITDA, '25 is the best quarter ever. It is over EUR 100 million higher than the same quarter last year, '24, in spite of the EUR 30 million -- almost EUR 30 million adverse impact. So you should raise on a like-for-like EUR 670 million versus EUR 540 million. Remarkable also the EBITDA margin that reached the outstanding level of 14.8%, 1 percentage point higher than the 9 months comparison to last year.

The organic growth in the quarter has been outstanding also with a 9% increase that brings the overall 9-month growth for '25 at 6%. We also continue our successful journey towards sustainable targets. 39% has been the CO2 emission reduction in Scope 1 and 2 versus deadline and recycled content of material in our cables risen to 21%.

Let me now enter into each business unit to explain you the strength and the performance of the individual business. Transmission, first of all, strong backlog, EUR 16 billion. We had it in line with what was in the past despite additional revenue consumption. And on top of this EUR 16 billion backlog, we have been pretty successful in the order intake in quarter 3 with EUR 3 billion worth of projects awarded in this quarter. They will turn and convert into backlog in the coming months as this project will be awarded in notice to proceed.

Amazing has been the growth of Transmission, 40% in the quarter, which confirmed a solid growth in the 9 months, almost 39%, 40% also for the 9 months and outstanding is the EBITDA that has risen from EUR 90 million last year, same period to EUR 150 million. And by the way, this EUR 150 million, probably already is in 1 quarter, what one of our competitor makes in the full year. Extremely rewarding for us is the EBITDA margin achieved in the quarter, almost 18%. You'll remember that we set goals for 2028 for value, we need to achieve a range of 18% to 20% EBITDA margin by 2028. So we are well ahead of that trajectory. 17.8% is 2.5 points higher than same quarter last year and if you take the 9-month view is the same. We are 3 percentage points higher than last year.

Thanks to outflows as a cushion, thanks to better margin in our backlog and thanks to entire team, regions in the Transmission BU working hand in hand to maximize the results and maximize the execution of the CapEx and the relevant projects.

Let me now move into to Power Grid space. The organic has been significantly high 15%, basically driven by all countries, with North America actually outpacing this 15% growth, more than 20% was the growth in the United States. When you look at EBITDA, you see a moderate growth in EBITDA, but you have to take into account 2 effects in this EUR 6 million only increase in EBITDA in quarter '23 -- in quarter '25 or '24. There is a ForEx impact of close to EUR 8 million. And there is a Midwest impact driven by tariffs that hit one element, one family of products in our portfolio business in U.S., the overhead business. It's a project-driven business, where we have a firm price and we've been hit by projects landed in quarter 1 and quarter 2, where we could not stand a chance to increase and adjust the price to reflect the Midwest premium impact.

So you see a temporary blip in the EBITDA margin, 15.2% last year, 14.7% this year. This will be recovered in the coming months as we flush out the old project backlog and we will end the new project. The rest of the Power Grid business in U.S. is immune to Midwest premium because we have formula in frame agreement to transfer the cost to the market. The organic growth in the 9 months has also been pretty successful with a solid 6%.

Moving to Electrification. In spite of this moderate growth in I&C Global, you have to see behind this strong organic growth in United States, 10% year-over-year growth in quarter 3, remarkable growth in EBITDA in U.S. in quarter 3. Despite a weak start with July still affected by negative tariffs, thanks to August, September, we had performed a 15% EBITDA increase quarter 3 '25 over quarter 3 '24 in the U.S. in the I&C space, namely more than EUR 30 million in absolute value.

Unfortunately, this has been offset by ForEx and has been offset by some pricing normalization in LatAm, where we had spikes last year in quarter 1, quarter 2, quarter 3 in Argentina, which has normalized over the period -- this period of time. The EBITDA margin, we achieved sustainable 14.5% level. And when you look at the 9-month view, you see the upgrade and the accretion of the EBITDA margin associated to the -- attributed to the acquisition of the accretive and profitable perimeter over Encore Wire.

Specialty, I cannot say that we are happy. Actually, we are disappointed about this, nothing that was not foreseen. We are still struggling with the automotive performance. The demand is very weak. Price pressure is very high. We are still working on the disposal of a few plants and a process is -- unfortunately, I have taken longer than expected. We will resolve this in the next months. And we also continue to see some level of softening in the elevator space in the U.S. attributed to the weakness of the residential market in the U.S.

Moving to the last business unit Digital Solution, we reported a significant organic growth stand-alone legacy Prisma, 13% in the quarter. And you see the EBITDA left from EUR 45 million to EUR 88 million, thanks also to the perimeter change. There is the inclusion of more or less EUR 40 million coming from the Channell integration. This is the first quarter where we have the full consolidation in the treatments of the Channell perimeter. Amazing is the EBITDA margin. We never had better than 14% EBITDA margin in the business in the past. Now we raised this level of margins sustainable in the future to 20% with additional scope, with additional connectivity in the U.S. space.

Before I hand over to Francesco for more financial insight, let me draw your attention to maybe one only of these KPIs in the first one on the top of right-hand side of the page, revenues linked to sustainable solution. We raised this revenue from 43% last year to 44%, 45% already. In 12 months, we will show another improvement over this level. We have a target of 55% by 2028 as per our Capital Market Day. This is our important way, it is an important way, it's an important KPI to read our ability to innovate to drive EBITDA margin improvement. And the 14.8% EBITDA margin achieved in quarter 3 is a real reflection of the efforts that commercial, R&D, operation and rest of the team has put in innovating our portfolio, innovating our solution to increase share of wallet on the one end and improve profitability. And now Francesco.

Thank you, Massimo, and good morning to everybody. As usual, let me recap our profit and loss and summarize some messages that Massimo has already passed.

The -- an outstanding quarter, this 3 quarter. Starting from the revenues, EUR 14.7 billion with an organic growth in the third quarter, very robust, over 9%, which was driven by an outstanding growth in Transmission and a very strong improvement in the growth of Power Grid by the way, across the board, as Massimo said, both in North America, but also pretty strong in Europe.

The highest quarter ever in terms of EBITDA. You see the bridge on the right of this page, quarter-by-quarter. I would focus on quarter 3, EUR 644 million, an increase of over EUR 100 million versus Q3 2024 in spite of pretty significant adverse ForEx effect of EUR 27 million, which is mainly in the Power Grid and the Electrification business, but also Digital Solutions business.

In terms of margin, I don't have much to add to what Massimo said. At constant metal in the quarter, we grew 1 percentage point from Q3 2024, mainly driven by the growth of the margin, but also of the revenues in transmission, which is obviously changing the mix in the positive sense. It was driven definitely the increase of margin by the full inclusion of Channell in our third quarter results. And I would add also a pretty robust Q3 in I&C in North America, in particular.

On the lower part on profit and loss, you see group net income, which is almost doubling compared to the first 9 months of 2024, over EUR 1 billion, EUR 1.022 billion. Of course, this was heavily impacted, positively impacted by the disposal of our 23.5% stake in YOFC, which generated gains in the region of EUR 350 million. But let me say that even taking out this obviously one-off effect on our net income, the net income was very robust.

And I like to confirm what I did already in the first half of the year that in terms of growth of our EPS, we are definitely above the level that the CAGR, you remember the midpoint of this CAGR was 17% for the period '24, '28 that were setting last March in New York as a target. I would say we are more in the region in the first year of a 25% EPS growth for the full year versus 2024.

Okay, I flip quickly to the cash flow generation. That's the usual bridge of our net financial debt from September '24 to September '25, it's a strong deleverage, which was obviously fueled by the cash proceeds coming from the YOFC disposal. You read the number on the right of this page, EUR 566 million, which were definitely much higher than we expected, thanks to the incredibly strong share performance of the company, specifically in the month of July and even more August.

In terms of last 12 months free cash flow, we are a bit below the level that we saw in the last few quarters. You remember that we were last 12 months, half 1, slightly below EUR 1 billion, let me say. And this is not very concerning, in my opinion, because it's almost entirely attributable to a different distribution of cash flows in our Transmission business. To be more specific, last year, specifically in the first 9 months, Transmission was generating very strong cash flows because it was benefiting of a very, very large down payments and milestones that this year are more skewed on the fourth quarter. So no concern. I think that we will come back and we will regain our nice level of EUR 1 billion plus, by the way, in line with the guidance that Massimo will comment in a while.

Also in terms of net debt, the boost of -- other than our strong cash flow, the boost of the transactions like YOFC will generate a faster deleverage than we originally expected. And I anticipate a net debt by year-end in the region of the EUR 3 billion, which was -- which is definitely much lower than the, thanks also to YOFC, of course.

Back to Massimo for the outlook and the final conclusion.

Thank you, Francesco. So let me walk you through the upgrade of the guidance. On the right-hand side chart, you see the evolution of our guidance for the EBITDA. We started the year with a EUR 2.3 billion midpoint for full year guidance. We raised it to EUR 2.40 billion in light of the perimeter change, which was particularly set by the ForEx. So the EUR 40 million additional is the organic growth of the EBITDA of the legacy Prysmian perimeter, excluding the Channell benefit. And now we are happy to raise it to EUR 2.4 billion, so another solid EUR 60 million additional EBITDA coming from the strength of quarter 3 and the expectation of the quarter 4, of course.

Free cash flow also you don't see the upgrade here, but we had a EUR 1 billion low range EUR 1.075 billion, now we raised EUR 25 million, the bottom range and by EUR 50 million in the top range. So making a net increase of circa EUR 40 million in free cash flow for the full year.

Let me move to the final remark and wrap up the meeting and leave time for you to address comments and questions. So definitely, a quarter, which reported an excellent performance, as flawless execution in Transmission, also supported by a good order intake. The benefits of the accretion of the EBITDA margin coming from the Channell acquisition and a strong driver of the business growth coming from North America, Power Grid, I&C and Transmission with now North America really posed to benefit from the tariff benefit in the coming quarters.

So thank you. I'd like now to open the Q&A session and get more insight into the business.

[Operator Instructions] We will now take the first question from the line of Vivek Midha from Citi.

I hope you can hear me well. My first question is around the I&C margin in the third quarter. Would it be possible for you to give a little bit more color around where the profitability of the U.S. low voltage business stands and how that progressed over the course of the quarter? You mentioned that July was lower and August, September improved. And then also on that, you mentioned just now about the benefits of the tariffs in the U.S. coming through in the coming quarters. Could you maybe give some color around how you expect that to phase in over the coming quarters?

Yes. Thank you, Vivek. So the I&C space in the United States, we had many turbulence in the very months -- in many months of 2025 due to the different dynamics interpretation of tariffs in the market. In July, we were still in the old scheme where tariffs were applied to metal, so imported metals, imports of metal and not on import cables. From August 20 -- from August 13, all the tariffs were set in a way that's also the meta content of cable imported were charged with 50% in addition to this called country tariff. So from August 13 onward, we had a full recognition of the fact that we are looking for local producer.

So given that circumstances, in August, September, we've seen a reverse in trend. While in July, we saw pricing pressure because we had cost that importers didn't have from August -- from beginning of August onwards, we had certainly more even and normalized competition. Another pressure is on importers. So the I&C margin in quarter 3 in U.S. is the best ever margin achieved by Encore Wire best ever. Despite July was weak due to the former setting of tariffs. We are at least 1 percentage point ahead of the same quarter last year, 2023, which, by the way -- 2024, which, by the way, was a strong quarter, as you recall. Now how we are going to benefit from the tariffs in the coming quarters?

We don't know what is going to happen. Certainly, the supply chain from imported is a long one because they're shipping cable from every place in the world. It's normally -- we consider it a supply chain of treatment. So it will probably take another 1.5 months or so before this -- the quantity of product has been shipped and our in stock in U.S. will gradually run down. And so we should be seeing hopefully, certainly from quarter 1 onwards, less lower pressure from importers and more opportunity for us to gain share of wallet. So we think that in the aluminum building wire space, the market started already and will more progressively shift from importers, whose price is not going to give them any more benefit into for -- into local suppliers.

So we will certainly have a share of wallet opportunity. Whether this will turn in additional profitability, we will see. We'll have to gauge it. It depends more -- it doesn't depend on tariff. It depends more on the possible dynamics of shortage of cable availability in U.S. vis-a-vis the local demand. Local demand is expected to grow beyond that in '25, driven by the usual data center expansion, but also by some expectation that the residential market in light of the further reduction in interest rate will rebound a little bit in quarter 1, quarter 2 next year and also thanks to our solidity of the nonresidential market. I hope I answered your first question, Vivek.

Absolutely. Just to clarify to make sure I heard correctly. I think you said was it was from -- at some point in the quarter, that was the best ever margin in Encore Wire, given that they had some very, very good margins after the pandemic. Did I hear that correctly, best ever margin?

Yes. July was not the best margin but August, September was few points higher than the same period 2024. So yes, you're right.

Okay. And my second question is around the Power Grids margin. Just a clarification. Thank you for the color on the Midwest premium impact. Could you maybe confirm then was the margin in the power distribution business and high voltage AC, i.e., the business outside overhead, stable relative to the second quarter?

As you noticed, the blip in the EBITDA margin was really minor. The rest of the product -- the rest of the family side of Power Grid, so high voltage AC, power distribution and network components were not suffering any sort of margin contraction. It's only the overhead business in U.S., where we win projects is similar to the transmission space. We win one-off projects. We win projects and the price and the project is firm until you completed there's a cushion.

And the Midwest premium has risen in the last 2 quarters due to the additional aluminum tons supplied to metal imported in the U.S. We could not transfer this to those firm price project. While we've been completely successful transferring this Midwest premium increase to the rest of the business, call it I&C, low voltage, medium voltage distribution, no way. We have no issue there. We have formula to reflect the cost inflation coming from Midwest premium, copper rod, all the rest to our customers in the existing frame agreement. In this specific niche on the portfolio Power Grid, we didn't have this chance. We actually renegotiated some contracts, but vast majority at firm price.

So when we get past the end of this year, it is a backlog of old projects that suffered this price pressure -- sorry, this margin contraction due to cost increase will fade away and will enter 2025, '26 with a different speed. That's why I call this blip in 1 -- in '26, sorry, quarter 1, this will be fully reverted back to the original level of margin, 15% plus.

We will now take the next question from the line of Daniela Costa from Goldman Sachs.

I'll ask two, one on Electrification and the other one on Transmission, but given we just talked on Electrification, just following up on the comments there you made before. I think when you think about sort of this potential impact that you'll be better positioned versus the importers going forward on the Section 232, what's your view in terms of like will your intent be to mainly just grab share because they will be much more expensive? Or are you also planning to leverage pricing? Has that gap becomes so wide now out there?

Yes, it's a complicated answer because the tariff -- due to tariffs, first of all, been only applied to imported cables in the aluminum space. We expect the same treatment, the same approach to happen from December onwards where also for copper products imports, there will be the same logic. So the metal content of cable or copper cable import in U.S. will be charged with the same 50%. So -- but this still has to happen. Our interaction with the administration suggests that also for the copper space, this will happen.

Should this happen, we'll have Electrification, Power Grid overhead, high-voltage businesses, where we see our position in the U.S. strengthened by the fact that importers have additional cost to live with, to bear with. Some of those importers decided to eat this cost to digest it. So they didn't increase the price. By now, after 3 months, we noticed the attitude or the chance to hold the same price and getting charged with is 50% of metal content and on top of country is becoming; too overwhelming for them.

So we expect to see a reduction of imports of cables across the board for all importers in U.S., in high voltage, low voltage, medium voltage and electrification. So this reduction of supply to the U.S., driven by the extreme cost impact due to tariff will certainly create some imbalance in the market. So we think that the first immediate benefit will be the share of wallet. It is too early now to say whether on top of the share of wallet, we also have a price benefit. But be reassured that every time we had a chance to increase price and to improve profitability without losing share in the market, we go for it as we've done in the last 9 months.

The market was not that strong, but we haven't seen a particular EBITDA margin erosion in any space in the United States, despite tariffs were not in favor of local producer. So price we will see. Certainly, share of wallet is within reach.

And moving to the question on transmission. I mean, as you've mentioned, you're pretty much there sort of at the 18% and there's upside, as you said, to the 18% to 20% or that you're comfortably in there in the 18% to 20%. But the backlog is not dramatically different to the backlog we had at the CMD. So I guess you had visibility on sort of like what the gross margin on those projects were. So can you elaborate what you changed in execution and whether this is something that we kind of see has more longer lasting? And in that case, what is the ultimate ceiling of transmission margins?

To be honest, we also have to be more accurate in setting the target for '28. So the 17.8 today is based on standard metal. Should we base also the 18%, 20% target on the same standard metal, so the historical metal 10 years ago, we should naturally raise 18%, 20% to 18.5% to 20.5%. So in my view, the natural ceiling is 20.5% is the top of the range. It's the top of the range because it is true that the backlog is what it was 6 months ago. We've definitely been more successful or better -- sorry, more successful than anticipating in the execution, let me say.

And some of the risks that were in our execution and that we quantify and we assigned to provisions didn't materialize or we handled them with lower cost than anticipated. So it's again back to this execution. The strong team, strong assets. So don't forget, we have now plenty of new assets. And the new Monna Lisa is a new super performing installation asset with different capabilities and Leonardo da Vinci. Alessandro Volta, the asset will join our fleet in December '26 has a different set of capabilities as well.

So we have different tools for installing/burying cables underground. We have new factories. We have new vertical lines in Pikkala that has come to -- that came on stream at the beginning of this year. We have a new production line in Arco Felice. We have a fantastic new asset. Our cohesive team working with a strong focus on execution, and this is what has driven the significant uptake in EBITDA margin in quarter 3. And this has given us confidence that the 20.5% top of the range is also achieved over by 2028.

We will now take the next question from the line of Max Yates from Morgan Stanley.

Just my question is on capacity utilization in your Encore facility. So you've kind of mentioned there may be the opportunity to take share and take customer wallet share from -- as a result of the tariffs. So could you just give us a sort of indication of if 25% of the market is going to be challenged by these tariffs, how much can you ramp up your Encore facility in the next 1 to 2 years to maybe take advantage and knock out some of that competition that then has to put through higher prices. So where is capacity utilization and sort of how much room do you have?

Our strategy is pretty simple. We have spare capacity in the range of 30% in Encore Wire. We are not there in idle wire because we like to have spare capacity. It's there to guarantee the service. But in case we need it to respond -- to fast respond to market demand, we can utilize the Saturday and the Sunday shift to expand this capacity and leverage this available at incremental output. Of course, in the short term, this will be the answer.

But as soon as we see stronger structural demand growth, we will resort to the short-term action to gain share and then we back up this action with additional investment, which might take 12 months, 18 months, it depends on what we're going to do in terms of where we want to spend capacity. Of course, it would be [indiscernible] which line. So short term, we respond with the shifts -- available shifts on Saturday and Sunday to avoid to compromise in the long term, the service level, we will immediately activate the CapEx deployment to increase the structure of the capacity.

So we are the only one with this benefit, thanks to Encore. We didn't have it in Prysmian because Prysmian run facility at full capacity on 7 days a week. And the same does the other -- the same to the other players in the United States. So with this opportunity, we can certainly leverage the tariff in a better way than the other people and hopefully to gain share in the market.

Okay. And maybe just a second question around what the competition are doing in North America? Because I guess when we look at Encore margins, they're clearly at very attractive levels. Obviously, your biggest competitor, Southwire is private, so it's harder to keep a track on kind of what they're doing. But when you speak to your sort of salespeople, what do they say about what the competitors are doing on capacity? How much availability do they have to ramp up? And are you seeing kind of new entrants or people expanding capacity that maybe you didn't see before given how attractive margins are now in this North America business?

Yes. The margin attracted new entrants from outside are really not coming because of the challenge. So there could be new entrants from inside, I doubt it. The copper building wire market is in the hand of 2 players, Southwire and Cerro and the aluminum in the hand of us and Southwire, the rest are importers.

So behavior in the market is pretty simple to define. Southwire is very disciplined when it comes to price. Of course, they are suffering more than in the past because they are too exposed to the residential market. They have a significant exposure to residential market. This market has been sluggish and flattish over the last 2 years. And so they're probably not enjoying what we've been enjoying on the contrary of our side because with the electrification space, again, from Encore Wire, we have a huge exposure larger than before to the nonresidential space.

And on top of the nonresidential space market, we have access to data center, stronger than anyone else because we have a product range, very broad, large and complete, from telecom to Electrification, to Power Grid, to Transmission, which is unique, not common to a telecom player like Corning on Costco, not even common to Sourthwire. So they are disciplined. They always follow our price. Sometimes they are the first at price increase in the market. For example, in the last 2 weeks, we've seen copper increasing -- increases that forced us to increase the price, but Southwire anticipated us. They came with a price increase in the market first.

So we are happy about the level of competition. Whether they have spare capacity, I don't know. But what matters to this market is the service level. So if you have gained so much share in the center space, is because we serve these demanding companies, the likes of Microsoft, Meta and so on with our 24-hour service. It is because with 3, 2 days spare idle capacity we can respond with massive output increase that other people cannot respond to. So we are well positioned to leverage now the settlement achieved by the tariffs in the market to leverage our strength, our portfolio and the asset of McKinney and gain additional share in the market.

We will now take the next question from the line of Sean McLoughlin from HSBC.

Can I just build on the previous answer. Maybe could you specify what kind of growth you've seen in data centers, maybe across the different divisions? And my second question is related to fiber, particularly if you could maybe split out the growth in Digital Solutions in the U.S. versus other regions. And particularly, if we're looking at fiber shortages in the U.S., what kind of positive pricing impacts do you expect this might have over the coming quarters?

Thank you, Sean. In data center space, we've seen our revenues 9 months to date versus 9 months last year, doubling in value. And this is pretty much across 2 main spaces, Electrification, U.S. and Optical Digital Solutions U.S. So now in the optical space, 40% of our volume -- trade volume in U.S. belongs is for serving this data center business.

And in Electrification, I say that we have 25% of the total Electrification business, I&C business U.S. attributed to the data center expansion. This is not the same that we've seen in other regions yet. We are still working in Europe, in LatAm and APAC to become more relevant, to become more engaged with the go-to-market with a proper supply chain to win more share in data center space also as well.

As far as fiber is concerned, you are totally right. There is a shortage of fiber in U.S. to the point that we are really backfilling our capacity in the U.S., we have a factory in U.S. producing fiber with fiber production coming from Europe, price improvement happening -- has happened in quarter 1. Quarter 2 is happening as we speak. And so we count on this pricing and profitability enhancement in the coming quarters to set a new level of EBITDA for Optical Digital Solutions business U.S. next year.

We will now take the next question from the line of Monica Bosio from Intesa Sanpaolo.

I hope you can hear me. The first question is on -- from a strategic standpoint, Massimo. If I'm not wrong, in occasion of a recent interview, you anticipated that Prysmian could be ready for a big acquisition in 2026 in LatAm or Europe. Can you please give us more flavor on this side? And just a question, would you see as reasonable and external growth in the digital solutions space or in other areas? That's the first question.

The second one is related to Sean's question in the Digital Solution space. So pricing is coming -- so what kind of margins could we expect on a steady state in the Digital Solution space and more in general, given the exponential growth of the data center, do you see any supply constraints or disruption that could bring to some stops and growth along the trajectory?

Thank you, Monica. So yes, our position regarding M&A is the usual one. We consider M&A, the natural to top up our organic actions, organic plans. We think we are well positioned based on our track record of M&A to leverage additional opportunity. We will be ready for large ones. And by that one, that means something closer to the size of Encore from 2027 onwards, not in 2026. We have some more financial flexibility also in '2026 due to the disposal of YOFC shares, the treasury share. So we have still some room for minor midsize acquisition in '26.

Another point is to work in identifying the specific targets, the one that we can start the highest level of synergies. And certainly, we are looking at North America, LatAm and Europe as main priorities to expand leadership, expand portfolio and become more relevant within the customer base. I didn't capture the question about the standard growth in Digital Solutions.

You mean internal -- the organic -- so there is growth in U.S.A. in Digital Solutions, again, partly driven by the rollout of Fiber to the Home and also complemented by rollout of data center expansion. There is not that much level of growth in the other countries because they are much more advanced in the fiber-to-the-home implementation. France is almost at the end. The U.K. is almost at the end. Spain is made way too. So Europe will not probably give us satisfactory organic growth. North America will continue for 5 years at least to support organic growth of Digital Solution space.

Yes, my question was -- sorry, Massimo, my question was given the pricing that is coming in the U.S. in the digital solution, this could be a lever for further margin improvement. What you...

Okay. So the margin was coming to the point of mind. We reached a 20% EBITDA margin. So I think it's the level we consider sustainable. There will be upside in U.S. There will be probably stability or slight reduction in Europe. So I would not bank on significant expansion beyond 20%, which is already very accretive vis-a-vis the past trend.

Of course, there will be additional synergies that we want to leverage, thanks to the acquisition of Channell. Because now we own a satisfactory portfolio of connectivity products with the ones that we had in Europe, with acquisition that we made, a small acquisition that we made in Australia, the Warren & Brown and Channell. Now we can leverage the full portfolio and eventually further enhance the profitability of the business unit.

We will now take the next question from the line of Alasdair Leslie from Bernstein.

I had 2 questions on Transmission. So you talked about 2028. I was just wondering whether you could help us a little bit in terms of kind of calibrating how transmission scales up here in maybe the next 6 to 12 months? I mean how should we think about top line growth margins both in the balance of 2025, but maybe also 2026 as well? Any early thoughts there as consensus only has around 15% like-for-like growth in '26. It feels like maybe that's now too conservative?

And maybe also just a little bit more detail around the phasing of capacity coming online, please. I don't know whether you can kind of update us on those lines of Pikkala. The first one, I think you highlighted again, that's up and running. But the second 1 maybe an update there. Can that be brought forward a little bit? And maybe if you can, what's the kind of run rate on that submarine cable now in Pikkala? I think you were talking about starting with 32 tons and wanted to double that. So where do we stand now?

Thank you, and good morning, and welcome to the First Half '25 Result Call. I'm very excited to show the results achieved in quarter 2 '25, above EUR 600 million. This set a new record for the company EBITDA. The last best quarter was quarter 2 '24, that was quarter after the consolidation Encore Wire, EUR 540 million, but EUR 605 million is definitely an outstanding performance that has beaten and outperformed the past result. It is true there is some EUR 10 million plus from [indiscernible] perimeter change, but there is also another [indiscernible] impact in our quarter 2 '25 results versus the previous EUR 540 million of quarter 2 '24. Amazing is the 14.5% in margins, indicating a significant accretion of margin across all business transmission, PowerGrid, but also INC and Digital Solution.

The organic growth in the first half posted a nice 4%, which is basically coming across all the [indiscernible] business. EUR 1 billion is the free cash flow over the last 12 months, confirming that we are solid in delivering the free cash flow guidance that by the way, we updated for the full year. To be [indiscernible] faster consolidation of [indiscernible] perimeter from June, only took less than 2 months after signing and also on the CO2 emission and the target date significant reduction of CO2 emission in Scope 1 and 2 versus 2019 or 30%, heading for 40% for the full year scope.

Moving to some achievement. I think we never celebrate our achievement. Here, we want to make sure that we all understand that not only are we focusing on the results on the company employment on the growth, we are also setting the foundation for the future opportunity for growth. In the first bucket of comments achievement in the different [indiscernible] business in [indiscernible], Mona Lisa and [indiscernible]. So an important milestone in confirming our track record in delivering this functional capacity, both manufacturing installation on time and on cost, several agreements in Power Grid space. Stargate data center larger project adjudicated to us in U.S. for [indiscernible] project in terms of electrification cables and also digital solution cables. And very important, the consolidation expansion of connectivity space within Prysmian, leveraging channel and [indiscernible]. But I'm much more proud of what it is underneath, a lot of innovations. The first cables 245 for dynamic solution for floating wind offshore platform, a solution for connecting substation to the grid with medium voltage plug-and-play cables with connectors edges, fire-resistant range of products, new range of product for the U.S. And probably the most striking 1 is the hollow core fiber technology. We partnered with [indiscernible] U.S., the developer solution. We are industrializing it. This will allow to produce and sell cables -- fiber optical cables, whose core is empty. So they can be light data, transfer the highest speed in air that in glass allowing data center to be stretched over the territory without insisting on the same power grid. So making the data center expansion facilitated. So this innovation are key to confirm our leadership in technological space and supporting the first growth of the company in the coming years.

Let me move now to the individual business. Translation is the start of the [indiscernible]. I'd like to comment on the first half result, EUR 250 million EBITDA for the full first half versus EUR 150 million last year. So EUR 100 million more in the same period. With an important and significant growth in EBITDA margin from 14% to 17%. This, again, remarks the solidity of this business, remarks our confidence in achieving the 18% to 20% targeted margins by 2028 as per our Capital Market Day. And with EUR 250 million per semester, we see the journey to EUR 1 billion goal by 2028, EUR 1 billion goal EBITDA we'll be rich. Thanks to the solid expansion of the capacity, and thanks to the solid execution of the project of better margin that we have in [indiscernible].

In Power Grid, we are also happy to confirm the stability of margins. Margin had gone up 15.6%. EBITDA margin in quarter 2 is higher than what we reported for quarter 1 '25. The growth is substantial 5%, leveraging the capacity that we unlocked towards the end of 2024 and similarly that the market demand in U.S. in terms of grid enhancement is pretty strong and solid and driven by solid secure effects.

INC, also in INC quarter 2, you see the significant jump in EBITDA margin, indicating a highly accretive contribution of Encore Wire to the performance of [indiscernible] business in the entire group, 10.6% of the reported numbers for 2024 quarter 2. Overall, [indiscernible] year-over-year is at 14.1% this year with a significant improvement over last year. The growth was not certainly significant in this quarter 2. By all, the environment is pretty bumpy and our focus is on profitability. We didn't lose market share, actually grown market share, thanks to our solid service level coming from Encore Wire. Quarter 2 last year was particularly stronger. We really want to focus on service and profitability and maintain our leadership in the market and so setting prices in the U.S. market. Specialty we have some organic growth, not bad. The EBITDA margin is not yet at the level of the [indiscernible]. We are still suffering from the softening that we've seen in the automotive space. We are close to finally disposing the last 2 factors that we want to get rid of in the automotive space. This will happen before the end of quarter 3. We also had a negative impact coming from exchange rate, but more important decline from a softening in the residential, [indiscernible] business in the U.S. All the rest is solid, driven by significant amount of projects across all the verticals, shipyards the [indiscernible], fires products and crane and mining and so.

Digital reflects the benefit of the perimeter change, twofold. The EBITDA margin surged from 13.3% last year to 16.8%, and this accounts only for 1 month out of 3, where we consolidated a channel that namely was June. And the EUR 20 million improvement in EBITDA partly come from channel for more than EUR 10 million plus per the June month, and there are still the organic growth of the company. [indiscernible] channel is outperforming as [indiscernible]. As we've seen markets rebounding in the fiber-to-the-home cable business in U.S. channel is enjoying a significant rebound in volume and also profitability in the connectivity space in U.S. The combination to will make us a stronger provider of fiber to the end solution to the market with exposure also to the [indiscernible].

EFG KPIs, I'd rather commented 2 on the top right side of the page, 44% is a big share of the total revenue, which is linked, which is associated to sustainable solutions, so recycled content or material products [indiscernible] for previous [indiscernible] that can enhance our position in terms of supporting customers to grow us their goals in making them, allowing them to achieve the sustainability goals. Remarkable is also the 19.9% -- 20% of recycled content in our product. This is driven paradoxically by the [indiscernible]. The U.S. market had an excess of waste of copper available. China that used to buy this waste didn't buy because of the additional cost, and we took immediate opportunity. Encore recycled up to 30%, 40% of waste into the virgin material in the McKinney Facility. So Encore has proven to be taking advantage of the cost benefit of recycling waste, but also taking advantage of the recyclability part, the DAG part of this topic.

Let me hand over to Francesco for more financial insights into the P&L and the free cash flow.

Thank you, Massimo, and good morning to everybody.

A very robust effect of half 1 results, as Massimo anticipated revenues were not far from the EUR 10 billion level, EUR 9.6 billion in the first half, and the first half organic growth at 4%, recapping the main messages on growth, certainly a very strong transmission business, where the growth confirmed the strengths that we have already seen in the first quarter, a nice improvement in terms of growth in the power grid business, both in Europe and in North America, I would say. A good growth also organic and in Digital Solution with particularly strong North America and also definitely an improvement in terms -- sequential improvement at least in the electrification, namely in the INC, where we posted some good growth compared to the first quarter. So all in all, 4%. I think even better in terms of EBITDA performance, Massimo anticipated a record second quarter at EUR 605 million with margins at constant at standard metal price at 14.5%. And also half year, you see the accretion at standard metal price is very significant from 12.6% to 13.8% plus 1.2% is an accretion, which is mainly driven by transition, which is achieving already in the first half, the 17% level in terms of EBITDA margin. But also power grid with margin stays stable, actually even slightly improving at a very good and very high level. And of course, it's an iteration, which is also benefiting of the significant changes of perimeter that we benefit all in this first half, the Encore Wire consolidation, of course, comparable to the first half 2024. And last but not least, the fast and quick closing, we had on the channel acquisition, which is starting to contribute and to enhance our profitability quite nicely in the month of June since the month of June, and which will be a definitely better upside on the digital solution in terms of margin for the second half.

Below a line -- below the adjusted EBITDA line, very few comments, basically new to adjustments, EUR 2 million, benefiting from the gains that we realized on the 8% stake that we have sold so far of YRC. This 8%, by the way, excludes the farther 5.5% that we disposed of in July here, of course, the cut-off date is end of June. We have definitely a level of financial charges at EUR 145 million, which reflects the new perimeter. It is substantially in line with our expectation and tax rate in line with the 27% that we're anticipating at the Capital Market Day. All in all, this results in a very strong boost on our group net income. You remember that the first quarter reached EUR 150. This means the second quarter at EUR 276 million, giving the EUR 426 million year-to-date June. I think we are very well set to achieve the first year of our 4-year plan for group net income and EPS growth, which is -- I'm sure you remember metric that we were setting a very important metric, we were setting. You remember that we were setting a range for the 4 years between 15% and 19% CAGR. And I'm very confident that in this first year of the 4 years, we may even achieve this. We may even exceed this range with EPS growth, which may open will be higher than 20%.

Let me now flip to the very solid cash flow delivery that we had in the last 12 months, a solid and pretty much stable at the level of EUR 1 billion compared to Q1, last 12 months and also full year 2024. This is even more solid if we think that in this EUR 979 million, we discounted pretty much a peak in terms of CapEx. You see this EUR 940 million, there are very high level of -- CapEx will progressively decrease our full year base to the level that we have already anticipated to you of approximately [ EUR 747 million and EUR 50 million. ] For the simple reason that this year CapEx are distributed much more evenly, much more linearly than last year. And this will drive our cash flow up towards the new level of guidance that we have decided to upgrade and that Masimo will comment in a while.

Let me maybe remark here that the -- you see that this is a bridge of that from June last year to June this year. And you see the accounting treatment of the hybrid bond. You see the cash inflow close to EUR 1 billion, EUR 989 million net of some transaction costs. This means that IFRS, as you -- I'm sure you are aware, the hybrid bond is treated as equity. So basically, it's a reduction to our bet. This is, of course, a different treatment and view that, for instance, rating agency is having where 50% of the hybrid bond is treated as debt. Just to clarify the accounting treatment, which may be, may be not so easy or not so simple for you to understand.

Excellent. I think I'm over, and I hand it back to Massimo.

Thank you, Francesco.

Let me move to the guidance, and I'd like to draw your attention to the chart on the right-hand side of the page. You see how we built it starting point, the previous guidance was set at EUR 2.3 billion, plus/minus EUR 50 million. We are happy to upgrade the premium perimeter guidance by a number that you can figure up is EUR 40 million. And then there is a perimeter set added on top, unfortunately offset in our assumption by the ForEx. As said before, we are happy about the performance of channel. The consolidation of June is extremely accretive to the group. And the trend of EBITDA that we see in the coming months is comforting as of this important acquisition for United -- American perimeter for device, telecom space and giving us a significant upside.

ForEx, maybe we've been too cautious on this assumption, but we think that was the right way to define the new guidance with a possible offset between China and ForEx. We said this, I mean, today, after having seen last night changes in the tariff system of the U.S., we're buying now the 50% that was expected to be applicable to copper [indiscernible] and rod imports from all the other countries from overseas and only to raw material and not derivatives to finish product after what happened last night, whereby the tariffs are going to be applied to rod only and not to copper, but also to all cables imported from overseas, I must say that I feel much stronger today for what this guidance is expected to deliver for '24 -- for '25 and also I would like to say that I see upside coming from the new target system. Also in light of the possibility of the same approach that has been set for copper will be also applied to aluminum, where for the time being, we have only [indiscernible] applied to raw material and not to product -- finished product imported from overseas. So we feel much more relieved. We feel that administration is taking the right decision to finally protect and preserve local jobs and growth of U.S.-based manufacturers, and we are 1 of them. 99.5% of what we sell in the U.S. is produced locally. And finally, this will do justice to our investment in the U.S. base territory. We will also -- we have also upgraded the free cash flow guidance from the EUR 1 billion mark minus EUR 50 million, plus EUR 50 million to EUR 1 billion minimum, EUR 1.075 billion max range, EUR 1.040 billion midpoint.

So moving to the closing remarks, I'd like to confirm the positive and outstanding performance delivered by all segments of business in quarter 2. Also, INC see that posted some negative growth versus quarter 2 last year. [indiscernible] can grow by 5.4% in quarter 2 '25 over quarter 1. So sequentially, there has been a significant growth and improvement in EBITDA margin in AC North America. Margin expansion across the EUR 1 billion level of [indiscernible] confirmed and the upgraded guidance certain important milestone for us in confirming that the targets that we set for 2028 at the customer today a few months ago, and we didn't reach and possibly, we might see some upside. So the EUR 2.3 billion -- [ EUR 2.340 ] billion EBITDA paves the way for the EUR 3.1 billion level of target for 2028. The EUR 1 billion plus free cash flow of this year is in line with what we want to achieve by 2026 -- '28, with EUR 1.6 million free cash flow. EPS in fact, actually has outpaced already the target that we set for 2028, and the innovation that you showed -- that I showed you in this second page of the presentation, highlight important for -- is to move towards solutions in order to strengthen our portfolio and our customer relationship and our opportunity for growth.

So thank you for this preliminary presentation, I'll leave the floor to your questions.

[Operator Instructions] We will now take the first question from the line of Daniela Costa from Goldman Sachs.

If it's possible, I would like to ask 3 things. But maybe the first one, just expanding on the comments just now regarding the potential from the copper tariffs announced yesterday. Can you talk through like what do you think this is going to do? How much are imports now? How could this cause sort of the shortage in fears about shortage that we had like in 2021? What would you see as potential on core margins upside from that. I'll start on that one and then I'll ask the other.

Thank you, Daniela. So tariff -- the original assumption was that tariff would have been applied to [indiscernible] and rod imported from overseas. Not of course, the local production will raise prices to the level of imports. So the rising impact would have been that we would need -- we would have needed to pass EUR 1.3 billion of -- as copper cost to the market, creating a potential shock to the local demand. This was our concern. With a new situation only rod imported are going to soften this. And as far as we're concerned out of the total rod that we need in the U.S. we only buy less than 10% of the rods from Canada. So we will have a marginal impact in cost in this import of rod in the U.S. But on the contrary, all the imports of cables medium voltage, low voltage, high voltage, copper cable is that imported from overseas Korea, India, [indiscernible] will be penalized by 50% applied not only to the copper content of the cable, but to the entire cable value. So this, on the 1 hand, we will not see a significant inflation impact due to the copper cost rise in the market. You must have seen that already in comics, which is the metal value of copper in U.S. has increased by 50%, even ahead of the [indiscernible] publication in the last few weeks versus the [indiscernible] European value. And so thus, inflation would not hit the local demand. And in the contrary, the local producers like we are, we benefit from cost of cables imported from overseas much higher than today. So this will certainly benefit our guidance, our forecast for the full year, but we will see in the coming weeks how this will come into [ today. ]

But just quickly on that, how -- what percentage is imports? Is it around 30% of the market in copper? I know in aluminum is higher, but how much do you think it is a copper?

The copper demand in U.S. across the whole industry is 1.6 million tons out of this 1.6 million tons of copper, 75% rod is produced locally. 25% is imported. But 50% of the cathode is produced locally and 50% of the cathode is imported. So in the previous version of tariff, the [indiscernible] was penalized with 50% tariff. Now this is not the case any longer. And only the other imports in the U.S., which is only 25% and not only will suffer this 50% impact...

Cable imports.

But the cable input is what [indiscernible] because at the end of the day, we don't rely much on rod imports on cathode, not at all. On [indiscernible] import only 10% of the total need for our business. So Encore Wire, as mentioned before, will benefit from it because there will be no unnecessary cost to be passed to the market. And on the contrary, not necessarily in the empowered space, but across power grid voltage, we will have importance of power grid cable [indiscernible] penalized by the 50% applied to cables.

All right. Super helpful. My second question was going to be, I think, in electrification, in the U.S., you have a sizable share of data centers. We've heard many companies having very big double-digit growth in data centers. But when we look at your electrification business altogether, the organic growth was still 1.5%. Can you maybe divide it up between data centers and the rest? Why wasn't the growth higher than the high rate center exposure?

Thanks for the question because this help me -- allow me to explain the dynamics of the market until yesterday. We noticed the origination market was kind of sluggish has been very soft over the last 24 months. But the nonresidential market due to this potential negative impact of tariffs on the cost of the products has started to soften also. Data center, which are considered nonresidential business have made the total nonresidential market growing in '25 over 2024. But if it was only for the nonresidential is to the data center, we would have seen a slight deterioration in market demand. So data center is growing where our exposure at the center is larger the organic growth that you've seen and you see is in the first in quarter 2 sequentially over quarter 1 high, it's 5.4% growth, and this is driven by data center. And the softening in nonresidential business demand that we noticed in quarter 1, quarter 2, we think will revert into a positive trend given the recent last night new resolution on the copper costs. Tariffs copper at 50%, we're certainly settling the entire project cost with necessary implemental cost. This will, in my view, relieve investors, relieve the companies, data center -- no data center, infrastructure investment in U.S. and remove some heavy uncertainty that has weighted on the U.S. market in the last 6 months.

Got it. And just finally, on the backlog in transmission, which is sequentially slightly down. Do you just expect that we will end up the year with a backlog above higher than we started.

This is the expectation. There's not been much order intake in the industry in the first half of this year, but we expect a significant of business from National Grid and [indiscernible] from [indiscernible] and from turn from other TSOs in second half. So what we expect to gain in second half will not fully offset by the revenue that we had to deliver. Second half, so expect to see a slight improvement on the system [indiscernible] level of backlog, which is, by the way, not as low as we want it to be because the high backdrop is nice on the 1 hand, but prevent us strong committing from being able to compete on tenders because our capacity is [indiscernible] to 2029. So a level of backlog between EUR 14 billion and EUR 16 billion is what we [indiscernible] is more healthy to have us to be competitive in terms of flexibility or [indiscernible] and respond to the new project intake.

We will now take the next question from the line of Sean McLaughlin from HSBC.

I had 2 questions. Firstly, on grid. So organic growth bounce back from a negative Q1, we're at the mid-single-digit organic growth level, but ultimately, you've guided for out to 2028. I mean is this the new normal, or could we see an acceleration of that organic growth in H2? And I just wanted also to understand regionally what drove that rebound in Q2? That's the first question.

Thank you, Sean. But for the first time, we're talking about other regions in the U.S. The organic growth has been pretty high in Europe. Europe investment across all utilities has grown massively. We should consider this growth in Europe well above the 5% global growth of the group. Across all countries, we're seeing this revamp needs of intensifying and electrifying final users, which push additional pressure on the existing rates, especially in high voltage grid, but also in power distribution grid. But to be honest, [indiscernible] demand has been pretty solid in this quarter 2 over quarter 1, is also by design by quarter 2 is strong because the season -- the summer season allows installation, contractor to worker to a different extent than what happened in Q1. As far as [indiscernible] is concerned, we expect the second half to benefit from additional capacity expansion. This will come to fruition in the beginning of quarter 4. Then as far as the growth rate for [indiscernible] 4, we had to gauge. As I said before, we are in the middle of a transition from a tariff system that was not supporting a local producer. If we had in this space to pass on to the market significant cost of copper increase, which is not the case any longer. So I'd rather hold my judgment second half until we see how this will be deployed in the market with the new system with tariff, tariff will be deployed in the market. I'm pretty positive about second half organic growth across the regions.

I mean staying in grid, I just wanted maybe any comment on broader overhead transmission project risks in the U.S. following Greenbelt Express project had its government loan guarantee canceled? I mean are there any other projects maybe that you're involved in that [indiscernible] these kind of risk, or how should we think about the transmission market in the U.S?

We run a large project with -- in energy in the indi overhead line transmission of line project reimburse, which was benefiting from -- and this is kind of a renewable product because it's connecting grids of different states, 3 states. There was also benefit started from the incentive that have been removed, but the project that stood up also without incentive. In fact, the product started without incentive benefit. End customer confirmed, it will continue with execution on this project for which we already received a good down payment, advance payment a couple of years ago when the project was launched. As far as new project is concerned, I don't see this happening. On the contrary, the 1 big beautiful build. There are a lot of, let me say, facilitation to spur the demand of power grid cables to strengthen the grid. It is true that the investment in renewable solar and wind will not benefit from tax credit any longer. But equally it's true that there is a strong push to make the grid more robust, facilitating permitting, facilitated a local production and is [indiscernible] local production to support the [indiscernible] grid expansion in U.S. So I also see positive market trends arising from this 1 big beautiful builder, that's been just implemented a few weeks ago.

We will now take the next question from the line of Akash Gupta from JPMorgan.

One question. My question is on INC growth in the quarter. You had like minus 3.2% negative in Q2. And I'm wondering if you can provide some color on what did you see in different regions in Europe versus U.S. and within U.S. what was the growth rate in Encore and outside Encore? And then when we look ahead into Q3, do you see prospect of double-digit growth in some regions in INC as indicated by 1 of your peers recently.

Yes, one of the driver of the negative growth in quarter 2 '25 is unfortunately a difficult tough comparison towards quarter 2 2024, especially in U.S. quarter 2 2024, including pro forma cost the perimeter of Encore Wire. There was a significant demand, which benefited Encore Wire back in [indiscernible], sequentially. As mentioned, the INC growth in quarter 2 over quarter 1 is high, is 5.4% across the board. It is high in U.S. This is actually stable in Europe or the demand of INC business. We now to dig also from comment from our distributors [indiscernible], which see stabilization of demand in Europe for the time being. And luckily, we can compensate some stabilization. And you see with additional demand data center space also in Europe. Then what we see in quarter 3 and 4 and quarter 4 is probably a new scenario because this scenario discounted or this organic growth over '24 or discounted that significant uncertainty in U.S. market arising from this a huge cost that come from the application of aluminum tariff and wrong tariffs. With a new scenario, I mean, a lot of those inflation or the inflation that we expected to see in the market, which could and [indiscernible] part of this slowdown the nonresidential business exclusively [indiscernible], will disappear, will fade away. So it is probably too early to say what will be the scenario in terms of organic growth in 3 and quarter 4. But I feel I said before, much more positive than it was '24.

We will now take the next question from the line of Uma Samlin from Bank of America.

First is a follow-up on INC. So given the current corporate situation, do you think it seems like you're saying you've been getting market share and you're expecting to see a better H2 going forward? Then should we be able to expect both the pickup in growth rate and also better margins on the back of the corporate tariffs.

We will see finally a lack of [indiscernible] demand in U.S. because the huge cost coming from 50% applied to commerce. And the commerce cost is pretty high. We are talking about $10,000 per ton, which has become $15,000 per ton as a result of the regional tariffs will disappear. So we expect the market to rebound in terms of demand. Data center were already even [indiscernible] in quarter 1, quarter 2, a strong driver of growth in U.S. So I expect to see more organic growth in quarter 3, quarter 4, as I said before, let's wait and see. It will certainly be another figure of opportunity. If they apply this principle of not penalizing the rod cost, but penalizing the cable imports with -- from overseas with higher type. This principle has been applied to copper, will also be extended to aluminum. So if in what situation of this material copper and aluminum, we had tariffs applied to cables has happened over last night for copper. We will have a simple situation and much less cost to pass to the market and all the [indiscernible] being disadvantaged versus the lot of producer. This will certainly drive our organic growth massively, let's wait and see. I hope this will also happen for the aluminum space.

That's helpful. My second question is on your new guidance. So you updated that by EUR 40 million, and is that more of a reflection of the better INC and -- yes, from INC earnings in the first half. So I guess what are your gross margin assumption for INC great for the second half to support this guidance? And do you have any growth acceleration in H2 already baked into the guidance?

I think the EUR 40 million upgrade of the legacy Prysmian guidance is based on the growth information, which is coming in pretty well, ahead of our expectation, is also based on the growth in power grid we've seen in quarter 2 sequentially year-over-year. And also based on the fact that there are some additional volume opportunity that we think we'll be able to capture in quarter 3 and quarter 4. As I said before, doesn't reflect at all the new change in tariff dynamics because we didn't know this until midnight yesterday. That's why I said we might see some upside from what we posted today as guidance for the full year.

We will now take the next question from the line of Monica Bosio from Intesa Sanpaolo.

I hope you can hear me well.

Yes.

I have 4. The first is the power grid in the USA. I'm just curious, what is now the balance between demand and supply. Are other players capacity is at the [indiscernible] capacity coming on stream? And do you see any effect going forward in the market, in terms of higher competition of pricing, that's the first. The second one is on the pricing in the digital solution, how it is going on this side. And I was wondering if you are still supplying part of the U.S.A. demand from the European plants. The third question is maybe on the data center, which are growing to rest within the Industrial & Construction. Can you just share with us some number, what is the growth that you see coming in terms of revenues by year-end? And very, very far, and I am sorry, is for Francesco. The ForEx impact, the impact at the adjusted EBITDA level is very clear. If he can share with us the potential impact, if any, at the free cash flow level.

Thank you, Monica. Supply demand in U.S. is certainly more balanced with supply than it was 1 year ago, and some competitors likewise as a complete in the expansion capacity, but demand is still growing because there is a lot to do in power grids, and the 1 big bid for is pushing utilities to invest more in standing at a grid and making also the expansion at the center, feasible, achievable because as far as today is concerned, this percentage expansion is somehow constrained by the lack of electricity delivered to the new location. Price evolution is early to say, but I said before also in this space, we will benefit from tariff or copper tariff applied to cable imports and not only to raw material. Digital solution demand is super strong. We are still using European capacity, which was a great opportunity for us to gain market share because activating this floor using existing capacity in Europe, we could respond to the market surge in demand faster than the local players like [ Conscope ] and [ Kornick. ] It is true that we will probably see and as of today, we will see 15% import tariff applied to this flow. But the benefit on the share gain will outpace the possible margin contraction resulting from this 15% tariff application. Data center demand is so strong that is overshadowing the software in the rest of the nonresidential business. In terms of growth, we will perform in twice as much revenues than what we had in '24. And this is not due to the expansion of the center per se. It's also due to the fact that we are a full fledge player in data center. We sell the full range of cables from digital solutions to electrification to [indiscernible] and somehow also in transmission. So this is a unique position, secure, thanks to our synergistic portfolio. And the data center use case is the best use case that proves how crucial for us is to have these synergies, the portfolio -- such a growth portfolio. Francesco?

Monica, thanks for the question. The ForEx impact, the free cash flow level depends on the -- of course, on the conversion rate of EBITDA into free cash flow. So to simplify, let's say, that if versus the original guidance of the ForEx impact on EBITDA is around EUR 80 million, you can assess in between EUR 40 million, EUR 45 million in terms of impact on the free cash flow. Of course, also in this case, it is taken into account already in the new guidance upgrade of free cash flow that we have given.

We will now take the next question from the line of Xin Wang from Barclays.

So maybe I'll ask 1 on Digital Solutions. On channel, obviously, it's already contributing to strong top line and margin. Can you replicate their model to legacy Prysmian Digital Solutions business so we get further upside.

Thank you, Xin. We already have this model of combining connectivity with cables outside of the U.S. In Europe, we have a stronger connectivity business, which supports the cable business. In [indiscernible] also, we have the same solution. So channel was the best opportunity to complement our cable business in U.S. with connectivity in what we consider the U.S. -- the largest by far and fast growing further to the market in the world. So there is no need to replicate it because you already have it, but this will boost the opportunity in U.S.

Okay. That's really good to hear. Does that mean that we can expect static EBITDA margin for the segment any time soon.

You had to take a proper balance between marginal channel of about [ 55%. ] Margin at Prysmian is around [ 12, 13, 14. ] 30% would not be the profit weighted average to margins, but they will certainly go above 20% mark. That's coming on 12% is a significant accretion of the global margin of the group.

Okay. Good to know. And then the other 1 is technical along. So I want to confirm on the hybrid borrowing, this EUR 1 billion, the borrowing costs will go out as dividend instead of financial expenses. So there is no change to how we think about financial targets this year, is that right?

It is absolutely correct. They will be out and retire dividend, so they will not impact the interest expenses in the profit and loss. They will not impact free cash flow also because basically, they will impact the debt because the coupon will be distributed and treated as a dividend. So it will impact that but not free cash flow. The only new answer is that the hybrid interest will impact on the other end, the EPS, are impacting EPS. And by the way, the estimate that I'm giving of course, I considered these because being treated as preferred dividend, the net earnings are adjusted to [indiscernible] of hybrid bond interest expenses, but only for EPS calculation, not for net income.

Okay. That's very clear. Maybe the last one, if you can comment on this. So you mentioned -- so when people ask about the backlog of tendering activities in transmission, you said obviously, H1 market activity was not so satisfying. But H2, we can expect some level of activities from national grid and IPO or IPO. Obviously, we all know there is 1 problematic projects right now that 1 of your peers is having. And yesterday, they commented on the call that the other possible Plan B is to work with [ Itso ] on another project. Do you think that compromise your competitiveness in future tenders with Itso? How do you view yourself positioned for Itso tenders versus other market particularly?

No, it's for us kind of not easy to comment about competitors projects, but our position at Itso is pretty strong, and we don't see any impact coming from other competitors in our relationship and leadership with the Itso business.

We will now take the next question from the line of Miguel Borrega from BNP Paribas Exane.

I've got a few. First, on low voltage. I remember last time we spoke, you returned to making a 15% EBITDA margin in the U.S. Is that apply to only Encore Wire or also Prysmian U.S.? And then just a measure of comparison, can you share how much you're making in Europe at the moment? I would imagine a little bit lower than the U.S. And maybe big picture, how is the competitive landscape in Europe? Does that come from also foreign players? Or is the market more fragmented on a local level, in other words, why doesn't Europe do the same as in the U.S.?

Well, the EBITDA margin in U.S. is 15%, including Encore and including the Legacy Prysmian. Second quarter too, we resourced -- thankfully restored, thanks to the solid market demand and our pricing leadership were 50% EBITDA margin across the entire INC space in U.S. Europe is around in [ 10s ] on different countries, a country at 7%, a country at 15% to see where is U.S. I had also talked about LatAm. LatAm is a country where we are close to the level of margin that we have in the U.S. So the account in LatAm, where we had 13%, 14% EBITDA margin in average were 12%, and so we will, of course, try to maximize the margin across the board. But you're right, the competitive landscape scenario in Europe is different than the U.S., and it will never be close to that U.S. because there is fermentation and because the market is not protected. But still, the differentiation comes from sustainable solution, innovation on will help us outpace the others in terms of margin increase in the AC space in Europe or in other regions outside of the U.S.

And so if you're making 10% in electrification in the U.S. make 15%, what is dragging the margin then?

First of all, you should not choose electrification and INC. INC will make U.S. 15%. And globally, as you see, this has been confirmed. But I told you that are different geographies where the margin is not as high 15%.

Clear. And then in high voltage, if I may follow up here. You mentioned limited order intake year-to-date. How do you explain that? Is that just timing? Is -- are there projects being canceled or not new tenders going on? And how do you see the supply-demand balance evolving from here? Are you still being to keep it expanding until '28?

It is a matter of size of project and length and complexity of tenders. And you should not -- you should never read the market as a flat market in terms of ordering [indiscernible] per months, even the spread across the year. So [ apples ] in other years that you have a lot of intake in year 1, in first half, sorry, and lower intake in the second half and the other way around. This year, there will be a significant level of work in second half of this year as opposed to first half because this is the phasing of the tenders organized by customers. We will -- we haven't seen any particular [indiscernible] whatsoever. We're going to still a significant big balance between capacity and demand. And as you see, the foreign players are not winning shares in this market because there is a significant technological barrier. And b, as the technological leader in the market, we like enjoying creating even further [indiscernible] for importance like Chinese or India or other companies. The lack of installation capability is the main reason why this European business had not been awarded the 2 Asiatic players. And among these installation capabilities, we are the most capable, thanks to; a, vessels and our continuous effort in innovating in the space of [ burial ] debt see that installation capabilities. I hope I answered the question.

Yes, you did. Just wanted to confirm also you're still keen to expanding until '28?

What projects have been launched in '22, we will continue. And in fact, we have accelerated adding additional expansion of capacity in summary and land space to cope with the demand that continue -- that continues to remain strong.

We will now take the next question from the line of Alessandro Tortora from Mediobanca.

I have 3 questions, let's say. The first 1 is a follow-up on the Digital Solution profitability. Can you give us an idea of the driver behind the margin expansion we saw even sequential the Q2 versus Q1. I remember that profitability was around 10%, and now we're talking about 10%, 15% because considering the organic growth, it seems much moderated, I don't know, if you say mix or maybe some savings pricing. So just to understand driver behind this 14, 15 because, if understood well, with such a profitability and also probably with a good demand outlook, you mentioned combined profitability for digital solutions closely to 20%, including -- sorry, channel. That's the first question.

So there is an expansion of margins at Prysmian level, thanks to the organic growth in over quarter 1. So sequentially, it was pretty high. It was almost 10% growth in [indiscernible] 2, and this is also matching what I said before, we are supporting U.S. demand with European production, making organic growth stronger than the other players, local players. And the second component to this EBITDA margin improvement that comes from the channel acquisition. So we are blending in quarter 2, 1 month of channel at 35% EBITDA margin, weighted typical 12%, 13%, 14% margin of the legacy premium. So this has enhanced the margin of the quarter 2. And since from now onwards, the channel will be falling budget in our monthly numbers, you will see the EBITDA margin that was set at 16.8% in quarter 2 down towards a 20% EBITDA margin in the coming quarters.

Okay, okay. And then the second question is your comment on the data center-related sales, including [indiscernible] also the comment on twice the revenues we bought last year. So basically, considering, let's say, the old perimeter that we are talking about, I don't know, much around 10% of your group sales even though, let's say, group sales increasing by copper. But let's say, around 10% of your group sales could be linked, let's say, to all these data center expansion, let's say, kind of proxy which...

There is a bit too much. It was last year around EUR 600 million of the revenues associated with Data Center. This year, we did a base, we will be getting past the EUR 1 billion level. But you should see this inclination with the nonresidential space, where while last year, there was a strong growth especially in quarter 1 and quarter 2 in terms of infrastructure investment for no origination business, so airport commercial center [indiscernible] this year due to the inflation, the tariffs, the aluminum cover tariffs there's been a softening in the [indiscernible] reservation. Only when you couple the traditional nonresidential with Data Center, the global nonresidential in the market shows an increase. So Data Center is adding significant growth. Part of this growth is eroded by the softening in the mine in the typical and the original and [indiscernible] residential space. But overall, I said before, the nonresidential, including [indiscernible] is growing by a mid-single-digit growth.

Okay. And is it fair to say that, let's say, all of these data center growth driver for you. Can we say that it is cheaply related to the U.S. market in the sense that Europe -- as you mentioned before, this is kind of stabilizing and on the INC demand also in Europe, but it is fair to say that so far -- is data center [indiscernible] for you is chiefly a European driver -- sorry, an American driver?

Data Center setting a strong driver for our growth in U.S. We are much better positioned in U.S. in other geographies. But we are working on it. We have a significant share in the U.S. and limited share in the other European country [indiscernible]. But we are especially running one-off projects, one-off activity to create more engagement with the contractors in Europe, which are the real channel to market, to Data Center's expansion conversely from distributors who are the China to market in U.S. So we are adjusting our word-to-market channels in order to be also in Europe, a significant player in the server space.

Okay. And sorry, the last question is just on the EPS growth, let's say, target for the current if you can help me to understand the capital gain, the amount of the capital gain also including the last disposal you made from [ YFC ] that would be the bottom line and the expectation for financial charges for the full year?

Yes, I start from the second, Alessandro. The expectation of the financial charges for the full year is in between EUR 270 million and EUR 275 million. So as I was commenting in the second half, which is slightly declining, slightly decreasing compared to the first half. On YFA, we sold so far 80% stake, actually not so far year-to-date June, 8% stake, moving from 23.5 -- 23.3 down to 15%, then we sold on top another 5% in July. On the part realized by June, the gains were around EUR 30 million, say, EUR 29 million to be exact. And on the, I'm checking, on the second -- on the path, which was already done in July, the gains are, let me say, EUR 45 million more or less. No, of course, not included in our half results yet.

Sorry, the remaining 5%, the capital gain was 45%.

Correct. Because they sold at a much higher price.

Okay, okay, okay. So let's say, we can assume so far with your disposed stake, this EUR 29 million plus EUR 45 million.

Correct.

We will now take the next question from the line of Vivek Midha from Citi.

I have 2, if I may. The first is on the transmission pipeline. One of the U.S. high-voltage companies commented on the call that they've seen a softening in the European HVDC project pipeline? Do you see affordability concerns for customers? What are you seeing here? How are you seeing the European pipeline developed?

We haven't seen yet there is a possible softening there, but it is so that after a big wave of the [ world ] that's happened '22, '24. Will have to realize that capacity is not yet at the level they need to have -- to have a shorter distance between the [ world ] and the [indiscernible] executed -- start of execution report. So I think now the mark is adjusting down, adjusted -- that is adjusted to the level of capacity and taking stock of the fact that the capacity fully saturated across all players on '28, '29. And so we confirm the EUR 15 billion level of market in the coming years, as we said, a few months ago.

That's very helpful. And my final 1 is just a follow-up. I really appreciate all the color on the copper tariffs, the the impact on copper imports. I'm a bit curious around the rod -- the copper rod imports. You mentioned that about 25% of the market. I'm just curious how much spare capacity do you see within the industry for the existing U.S. broad mills, i.e., if there's any reduction in those imports of copper rod can all that shortfall being met by the U.S. mills that they're existing or indeed any new addition to the market? Or do you see any risk of shortages?

U.S. players, rod producers are investing to expand local capacity. On the 25%, as you said, is the gap between the demand and the current capacity. We are also planning to invest in new or capacity in Encore Wire as part of the plan for synergies. So gradually, this 25% gap is meant to fade away over time.

We will now take the next question from the line of Lucas Ferhani from Jefferies.

I'll have a few as well, maybe we did 1 at a time. Just the first one is also on copper and also the discussion in the paper on copper scrap. Do you see that also as a win because that can be used that generally comes at good prices, and now they are forced to keep it domestic. So can you talk again about kind of copper recycling and your use of copper -- crops and whether that could be also a competitive advantage on price?

The copper scrap is sold to the market at a discount over COMEX. So when the comments went up from $10,000 to $15,000, there was still a discount over the level of [ COMEX. ] So the real bang is that we have regardless of the level of [ comics, ] some, let's call it, should I disclose it, but anyway, it's $300 saving per tons of copper produced at Encore Wire already described. Of course, as we edged towards higher recycled copper in our rod facility at McKinney. These $300 per ton saving is going to increase. We used to have an average over 15% recycled waste in our copper rod. Now thanks to the excess of waste available in U.S. market, this level has risen to 30%. So this level of savings is growing. And yes, that was probably -- is that clear, Lucas?

Yes, that's clear. And then the second one was just on the [indiscernible] fiber technology. Can you talk a little bit about the agreement essentially in your kind of buying the IP and then you can produce sell the cable? Will that work as a JV? Can you take us a little bit into how that will work financially and also generally on the size of the market there, my understanding is that it's only really required in peak application and portable addressable market is probably quite small. So just wanted to have your view on those 2 points.

[indiscernible] market. This is a new market. For tending this technology was not available. This company, Relative Developer Solution, and the other commercial partner to us. They have sold tables to Microsoft other players, hyperscaler at which were not -- they were not able to produce apart from what they could do in their lab. So we became the industrial part to this company. So we are industrializing their solution, their process for hollow-fiber in our factories in Europe. So the combination of these 2 companies as in the relative net will provide the market with industrial cost-competitive solution to sell hollow fiber to hyperscalers, enabling them to distance the data center further out. Then what will be the market size, it is early to say, we have to wait see what will be the cost of this industrialized solution. [indiscernible] is a lot of interest from Data Center because the current latency of the fiber solution provide -- I mean set significant constraints in terms of selecting the possible areas where data center could be built. So we will let to figure out this market size in the coming years, but certainly, the profitability of this solution is pretty high as we speak, pretty high.

That's very helpful. And then the last 1 just on what you're doing exactly in the specialty business in the automotive segment. I think if I understood correctly, you said you were kind of in the last process of divesting some of our automotive exposure. Do you mean kind of winding it down, we're no longer producing some of those kind of more commoditized automotive cables, or are you actually selling some of the factory capacity. We are selling the assets, the equipment and the customer attached to -- a contract attached to this business for 3 plants out of the 7 plants that we had in our perimeter. There's 3 plant disposal. 1 is up already in quarter 1. The other 2 will be completed in quarter 3.

And what would be roughly your exposure to automotive after that in terms of revenue [indiscernible]

We had before some EUR 600 million, EUR 700 million revenue -- worth of revenue in this space. With this disposal, we will do this EUR 700 million down to EUR 450 million, only on business that is worth keeping like the 1 that we have in the U.S.

We will now take the next question from the line of Chris Leonard from UBS.

Just 2 quick ones for me, if I may, please. The first is regarding the U.S. dual listing. I just wonder you can give us a time line about when you might consider repositioning on that given acquisitions now have been bedded in with the Encore Wire in the business for more than a year and channel is going well. Equally, the U.S. market looks like it's going to be very strong on the back of commentary on the copper tariffs. So I just wondered what your thinking is there on your dual listing?

Thank you, Chris. This is still a project on hold. We are super focused on the resolution of what we have to complete the transmission growth is solid, but we are still few steps to achieve -- to target the EUR 1 billion goal for '28. We're just entering to the channel integration as we speak. And by the way, they are -- will continue through year-end. And so the real integration will be more executed in '25. So we also invested much more time in engaging U.S. investors than we did in the past. So try to capture in a way the benefit of U.S. dual listing without performing U.S. dual list. It remains an opportunity at the proper time, we will make the relevant decision.

Okay. Super clear. And the second question was just on the guidance range. And I think you have the upper end. Is there anything you can help us on the sort of moving parts of what might take you to the upper end of that guidance range of EBITDA?

As said before, 24 hours ago, we didn't think to modify it and to consider the upper end really, within reach. Now let us assess what the dynamics -- the new dynamics of the market of U.S. will be following the announcement of last night, and we will be more specific in the coming months. But as I said before, we feel much stronger than 24 hours ago as far as delivering the guidance and some upside.

As a follow-up to that. Was there much in the upper end of the current guidance range that was attributed to sort of INC and electrification business, or are you more focused on power grid and transmission?

I think we see -- I see electrification in power grid. There would be the possible upside over this current guidance, having transmission be fully recognized in this guidance already and digital solutions as well. Apart from the channel business that we had 1 month at the trajectory and the trends and the outlook for the coming quarters is positive, but we have to wait and see what happen. So the 3 possible later upside channel, power grid and electrification.

There are no further questions at this time. I would like to hand the conference back to Massimo Battaini for closing remarks.

I like to thank you for spending this time with us. Various [indiscernible] to your question and try to answer your question with giving you the sense of what's happening in the market. There's a lot of things that's happened at once, but I see very positive about quarter 3 and quarter 4. Looking forward to talk to you in the coming quarter. And for those of you who are going to have a summer break, please enjoy the break. Thank you very much.