The call for the full year 2020 financial results of Prismian Group. Okay. Let's start with Page 2 sorry, 3. The priorities we choose for 2020. 2020, as you know, has been a very peculiar year due to COVID issue.
And we decided since the beginning, on the basis of the experience coming from our Chinese affiliate, That the first priority was to protect the people. Protecting the people, we were going to protect the business. And that is this for the entire year, The main direction of our action. Chapter 1, we decided to protect the people and obviously, the customers too. Secondly, we protected the business, protecting the people because if There are no people available.
There is no capacity to satisfy the demand of the market and vice versa, Having a quite good sustainable output of the factories Due to the protection of the people, we have been able to follow and to protect our customer needs. At the end, we have been able to keep this on time delivery on their orders of our customers over 94%. That is not The top, but considering the very difficult season we have been through, I can recognize to the team that they did a pretty good job. Other than that, we have worked a lot innovating to build our future. And that has been mostly on the HVDC Technologies, developing the P laser and the Higgs LPE for the 525 HVDC, The high depth 3 core and single core submarine cable able to be installed over 3,000 meters depth for the single core.
For the 3 core is roundabout 1,000 meter. In terms of fibers, the telecommunication cable, the flex ribbon and the Chiroqua Extreme that With the 180 micron fiber has been reaching density of fibers per square millimeter that is extremely high. So overall, we have been working on these chapters. And the result, moving to Page 4, have been CHF 10,000,000,000 shares with an organic growth negative, unfortunately, for 8.3 percent, but with a sequential improvement. In Q4, the decline has dropped to 4.8 And the same in Telecom.
So we have had an year with the first half very low, especially the Q2 that has been the quarter most impacted by the pandemic problem and going to recover in Q3 and Q4. Q4, anyway, has been still 4%, 5% organic decline. The adjusted EBITDA. The adjusted EBITDA other than the sales suffer or can be recovered by the cost efficiency actions we implemented since the beginning. We have seen in January 2020, we have seen the pandemic, the virus coming.
And we started implementing all the actions in order to mitigate as much as possible the effect of the pandemic on the company and consequently being able to more or less able to limit the effect of the pandemic on the business. The result at the end of the story has been that Adjusted EBITDA closed at €840,000,000 with more or less the same margin of the previous year, 8.4% versus, If I'm not wrong, 8.7 percent because we protected the margins. We lost At the end, 8% of the turnover because it
is what it is.
And we have impacted very Seriously, especially in the second half, by the ForEx for $32,000,000 So the exchange rate, especially of U. S. Dollar that for us is a very important chapter, has been pretty heavy. In 2 years, if I'm not wrong, we are roundabout €60,000,000 ForEx effect. Free cash flow.
Once the pandemic came, We have been starting to protect the cash. Protect the cash means Not
to give the
products to customers, if not under a certain reasonable guarantee to get the money at the end of the game. That's one of the reasons why our free cash flow has been very high at 4.87%. You have seen along the year Debt free cash flow was pretty good, pretty sound every quarter. We have been able to close-up 487 with a net debt slightly below $2,000,000,000 The result has been really good, And the free cash flow, again, is the real outcome of our company. The problem is that, obviously, with the EBITDA contracting by over €100,000,000 the free cash flow has been unfortunately, suffering a EBITDA.
Otherwise, it would have been much higher and about 600,000,000 Let's flip to Page 6 5, sorry. Page 5, the financial highlights. Sales from 11,520,000,000 in 2019 to 10,000,000,000,000 in 2016, So a significant drop, minus 10.3 percent organic decline due to COVID, obviously. And the adjusted EBITDA, that's more or less kept the same EBITDA margin from 8.7000000 down to 8.4000000 with sales debt by Cerveza scaled down significantly from 1,000,000,000 and EUR 7,000,000 to EUR 840,000,000. So very significant reduction of the sales with keeping more or less The margin that has been obtained with an extraordinary effort on the fixed costs, on the variable costs, on all the items that we were able to control in our hands.
On the financial side, We have obtained a significant reduction of the working capital from $749,000,000 December to 432, reaching 4.3% of the sales. That is a very outstanding percentage of Working capital and sales. Unfortunately, the working capital, it's possible to reduce, but not forever. The goal you'll see now is becoming to keep it stable. The financial debt, as a consequence, has dropped roughly $200,000,000 slightly less after having distributed anyway $50,000,000 of dividends to the shareholders.
Consequently, net financial debt From $2,140,000,000 went down to $1,986,000,000 Let's flip To Page 7, the organic growth by geography. As you can see from the chart, it's very clear that the Q2 has been the most impacted by the pandemic. In all the regions, except Asia Pac that has been impacted the Q1, You see that the total group has been seriously impacted in the second quarter with a minus 17 organic growth after our 1st quarter with 5.4% driven mostly by the Asia Pac by China because China dropped significantly, very significantly in the Q1 and then recovered The other regions more or less have followed the trend With our Q2 very, very heavy, you see that Latin America is relatively sizable, minus 27.3% in the Q2, but going to recover quite quickly in the following two quarters. North America, minus 14% in the 2nd quarter with a very good first quarter with plus 3.3%, and then started to worsen the performance because the pandemic was affecting even North America more heavily. Let's move to Page 8, The trend of the EBITDA by business.
So projects. Projects went down from $1,800,000,000 to $1,400,000,000 so a minus 20 point 6% organic decline, a significant reduction Because of undensaturation of excluded capacity affecting submarine business, The HV land has been suffering the production and installation limitation due to the forward effect, especially in ALF 1 and is recovering in the 4th has been recovering in the 4th quarter. The energy E and I pretty stable with a minus 7.5% in the full year An organic decline driven mostly by P and I and partially offset by power distribution, especially in North America. Because in North America, the renewable business has been pretty good in the first two,
three quarters, let me say.
So Same profitability, you see, 5.8 percent with a reduction of 7.5% of the sales from $5,300,000,000 to $4,700,000,000 and the consequence is an EBITDA that is scaled down from 308 to $275,000,000 Industrial network component, more or less on the same trend that reduced by 7% organic decline with an organic decline of 7% from €2,500,000,000 to €2,250,000,000 with a slightly scaling down margin from 7.9% to 7.4%, overall from $196,000,000 to $166,000,000 losing $30,000,000 EBITDA. What is good and what is not? Renewable and elevators have been Pretty good, at least more than stable, whereas automotive, as you know, oil and gas and audio have suffered a lot the pandemic effect. Last but not least, the telecom, €1,600,000,000 sales in the first in 2019, that became 1.4 short, with an organic decline of 14.1%. Here, the organic decline has been significant.
And the problem is the optical cable are the optical cable that in Q4 has it accelerated, meaning that the telecommunication cables, the optical cables are increasing in term of demand in terms of volumes, keeping a very low level of prices. So sequential improvement in the optical cable. We took a lot of cost efficiency. We have to add the effect of YFC that has scaled down from $22,000,000 to $14,000,000 You may remember that some years ago, the effect of YOC on our P and L was around about €50,000,000 Now we are talking about 2014. So consequently, the reduction for YOC impact has been pretty significant.
Overall, a very difficult year, fortunately, fortunately, thanks to the actions taken by the company. From the cash point of view, very positive because The companies can bail out because of cash, not only because of EBIT or EBITDA. Let's flip to Page 10 and have a brief look at the trading update for ENI. You see in the graph that the total group is getting a trading update February year to date, that is positive compared obviously to the February last year. Overall, With North America, that is, for the time being, below the previous year, simply because the previous year, North America was going very well, especially on power diesel.
This year is going reasonably well, but not as well as last year. EMEA is recovering. Is suffering has been suffering in the first half of the year as well as APAC. APAC has been terrible in the first half of the year. Today, the trading update is telling us that the total group is recovering in term of volumes, Not too extremely high, but consistently better than the previous year in the Q1.
Let's have a look of the EBITDA and the margins by geography, flipping to Page 11. EMEA moved from $6,200,000,000
to $5,344,000,000
with an organic decline of 8.9%. The margins went down 1 point from 7.9 to 6.9 and consequently the EBITDA scaled down for €491,000,000 in 2019 to €370,000,000 in 2020. So €120,000,000 out of the total are coming from Europe from EMEA, let's say. North America. Sales went down 6.5 percent from $3,400,000,000 to $3,084,000,000 but improving the margin.
Consequently, the EBITDA has been stable. North America has been enjoying a very good our distribution trend and the overhead. The margins have been driven by the very strong push on the Costa side. Latin America has been one of the region mostly suffering the pandemic, with an organic decline of 10.4% and a margin decline of 2 points from 10.9% to 8.8%. Overall, the EBITDA went down from $102,000,000 to $68,000,000 The region has been heavily affected in Q2 with a better recovery in the second half that is giving a positive direction in the second half, especially because the organic growth in Q4 has been Last but not least, Asia Pac.
Asia Pac Moved the sales from 951 to 813 with an organic decline of 10.1%. Obviously, the weight of Asia Pac is limited in our global numbers. We are seeing a slight recovery in the Q4. From the margin point of view, you see that from 6.5%, the margins went down to 6%. Asia Pac doesn't change our numbers, but it's a sign.
Finally, let's go to Page 14, let's flip the page, Page 13. The outlook. The outlook for 2021 is 870,940. Obviously, the outlook is not accepted. It's an expectation.
I believe that the upper side of the range is achievable as we used to achieve every year. Unfortunately, we have to consider that next year, there are A lot of uncertainties and that's the reason for the $870,000,000 The lower part of the guidance is taking in consideration that there are a lot of uncertainties in the speed of recovery of the economies, In the speed of the COVID, leaving Our economy. You see from the arrows that projects is expected to grow, Not extremely. Energy is expected to recover significantly. Telecom, Furthermore, whereas we have clear sign in the last quarter, but even in the Q1 last quarter last year, Of a significant recovery of the volumes, Prices are still under pressure, and we have to take it into consideration, especially for the coming tenders.
Last but not least, the ForEx are not at all helping us because we expect an effect of ForEx negative for at least €25,000,000 €20,000,000 to €25,000,000 next year, next year, this year, because we are into the year. Page 15, let me give you an update on the climate ambition and the targets the Board has approved today. And I would like to leave the floor to Cristina. Christina is responsible for ESG inside the company. And she's the best to communicate to you which are our targets.
Thank you. Thank you very much, Valerio, and good afternoon to all of you. We are Proud to announce today Prismian's climate change ambition and targets. We set carbon reduction targets, Which are aligned with science based target initiatives. We signed the business ambition commitment letter consistent with the 1.5 degree containment.
We set net zero targets. We set a net zero year between 2,035 and 2,040 for Scope 1 and 2 emissions and by 2,000 and 50 for Scope 3 emissions. We set interim targets, which are consistent with these ambitions, so a reduction So now 46% of emissions for scope 1 and 2 by 2,030 and by 14% on scope 3 by 2,030. We are very focused and committed also for a new achievement of this target. Our main focus is on the Scope, we cannot directly influence.
So scope 1 and 2, our target is to decarbonize 80% of our carbon footprint of scope 1 and 2, so covering Our global operations, 130 sites, all the plants plus the R and D centers. We are Of course, on reducing the diesel emissions and also on phasing out SF6 gas. This will entail approximately $100,000,000 CapEx in the next 10 years. So we are very, very committed, very focused. And with this big ambition in mind, Valerio, I'll hand you over again the presentation.
Thank you. Jesman, you know that we don't like too much the show. We took the choice to be at the forefront of the ESG, especially the environmental, and we are going to act in that direction. Then obviously, the Scope 3 is pretty difficult because it's not over in our hands. For sure, We are going to do whatever we can do inside our ability, our possibilities.
Okay.
Finally,
Shareholder value. We are proposing Today, Board and the Board has approved a dividend per share of €0.5 per share, Increasing the traditional 0.42, 0.43 that last year has been reduced a little bit because of the COVID issue. In that sense, we are going to proposed €0.5 per share, 2.3% dividend yield. I believe that,
As you know, I have
a lot of shares. A lot of my assets are in the Prismian Group Shares, and I'm very happy because our shares that other than distribute a certain dividend every year have the possibility and are able to grow. And I hope that, that will continue for the next years. If you look at the TSR of our share, in 2020, it has been 37.1 percent And since the IPO, 155.5%. As a shareholder, I'm reasonably happy.
Thank you very much. I leave the floor to Francisco for the profit and loss statement and the financial details.
Thank you, Valerio, and good evening to everybody. Starting from the snapshot of the profit and loss statement, as Valerio said, Sales closed very, very near to the €10,000,000,000 level with an organic decline Of 10% approximately, 8% excluding projects. What is very good is, as Valerio remarked, Quite consistent and promising recovery catch up Of our volumes and sales, starting in particular from the Q3 across, I would say all the regions and across all the businesses, of course, more robust in some regions and businesses a little bit more subdued in others. But in general, the catch up trend is pretty promising and dividend everywhere. In terms of adjusted EBITDA, as Valerio said, we delivered the pretty high part of the range of the guidance we updated after The COVID outbreak with the publishing of our Alfa Romeo results last July 2020, $840,000,000 And we did that despite a very heavy ForEx impact, which materialized, as you clearly see in the Box top right on this slide, which materialized in the second half of the year and which was particularly heavy in the 4th quarter.
Out of the EUR 32,000,000 negative ForEx effect, EUR 29,000,000 in the second half, out of which EUR 17,000,000 in 4th quarter. Let me clear clearly say that when we gave guidance end of July, We didn't certainly expect the $32,000,000 negative ForEx. So we expected more a ForEx negative impact in the region of 'twenty. So without these very early impact, I think we would even potentially exceed the EUR 850,000,000. But of course, Forex is part of the game, it's part of the business.
So it's something we have to be aware of. Our EBITDA report It also benefited from a drop on of EBITDA adjustments, in particular of restructuring cost. You see bottom right, in the little box bottom right, that restructuring costs Drop from over €80,000,000 in 2019 to €32,000,000 in 2020, And this is the result of the completion substantially of the integration After General Cable acquisition, in particular also the part regarding the industrial footprint. EBIT was impacted by some asset impairment. Part of that It was already taken in Alpha 1 related to a specific region, South Europe, which was, By the way, the region by far or one of the region by far mostly impacted by the pandemic and another a total amount of €68,000,000 I would say pretty in line with what expected.
A major boost to net income came from the very good drop of financial charge, The major cut from €125,000,000 to €101,000,000 and I will elaborate a little bit better on this. Tax rate was also reasonably low at 31%, of course, is always high. But Considering also the drop of the profit before tax that we experienced in some geographies and which normally inflates Tax rate, I think, is a pretty good achievement in terms of tax rate. And net income related to group shareholders closed At 178,000,000 of course, down due to lower operating profitability, To asset impairment, as I said, but in the end, A pretty solid result. In terms of EBITDA, If you focus the box top right, you clearly see that the 4th quarter Discounted pretty much the heavy ForEx effect.
I have to say that the energy trend, which apparently looks a little bit weaker In the Q4, it's not weaker at all. I would say that the only difference compared to Q3 Is the very heavy ForEx effect, which impacted the comparison with the prior year. Pretty good, the development as Valerio also highlighted on the telecom side. You see that The Q4 is the 4th is the 1st quarter where the telecom EBITDA is above The level of last year. By the way, also in this case impacted by ForEx pretty significantly.
Let me flip to the following page. Just to comment very quickly the major drop of financial charges, which comes from net interest expenses, Which closed to $77,000,000 pretty in line with the indication I have given, I believe, already in the Alpha 1 with the Alpha 1 2020 And driven by the very robust cash flow generated in 2020 And also by the very low leverage that we managed to achieve to reach at 2020 beginning of the year And which benefited most of the year in terms of low margin lead and low financing contract pricing. The other piece of major drop of Financial charges is related with the hedging costs, which were reduced pretty much in some geographies, particularly expensive from Hedging necessary to 2 business like, for instance, Turkey, just to mention an example. I switch To the balance sheet. To comment the very robust performance On working capital, down by an amount in excess of €300,000,000 from €750,000,000 approximately to $442,000,000 This was the result of our free cash flow In 2020, which reached a record level, as Valerio already highlighted.
Generally speaking, I would say that half of this reduction Free cash of working capital results from a strong improvement of working capital in projects, Which is mainly driven by the major inflows coming from ordering takedown payments, Starting from the German quarter, but not only for a very significant The other part is related to the non project business, and I'm particularly happy to mention here The achievement of a reduction in receivable overview by a very material amount of €70,000,000 €80,000,000 In a very tough and challenging environment, so not a given at all. And then the other part of the working capital reduction is less relevant The monetary component mainly related with the deflationary effect of ForEx once again. The net financial debt decreased by almost €200,000,000 very good With a leverage which is only slightly in excess of 2x in terms of net financial debt on adjusted EBITDA. Cash flow. This chart as usual, 2021, is breaching the Debt the opening debt 2020 with the year end debt 2020.
So the €2,400,000,000 with a €1986,000,000 The EUR 375,000,000 free cash flow mentioned in the slide Includes the $112,000,000 of antitrust disbursements, most of which are related Well known payment of the EU finance, the trust fine, which was done in December. And this brings it back to the number that Valerio mentioned of 487,000,000 Of course, the boost the big boost, which unfortunately will not be there for 2021, is coming from the working capital €259,000,000 negative or decrease of working capital in 2020. On the other hand, I think that 2021 will benefit from lower restructuring cost that in 2020 were Still pretty material, but we also need to recover some CapEx projects, which was quite contained in 2020, in which some of them were postponed in 2021. Of course, within a very still very reasonable amount with these two Components of restructuring and CapEx, which will broadly offset each other in 2021. So in principle, to explain very clearly the guidance of Equatorial, as Valerio mentioned, the Well known $300,000,000 plusminus20 percent.
We should simply think starting from the €487,000,000 Considering the lack of boost Coming from working capital reduction and assuming a neutrality stability of working capital for 2021, A broad compensation of CapEx and restructuring cost. And of course, the challenge, which is, let me say, At least the midpoint of our EBITDA guidance, which will drive an improvement of cash flow. In principle, this EUR 300,000,000 free cash flow is Then with a target of net debt year end 2021, which will be around €1,900,000,000 On possibly then a bit lower than €1,900,000,000 So very important that we will keep deleveraging and of course targeting the improvement of Yes. We should reach a significantly lower leverage year end 2021 compared to year end 2020. Last but not least, I thought it was wise to update on the maturity and on the new, let me say, maturity schedule Of our debt, also following the issuance of the equity linked 0 coupon bond That we executed beginning of January.
You see that our average maturity increased very significantly, Almost up to 4 years, 3.8 years to be exact, which puts us in a Pretty comfortable situation, both in terms of deadlines that we have to refinance and also in terms So of very abundant liquidity, which gives us confidence also to face a still pretty And difficult environment. The first deadline, which is coming that we, of course, So a deal with the second half of this year is the refinancing of the straight non convertible euro bond for €750,000,000 But It's something where we are absolutely comfortable and confident to deal with. Very good. I think I'm over with my presentation. We can move on with the Q and A session.
Thank Your first question today comes from the line of Lucy A. Carrier from Morgan Stanley. Please go ahead. Your line is open.
Good afternoon, gentlemen. Good afternoon, Cristina. Thanks for taking my question. I have 4 actually today. I was hoping to ask And to go one at a time.
The first one was around the bridge for 2021. I see that on your Qualitative guidance, you've guided for telco to be down. And I just want to try to understand the message here because we've Seeing the performance improving in the second half, especially from a profitability standpoint where it looks like you've been able to very largely offset, I would Say the pressure you see both on volume and on price. And so I'm trying to understand why you are not expecting to be able To renew that type of performance next year or rather this year in 2021.
Hi, Lucie, Valerio speaking. Thank you for your questions. I try to give you answer that have a sense. The real problem here is that the volumes are coming strongly from North America, not from Europe. The problem are the prices because contracts are going to be renewed now in the Q1 mostly with significantly lower price than the previous year the previous contracts.
That's the reason for the not pleasant expectations we have on the telecom business. A lot of volumes, but not at all are recovered in the price. And consequently, the prices will be under pressure, creating unexpected slowdown in the performance global performance of Telecom. In addition to it, obviously, we have to take into consideration Our contribution or our participation to YOC that we don't have any very clear guidance on it, but we expect Not to be better than 2020.
If Valera may add one quick Liberation on this comment. North America volume and prices are good. It's actually in Europe where we saw Despite the strong recovery or rebound in volume, we continue to suffer the price deterioration. And the combined effect of these two areas, geographical areas that telecom overall is largely declining in 2021, but with this differentiation between the two regions. Sorry, this is Massimo speaking.
Sorry.
Yes. Thank you, Massimo. That's helpful. The second question I had was around the backlog. You're ending the year with a €3,500,000,000 backlog On the project business, I was hoping you could help us understand a little bit how we should think about this backlog in
terms of execution for 2021 and beyond
because there was a For 2021 and beyond, because I was a bit surprised by the drop of revenue you had in the Q4, which seems quite outsized versus what you had experienced during the rest of the year. And also an update on maybe A new project to come because I think there were a couple of projects which were expected to be awarded even at the end of last year and which we still haven't heard much.
Okay. Projects. The backlog is big, I agree. The problem is that 2 out of €3,500,000,000 are the German corridors, €1,800,000,000 And the German corridors are going to start from the summer 2021, the execution, consequently, the recognition of the revenues. So in the second half, we see an improvement, but not in the first half.
Moreover, we have a lack of backlog In term of extruded cables, some oil. And Eurasia, obviously, is The main expected projects to come has foreseen reality. The conflict between the 525 and the 400 The 400 kilowatt DC is going to be in favor of 525. But the 525 DC See, summary. No one has yet oblivated.
Consequently, the delay for the execution of the problem will be not minor, and we have to deal with it. In few words, Means that the project will not be for 2021.
But if I may add, Massimo, again, on a good note, the order intake in 2021 of the market is very strong and bullish. And we believe that we will land Good projects in 2021 to close this gap that we have in this through the footprint. But as Valerio said, this will benefit more 2022 then 2021. But the market is there.
So and we are going to compete for this organic. If you like the expectations, the market is expected to ramp up to 7,000,000,000 Everyone is happy, we do, but we wanted to have the order in hand to realize it. And we still have a gap in the saturation of the HV submarine extruded.
Understood. My question related to that in project is around offshore wind in the U. S. It seems that the Vineyard Is able to come through. And I remember that initially, when you was awarded, and there was a while ago, before the regulatory delays, you were present on that contract.
So I just wanted to know what was the status now for you on the Vineyard. And if you're also seeing Now an accelerate a potential acceleration in regulatory approval in the U. S. For offshore wind that could maybe lead you to have To add
capacity? If it's true, as they say, that the regulatory Body in U. S. Has approved the vineyard, we should receive the notice to proceed before year end. And consequently, we'll not have maybe significant effect, if not in the last quarter, But it's at first very good starting point.
And I'm quite sure that it's going to happen.
Sorry, you said you're quite sure or not quite sure?
Quite sure. It's going to happen. No, no. We have been suffering almost 2 years with Vineyards and other projects that have been postponed by the administration. Now seems that the administration finally has taken the decision To kick off.
Valerio, it's Hakan speaking. If I may add, The first approval has been given. The final approval is going to come very soon, what we are also receiving from the customer. The Q3, we have a great expectation that the project is going to go forward. It is the first project that the government is Focusing in giving the green light and the news out positive.
So there is significant Likelihood that the project is going to go forward this
Q4. Thank you, Alexander.
And Do you think you will accelerate approval in offshore wind in the U. S? Or do you think it's going to continue to be As until we have several projects kind of onstream.
Hakim, I leave to you the floor. Yes.
Thank you. I have to tell you that, of course, the changes in the political environment in the U. S. Has given us thrust, a Big thrust into the project of the wind farms in the U. S.
There are already Many projects that have been tendered in terms of licensing on the West Coast and also in the East The majority is on the East Coast, but also California has plans to expand and has already opened up Discussions of 2 gigawatts from the very beginning in the U. S. So there is a list Significant project. The vineyard is not the only one. Currently, there are already about 3 gigawatts, I can say, already assigned to different developers.
And This year, we expect that the first start is going to be with the approval of the vineyard. We are seeing also positive news from the BOEM inside the U. S. And the pipeline is relatively Strong. And we are, let's say, talking to the developers being part of this project.
So We do not see the same struggles that were in the past because There are high targets also inside the United States To improve also the carbon emission reduction and the significant policy change. So we do not expect that these are going to be significant delays as we saw in the past. So we are relatively optimistic, I can
And lastly, if I may ask, on the U. S. Steel, can you comment maybe on your view regarding T and D investments. On the land side this time around, on the back of the issue we have seen in Texas a couple of weeks ago, Do you expect that this is going to trigger more momentum in T and D investments in the U. S?
And if so, Can you remind us your market position in this market in the U. S?
I can.
Valerio, this is more on the land side, but I can knowing the U. S, I would like to answer As well here, the textile situation has created significant, let's say, power outages, as you know, And utilities have been in significant difficulties, which caused also, let's say, administrative, Let's say, managerial issues inside the utilities, as you may have seen. Through my experience and also what we see and what we talk also So to our customers, the undergrounding is going to be a significant, let's say, step That the utilities are going to take. In short term, definitely, there are going to be some repairs and improvements on the overhead lines and also in the undergrounding. But There are, in the pipeline, significant DC projects that will, let's say, have been planned for a long time, but I've never come to the conclusion competing with the overhead line.
So we see that these DC projects and also AC undergrounding are going to be in acceleration. And this is what we see also what we receive Also from our customers as indication.
Lucif, I may add. Massimo speaking. We will see some improvements on this topic of underground. Although we know that since years, we have seen in the United States outages happen in California for fires in Texas and so on, But the undergrounding cost in comparison to the overall lines is a big call, is a big challenge. I think that we will see a Stronger leap in demand in the El Lugansk cables once the onshore business became more effective, more popular in the United States.
We're probably close to see this happening, thanks to Biden administration and to the Biden's stimulus and incentives for renewable sources.
Thank you.
Thank you. And your next question comes from the line Of Monica Borjeo from Intesa Sanpaolo. Please go ahead. Your line is open.
Good afternoon, everyone, and thanks for taking my questions. Just a follow-up on the energy projects. I understood that a higher contribution Will occur in the 2nd part of the year due to the start of the execution in German corridors. But as for the extruded in the submarines, when do you But the negative impact of the under saturation of extruded capacity might reverse. Should we assume the 2nd part of the year?
And in relation to the energy projects, Do you have any update on the Eurasia link? And this is for the energy projects. Skipping to the telecom. Obviously, there is still a strong pricing Sure. In Europe, do you have any update on the timing for the outcome of the European Commission Investigation in relation to potential antidumping tariffs.
Do you expect that this could The introduction of antidumping tariffs might materially reverse Your outlook in telecom business may be driving an upside rather than a downside. And just a follow-up. The downside, I understood that it will be on the absolute Leve, what about the margins? And last but not least, from the financial side, For Francesco, can you just give us an idea of the copper impact on the working capital And a rough indication for the expected CapEx in 2021? Thank you very much.
Thank you, Monica. Valerio speaking. First of all, what about the projects and excluded shortfall in backlog. We are working on it. Obviously, there is always a window for the projects.
I believe that in the second quarter, We are going to receive new orders that will fill the capacity for extrusion cables, but mostly starting from next year. This year is difficult to see something effective in the backlog. Eurasia. Eurasia As not foreseen, but unfortunately expected, Eurasia has been postponed because
of the
Crete Actica is 525. The Crete The other part of the link, Cyprus, they would like to have a 5 35 in order not to have a double station, power station, transformer station in Crete. Now the project originally was 400 kilowatt, but the 400 kilowatt doesn't match with the 525 of Crete Perconisse. And that's the reason for the re tendering. The re tendering will come probably next year this year, sorry, for execution a little bit late.
But at this stage, Having known the technology of 5 35 Submarine yet, moreover, has to be 525, we see somewhere in at 3,000 meters. That will not be an easy task. We'll need much more time in order to develop it. We were ready for the 400 KW DC, 3,000 meter, we are not yet ready. No one is ready for the 5:30.
Okay.
Can I add something, Valerio?
Of course.
Just to complete. Thank you. Valerio explained very well the conflict that is in the project that created a delay. We are going to have the quotation in March, April timeframe of this year. We knew for the 500 KB.
The first step is that the European Commission has to define which Technology is to be chosen and the budget of the project. So we are expecting that until end of April, The discussions in the European Commission is going to be finalized, and the tender evaluation is going to be on the 525 kilobytes Definitely, the 400 kV was a project that we could do to complete In an earlier stage, this is going to create further development requirements, which definitely It's going to affect the completion of the project at least 1 or 2 years later than the 400 that We were thinking. So however, still we are, let's say, In the development and also in the discussions, and we hope that we are going to be part of this project. On the AC, Through this side, there are many different projects that are currently under tendering. And We are expecting during the year, as also Massimo said, that we are going to be part of this award.
However, we are showing already an improvement in the guidance. Valerio showed That project is going to improve for the coming year. It will very much depend on also the execution and the permits of these Projects, if they can be anticipated to make that happen.
Okay. Thank you. Thank you.
Okay. Monica, let's move to the question for Peloton. I believe that Filipe is on the line.
Yes, I'm on the line, Dario. I will answer
To Monica?
Yes. Yes. Hello, Monica. The antidumping process that is ongoing. It should lead to a decision, let's say, between May October this year.
Of course, we don't know what kind of decision it will be. So if I would say, if there is any impact Of the anti dumping process in Europe, I expect it more to be about 2022 than 2021. And I would define it as about stopping the bleeding in 2022 More than completely eliminating the price pressure in 2021, of course, because They are it is essentially set to make Europe not anymore the Systematic target for very aggressive pricing because North America is protected, China is protected. Japan is protected. Korea is protected.
Europe is
not protected.
So That's the point. I think I expect an effect in 2022, but still there are also Non Chinese competitors. So I think we are going to go back if the decision is go on. I hope it will be. We are going to go back to a more level playing field, which doesn't mean there is no competition anymore.
I would look more towards China to understand whether the prices could rebound or not Because in reality, all this is due to the excess of capacity in China, and it depends very much On the Chinese five gs plan that is going to be launched very soon. If the Chinese plan goes strongly, Then we could see a change in the price trend worldwide.
Okay. So at the end of the day, do you expect a The deterioration in the margins of the telecom business in 2021 and not only a decrease at the absolute value?
I would say that, yes, our margin is going to be under pressure. Europe is we are more exposed to Europe Than most of our American or Chinese competitors? And Europe, so the price Pressure coming with a certain delay due to long term contracts and to the destocking effect that we have seen in the last years. So I expect my margins to be under pressure, although we continue our work on the cost. If you look at 2020, actually, if you eliminate the effect of YOHC And you eliminate the effect of ForEx.
The telecom margin in percent was pretty stable compared to 2019.
Yes, correct.
So we were quite able to offset the price pressure With cost actions, despite the COVID situation, I expect 2021 to be under pressure And then the time to fully implement the cost reduction measures, I expect, of course, to come back to that sort of level Later in the year and 'twenty two.
This is my view today, if you want.
Okay. Thank you.
For your last question, Monica, I would like to leave the floor to Francisco to comment on the copper impact.
Yes. Thank you, Monica, for your questions. You are right pointing out that The sharp decrease of the copper price will definitely have an impact In on our working capital 2021, we are talking of an increase of 35% to 40% in copper price in the last 6 months. And as always, when you have this kind of increases Taking place in the last part of in this case, 2020, the effect are to be seen in 2021. I think we can this will create pressure on working capital and cash flow.
And by the way, it's think that we have taken into account in our guidance. I think that with this level of copper, if This is added to stabilize for the entire year. I would quantify impact of at least €50,000,000 €70,000,000 €80,000,000 On our working capital? Okay. This will make it not easy to keep working capital stable Because we will start with the minus to recover.
And I think that we will have we have an opportunity to improve our stock level and further and reduce the Days of inventory. For the simple reason that with the recovery of the volume that we are seeing, Visa should be Feasible as the stock level was in actual terms not high, of course, at year end. But in terms of days of inventory, increased EBIT on the effect of lower volume, talking about 2020, Yes. With the volume rebounds and with the volume recovery that we're seeing now, we should be able to optimize the level of stock and recover and work to recover It's material copper impact that I was mentioning. So that's of course, it's a challenge.
It would have been better To stay on a more stable copper price, but I think it's manageable, and will deal with that. Then you also mentioned that you were also asking for a CapEx indication. Well, CapEx So we'll definitely be a bit higher than in 2020. I would say approximately €50,000,000 just to Sharp cut number. Financially, I believe that this higher CapEx, which is, again, not higher CapEx in itself, is only a recovery Of some postponement of CapEx that we did in 2020 also For physical reasons, because all the physical is very difficult to execute all the industrial CapEx in the plans.
And financially, I think that we can be pretty confident that desired CapEx will be offset by the restructuring charges for these
components
We'll be quite neutral on our cash flow for 2021. Very clear. Very clear, Armonia. Thanks.
Very clear. Thank you, Francesco. Thank you all.
Thanks, Monica.
Thank you. And your next question comes from the line of David Barker from Bank of America. Please go ahead. Your line is open.
Good afternoon, everyone. Thanks for taking my questions. I've just got a couple. Firstly, on capital allocation, there's been some comments in the press From you about potentially looking at a new acquisition in the U. S.
Obviously, one of your major peers is talking about doing a lot of acquisitions. How are you thinking about the capital allocation process for the group going forward more generally? And then my second question is a bit more of a general one. You're obviously taking delivery of the Leonardo da Vinci ship this year. How should we Think that impacts the Projects division in terms of margins and commercial capabilities.
Is there any kind of midterm margin uplift From having this shipped? Thank you.
Okay. David, thank you very much for your questions. Capital allocation. The capital allocation, first of all, you have to have the capital. We have the capital.
Otherwise, you have not you are not able to allocate anything. We have the capital. We can allocate. We have been talking about the desire to look at acquisition in the next, let's say, 1 or 2 years, possibly in North America. Why?
Because North America is a market that we have seen is pretty sound, is a good market, It's a market where it's important to be relevant for customers. We are, and we would like to be more relevant for our customers. Now the problem is to find the proper target at an acceptable value. We are working on it. And as soon as we are going to have a more clear view, we will let you know.
The second question, I'm sorry, but I missed part of the question.
Leonardo da Vinci's delvenuship will improve our margins going forward, The
Leonardo da Vinci will not improve our margins, will let us to execute A little bit better, the big projects that are not anymore in the scope of the Giulio Verna. Giulio Verna is going to retire, let me say, by the year end. And Leonardo da Vinci is going to be fully in charge by July this Did I answer your first question?
No. Thank you. Thank you, Valero. That's all I have. You're welcome.
Thank you. And your next question comes from the line of Max Yates from Credit
Just my first question sticking on projects. I just wanted to think about the ramp up of revenues over the next couple of years rather than just 2021. And I mean, am I thinking about it in the right way that if the business today is about 1,400,000,000 About half of that is from submarines, a bit more than 700. If we see this business go back full utilization, should we expect another, say, dollars 300,000,000 on the submarine side to take that back To $1,000,000,000 and then another, say, dollars 350,000,000 from the SoodLink projects to get us to a sort of $2,000,000,000 revenue number In total, dollars 2,050,000,000 for the Energy Projects business by 2022. Is that still realistic?
Or is that something we're not considering In terms of where revenues for this business can go?
Okay. One step at a time. First of all, This summary, we are very keen in getting new orders for the excluded capacity we have because we have capacity available. We have not been able to fill capacity and we hope to be able to do it during the second half of twenty twenty one. That's in order to be ready with 2022 at full capacity.
Confirming consequently the billion you were mentioning. Can you repeat the second question?
Yes. And when we think about the German corridor projects, which are obviously zero contribution of revenue Today, I assume that kind of in 2022, we should be running at around 360,000,000 Contribution from those, which is $1,800,000,000 over 5 years is $360,000,000 per year. So is that again still a fair assumption?
Max Vest makes sense because the German corridors are going to start July 2021. Will not be full year, will not be full speed, but for sure, second half 'twenty one And the entire 2022 and 2023 will be at full running rate for the German corridors. So your idea of €300,000,000 makes sense.
And I guess my second question is just then kind of how we think about margins in the backlog because, obviously, this year will be
this year and next year will
be Viking Claude, because obviously this year will be this year and next year will be Viking Link. We'll also have the German corridor projects being a big contributor to revenues. So should we be thinking about margins going back to that sort of 15% level? Or is Kind of the 13% level more realistic of the shape of the backlog. I'm just trying to understand what a normalized margin Would look like for this business at 2% Do
you prefer an honest answer or a marketing answer?
I'll take the honest answer, please. The
honest is that to fill the capacity for HV Summary, excluded. We have to react to the Finito, what does it mean? That the margins may be under pressure. But we do not intend at all to give up on our position on the summary.
Okay. And maybe just a final third question. I mean, you mentioned When talking about telecom, the part of the effect we're now seeing is contracts that you're signing today being lower margin and that will put the business under pressure. I just wanted to understand how much of your kind of revenues Today reflect the lower prices, so it may be driven by spot markets and how much of it is driven by contract That still needs to feed through and reflect those margins. Where would margins be if the full business today Selected the pricing environment, I guess, is my question.
Let me be very clear, Azim. It's true that our margins are going to be under pressure at least in the first part of the year because we are moving from contracts that were at higher margins, higher prices to contracts So that for the fibers are suffering with the decline of the price of the fibers. That's We used to have quite long term contracts that have been protected our margins till now. Now and I mean in the first half of twenty twenty one, we are going to renew part of this contract. And most probably, we are going to be obliged to give up some margins in order to keep our position.
So I do not see our ability to compensate the decline of the prices that we have seen in the fibers with the cost. Partly, We are doing everything is possible, but obviously partly will go into our P and L. And that's the reason for the scaling down arrow we put in the telecom forecast.
Okay. That's helpful. Thank you.
Thank you to you, Max.
Thank you. And your next question comes from the line Akash Gupta from JPMorgan. Please go ahead. Your line is open.
Yes. Hi, good afternoon, Valerio, Tina and Francesco. And I have a couple of things to discuss. The first one is on projects. So clearly, When we look at you, you are still struggling with lack of capacity utilization where you still have some capacity that is available While your competitors are talking about increasing capacity and one of them has even announced further investments on top of what they We're doing already.
And even if I look at your slide number 22, clearly, you are not more positive on outlook for Subsea and all. And so maybe the question I have for you is that given you are already having some capacity issues In terms of underutilization, at what stage you will go for investments? And also to add to that point, do you need to have a factory In the U. S. To qualify for some of the projects, not the initial ones, but the later ones, if there would be any local contained requirement.
Okay, Atas, thank you for the question. It's clear that our decision. To move towards a more determined action To saturate our capacity is due to the fact that our some of our competitors are ready or have been ready to give up prices and concluding remarks for volumes. Now they are thinking or they are acting, expanding the capacity. And now, Vasta, the game is over.
We don't want to get eroded our market share and our position in that market. The reason why We are ready to fight on the margins and on the prices if needed. Clearly, The party is aware.
We are the leader of
the market, and we wanted to confirm our leadership. If That means to reduce our margins, we have to react on the cost side. But I do not intend to give up on our market positions in Visa.
Yes. I mean, maybe if I ask a follow-up on that. Like, mean, if you look at your slide 22 and if you look at the orders historically and what we expect from 2020 to 2,030 onwards, I think It looks like everybody in the industry would need to increase capacity. And if I may ask, what would be the trigger for you to consider capacity And would that be greenfield or do you have scope for brownfield investment as well? And then also if you can answer the question on U.
S. Cash. Thank you.
Listen, to be very clear, from the capacity point of view, we may not need to increase the capacity. If the market is moving Towards U. S, and I hope and I think that will happen, obviously, staying in Europe only will not be an advantage, and we have to react. We yesterday, in my trip in the car, I was debating with Andre Sierra Perundini, our CEO North America now, about the possibility to transform 1 of our F2 is in U. S.
Into our submarine plant. That will happen for sure. If the market for offshore wind We'll take off as expected in U. S. We will be there to serve our customers.
Don't worry. It will be a quite significant investment that obviously will be much or less more or less significant in term of millions depending on the fact that it's going to be a greenfield or a transformation of 1 of the existing plants.
If I may add, Valerio, one more thing. I just want to tell you that we have the biggest capacity in the market. So from our perspective, It is not necessary to add more capacity compared to our competitors. Their decision to go and enlarge their capacity is, as Valerio said, based on lower margin business and for future expectations and not, let's say, the And not, let's say, the reality which is in the market. It is not that the market is Completely, as of today, in a saturation mode.
There are good opportunities in the future, and we will follow the opportunities. But we will not invest before the market is going to depart. On the other hand, Don't we should also compare always the incremental capacity that they are putting versus our capacity, is relatively bigger than there.
And my next question It's on more medium term performance. So clearly, if you look at the group on a 3, 4 year view, and I think It's pretty clear that high voltage projects would be a growth driver for earnings given we have support from Sealed Link and also Once this capacity being saturated, your earnings will go up. But maybe if you can help me understand that outside of projects, What would be the driver for improvement in performance? Is there any self help that you can come out and grow your earnings? Or will the earnings growth in rest of the business would be depending on what sort of top line growth you may see in the next few
Akash, Marciano speaking. So as we said, I wanted to be covered. Telecom, we are going to expand our capacity and follow the growth of the market in North America, which is where we don't see price pressure and also where we don't see any sort of volume decline actually This is a stronger market opportunity. As far as the other segment, we are going to leverage on the rebound of the market. Coming out from COVID season, we see strong growth in E and I, in Power Distribution, in T and I, in Industrial Cables.
So those are the segments which we are building our growth in 2021 and waiting for the additional growth coming 2022 from Energy Products. So that is our plan for 2021. And we have to we are leveraging the principle, we are leveraging the portfolio, while leveraging a stronger customer relationship. And we already seen in quarter 1 this year The stronger growth in our volumes as we've seen from our presentation before in the NII market, both in industrial cables So this is where we're going to account, we're going to bank for the for 2021 growth, short term, midterm growth in the business, mostly
in Energy subsegments.
Thank you. And my final quick one is on if you can comment on what you have seen in terms of trading in the first few months of the year?
In terms of trading, yes?
Yes, how the trading has been in the first couple of months of 2021?
As we said, we are seeing volume back to the level of 2019 In energy products, so in E and I and industrial. Of course, there is some pressure also there in terms of cost inflations, But we have also been working on we've also been working on the strong efficiency actions in 2021. So we see volume already running at a level of 2019 pre COVID. So this is positive. And that's why we are confident that the Energy Products division will outpace 2019 will outpace 2020 and will reach a similar level to 2019 in terms of profitability.
The level of the volumes is good, is improving.
Going back hopefully to 2019, the problem is the inflation of raw materials that we have to pass to the market. And that will take 3, 6 months as usual. That absorbed in between 1 quarter 2 quarters before to be completed. Is also foreseen to give an upside when the raw material will go down, if will happen, and the prices will not fall immediately. It depends on the appetite of the competitors.
But for our business, the raw material at a high Stable label is the best solution, including copper. You're welcome, Akash.
Thank you. And your next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Your line is open.
Hi. Thank you. Good afternoon. I have 3 as well. But I wanted to Sorry, following up on a point you mentioned you were interested in maybe consolidation in North America.
Also wondering if you could give us some colors on which Areas in terms of end markets are more interesting. As you know, you're here in Nexon that Telecom, for example, are divesting. Wondering which end markets are more attractive in your view?
Daniel, Massimo. This is Massimo.
We are looking at options to growth in North America, to grow in North America and consolidate Other players? As Valera said, we have to identify the targets. The proper targets. The proper targets from a product portfolio point of view and from an accessibility point of view. We believe that we want the targets for us in terms of business segments are Power Distribution or Industrial Chemicals.
These are the 2 areas where we might enjoy from a consolidation in the American market. Leveling on our scale already wider, but becoming even stronger across all the customer base. We are not thinking, yes, any sort of telecom opportunity in North America.
Daniela, the problem is that our debt is scaling down, But this is still almost €2,000,000,000 Consequently, we have to look at the targets in 18 months to go, not tomorrow morning.
Okay. Very clear. And my second question is more on the projects business. We know that For you, copper is a perfect pass through. But for your customers, I guess, it is not.
And they have seen very significant copper price Increases. Do you think this, at some point, can kind of impact time lines and cause delays On the project side of the businesses, if customers might wait for a more favorable price than what they when they had signed the contract?
Daniela, my opinion is that in the project business, the copper value is not an issue. It's a really automatic pass through. Needs of some time. The problem is vice versa on the less more competitive market. The PD and the T and I, We have, by Sebastian, the high staircases I was mentioning before in terms of pass through, needs of some time in order to Convince the customer that there is no other way.
Daniela, you were worried about customer making different decisions or delayed projects. I don't think this will be considered by customers. Projects have a longer lead time, a longer Development time and copper has never been hindering the decision for making ornamenting projects. So I don't see this happening in the energy project business and the high copper will hamper the activity of customers. No, no.
Assuming that the capital is going to
be something like 20%, 30% of the value of the cable that is not the value of the project. The change of copper price will not kill the project.
Okay. That's clear. And then Just a follow-up. I know you labored on this point a bit, but I didn't maybe I didn't understand They'll reply completely. On 2021, capacity utilization on high voltage, Where are you going to be?
Like how big is the problem of underutilization?
Okay.
High voltage is fully saturated. Obviously, with German corridors especially, the high voltage land is even over that we did. The submarine high voltage extruded is vice versa, 20%, 30% free. And we are going to saturate it. Now the Vineyard, It really is going to take off by the last quarter.
It will change the picture in the last quarter of the year. But we have to create the backlog for next year.
And your question comes from the line of Alessandro Tautoro from Mediobanca. Please go ahead. Your line is open.
Yes. Hi. Good evening. I have, let's say, 4 questions, if I may. The one is on the telecom.
If you can, let's say, if Anderson is well, first of all, you talk about The deadline for the anti mapping investigation, let's say, in maybe May or maybe October, just to If I understood well. And the question is related to, let's say, China. If you can give us an update on the recent tender in China, if you have observed any price stabilization or price improvement considering the collapsing prices We saw last year. This is the first question. The second question is on projects.
Can you considering all the factors you mentioned in this presentation, can you help me to understand where is the
I missed the question on projects. Can you
repeat that?
On projects, just to I saw the let's say, the other on the positive side. So considering all the topics we are discussing, I understood that probably this year, you will have more installation, thanks Viking. So just to understand which kind which software improvement, okay, you are expecting On the project side, considering that you need to fill also the underutilized Capacity on the extruded side. So this is the question on projects because at GMV, you expect, let's say, positive EBITDA delta On projects? The third question is on is probably just, let's say, the technicality.
First of all, in your tax rate expectation for this year, considering the extremely low level you got in 2020, financial Charges? And then just a clarification on IFRS 16. I saw a sort of add on on the bridge on IFRS 16, you should then give me an idea of what happened on these items.
Hey, Alessandro, let's take the first question. The first question is on the antidumping. It's clear that the antidumping procedure is going forward slowly because we are Europeans. And we are not so fast and deceasively as the Chinese have reached the group to introduce their antidumping Tax. The tender in China has been Not improving yet, but not declining anymore.
And that's a very first very good segment, meaning that no one, even in China, has anymore the power to drop the prices without losing further In a certain sense, it seems that the fiber price in China has reached the bottom. We have seen a very modest recovery in the fiber price in the market. I don't know if Philippe has something more detail. Do you add?
Yes. I could say hello, Alessandro. I could say that in the last China Telecom Under at the end of the last year, we saw prices that were higher compared to the prices of China Mobile. China Telecom is smaller than China Mobile, so the impact on the average price is lower. But still, I think we can say that the prices in China are stabilizing.
Now we have to wait for the next China Mobile Big tender that is going to come in the coming months to see what the real trend is. I would expect it not to be down anymore, At least to stabilize, I would say, because it's clear that the Chinese industry is suffering very much from Just look at the results of YUEZ. I think it's clear. So it's obvious that There is an end to always reducing prices even in China. And it seems to me that we are close to Okay.
Hi, Sandro. If I can answer to your questions on projects. As you have seen from the arrow, the arrow is an upside, is not Extremely strong. Why? Because we have foreseen an improvement of the Each will end, thanks to the second half twenty twenty one upside coming from German corridors.
And at the same time, we have a modest improvement of the summary because of the increase of activity on summary. Even if we as I already said, We have 20% roughly of capacity for excluded that is free. It's unsatisfied. I know. But Nobody knows what's going to happen in the next quarters.
Maybe that we are going to be able to saturate quicker than expected. Depends on the number of tenders that are coming into the market because in the second half of twenty twenty, We have not seen a significant impact coming into the market. No one has seen it.
Okay. Thanks.
You're welcome.
I have two questions for Francesco.
Yes. And Bacheco, would you like to answer to the questions, please?
Yes, absolutely. Ciao, Alessandro. I start quickly with tax rate. I think a good realistic You is to have a tax rate for 2021, maybe a few points above 2020. That you highlighted was Particularly low.
So I would say a range of maybe 31%, 33%, 34%, something like this. And this we should benefit, by the way, on the we should benefit of the response of some Geographies in terms of profitability and profit before tax, in particular in Europe, where we are seeing very positive volume and recovery Over profitability from the low level of the central part of 2020. This normally benefits tax rate pretty much. In terms of financial charges, I think we will have a slight increase. I will quantify the region over a 5 minute for a number 1st of all, we are starting the 2021 year with a leverage above 2.1 times In terms of EBITDA in terms of debt on EBITDA, whereas beginning of 2020, we were below 2, slightly And this makes a few million difference in terms of impact due to, say, our margin rate from financing.
Then you have seen the transaction that we have done on the equity linked bond with the issuance of EUR 760,000,000 and with a partial buyback of the existing convertible bond for EUR250,000,000 of course, It creates in 2021 an overlapping of 2 instruments, providing a lot of liquidity, which It's not remunerated brilliantly by the market now. Of course, we thought it was wise to pay this bill of a few 1,000,000 more interest
Spence is in view of
promoting and getting a percentage of exceptional good condition in equity linked Market. So it was a tactical move, which we need to affect an overlapping of the Two instruments, at least partially, in 2021, which is 3,000,000,000,000,000, slightly higher financial charges, but nothing really material. And then your technical question on IFRS 16. This becomes from the way IFRS It's been stated in the cash flow statement. As you know, IFRS 16 is basically converting The monetary cost that before IFRS 16 were related to Leaving contracts where monetary costs affecting negatively our EBITDA since before IFRS sixteen assumption It's converting these monetary costs into depreciation.
I'm trying to simplify that. Of course, by doing that, it's boosting The EBITDA and the free cash flow is having a positive impact on the free cash flow, Is treating these monetary costs as installments in loans, basically Group. Leasing, yes, financial and operating leasing as loans. And when these leasings are due for renewal, these renewal, of course, are Increasing the debt. So there is a kind of natural compensation between a higher free cash flow Okay.
IFRS 16 is triggering, but a component, which is not the cash flow Renewal and new a rollover basically of operating and financial leasing, which is increasing the level of debt. And this bridge, you will consistently see this impacting in the bridge for the coming year since the region of the fiscal year, just to quantify.
Okay. Francesco, sorry, because the line was not, let's say, perfect. So coming back to the financial charges, You're telling me that maybe $110,000,000 is, let's say, a flat assumption for you considering all the
Maybe a bit less, I would say. I would say 105,000,000 or something like it.
Okay. Got it.
Thank you. We will now take our next question. And your next question comes from the line of Sean McLaughlin from HSBC. Please go ahead. Your line is open.
Thank you. Good afternoon and thanks for taking my questions. Firstly, on Telecom, You said you worked on costs in 2020, so that ex YofC and ex FX, the telecom margin was Stable in 2020. Can I just understand what is the magnitude of price pressure In 2021 or over 2020? Can we expect to see a good 300, 400 basis points of margin pressure ex YofC And FX, just to understand the degree of pricing pressure that you're seeing in Europe on fiber this year.
Probably the better person to answer to the question is Philippe, but I give you just Wide picture. Fibers were more or less at the $9 $10 per kilometer. Today, in the Chinese market, are at 4. Consequently, representing fibers usually 40% of the value of the table. If this 40% has become Half of the build, mainly is that the reduction of the price overall in the table may Be for sure 2 digits, between of 10% 20%.
Philippe, I gave a wrong picture?
Let's say a blunt picture Because the prices on the spot market reached indeed $9 to $10 but it was not our average case. We were lower than this before the change in the market. And the second point is that, of course, as everybody knows, Our optical business is approximately half our telecom business Because we also have the enterprise side, the copper side and the specialties. So I would say A few percent. In the worst case, yes.
I think we can maintain the fact that In previous calls, many of you will recall that we were always talking about 12% as a kind of a worst case. I would maintain that view today. I think it could be A few percent margin. It depends also on the volume we get in the same tenders we are talking about. The margin could be better with less volume or could be a bit worse with more volume, Giving us more room to improve the efficiencies.
We are currently in a Few important tender process, and we need to understand where they will end before we have a better you, I think we will be able to answer much better to your question in 3 months from now in our next Conference call.
Anyway, Sean, Valerio speaking. I would remind you that the telecom business has proven to be very fast going down, but also very fast going up. Now the question is the demand is growing. It may be the case that 6 months, 1 year from now, Are we going to be in shortage again? Who knows?
But the market the telecom market differently from energy It's extremely quick, going up and going down, has gone down. Maybe that is preparing himself for a rebound. That's the hope.
Very clear. Thank you. My second question is on going back to Slide 22. It's fascinating to see What looks like a clear structural change in market size. And I think we've been talking about this for some time.
And thank you for providing this 10 year view But we can answer our thoughts around. My question is really about the regional mix because obviously this has Being really a European market, as we move to this new level of kind of 7 ish €1,000,000,000 already in 2020. Is this still all Europe? If I look out then to 2027, 2030, How is that mix changing on your assumptions? Thank you.
It's a quite difficult answer for you for your question. Of course, the market is growing. It's growing even significantly. But until we don't see the tenders in the market, frankly speaking, our expectations, and I cannot be committed for results based on expectations only. So it's better to be patient, to prepare ourselves, and we are basically ready.
But before to see the fact In the P and L, we need of time. I believe at least 1 year because in 2021 2022, A lot of big tenders should come into reality. And that's the reason why The market is going to ramp up from the $2,500,000,000 to the $7,000,000,000 But for the time being, there are a lot of constraints yet.
Thank you. And your next question comes from Gabriela Gamborova from Banker ARCA. Please go ahead. Your line is open.
Yes. Good afternoon, and thanks for taking my questions. Only 2. The first one is on Free cash flow guidance, you have this €300,000,000 plus or minus 20%, which is a pretty, let's say, wide range. I was wondering What are, let's say, the biggest and most important moving parts behind this pretty wide Range for free cash flow.
And the second one was still on M and A, I'm Sorry, but I was wondering I mean, I understand you are just in a very early stage, but I was wondering if have in mind what you could do, I mean, if you have a bolt on acquisitions or Something bigger in mind. And possibly if you have an idea what could be The commitment, the 5 bar where you could commit on
this M and A? Thanks.
On the free cash flow, I leave the floor to Francesco that's for sure better than me, Anit.
Hi, Gabriele. Cescot speaking. Very good question. Thanks a lot. I believe we have 2 main moving parts.
1, I'll first back to a question that I think Monica Bosio asked And which is related to the impact structural or less structural impact on 2021 of the corporate life, Which is very uncertain because it's an easy assumption to assume that the copper price remain at 9,000 U. S. Dollar a ton, but of course, it's a very uncertain function and the impacts are major. And behind this is, of course, the challenge to offset any impact with, as I was explaining, with an improvement of The stock level in terms of days of inventory, which is not easy, which is a certain feasible, but is something to be done. That's the first moving part.
The second moving part has certainly to do with the project business And it's related with the order intake, with the order awards. This doesn't mean that we are not confident to have very good order intake and Order awards because Palerio and the colleagues have been pretty clear on our commitment to establish our A leadership and to maintain our market position, but then the timing and the actual awards in terms of months Quarter of the projects and related down payments, of course, can easily shift from 1 year to the other. And these are amounts of €10,000,000,000 for each project. And this explain the reason why We prefer that to have a pretty high range in terms of free cash Then of course, as usual, we hope to be from a midpoint up, let me say, yes? That's obviously our Very clear, Patrick.
Okay. Thank you.
Gabrielli, Gabrielli, about the acquisitions. Of course, we are looking at many multiple opportunity. It is too early because a bolt on significant acquisition similar to General Cable, We even don't have the balance sheet to manage it because, as you know, we don't like to increase too much our leverage, taking risks for the future. We have to look at medium size or even little size positions, but creating a flow of transactions that can create something more solid for the future. That's the area into which we are looking for.
It's 2 year, really.
So
be patient as we are.
Thank you. And your next question comes from Roberto Campana from Mondi. Please go ahead. Your line is open.
Hi, good evening. I would like to know if possible, please, to have an idea of the size of the project Eurasia or Europe Africa as you want to call it, both in terms of maybe Cables and installation.
Okay. Eurasia. Eurasia is an over €1,000,000,000 project size in cable and installation. That's more or less the expected sides. Now if it's going to be really $525,000,000 maybe higher, maybe lower, probably would be higher.
But the way to go for the technology technological approval is definitely longer. I understand the customer. As I said, they have crepe de la Punez that is 525 Ni. Why not the CREED Cyprus not to be the same or similar in terms of tension. Generally speaking, the Mi for our know how It's very, very heavy to be and very, very difficult to be laid at the 2,000 meter.
The excluded would be better, but no one has today an motivated or even near to be motivated 5.25 BDC excluded. So there is need of time for developing the
Thank you. We have one further question. And the question comes from Alessandro Tortora from Mediobanca. Stearbanker, please go ahead. Your line is open.
Yes.
Thanks. Sorry, quick follow-up on Telecom because We discussed a lot about margin. Fabio, Philippe, can you tell me what is your expectation on the demand Said, also considering that probably you will care about, let's say, mix considering that demand is not so bad.
Sorry, Alessandro. I didn't really get your question. Can you repeat?
Yes. The question is on the volume, considering the price trend that we already discussed.
What's your view on that? Sorry. Okay. Thanks. Yes, yes.
No, I believe the volume is going to be back to growth In 2021? In a relatively Strong way, and that's what we see today. There is a rebound in volume in the market, as Valerio said earlier, in particular, I think we can say that the destocking effect that we've been talking about for many months now Seems to be over. The COVID effect is an uncertainty, of course, but I think the volumes are back And we are going to be back to growth in terms of volume, let's say, high single digit, I would say in terms of volume, but that doesn't mean at all that we will have the organic growth At the same level, of course, because it depends on the price pressure. The price pressure, as we said, is going to be very significant.
It's as I said earlier, I think if you ask the question again in 3 months from now, we'll have a much better view On because we are currently too many in too much inside The tendering processes.
So there's a lot
of things I don't know yet for the year.