Prysmian Aktie

Good day, and thank you for standing by. Welcome to the Prysmian to acquire Atkore 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. Thank you, and welcome to this call. It's very important, and I'm very excited to mention the completion of this M&A acquisition. It's an important step forward in our leadership in the United States. You remember that we started 2 years ago in June '24 with the leadership in electrification space cables with the Encore Wire acquisition. We gained momentum in that market, and we got exposure to data center. Now this acquisition is bringing us additional complementary products that make us a unique solution provided player in the electrification space in U.S. We are becoming a one-stop shop provider of cables across the whole range of cables for data center, nonresidential, residential application.

And we complement this cable performance with all the components that are needed and utilized to install cables in the different building be the residential -- residential and also data center. In this sense, with this shift to solution provider, we are even more exposed to the long-term growth driven by the stronger sector driver of growth in the electrification space in the United States. The acquisition is extremely accretive in terms of additional value. We will be adding $150 million worth of synergies to the combined entity, thanks to commercial strengthening and operational efficiency. And of course, as you've seen, we will fund this growth, this acquisition with partly debt and partly with equity in order to preserve our investment-grade rating.

In this context, we -- this acquisition fits extremely well between the strategy to become even more relevant in the United States. This one-stop shop solution provider make us even more relevant with distributors who are the key partners to our business in the United States. We will become more sizable and will become more complete in terms of product offering. There is a common go-to-market. All products are called -- sold through agents to final distributors in the same way cables are sold by Prysmian to Encore and legacy Prysmian perimeter. The synergy opportunity I mentioned before will create additional EBITDA margin improvement over the coming years. And we will expect again to confirm this completion of the synergies by the end of 2029 -- at the end of 2029.

The other product offering of this player is pretty broad. There are many components, let's call them installation components, so steel conduits, pipes, electrical fittings, metal framing, all the stuff to cable -- to manage cable during the installation and cable tray, wire basket, all the stuff. They play in many end markets, industrial construction, data center, cables and components for power grid for utilities, renewable business and specialties.

The perimeter is supported by -- the business is supported by 30 factories so they're very spread and they're able to reach out all the end markets in the different states in the United States. They also have a presence in the United States, 15%, 16% of the revenue is made overseas, $2.8 billion revenue in total in '25, $386 million EBITDA and 14% EBITDA margin. Some comments about the value of the acquisition. The EV is $3.8 billion, regarding to $95 per share in the [ cash transaction ]. The multiple based on 2025 is pretty contained at 9.8x. And after synergies, it will further go down to 7.1x EV/EBITDA of 2025.

Value creation $150 million synergies. And from day 1, from year 1, you will see a single-digit growth in EPS, high single-digit growth, then supported by a double-digit growth at the time at the run rate in the implementation of the synergies. It was important to preserve our investment-grade rating to this acquisition. And at the end of the '26 pro forma ratio will be 1.4x EBITDA year-end. So confirm closing -- confirming the value creation associated to this acquisition. It's a third acquisition in a row in the United States. We start with Encore, giving us leadership in electrification. We continue with the Channell where we gain a remarkable position in the digital solutions space. And with Atkore, we complement the journey initiated with Encore in 2024.

The one-stop shop is the most relevant rationale behind this acquisition. When we have a broader portfolio and you can sell the whole footprint of cables that are needed by customers, data center, distributors, agents, EPCs, you gain leadership, you gain share of wallet and also profitability enhancement in the market. Solution provider is what we are aiming at. You know that we have target out there for '28 to have 55% of our revenues that can be considered solution. And this is actually consistent with that and even better adding more revenues as solution providers to our perimeter.

The accretive acquisition from year 1 speaks to itself for the value and the complementarity of this acquisition to our perimeter. I think I covered this. And then I'd like to leave the floor to you for your questions and comments.

[Operator Instructions] We will now take the first question coming from the line of Max Yates from Morgan Stanley.

Maybe just my first question, could you just sort of walk us through the industrial logic a bit more? So when you sell a cable via a distributor, how do these products actually kind of relate to that sale? Do -- is this about sort of packaging them together or at the point of sale? Or is this really -- what are the advantages for the customer of having these 2 products kind of together under the same roof as opposed to them just buying those kind of individually?

Yes. Thank you, Max. This is a key point and pertinent question to appreciate the rationale of the deal. Our go-to-market is similar to Atkore. We use agents to sell our cables to distributors, mainly to distributors and EPCs. Our distributors, which, by the way, are the ones that we inherited from the Encore Wire acquisition already sell other cable components and call them installation components alongside our cables. And in particular, mostly some of them already sell Atkore products to the same customers who we sell the cables to. So at the end of the day, the packaging is the logic behind this.

When you have a larger portfolio in the go-to-market through our own agents, which we will, of course, consolidate with the Atkore agent. When you sell the cables plus components, you enhance your chance to win the bid, you become stronger and you sell more than individually because there is actually a package. You need a cable, but you need at the same time that you deliver you need all the components install cables at the premises. So that's the strong rationale behind this acquisition. Complementarity portfolio, same go-to-market, same agent packaging solution, packaging orders.

Okay. And maybe just sort of 2 more brief ones. So just the synergies, cost, how much is cost, how much is revenues? Just if there's any kind of guidance you can give us there?

We have out of the $150 million synergies, more or less 55% of those synergies are commercial. So call it between $90 million and $100 million. The rest can be associated with operational synergies, procurement and organizational synergies. So $100 million revenues and margin uplift, $50 million cost efficiencies. And to be honest, Max, we haven't completely embedded in this $150 million on the operational side, opportunity to further consolidate the perimeter. There is also some cable production at Atkore site, which we might decide to move in our factories. So all these additional opportunities have been included in the original $150 million submission.

Okay. I'll ask -- I'll let someone else ask about the equity raise. But my final question is actually more -- it's just more about competition in Atkore's end markets and how you get comfortable with that. If I go back, I think I've written notes in the past about kind of Atkore's profit warnings back in 2025, where people were kind of comparing it to your business. They had a lot of issues with imports from Mexico, I remember at the time. How do you get comfortable with the sort of competitive landscape? And I would assume their business looks a lot better under a tariff regime than not. So I guess, does this acquisition work in a world where we don't have 50% tariffs on imports of raw materials? And how did you get comfortable in the due diligence with kind of Atkore's competitive position given this seems to be a real issue for them 2, 3 years ago?

Yes. We carefully analyze in our due diligence those aspects, Max. And there has been normalization in the pricing and margins for the company. The trends that they follow in the last 5 years is pretty much the same that was recognized in our legacy Prysmian perimeter, IMC and Atkore, where there's been an increase of margin through period '21, '22 and '23 and then a normalization. We see us -- we see Atkore now at the bottom of this normalization. If the early margin has started improving in quarter 2 and quarter 3 of this fiscal year 2026.

As far as competition is concerned, we see them, first of all, they are the ones with the largest portfolio and the deepest portfolio. So they have a comprehensive offering in terms of installation components. Most of the competitors have a very depth presence, but only in few verticals. So that's why their portfolio combined cables portfolio that we own, which is the largest possible give us a significant competitive advantage over the other competitors. Then as far as the tariff is concerned, we didn't see particular concerning point there. They have good sources for the key commodity material, competitive sources. They suffer a lot in terms of operational inefficiency more than raw material cost increase in the last few quarters. So I think that with the consolidation opportunity and bringing the discipline of Prysmian will restore a proper efficiency manager, cost manager and go for an enhancement of EBITDA margins.

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

So my first question is on the data center exposure of Atkore. It seems like they do have a relatively significant data center exposure. Would you be able to quantify that? And also, it seems like they've been growing a bit less than the Encore business, the data center exposed part of Encore at around 10% year-to-date. And would you be able to elaborate a bit more what are your thinking there? What should we think about the total share of wallet for your data center customers after the acquisition?

Thank you, thank you for this point, Uma. They have more or less 10% -- 10%, 15% of revenues in data center. So they've not been able to capture or carry the growth in data center for many reasons that I think we need to dwell on now. But that's exactly the point. While we've been able to grow fast in our data center end market and our share of wallet has increased a lot, and we became the #1 provider of cables in data center, having this additional piece of portfolio where we can combine cable and more cables for data center sophisticated application with the adjacent component, we can further accelerate our growth in data center together with Atkore. So us and Atkore can join forces to make Prysmian even a stronger player in the data center market in the U.S.

That's super helpful. Another one I have is a follow-up on the synergy part. So this reminds me a lot of the General Cable you did in 2018. And I was wondering like do you see a lot of synergies in terms of procurement of raw materials and SG&A and manufacturing optimization. And I guess you touched a bit on that. Would you be able to elaborate perhaps a bit on that?

I would rather associate this acquisition in terms of similarity more to Encore than to General Cable. In General Cable, the deal was aimed at consolidating the market and 75% of the synergies were cost synergies, and we didn't think of achieving commercial synergy back then. Then in reality, we had also upside in commercial synergy. But when you look at the size of the synergy with Atkore, $150 million, it is the same amount that we committed to achieving in Encore, $150 million. And the breakdown between commercial and operation is exactly the same. We have $90 million commercial synergy with Encore, and we have now $95, $100 million worth of synergies in Atkore.

And the operational synergies are slightly different. There is -- they were in Encore, $50 million of operational synergies is basically associated to the consolidation of our cable activity legacy business into the Encore site. With Atkore, we have some organizational opportunity. We have some procurement savings, and we have also some manufacturing consolidation. But the split and the breakdown is pretty much the same, $100 million commercial, $50 million operation is more or less the same split that we had with Encore Wire.

That's super helpful. My last one is on the U.S. listing. So I guess you previously mentioned that you could potentially use the M&A as a way to do a secondary listing in the U.S. It seems like that's a bit more further down the line. Would you be able to perhaps let us know what's your thinking on that?

We -- this will further expose us to the U.S. We will become even more U.S.-based than before. The revenues and EBITDA generating even higher share in our total portfolio and U.S. listing will be an opportunity at the right moment that we will disclose.

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

Just a question on the U.S. exposure. If you could just remind us how much of Atkore revenues are U.S. And just looking at the other locations that you mentioned, is -- how do we think about international locations and other market opportunities for you? Or is this really just a U.S. story? Just to understand that regional dynamic a little bit more clearly.

Sure, Sean. No, it's not just a U.S. story, though U.S. is a prevailing part of Atkore and is where the electrification market is the strongest. Outside the U.S., there is a presence in Canada, there's a presence in Australia and New Zealand. There is a presence in U.K., Europe and a minor presence in South America. And call it, 84% is the U.S.-based revenue and the rest is this international business, which is very relevant also because it's exactly overlap where we have strong cable presence, as I said, U.K., Europe, LatAm and APAC, Australia and New Zealand.

Okay. And can I just check some of the numbers that you gave because it sounded like you're talking roughly $100 million on commercial synergies and $50 million on cost synergies, which is more like a 2/3, 1/3 split.

Yes. Correct. Correct, Sean.

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

Just the first one is, how do you plan on managing it? Will it be kind of a stand-alone within Prysmian? Or do you plan to fully embed it within the electrification business?

It would be meant as a stand-alone assets, but embedded completely in the electrification business because in electrification with the combination of Encore, legacy Prysmian and Atkore. It is where you will find the EBITDA coming from these 3 special perimeters. So it will be included in the electrification segment of the United States and also in the other relevant geographies.

Perfect. And then another one just on litigation. They were involved in kind of antitrust litigation. It seems the main issues have been resolved, but there are still some that are ongoing. So I was wondering, is there anything in the deal regarding kind of the potential liabilities or remedies that would be needed if there's anything else on that topic?

So there is still a pending litigation with DOJ that we assessed during the due diligence that thoroughly assessed, and we embedded this potential impact in our price. So the $95 is where we factor in the possible risk arising from antitrust, not antitrust, DOJ litigation.

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

I was just wondering if you could talk about the financing for this deal and the thought process there. I realize it's going to be a combination of debt and equity. But in theory, it looks like you can comfortably do this with just debt financing and still be investment grade. And on the equity side, do you plan to use up all of your treasury shares? Or would you also issue new equity here?

Thank you, Nabil. I'd like to defer the question to Francesco that is online.

Thank you, Massimo, and good morning, Nabil. Actually, the financing is targeting to preserve our investment grade. It will be a mix of equity and debt. You are right in assuming that the amount of equity will be fairly limited. Just to give you an indication, we believe that the amount of equity taking -- let me convert this in euros, taking a EUR 3.3 billion transaction enterprise value, we believe that the amount of equity will be around 20%. This is really limited because if you convert that into shares, it means barely 2% of our capital at the current 2% at the current price.

And another, say, 20%, 20% plus we anticipate to finance through hybrid debt. As you know, hybrid debt has also from the credit rating point of view, a 50% equity component. So this will provide only from the credit point of view, additional equity, but actually hybrid is not a dilutive instrument, as you well know. And so 20% plus 20% and another 60%, which is by far the largest part will be debt. This is the way we will finance the transaction, ballpark numbers. And it's totally consistent with our current investment-grade rating, which is, by the way, recently -- has been recently improved to a positive outlook, as you know.

Okay. I think the treasury shares, sorry. Well, we can both resort to treasury shares or newly issued shares in the same transaction, basically, which will be this 20% of the total enterprise value. So we have not decided yet if we will prioritize treasury shares or newly issued shares, but it's totally, let me say, neutral from a value creation and dilution point of view.

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

I was wondering whether if you can elaborate a little bit more on the breakdown of Atkore businesses. So you said a part is exposed to data center, but if you can elaborate on how much of Atkore business is do you consider as cyclical and how much not? And I was wondering about the sustainable EBITDA margin for Atkore in 3, 4 years' time? And the last question is on the synergies. Should we expect synergies will be evenly split in 3 years' time or maybe more back-end loaded? Any flavor could be useful.

Thank you, Monica. So the business breakdown, I give you a first breakdown between the electrical infrastructure components, which accounts for $2 billion out of the $2.8 billion of the company and $800 million is the second division of business is called Safety and Infrastructure. This business used to be cyclical in the past, like our industrial construction business after the -- despite the availability of new drivers like nonresidential growth, manufacturing plant reshoring, data center, AI-driven expansion and all the rest -- the driver of growth has become solid. This has happened already since, let's say, the end of [ '23, beginning of '24 ]. And so we don't see cyclicality in the end markets owned by Atkore.

On the contrary, we see that thanks to the strength of the combination, we can drive further growth through the combined perimeter. Data center, as mentioned, is not as intense activity in Atkore is not as intense as in Prysmian because they probably missed the first wave of opportunity. But the combination of the 2 perimeter will give us a chance to align us to our share of wallet in data center to Prysmian and boost additional revenue there.

The margins we think, as I said, a similar situation to that of Encore. We bought the company and bottom of the normalization. We think that also we are at the bottom of price normalization. In fact, as I said, in quarter 2 and 3, '27 and in the late of '26, they see margin accretion becoming solid and more evident in their business. And so I think the margin will benefit from the additional synergies in terms of EBITDA enhancement.

The synergies, I would say that more or less evenly split between the 3 years. Commercially, we gain faster leadership. We gain faster traction in the market. And for the operational, some are more short term, some are more mid, long term. But you can probably consider evenly the $150 million spread over the next 3 years, '27 through '29.

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

Maybe 2 for me. The first is on Atkore. And I think I've read recently from one of their transcripts, they were seeing a 3x increase for product intensity inside the data center versus the typical sort of warehouse fit out. Can you just comment on what's driving this? And do you think there's opportunities for you to expand level as you bundle the offers together with your LAN cable business?

And then the second question would be on the synergies at the moment that you're targeting? And perhaps could you as you do comparisons to Encore Wire, could you maybe give us a feeling for how the progression is going with Encore Wire actually in terms of the targeted synergies you looked for of about $140 million within 4 years and how you're seeing that shape up across the commercial and operational synergies you're looking to capture?

Yes. I think the data center and the sales opportunity I already mentioned, there is this packaging opportunity, which combining using the same agents cables portfolio with the installation components, you either win business that you will not win on -- it would not have won on a stand-alone individual basis or you have more power in pricing, also thanks to the best service provided by Encore. So the packaging of components and cables is behind -- is basically the strong -- behind the stronger driver of the rationale of the acquisition is sell a complete package as a one-stop solution to distributors who would like to buy from one single shop all the stuff for EPCs, data center, other infrastructure developer in the nonresidential space.

The synergies compared to Encore Wire size is pretty similar. In terms of the $140 million synergy of Encore, we are pretty much done with $110 million synergies. The one that are remaining are the one associated to the rod investment that we haven't achieved already in terms of implementation. It will be happening around '27, '28 and early '29, the completion of the rod mill investment. At that point, the level of synergies mentioned and the Encore acquisition will be fully met.

Just to follow up. Is there any view as Atkore in terms of capacity expansion or anything you need to do there to further capture more data center growth? Or are you leaving the business as it is?

From what we've seen, there is enough capacity across different end markets Atkore play a role in. And we will assess anyway the opportunity for additional capacity should we find that there is a shortage, bottleneck in the output of the factories. But from what we've seen in due diligence, we should be able to go with additional volume without adding capacity.

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

I have 2 questions, if I may. The first one is if you can elaborate a little bit more on, let's say, the cash conversion side and what's your expectation, let's say, considering the profitability that Atkore had? I see in their last presentation that they mentioned, let's say, a very limited amount of CapEx. But we are I don't know exactly say which kind of working capital intensity this business has. And if you see, for instance, opportunity also to optimize bundling together this kind of level of working capital intensity. So this is the first question.

Then the second question, sorry, it relates again to, let's say, the mid-cycle profitability for this business -- as you recall before, you mentioned Encore Wire has a kind of reference also not be to this transaction? Do you see -- or which kind, let's say, of level do you see as a sustainable level also considering the synergies you mentioned, also considering the cost inefficiencies, the company had in the past because it seems that maybe this company can have, let's say, a level which is probably much more in the high teens space instead of the mid-teens profitability the company is having today?

I'll try to answer Alessandro, first of all, the second question. And I'd like to make an analogy to Encore Wire. Encore Wire, we acquired a 14%, 15% EBITDA margin. which was basically the margin prior to the cycle, the positive cycle. So in 2019, 2020, 14% was the margin in the Encore Wire Cable division then the growth to the spike up to 32% normalized in 14%, and we added more margin after the acquisition synergies. In Atkore the level of margin of today, 14% is slightly lower than what we had pre-spike. So in 2019, 2020, the margin was as high as, 17%, 18%. So the reason for this gap, I think, lies with the lack of efficiency in the perimeter post pandemic and post the market development over the last 3 years. So I think that we should be able to restore as happened with Encore the same margins that at Atkore had prior to the cycle '21, '22.

And then, of course, part of this will come through the synergies, partly through the additional efficiency part to a more disciplined cost control and [ adamantly ] part due to the different market because now we see in a different market, we've been more driver growth or stronger driver of growth and more demand in the electrification space. So long term, I think we should be looking at something beyond 14%, 15%, 16% EBITDA margin.

Back to the commercial side, I'd like to make 1 comment on the CapEx. The CapEx are limited, is in the range of $80 million, $90 million per year, the level of CapEx that we look to maintain in the coming 3, 4 years, excluding some extra capital restructuring costs for the operational synergies and so on. And I'd like to have Francesco complement the answer with regards to the working capital trend and the best estimate of the cash conversion.

The profile of working capital is not materially different from Prysmian. Of course, I refer to Prysmian excluding the transmission business. So I refer to which is a totally different working capital profile. So growth pattern of Atkore and the combined entity will not mean any particular cash absorption coming from working capital growth. And as you know, I believe that our Prysmian Group is particularly effective and efficient in managing working capital. So I'm sure that this will be an area of further investigation of further improvement and we'll be able to further optimize the working capital profile of Atkore.

Okay. And sorry, just as a follow-up. Firstly, on the, let's say, U.S. GAAP accounting, should we expect, let's say, some changes or let's say we can consider these numbers of Atkore is sounding pretty similar, okay, moving to our accounting principle. And then do you have, let's say, forecast for the integration cost?

I take the U.S. GAAP. The U.S. GAAP has no huge differences. Having said this, there is one not insignificant impact, which is positive once it will be converted from U.S. GAAP into IFRS, which is quite normal with the U.S. company was there also in Encore, but in this case is more material and it is the leasing accounting. So the application of the leasing accounting and IFRS, the lease, rent quite a number of sites. So the application of IFRS will result into a not insignificant improvement. I can even mention the amount, I would say, north of $30 million impact or improvement.

And the integration cost would be in the range of $45 million, $50 million in the coming 3 years, Alessandro.

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

The first one is a follow-up on the cost synergies. You mentioned that the business of cable of Atkore could be improved and probably has margins that are below your average margins in low voltage. So I would like to understand your feeling which are the reasons why this part of the business is probably not so performing? And secondly, if I understood correctly that, I mean, the in-sourcing of the production of these cables in your manufacturing is included or not in the $150 million of synergies. So just to understand if it could be on top of this. This is my first question.

The second one is about the financing. Just to be your feeling about the cost of debt that you expect to finance the deal, of course, excluding the hybrid. And then if you confirm me that in your calculations, basically the hybrid bond financial expenses are not included in the adjusted EPS calculation as the Prysmian standard.

Alessandro, I answered the first 1 and 2 questions. So I didn't mention and maybe I was misunderstood that the cable margins -- there is a cable business in Atkore's lower margin than Prysmian. What I mentioned is what was the second part of your question so that we will think that we could combine the production of cables of Atkore with the Encore cables so that will create a larger scale and more efficient production base for this portion of business, it is around $400 million revenues in cable. So it's not a major part of the business, as we mentioned. And so the benefit of this consolidation will not be able to fully quantified and so they are partially included in the $150 million part that will be on top. And if you don't mind, I would like Francesco to step in for the final question on financing cost.

Thank you, Massimo. And thank you, Alessandro, for the question. The -- let me say, the blended cost of the debt, including both the hybrid and the new hybrid debt will be below 4% -- 4%, below 4%. Of course, higher on the hybrid debt and significantly lower than this on the senior debt. As you can imagine, there is an acquisition structure of acquisition financing in place,. and this acquisition financing for the debt component will be taken out through the issuance of capital market instruments, including hybrid debt and also will be taken out through the, let me say, cash flow and other lines, other committed and uncommitted lines so Prysmian and there is also, let me say, a part in this acquisition financing of bank financing. So I have to say it's a very efficient and very cost effective, financing structure.

Actually, the -- I have to correct your assumption because hybrid expenses are not part of the net income. So are excluded from the net income, but are taken into the calculation of the EPS because our part of the comprehensive income. So to be very clear, the EPS calculation, our accretion, which is, as we said, high single digit from year 1, excluding synergies and double-digit once synergies are achieved, taking into account the cost of the hybrid. The interest expense...

It's very clear. And the last one on the [ ceteris paribus ] that the vast majority of the business, of course, is U.S. About the international business, so you can add more color what is your view of this business? What is your strategy? Just to understand excluding the U.S. business, which is your strategy, which is your feeling about the business?

Yes. Thank you, Alessandro. The strategy remained the same. In the other areas where they have presence at U.S., we also have a strong leadership in industrial construction. So the combination of our cable industrial construction business with Atkore will give us additional opportunity to add revenues and grow share of wallet in those countries. So it's nicely overlap perimeter between cable and components for installation, both in U.S. and outside of the U.S.

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

Sorry if this has been asked before, I had a little bit of trouble with the line. When we start, let's say, fast forward 5 years, can you talk about how much you envision -- envisage your business to be cables versus non-cables given you're now moving sort of into adjacent areas? And then after today, how much firepower do you think and management capacity do you think you have to continue to do pivot away more to adjacent areas?

Daniela, you mean as global Prysmian how much is cable how much in the last 5 years, how much is cable much is not...

Going forward, when you think about the portfolio, how you want it to be? Yes.

So we still have an opportunity to do similar deals to Atkore in other areas of the world where we can combine components for installation to our industrial construction business. We have further addition to solution provider goal in the digital solutions space. So it's -- there is probably a different consideration to be made here. Given our high level of leadership in many of the cable spaces in different geographies, the best opportunity to grow and also to enhance margin will be exactly the one that we are performing now with Atkore to add additional components. So this is where we're going to focus in the coming -- for the next acquisition.

But do you have like a vision of the group being half-half? Or is it still you think like in 2030 will still be mainly cables and this will be a small adjacency?

In reality, it is not probably the right way to say cables and against the components. We call this KPI solution provider KPI. So in '28, we will achieve -- we were supposed to achieve 55% of total revenue that were made of solutions where we can bundle and package cables with the components. Now after the acquisition, that 55% will certainly grow to beyond 60%. And I think we have an internal view of ambition, I mean, to bring this number as high as possible, probably the 75% range if it is within reach in the next 3, 4 years, if you continue pursuing similar type of acquisitions. And it's not that relevant whether it is only cable whether component, but whether we can sell the 2 together is where you gain share of wallet and prices and enhancement of margins. So this KPI is the one the right one to track. And at the next Capital Market Day in quarter 1, quarter 2 next year, we'll be talking more explicitly about how far we can go with the solution provider journey.

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

Maybe a question on geographic split within U.S. So you have Encore, which has their headquarters in Texas and entire manufacturing located in that state in Southern U.S. And the Atkore, I mean, I don't know much about their manufacturing and distribution footprint, but their headquarters in Illinois, which is on the north side of the border. So when we look at like geographic footprint of Atkore and your Prysmian IMC footprint in both on manufacturing and revenue point of view, can you talk about it? And is there any synergy in terms of like they are being strong, particularly strong in one part of the U.S. where you are less so and vice versa. So that's the first one.

Yes. Thank you. Very interesting perspective. There are 30 manufacturing distribution center sites in U.S. and Prysmian has also 30 sites in U.S. We are much more concentrated on the East side of the U.S. as Prysmian, also well overlap with us on the East side, but they are more spread on the West side and the center. So there's definitely opportunity for synergies where there is overlap. More or less all our 30 sites have within a certain range of the other site from Atkore. But there is also the benefit of having access to a part of the market that for Encore is not simple to have access to the central part of the U.S. and the Western part of the U.S. where they have good manufacturing and distribution presence. So the overlap and the spread out footprint is also value that this acquisition will bring to us.

And my follow-up is on balance sheet. I think when you acquired in previous deals, you mentioned how long you need to delever before you come back in market again for M&A. Any early thoughts on Atkore? I mean I think you're going to close the deal by end of the year, but how soon can you come back in the market for, let's say, $1 billion or more size of M&A?

I think Akash, we have more power than $4 billion acquisition already as we speak. And so we are recognized to have almost $10 billion power acquisition by using treasury shares equity increase and debt. So technically, we're already available, and we are already considering other opportunities in the coming years. So we don't need to pursue any specific deleverage to continue expanding our perimeter with inorganic moves.

We will now take our next question from the line of Jonathan Mounsey from BNP Paribas.

First one, just was this a competitive process? Or were you the sole bidder? Secondly, just some clarification. I listened with interest to the way the deal will be structured from a financing point of view. Just wanted to clarify, it sounded to me, if we break it down, 60% of senior debt, the other 40% is 20% pure equity, 20% hybrid. So I guess from a rating agency point of view, that would be 30% equity, if I understood that right. And then on the nature of the hybrid, you've used the term, I think, throughout, but do we actually just mean a convertible? Is that what we're going for rather than other flavors? And then finally, in terms of the financial leverage we land on, taking all that into account, where do we see net debt to EBITDA as we enter 2027?

Okay. Yes, the competitive process. So the process was a competitive process. And I'd like to hand over to Francesco for the 2 other questions.

Yes. Thank you, Massimo. Yes, your understanding was correct, Jonathan. 20%, of course, is 20% plus/minus. I don't take this number at face value, but it's pure equity. Pure equity may come from disposal of treasury shares, for instance, or from the issuance of new shares under our preapproved 10% capital increase authorization. And this 20% if you do the math on the EV is around, I would say, even less than 2% of our capital of our market cap. 20% is hybrid and not a convertible, are completely different things. So it's a hybrid that just to be clear, very similar in terms of features to our outstanding hybrids of $750 million. We have already an outstanding hybrid. It will be a very similar one.

In terms of financial leverage, remember that under IFRS, the hybrid is treated as equity, not 50%, but 100%. This is the assumption and this financing mix is the assumption for the 1.4x of net debt on EBITDA end of 2026 that Massimo mentioned during the presentation, which is a very low leverage. And this, of course, will drop further in 2027. Let me say, around 1, maybe 1x something like this.

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

Thank you all very much for your time today and for joining this call. And there will be more to come in the coming weeks, and I hope you will take a good break and see you soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.

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

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

Good morning, everyone. Thank you for joining this call, quarter 2 results. We are super excited to highlight that this is the best quarter ever of Prysmian, EUR 730 million EBITDA, 13.4% EBITDA margin, 9.4% organic growth. So as you see it's a great quarter from the numbers perspective. It is also great in terms of the achievement of the appeals and mortgage deals with a EUR 10 million in the optical space over the next 10 years. Also, on the sustainability side, we exceeded our expectation with that 46% of the current revenue leading to sustainable solutions. When you read 46%, you need to read almost EUR 10 billion, where we provide customers with low carbon footprint and solution that has achieved their own targets. 42% is amazing reduction of Scope 1 and 2 over the design of 2019, setting great confidence in achieving the net 0 by 2035, well ahead of everybody else.

Moving to this quarter 2 perspective, I think is important to share these slides -- not moving up, right? It's important to share this different perspective, which we are very proud of. You see in quarter 2, we delivered -- we created EBITDA higher than what has taken us more than 12 months in the past. In '19 -- 2018, sorry, we generated EUR 700 million EBITDA over the full year. In 2022, it has taken us 6 months, 1 semester, to deliver a similar EBITDA. Now, we did this in 1 quarter. This is a strong sign of the effectiveness and the good execution of the strategy that we designed years ago. So the stats that it is basically set on expanding the transmission business, growing leadership in North America, thanks to the acquisition.

And also, shifting our focus from cable manufacturer that was our past driver of growth to solution pivot. Entering to the digital solutions space with more detail, I think you read the press release. I'd like to give you more color around the deals. So these are EUR 10 million revenues that applies to the optical space. There is a time lag in the change -- in the slide change. You see at the bottom on the right that our digital solutions business covered 3 of bits. One is optical, which is -- which account for 40% of the revenues in digital; connectivity, so components to connect cables; and MMS, which is copper cables, both the last 2 accounted for 30% of the total revenue.

You see on the left chart, the green bars has played our involvement in data center activities. The horizontal line sets the scene relative to the past situation where we had in '25 green data center exposure -- data center exposure in green and in gray fiber to the old business. You see that we're adding this EUR 1.1 billion at run rate incremental revenue. At the same time, we are reallocating the best parts of the original to the own business to data center to gain even more share.

And when you look at the 2021 perspective, you see that 19% of our revenues and even more in terms of EBITDA belongs to data center expansion. And we see ourselves as the company enabling the data center expansion better than anybody else because alongside optical, we have the whole range of -- a broad range of power cable products.

Last to mention is the submarine telecom interconnection long haul, thanks to the acquisition. So this is definitely a transformative opportunity for the digital social space in Prysmian. From a very sacral business into a fast-growing business that is meant to chamber a sizable EBITDA by 2030-'31. We'll give you more detail about this at the next capital market.

Moving to the semi-business, transmission continues very strong journey in terms of EBITDA margin at 22%, 20.2%. In terms of organic growth, extremely solid, 14.3% in quarter 2, and in absolute value, EUR 180 million in quarter 2. When you compare this to same quarter last year is almost EUR 60 million EBITDA accretion.

In Power Grid, we confirm what we basically told you last quarter, you see a significant rebound in EBITDA margin from 12.4% to 13.8% sequentially with EUR 135 million EBITDA, set partly by strong demand in U.S. and also strong demand in Europe. But I will say that there is a kind of solid demand across all the other regions because the strengthening of the grid is a very common underlining driver of growth across all segment or market in our geographies. The organic growth was particularly satisfactory at 13-point -- 13% increase in this quarter.

Moving to Industrial Construction. Also here, we improved significantly EUR 228 million EBITDA, EUR 20 million sequentially over 2025 quarter 2 with a EUR 5 million headwind coming from, even better when we excluded the ForEx effect. EBITDA margin rebounded from the 13% of quarter 1. We had a very strong quarter 2, especially in the United States with a very strong month of June inside this quarter 2. Organic growth in U.S. is higher than the group average, 13.4%, driven by data centers, so but not only also driven by the nonresidential market that has showed different signs, new signs of improvement vis-a-vis a kind of a flattish situation in 2025.

Specialties is still suffering from weak demand in elevator in oil and gas and profitability under pressure in the automotive business that is remaining with us. But we maintain stable is a solid driver of EBITDA in different regions and is a nice complement to the last and construction business because those are sophisticated -- sorry, cables that we coupled with business, 235 equipment alongside, so it's an important complement and portion of our portfolio.

Digital, digital is the start of the quarter, you see the standing EBITDA margin, 24% coming from 20.6% in quarter 1, and 24% is now the end of the day. It's not the end of the story. The 24% we go further up in the future. So this is said to be the most profitable business from the EBITDA margin perspective inside of the portfolio, beating the transmission business at 21% EBITDA margin in the quarter.

You see our sizable is the increase over quarter 2 '25, EUR 60 million, out of which EUR 30 million are attributed to the perimeter change. Last year, we had Channell, including the port only for 1 month. This year is for the full period. But the rest from 60 to 90 channel from 90 to 122 is DAC's original perimeter. And you see the power of pricing efficiency, scale and the shift from to data center.

Our sustainability and innovation KPIs are also extremely satisfactory. The 25% recycled content in quarter 2 is a sign of lower reliance on the tight copper market in the United States. We recycle more waste than we used to do in the past, globally in our cost and the shortening the -- and securing the supply chain and sharpening anytime. 46% revenues commented already before. This 32% of Vitality KPI is also an important indicator of a crucial and key for this company is to continue be nourished. This is starting at 1/3 of our revenue have been achieved 2 products that we launched in the market in the last 2 years.

And when in terms of our revenue accounts for EUR 7 billion. So we have, in this year, EUR 7 billion revenues generated by new products. Why is this important? Because you probably set higher share of wallet, it means higher profitability. It means a different pricing power. It means a different value provided to our customers to strengthen our relationship. So key parameter for our growth in the future as well in the past. For example, of the innovation earlier, fiber is an innovative solution to convey data through air, so that faster, 30% faster than standard glass technology, allowing the center to this further space out involving to create a congestion on existing energy grids, which is the real constraint to the data center structure.

And also in the transmission business, a very innovative solution to very deeper, greater than the standard methodology making the network more secure, more resilient and providing customer in terms of reliability of the connection.

Let me hand over to Francesco for more details on the financial results of the quarter.

Thank you very much, Massimo, and good morning to everybody. As usual, let me use the profit and loss to recap some of the messages that Massimo has already passed.

The organic growth in the first half was in excess of 7% with a very good acceleration in the second quarter, reaching 9.4% in the second quarter. I have to say that all the segments of the company performed extremely well in terms of organic growth with a growth of 14% in Transmission, 13% in Power Grid, 9% in ILC, 18% in Digital Solutions with the only little exception of specialties, which was substantially flat or slightly negative in the quarter.

The performance was very strong in terms of EBITDA, as Massimo said, the best yet quarter at EUR 730 million with sequentially increasing EBITDA margin at standard metal at 15.4% and with a very substantial growth from the second quarter of last year, plus EUR 125 million, but also sequentially from Q1, plus EUR 130 million, as you see, from the right box of this chart.

The lion's share of this growth was taken by transmission and digital solutions plus EUR 54 million and plus EUR 65 million, respectively. Of course, with the support also of a great performance of Channell that Massimo mentioned. Power Grid improved the margin sequential, which is very important. And as you have seen, organic growth in Power Grid, both in Europe and North America was extremely positive.

Electrification and particularly I&C performed the best quarter in the last, I would say, 18 months Yes. So very positive, specifically in North America. Very good note also on the group net profit that reached EUR 569 million in the first half, by far the highest ever. And this is other than the EBITDA and the operating result, supported by a very nice drop in financial charges that you see here. slight improvement also of the tax rate. And this assess our group net profit estimate for the full year in excess of EUR 1.2 billion, which will mean a growth of earnings per share, which is significantly beyond the original targets that we had set.

Let me now turn to the cash generation, which was solid, close to EUR 1 billion in the last 12 months as of June, a bit lower than the 1 that we had in Q1. The main reason -- I would say, the only reason is the very high impact and adverse impact of the rising metal prices, which was -- which reached actually the peak in the Q2 and which will progressively decrease in terms of adverse effect in the second half.

Massimo will show you the updated guidance on the free cash flow, but we plan an extremely strong second half on the back, of course, of the contract with Molex, which will bring in a very substantial down payment. But even more importantly, on the back of a very strong cash flow coming from the transmission business. This year, the transmission business cash flow is mainly concentrated in the second half, and we are also doing great in terms of improving our working capital performance and efficiencies. And all this will contribute to this quite, I would say, strong target that we have set for the year, and Massimo will explain in a while.

I think I move back to Massimo.

Francesco, thank you. So quickly, to main challenges, the EBITDA, we raised this EUR 2.7 billion of the original guidance to EUR 2.850 billion, so a range of EUR 2.8 billion, EUR 2.9 billion is were saying that we have super high confidence to be the EUR 2.850 to end up in the top portion of -- in the upper part of the range to EUR 8.529 million. You'll see that safety South is already quite close to the target we set for 2028 at the capital market in 2025, which means that we will certainly in the next quarter 1 -- sorry, we will go out for a new Capital Market Day, providing and disclosing the trajectory from 2027 through 2030, 2031 with organic growth and a strong driver explanation of where we see this growth in the different geographies.

And is an amazing number. Now EUR 1.7 billion is of course the say free cash flow of the company. It is true that there is a EUR 550 million coming from Molex as a down payment, but important to mention that there are significant increase in CapEx, partly to support digital solution capacity expansion, but partly to start showing the growth that we had to underline that we will disclose next year at the Capital Market Day. This is organic across many segments and main geographies, North America, but also Europe, but also other regions in transmission. So the EUR 1.7 billion is the effect of Molex on the 1 hand, some additional CapEx in '26 that will continue stronger in '27, and beyond, with the efficiency and the additional EBITDA offsetting the metal versus the original guidance. And the metal impact is around EUR 250 million.

With this, I move to the closing remarks, so great performance, super satisfied by the change in pace of the company, the company showed this quarter. As I said before, we have -- we are pleased unique opportunity to be the only 1 serving data center with the whole product range they need for this function. We are on investing growth in '26 and beyond '26, and acceleration, I mean, paves the way for a new Capital Market Day in 2027.

I would like to hand over to you for your questions and more details about our success story.

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

I have 2 questions. I'll ask them 1 at a time. But first, I just wanted to follow up on sort of the going forward, how should we think about fiber margins from here? Should we think about sort of having a linear step up. I think in the past, you have commented about mid-20% EBITDA margin, given all that happened in that segment and your new exposure. Is that still appropriate and sort of how the path is more linear, more back-end loaded? If you could give some color on that, and then, I'll ask the second one.

Yes. The path, Daniela, is pretty linear through 2029 because the shorter market will continue until then. And we I mean, accurate targets, then we'll disclose at the Capital Market Day. We see us in the upper part of the range, 25% to 30%. So we will beat the 25% mid 20s and consider that's not only fiber will drive the growth, but also connectivity, especially the channel portion, which is also partly exposed to the data center will support the EBITDA margin growth in the coming quarters.

Sorry, 25% to 30%, that's kind of what, for the '29 period that you've mentioned or that's sort of throughout the period and then you...

Is linear from '27 to '28 to go as high as between 25% and 30%...

Okay. And then just second question. I think in the past, you had tied up doing a date on the medium-term targets with sort of your M&A ambitions. I wonder if should we read anything into the timing of the CMD and that, if you could update a little bit how you're progressing on sort of your ambitions there?

We are making progress. We analyzed a lot of companies in the last 12 months, and it could well be the case. We cannot comment much, but it could well be the case there before then will have a perimeter change. So that new ambition will include both organic and M&A perimeter -- additional benefit from the perimeter. .

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

Hope you can hear me well. My first question is around the Molex deal. You've highlighted the figure of over EUR 10 billion of cumulative optical data center revenues, of which Molex is EUR 5.5 billion. So within the other portion of that figure, could you maybe give us an indication of how much of that has already been signed as of today versus how much you're anticipating in deals to come?

Thank you, Vivek. The [indiscernible] as you said, bonuses hyperscalers, all players in the infrastructure deployment of data center function. And the balance is not as long in terms of duration as the Molex deal which is a 10-year deal. But for the next 5 to 6 thesis also covered by deals already signed. We are also thinking of making a second wave of capacity expansion because there's still a lot of demand unsatisfied the market. We keep receiving a request for additional volume delivered through existing customer, new customer, and I'm sure we are pretty confident that over the next 2 quarters, we will sign new deals in addition to the 1 that we agreed will end in the last 2 months.

Just a follow-up to clarify. So is that -- are those -- that second wave of deals over and above the EUR 10 billion? Or is this part of the EUR 10 billion?

It will be over and above EUR 10 billion agreements.

Okay. Understood. My second question is on the IMC margin. The very strong organic growth, particularly in the U.S. The margin is down year-on-year. The U.S. is typically margin accretive in that business or it is margin accretive in this business. So why is the margin not stronger? And maybe could you elaborate on how the margin has developed in both Europe and the U.S. ?

Yes. Thank you, Vivek. Yes, you actually an update. We also have another region that is highly accretive, which is LatAm. And so the margin LatAm are not as high as U.S., but close to. And in LatAm, we have, I mean, soften in margin in a couple of countries, 1 is Columbia, 1 is Argentina. And this is the reason why year-over-year, the margin are still slightly down. Also mentioned that the quarter 2 was a strong quarter in U.S., but June was the strongest quarter -- the strongest month ever. April and May were not as strong as last year. And so when you compare the year over year, the margin of quarter 2 '26, '25, bring it to cost did very well in June, but not as well as quarter 2 last year in April and May. But mainly the major effect is this weakening in the LatAm region.

The next question comes from the line of Akash Gupta of JPMorgan.

And I got 2 as well. The first 1 is a follow-up on these framework agreements and that you have signed in optical fiber cable business. So Massimo, you previously said margins of Channell are higher than your remaining digital solution business because they sell directly to hyperscalers while your products were going through some intermediary companies that buy your products and then sell it to hyperscalers. So the question is that when you sign these optical fiber cable framework and you have Molex, you have directly with some hyperscalers. My question is that does the margin in framework agreement directly signed with hyperscale-er -- hyperscalers differs then when you sign with companies like Molex? Or are they same? So that's the first 1 to start with.

Yes, interesting perspective. The margins today are even higher than what we have in the long-term deals. The first was that we wanted to trade a longer duration and security margin over a longer time than the best margin possible in the spot business. .

When it comes to comparison comparing Molex to the hyperscalers, the margin across these 2 different customers is pretty much the same. Marcos new deals or recent deals have better margins than what we signed 2 months ago. And some of those agreements, Molex was signed 3 weeks ago, but some of the other agreements were signed 2 or 3 months again. So there is a close alignment in margin between the 2 them. There is a certainty today and is a terminal or October, November for sure. Better opportunity to enhance margin with new builds because they said the capacity is still what was 1 year ago, and for the next 2 years, we remain unchanged.

And what matters is the ability to shift from all the traditional fiber customers to data center. But also bear in mind that the market is buoyant within favor of our customer because they are the reform volume as well. So margins are similar across the whole customer base, but they will be progressively grow. So new deals will be a stronger profitability. China margins are higher because it's not cable. It's component is plastic, metal frame or the stuff, and the bespoke solution, partly for data center and partly for fiber today.

And my follow-up question is on guidance. Today, you are raising guidance by EUR 150 million at the midpoint. And I'm curious if you can help us split how much of that is because of digital solutions versus the rest of the company? And when we look at the upgrade that is coming from Digital Solutions, how much of that is already secured based on your renegotiation and higher prices from some contracts that are getting rolled over? And is there any scope for renegotiating some of the existing contracts in the second half that might bring upside to this EUR 150 million?

Very pertinent question. The 2 drivers of growth behind this guidance is solidity in power grid and electrification, which is the baseline but certainly, transmission and digital solutions are the 2 main contributors to this EUR 150 million or to whatever the number would be that result with would be definitely higher than EUR 2 billion under. Transmission this year will add EUR 200 million EBITDA to last year. Last year, we ended up with EUR 580 million. You can imagine a number this year, EUR 200 million higher. And this is impact in this guidance, not fully, but in this guidance. .

Digital solution is adding easily EUR 60 million, EUR 70 million, EUR 80 million to the previous guidance due to the repricing of the old business, we see margin improvement in digital solutions every single week. Every single week, we continue renegotiating contracts, frame agreements more content with existing fiber to their own customers. But every single week, we are telling customer, we are disappointing customers because we have more fiber to give them. So there will be additional chances to build extra profitability and digital solution in the coming months. certain point, we rationale.

Now the market will be fully saturated by existing capacity is for sale, but it's the capacity. There will be no room for new deals, but new room for the deals will come from the additional capacity expansion that we are thinking or negotiating with other players, hyperscalers or infrastructure players in the second half of 2027. So EUR 150 million basically solid growth in power grid electrification the 1 and a stronger contribution from transmission and it solution to top up this number to EUR 850 million and beyond.

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

So I just wanted to start up on the hyperscaler agreement. So I think in that press release, you said that you expected your hyperscaler revenues to be around EUR 1.1 billion by 2031. I was just trying to get a feel for how much of your total digital solutions you were expecting the hyperscalers to be? Because look, where I'm going with this is I was slightly struggling to reconcile the numbers. I think you previously said hyperscalers would be most of your optical business, your optical business is typically 60% of your total business. So it just seems like quite a low number given where consensus revenues are. So maybe just any kind of -- any color around that, how much of that business should you be that number actually doesn't seem that high in the context of where consensus is?

Yes. I like to -- I already said that, first of all, the breakdown the digital until revenue between the 37 optical connectivity and MMS. Take 2025 revenues, digital solution amounted to EUR 1.6 billion, out of that EUR 1.6 billion, you should see EUR 600 million more or less optical that is more or less equally split between connectivity and MS. When I say EUR 1.1 billion, data center is increment. So the EUR 600 million plus EUR 1.1 billion will make EUR 1.7 billion in the optical space.

In the data center piece, inside of the space, EUR 1.7 billion of revenue by 2030 will account for 85% of the total debt. Today, in the '25, the EUR 600 million revenues in Optical, we had more or less EUR 200 million of data center revenues. So from EUR 200 million to EUR 1.1 million additional, but at the same time, the aero the own business, we have shifted to data center. So overall, I said EUR 1.7 billion revenue optical total for 2030, take 90% that will be deficit. So EUR 1.5 billion.

Yes. That's very helpful. And maybe just a sort of bigger picture sort of question on tariffs. So we've seen obviously a huge amount of moving headlines. And I imagine it's very difficult for you to kind of keep on top of. But maybe just sort of your latest on-the-ground perspective of what all of these tariff headlines may be split by copper and aluminum is actually meaning for your business in terms of kind of underground activity? How it's driving competitor behavior? Whether you've seen any noticeable change in that in the last 3 months? And whether these kind of newer tariff headlines you expect any change maybe in the next 3 to 6 months as a result of any of the developments?

I think we confirmed the trend that we noticed in the market in the last 2 months. One in as far as the cable is concerned, when they shifted from 50 percentile to 25% of platinum value of the cable, we noticed changes in there in the market, in part has become less relevant because they had to be clear the all value cable and pay on total. This brought them out of competition in terms of price that could not offer any longer a better price than the lower player artisanal cables benefit from more pricing or margin power in the last 3 months. As far as there is a concern copper, nothing changed. As far as the future targets concerned, I don't have a clue. But I think will help again local player to strengthen their position in the market to become even more relevant than importers, and hopefully, to bank it from incremental markets.

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

Can I start with Power Grid? I mean, impressive organic growth. And you talk about the positive trajectory continuing. I'm just wondering where you are in terms of your current loading capacity. And if we look out over the next 12 months, what is driving that positive trajectory? Is it more capacity coming online? Is it pricing? If you could just maybe flesh that out a little bit in more detail. That's the first question.

The growth that we planned for our perimeter in power grid is coming from additional capacity. We approved that 1 year ago, additional medium base capacity in West and in Europe. And 2 months ago, we approved another wave of medium capacity increase in U.S. partly on that capacity, we serve the -- in City in the asset construction market, call it EPC or data center expansion, faster than remote will be for utilities because don't forget, this 4 grids that we have in U.S., mostly in Europe needs continuous reshaping and strengthening and hardening. Because the additional electricity demand increase across the globe.

We are also positive about infamous cost increase pass-through to the market in order this time lag effect due to the existing formula -- and -- but since the market is buoyant, prices is increasing the market, we will be able -- we should be able to restore this famous 14.5% or 15% EBITDA margin in the coming quarter, maybe part, maybe quarter 1, I would say, but the growth opportunity is amazing. We are currently flat out in terms of capacity in Europe and North America. If you any more, we will sell more at a good price.

That's very clear. The second question is back to Digital Solutions. Just on Slide 5, to understand, firstly, the cadence of the incremental revenues, which look to be peaking in '28. And then, you have a kind of a further pickup in 2031 after state -- I mean, I guess, '28 is related to higher CapEx in '26 and '27. Just wondering what's happening on the tail. And also the substitution switch of current revenues into optical. Is that -- again, should we assume kind of a linear progression, '25 to '31? Or is that switch are going to happen much more quickly?

So the steady level our capacity expansion run rate will be achieved by 2030. So in 2030, we'll have additional capacity equivalent to EUR 1.1 billion incremental revenues in the data center space in the optical business. Until then, we will have a marginal improvement on capacity from '28 onwards, but the full run rate is 2030, but will have an important benefit by shifting away from fiber to data set. And so I don't know if I answered the question. But imagine today, we have EUR 600 million in optical business. In 2030, we will have EUR 1.7 billion in optical business. Today, last year, we had EUR 200 million in datacenter out of the EUR 600 million revenues. In 2030, we'll have EUR 1.5 billion revenue in data center. I hope that this answer the question, Sean.

And I suppose just to follow up on an earlier comment you made about 2029. You're talking about the fiber shortage continuing up for them. Is -- do you already then assume that by '29, there is more of a supply-demand balance? Or is there likely to be more, let's say, demand upside risk pushing that date further back?

Unfortunately, Sean, I would be unfair to say, if I'm able to read the market in 2029. The comment I would like to make is that it will take 3 years, '27, '28, 2029 for the players to build this capacity. And bear in mind that the place I'm talking about is us and corn because none of the others are in U.S. -- we are talking about U.S. fiber. The fiber, the origin country , the original production as to avoid the unbearable tariffs if you were produced in 5. And so the volume demand, I think, will continue. I don't think we reached the balance in '29. In fact, we have a new opportunity to expand capacity now beyond what we're really committed to doing for Molex and the others because there is additional demand in the market.

What else to say, in the end of the day, for as far as our count is concerned, what the volume would be in demand in the market will be in '29, '30, '31 is not that relevant because we have security of the margins in absolute value over the next 7 to 10 years to the contract. But I believe that this balance will continue beyond 2029.

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

And maybe a few from me as well, 1 by one, perhaps. Starting on is solutions and thinking about the connectivity piece, obviously, you've spoken about the incremental revenue you see coming through directly into data centers. I wonder if there's anything you can give us looking out to 2030 on the connectivity portion of the division and whether or not that will also benefit from similar tailwinds and how you kind of think the Channell business will progress because, obviously, it's a very high margin?

It is already, Chris. I think it's already a great uptake in the performance on connectivity in the current month because as the market rebounded in the U.S. across fiber to data center. Also, these components of connectivity, closures, boxes, evolves all the stuff that China mix front benefit from additional demand and better prices. So we had in quarter 1 and also quarter 2 '26 outperformed the result of Channell in quarter 1 and quarter 2 2025, significant. And we expect this to continue. At the same time, we are developing new products, larger boxes that goes underground for data center application. So this will give us the opportunity to add additional similar revenue to the Channell business the origin was only fibration adding the data center opportunities to Channell business. .

And the margins in connectivity Channell is as high as 35% EBITDA, that 36%, 37% EBITDA. So very accretive to the division.

On digital, can you maybe talk about the phasing of the Molex contract this year? Are we anticipating a more material step up in revenue here for Q3, Q4? And with that, obviously, higher margins too on the basis of that basin being captured from the center customers, while Molex being 1 of them? And equally, the new contracts you just pointed to, that could be signed and maybe already have been signed to take you to EUR 10 billion or above, and those also contribute into the back half of this year?

Yes. I mean the whole market is really demanding more already in '26. And the phasing of Molex growth is consistent with -- on the 1 end, I was telling expanding capacity in U.S. and not only in U.S. but certain the fiber space and with our speed in the allocating volume from existing customers. But I tell you, we are proceeding a very high base both on CapEx and on shifting from further to the old to data center. So quarter 2 is much higher than quarter 1 in terms of EBITDA and EBITDA margin. Quarter 3 will be higher, and Quarter 4 will be higher. And this would be a journey that we see our capacity increase immediately released to the market. Also, our ability to renegotiate existing contracts with avoid adding profitability, but also our speed in reallocated volume from fiber to the data center and the additional opportunities. The run rate level -- so the run rate level, as I said before, will be reached in 2030, when the full capacity will be coming online. Sorry. .

That's super helpful. And as a follow-up to your earlier comments of margin expansion being quite linear, sort of a 25%, 30% and confident in the upper end of that range. Should we think 25% is achievable for your '26 performance in digital solutions. Is that kind of what you're pointing to today?

As a rate of quarter 4 for sure. Of course, the full year, it depends on -- in quarter 1, we had 20% because we were at the early stage of the pricing improvement. So if you take first half, we are probably a 22.5%, 23%. yes, we will end up slightly higher than 25% in quarter 4. Full year average would be probably 25%, but 27% would be -- the full year will be at a higher level of margins. .

Of course, yes. And then finally, going back to electrification and on the low voltage side and thinking about the margin progression here as we've seen some evidence the European market is picking up. Is there any comments you can make in terms of what you see in terms of the pricing opportunity in Europe and if you think there's going to be any sort of tailwinds in the next few years on what you can do there?

And we can much more on the rebound that we noticed in the United States and what we're seeing in Europe. Europe is stronger than US last year in terms of demand and pricing but are still pockets of low margins in Europe and as well as we have a nice country with image. So the real upside from what I see is going to come from stable or mild growth in Europe, volume and margins, significant growth in the United States.

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

Back on the phasing of the revenues in Digital Solutions. When I look at 2027, I'm wondering where is the acceleration coming from versus 2026 just because at that point, my understanding was that the repricing would be mostly done, and you don't have any new capacity yet coming online on 2027. So yes, just wondering why am I missing on the 2027 where it seems from the building drugs, you can grow kind of more on -- deliver more incremental revenues versus what you're delivering in '26 where the bulk of the repricing is happening .

Lucas, on '27. There will be some marginal debottleneck existing capacity that we come online in '27, which will be in additional volume. There will be a repricing across the board. So we will probably be almost done to repricing everything to the best possible level. And there will be more share of the data center business inside our total property business. Those are the 3 elements that will compose the EBITDA growth and EBITDA margin announcement in '27.

Perfect. And on the EUR 1.1 billion incremental, is that assuming kind of 100% of capacity is used? Or is that the visibility you already have from the frame agreement, and so there could be upside to that EUR 1.1 billion if you kind of deliver on other contracts?

Lucas, it's basically the same. We took a commitment and senator capacity or we raised our capacity to the level of the -- so they are same numbers, EUR 1.1 billion is additional revenues, EUR 1.1 billion is additional capacity. .

Perfect. And the last 1 was just on the free cash flow. It's quite a strong upgrade there for the year. very strong also conversion of EBITDA versus what we usually see. Just can you help us a little bit on the building blocks here just many big down payments coming in transmission? Or are there other things to mention for the higher free cash flow?

I'd like to have Francesco being on the main components of this bridge, EUR 1.35 billion, EUR 1.7 billion.

Yes. Thank you, Lucas. Actually, it's quite simple. -- we have the positive components coming from the additional EBITDA, which is plus EUR 150 million versus the prior guidance. Of course, you have to take out some tax effect from that. Then, as I mentioned, we are increasingly improving our performance in terms of working capital, stock receivable, and this will contribute not a very different number from compared to EBITDA incremental effect. And substantial these 2 elements -- these 2 positive elements will offset the negative metal impact versus what we had already embedded in the guidance that we quantify in the EUR 250 million. Then, what is left are 2 elements, partly offsetting each other. One is the big down payment coming from Molex, EUR 550 million, net of a strong acceleration on that we quantify in the year of approximately EUR 200 million over the level of CapEx, which was embedded in the guidance. And this is leading to the midpoint of EUR 1.7 billion plus EUR 350 million. I don't know if I have been clear on that.

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

Yes. The first is on Power Grid, margins improved sequentially, but they are still a little bit far to the, I think, your target. Do you expect -- can you give us an indication of what do you expect for power grid by year-end? Is it 15% margins really achievable? .

And my second question is still on the down payments and the structure of the framework agreements. So the company received -- will receive EUR 550 million of down payment. Should we expect further payments from Molex or the next down payments will come from the additional and not yet identified framework agreements? And should we model the same, let's say, the same weight of down payments that you got from Molex? And in addition to this, as the preform production is very energy intensive. I was curious about the structure of the cost within your framework agreement. Are you planning a complete pass-through to the final customer to the hyperscalers.

Take my very articulated question, let me say, with Power Grid. The only reason why the margins are slightly behind the record margin achieved 1 year ago. is because we are in a cost inflationary situation, and we are allowed to pass all cost increase to the market with a time lag. And as long as the costs continue increasing, we will still suffer from this time lag. Should the cost inflation end 1 day, we will catch up with the 15% EBITDA margin immediately. The whole point is that the real question is the market stronger because even if you had a good cost price adjustment closes, the market wasn't strong, prices will go backwards. So the market is super strong. There's no pricing pressure in the market.

New tenders will be made at a better price. So this is, again, a tempo some foreseen this mentioned, this is a temporary situation, which lasted longer, but it's due to the inflation in the year and work as a play into this don't be concerned the market is demanding more voltage, more cables, some more capacity and hyper prices pretty sustain. So we will catch up as soon as inflation will ease in the coming quarters.

The down payment structure starts that we received down payment. And as we start delivering revenues after a certain number of years, we'll have to return the money that we had in advance. And so in 2030, '31, we'll give back -- '32, '33 will give back the vast majority of the tape. The structure of this deal is solid in the sense that addressing your third question, not only do we form you to pass on the cost, we have guaranteed volume, we take or pay and guaranteed margin because we pass the cost immediately without suffering on the contract, to what I said before in power grid, from this same idea. So in a given quarter, at the end of the quarter, the price will be adjusted based on the cost increase up and occur in that quote. So the margins in terms of dollars per fiber sold will be guaranteed throughout the period. Hope this answers your question.

And the next question comes from the line of Alessandro Cecchini of Equita.

The first 1 actually is on electrification. So -- you said that margins were down -- or I mean slightly up quarter-on-quarter but due to LatAm. Could you give us sort of feeling what are you seeing in the market now from the first half to the end of the year? So if you are seeing some impairment of business or just to give some flavor on this?

My second question is secondly on...

We have lost the line of the questioner. We will now move to the next question, while waiting for him to reconnect.

And our next question comes from the line of Nabil Najeeb of Deutsche Bank.

I just had 1. Can you give us an update on the secondary listing in New York? It looks like the plan is back on with work being started on it according to your comments to the press this morning. Do you have a time line in mind for the listing?

It's taking a sale a crucial point about a value product for us for value creation. Currently, we are very busy with a lot of stuff solid deployment of the data center opportunity, the contracts, new waves of capacity increase M&As. So it will be remaining our got to plan top one in the list and the probable moment will disclose the timing of this operation.

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

Two for me, please. So first question is on M&A. I guess, you mentioned in the interview this morning, there are interesting in the M&A opportunities in the U.S. Would you be able to give us a bit more insight on what are the ideal type of business you find most exciting? Does the deal with Molex change your thinking in terms of how interesting and connectivity business for you versus accessories? Maybe we can start from that.

Thank you, Uma. Our approach to M&A, Molex is a way to organically expand the capacity. It's a fast-growing opportunity for us. in terms of incremental EBITDA. We are still open to spaces M&A in spaces addition to our cable piece because we want to reinforce the revenues -- the share of revenues in the company that are solutions rather than just pure cables. And so U.S. remain probably the best geography for those opportunities given the high profitability in the market, both in power, electrification and digital solution space, but we're also looking at other regions. And I'm confident that the coming quarter will -- we will be able to disclose more, of course, at the proper timing and the signing of the projects. .

That's super clear. My second question is on your capacity ramp-up for the fiber production. So if I'm looking at the Slide 5 from the presentation, it's very helpful on that slide. So it seems like you're already planning to have some significant capacity increase by 2028. Is that ahead of your schedule? And then how should we think about the phasing of your capacity expansion from there? And then I guess, a follow-up also on the second -- you were talking about the second wave of deals that could be above EUR 10 billion. how much more capacity do you be able to add on top of that tax, you have announced, what would be the time line there? So if you do sign those contracts, would that be done on top of the EUR 1.1 billion revenues?

Uma, yes, we will have the run rate capacity achieved by 2029 -- end of 2029. So part of the capacity increase will happen in '27 in Europe, the rest will happen in the United States, where we are planning to more than doubling the fiber capacity location in US. So by '29, there will be this more -- in 2028 will be -- the first chunk of this more than doubling U.S. capacity, let's say, 1/3, 40% of the run rate capacity will be already implemented by 2028.

If you went for new deals -- and this will require -- this will require additional capacity. We are not thinking to go too wide in terms of its capacity, but the demand from different players and the usual hyperscalers customers still unsatisfied. And we will, for sure, sign other deals. And this will bring the incremental revenues incrementally over the EUR 1.1 billion yearly revenue added by 2031 or 2030 of the existing deals.

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

Yes. Thanks to everybody. I have 3 questions. Okay, if I may. The first one, let's say, relates to the transmission business. If you can, let's say, give us an update on the, let's say, second half outlook in terms of tender of award, if you expect any acceleration on this one? .

The second question is on, let's say, I understood your comment on free cash flow, if you can help us also to reconnect a little bit with the, let's say, outlook on deleverage, year-end leverage, considering also the incremental CapEx? And on the factor you mentioned before on the upfront payment, and the last 1 is, let's say, just as more curiosity. You mentioned the 5 with, let's say, this innovative solution that you are basically under development from a commercial standpoint, a lateral standpoint. Can you give me an update on this? If you see that an kind of short teatime, years of time, if you see, let's say, any update and that this solution can be commercialized with your existing, let's say, data center clients?

As far as is concerned, the second half should be a bit more buoyant than first half in first half with what was available from the market. Our backlog is still pretty high, EUR 17 billion. The demand -- overall demand in '26, we estimate around EUR 10 billion in new projects awarding to the market, and we expect to see this level be beaten in '27-28 because the project in the pipelines that we '27-'28. Like to defer to Francesco free cash for connection to the leverage at the end of the year.

Thank you, Massimo. Based on this update of the free cash flow guidance we estimate that the year-end net debt will be in the region of EUR 2.3 billion/EUR 2.4 billion, which means a quite outstanding improvement versus our original expectation. And actually, in terms of leverage, if you take the updated EBITDA guidance means a leverage of around 0.8x. So a very low leverage.

Thank you, Francesco. As far the is concerned, we completed, let me say, investors phase. Last week, we were in U.S., and we -- we ended over this cable, not the fiber, the fiber in cables to Amazon for an installation trial, the test the passed successful they try to create this scale in a possible way that could not do it, and they could not achieve it. So we pass the test, we are now able to scale production to a different level. The demand is high. The level margins is extremely interesting. It's all about how fast we can scale this up to a more mass production level. It will never be a solution that accounts for more than 10% of the fiber market demand, but it would be pretty profitable from this perspective.

Understood. And just if I may, a quick follow-up on this. I recall that you have, let's say, this agreement or you invested into the Relativity Networks company. You're currently a shareholder of this company, assuming that you're going not to start commercializing the solution. Do you expect it to do also a step up in terms of ownership into the it networks?

Yes, good question. We are discussing this as we speak. I footage to make a decision. We want to wait and see what happened in the second half in terms the bar is on us in our field, we are to speed up the industrialization and additional capacity. Currently, we are producing this in Europe. The idea applies for the rollout of, in United States, where this demand is located. And probably towards the end of this year, we will evaluate additional ownership or additional opportunity with relativity network in terms of stake in the company. .

I'd now like to invite Alessandro Cecchini of Equita for his questions.

Do you hear me?

Yes.

Okay. Perfect. I repeat maybe my question.

First question we got.

I move to the second and we answer both. Okay. Okay. So my last 1 was -- I don't know because the line was down about the European opportunities in terms of margins electrification. -- you can or a little bit more on this if you have plans to restructure or to improve margins in the region. So I don't know if you answered this question.

Yes. So the first question was about the market development in other regions. In LatAm, we had -- we're going through a normalization. LatAm we had this spike in margins in the last 2 years in Argentina due to the country situation and in Colombia, and now, we suffer from normalization. No bad things to things that happened nothing extremely relevant. But, of course, LatAm weighed a lot in terms of overall profitability because their profitability is pretty close to that United States. .

Europe, partly to answer your second question, is mildly growing in terms of volume growth and in terms of profitability. We have plans to strengthen the growth through things that we cannot probably disclose too much. There will be some restructure some additional capacity relocations. So there some footprinting in Europe mildly reprinting, but will help us strengthen our position in Europe and also become more efficient in serving customers in a way similar to what we do in U.S.. So this is more or less the essence of what we have in mind for the European margin enhancement.

We have no further questions. I'll now turn the conference back to the room for closing comments.

So thank you very much, everyone, for your time. I hope you enjoyed the call, and hope you will be also enjoying your holiday in the coming weeks. Thank you, and see you soon. .

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

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?