Good day, and welcome to the Priceman Group 9 months 2018 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Valerio Batista, CEO of Frisbee And Group Please go ahead, sir.
Thank you very much, and good afternoon to everyone. Welcome to the 9 months financial results reporting of Placement Group. Page 3 highlights Organic sales grew 3.8%. Not so bad. 7.4 specifically in the quarter 3.
Thanks to a very good growth in optical and connectivity that now is going higher since more than 4 quarters. Positive trend in energy products in the cell and T and I, other than the underlying voltage. Even handed airbag voltage has been able to grow in the last quarter, 2 digits. The including the General Cable perimeter, the organic sales grew as being 3.4%. Driven by Europe and the U.
S. EBITDA. The EBITDA closed a debt of $577,000,000, 7.9% of sales West 74,000,000 contribute to the Biogen accumulative perimeter for the since the first, the 6th of the producers. Driven by Telecom, again, and energy projects, sorry, driven by teleconference with the growth of the telecom market and including the 70,000,000 provisions related to a sterling that have been posted in the first two quarters. The general cable integration is going ahead.
The process of integration is going well. And the synergies are in line with expectations. Net financial debt Closer after SEK 2,870,870,000,000, obviously much higher than the same period of 2017 because the EUR 2,600,000,000 acquisition effect. That we closed at the beginning of June. Flipping the two page 4 different financials.
Sales accounted for 1,000,000,000. With an organic growth of 3.8. The full combined, including consummating the entire perimeter of General Akcela for the full year, sales would have been 8,700,000,000 coming up from the 8,400,000,000 of the first 9 months 2017. The organic growth is going to move in that case from 2.8% to 3.4%, but doesn't change very much. The adjusted EBITDA vice versa went from the full 9 months combined from 714, down to 651, mostly because of the scale down of the provision for linked and a slight decline in the general equity perimeter that is obviously the effect of the acquisition and acquisition period.
Networkingcapital networking capital is now again very high with EUR 1,400,000,000. 616 of which are related to the general cubic perimeter and 827 related to the premium perimeter. The format with my payment. Now it's clear that the gap in between of the two numbers and the effect on the sales of the two companies, the two 30 meters is significantly different, 17.8% in the general perimeter versus the 10% in the Prisma perimeter. Even if and the Prisma perimeter in the last quarter that was expected.
The working capital has increased due to the effect of the phasing of certain projects and payments, especially the absorption of cash due to the glued down of certain order income in the project business. The next financial debt has closed about a EUR 2,870,000,000,000, much higher obviously of the EUR 1,000,000,000 52, September 2017, but taking into account to 1,000,000,000 of the acquisition of Genakin. Now, the level of debt is reasonably high. We expect to be in the range of the $2,300,000,000, $2,335,000,000 by the year end because the highest chunk of working capital increase in the foreseen in the working capital of the projects. Is already in Annalabad in the first in third quarter.
Let's split to Page 5. General cable. Obviously, this year, that's been a we have the problem to manage the two perimeter. So it's the transition year end. It's not so easy.
We are trying to help you in the way you can understand the numbers of the combined company. As we did in, at the time of JAKA. So 9 months 2018, the sales Gener cable, closer to 2,665,000,000 with an organic growth of 2.5% compared to the 2,592,000,000 of the 1st 9 months 'seventeen. So, unfortunately, a positive organic growth, not as good as the once we had in the Prism and Perimeter, but quite good in telecom and projects in Europe, but the projects are suffering in the Q3. U.
S. Is continuing to go very well. And finally, we are facing a little bit of decline of the Hoverite transmission line in South America, where the sales have declined a little bit. From the profitability point of view, $148,000,000, 5.5 percent of the sales comparable to the $167,000,000 of the same 9 months of 1 year ago that was a 6.5%. Here, we, obviously, at the profitability level, we suffered of SEK 8,000,000 of exchange rate effect.
And the megaprise dynamics, why? Because general cable was not edging. And consequently, the metal price, metal cost going up was not edged and created a higher cost in the cost of goods sold. Other than that, another very big increase we have been suffering in the 1st 9 months has been the transportation cost in U. S.
Because the change of the regulation in U. S, obliged a number of providers of the logistic providers to rise the price significantly and that needs time, it will be absorbed by the market. Flipping to Page 6. The performance by segment you can see that overall, all the segments are growing not so bad with a special remarks of the telecom that is running in 9 months after 21%, almost 21% of EBITDA margin. Energy projects is not very far from the previous year unless for the 1,000,000 accruals of Western Link, E and I more or less the same industrial network component 7.6% versus 3% and oil is gas that is negligible at 1.3% compared with 2.2% 1 years ago.
EBITDA wise and organic growth, we have already commented the total numbers But the total numbers of 3.8 percent of the Egyptian perimeter have to be splitted by segment 6.4% in energy projects, 1.7% in E and I, 4.9% in industrial and working in network components, oil and gas minus 0.04 and telecom+6.5. So the organic growth of all the businesses of all the business segment, it's positive, a part of oil and gas, and the profitability is improving has become flat in industrial network components, whereas it was below the previous year in the first two quarters, ENI is recovering slightly and energy projects could be better than the previous year without the Westerling provisions with prostate. Page 7, the bridge EBITDA bridge. And you can see the previous personnel perimeter and the GI cable perimeter. Here, we can say that energy projects After this million was the linked provision posted a reduction of 61.
Consequently, as I commented before, the projects have been increasing without the rest of the provision. I've been increasing that it's business profitability the profit. E and I minus 9, mostly coming from the hormone cable gas in the 1st 6 months because in the third quarter, OMA cable has started to recover Industrial network component has a plus 6 and the telecom has a plus 48, of which We have to consider that 12 are coming from the provision reversal of Brazil in Brazil for the bad debt and a carryover or the YOC results end of 2017 that we were not able to count in the 2017 P and L. Finally, there is a very significant effect of the ForEx exchange rate for EUR 28,000,000 in the perimeter of Christian. You just being on the chapter, if you look at the general table perimeter, there are other EUR 8,000,000.
So consequently, In the 1st 9 months, the total ForEx exchange has accounted for $36,000,000. Moving ahead with the degenerative perimeter, 14,000,000 negative variance the EBITDA level for North America. Euro positive for EUR 7,000,000 Latin America negative 44 and the ForEx that we I already commented for 8. To be noted that North America there have been 2 effects significant: 1, the metal, the metal price being not covered at by the generative organization, especially in the first half, got a loss in termite profitability, it has slowed down in terms of profitability and the increase of the transportation costs that has not been able to be absorbed by immediately by the market. Let's step to the last slide on the generative integration and synergies, we can confirm that the synergies are going to be the million we told you, the organization, as I said in the past, $90,000,000 is confirmed and are starting to come or that has already started to come.
Procurement of EUR 40,000,000, EUR 20,000,000 puts and rationalization and the total integration costs as a consequence are going to be $220,000,000. Just to be totally clear because here is not reported. The working capital synergies that we have already started to generate are expected to cover mostly entirely the integration cost of 2 ultimately. Now let's go statement by segment. Page 10 Page 10, you see the energy projects.
Energy projects closed at the 9 months with 10,086, sales, compared to the EUR 1,000,000,004 Tiguan of the previous with an organic growth of 6.4%. At EBITDA level, the EBITDA close at vice versa at 117.8%, definitely lower in term of profitability than the same 9 months ago because of the $70,000,000 worth of the inter crew. The summary business, how did the impact of the Westerling, has seen a notary intake that is in line with the market share of Prisma. In the 1st 9 months, obviously, all the market suffered of the delay of a number of projects that are had started to come in the third quarter And we expect, in the last quarter, to be completed. Overall, the total market 2018 is expected to be between $2,600,000,000 $2,800,000,000 in line with in line with the historical average size of the market.
That's one of the reason why we have given the go ahead to the supplier for the new Cable Lay invested. And so because Western Incorporated, in order to be able to be competitive, on the future projects, especially on the Viking. Moreover, Giulio Verne has been obliged to stop of 15 days, recently because our work aid was needed. So the sum of these two chapters has help us to take this decision, means that they eat. And the Grand Day voltage, and the Grand Day voltage is doing pretty well, positive results, in Q3 to both in Asia Pac, Southeast Europe and South America.
I have to say that Abel touched land, even if it's not too high margin as the summary, has given us good performance, a double digit growth that is is a good move. The order book, the order backlog, vice versa, is the weak charter of the quarter, but that's a matter of the quarter. Because the summer in, scaled down to 1,000,005 and the available integers, not so bad. But we have to consider that inside these numbers, we did not count for the 220,000,000 for the offshore wind projects in France, they create polyposines $125,000,000 and finally $80,000,000 of projects awarded in the underground what they mean that these projects are awarded to us, but having not to notice to proceed the hinens, we do not book in the order backlog. Let's move to E and I, excluding order to the general capital perimeter that we will address at the end of the presentation that I will address at the end of the presentation once shown.
The turnover for the 1st 9 months has been a EUR 2,500,000,000 slightly higher than the SEK 2,467,000,000 of the 1st 9 months 2017, with an organic growth of 1.7%. The EBITDA level, vice versa, has been $92,000,000 comparable to the $107,000,000 of the 1st 9 months of 2017. Obviously, here, there are 2 effects. 1 is OCI, and the other one is the exchange rate effect. Because the trade installed, as well as the power distribution, goes into markets that have been a series affected by the exchange rate effect.
Like Turkey, like obviously, UK, like Argentina, Brazil, many countries with a translation effect that has been affecting our results. Overall, the organic trend is not so bad. Obviously, it's not very fast, but makes sense. And the volume growth in North American Europe is quite consistent, limited, but consistent. Now OCI is improving.
Obviously, the first two quarters were very difficult in terms of completion, not just the OCI result. Now the third quarter OCI starts to be at least in line with the previous year. The PowerBC solution, as regards to, has had a positive organic churn in Q3, especially in Europe, and our profitability that has been affected by ForEx given here, the slowdown in Middle East in Alcoa, and Nordics that are caving down in terms of demand. But more than the demand, the demand related to the installation issues because the winter season has been pretty tough, difficult in the Nordics, considering the first quarter and the half has been a difficult season. Now the utilities are installing, but obviously there are not there is not sufficient capacity in terms of resendation to recover quickly.
That's constant. It has to be recovered over the over the You can see, finally, after many quarters of scale download of the E and I market, But finally, we are in the positive territory of something likely more than 0 organic growth something less than 4% to 5%. Flipping to Page 12. Industrial Network Components. Sales at ARS 1,146,000,000 compared to ARS 1,100,000,000 with an organic organic growth of ARS 4.23 As you may recollect is in line with the first quarter.
Sorry, the 1st quarter was custom. The 2nd quarter was 0 and the 3rd quarter cumulative is plus four quarters. So is, is going pretty well. The EBITDA is in line with the previous year, And we expect, at the end, not to go so bad because quarter by quarter, the industrial business has been able to recover a bit. What's happened?
Most of all, that the OEM is recovering. Lining special cables playing are appealing into the market and are gearing obviously higher margin that the transitional mix we had in the 1st 6 months. Elevator, Elevator is going well in U. S. Is not going very well home, especially into China.
Where the construction market had a significant reduction of speed. Automotive is growing, even if our middle team's digital organic growth, not as in South America is doing well, frankly speaking, I doubt that there will be a very bright future for the automotive growth in the next quarters because written everywhere that as the market of automotive is expected to slow down. And as happens, obviously, that we touch also our sales. Network components are continuing to go pretty well with pretty high margin and volume growth in China in North America. Finally, this telecom Telecom posted the $974,000,000 sales, comparable to the $953,000,000 of the same 9 months 1 year ago, with an organic growth of 6.5 percent.
The adjusted EBITDA raised up to 204,000,000 Thank you. In POCA, the million are related to, let me say, one off events the reversal of the provision in Brazil is our but the delay of Secret 4 months is expected relative to the area over. The market continues to grow. The demand is very high. The investments we launched, especially for the fiber capacity are going in into production.
And we are very happy with it. The you can see the LTM adjusted EBITDA that is continuing to grow up since over the 10 quarters. That is very, very helpful. The performance of optical is extremely good. Unfortunately, we have 2 negative effects that one is in the 3rd quarter.
One is the demand in Australia that is starting to slow down. You remember that in the 1st 6 months high of early told you that the copper cable was going down. That's the last mile of our main customer that is Nbn. Now the decline is going into the fiber. Consequently, the part we cannot be forever, And we were preparing for it, and we are going to be able to Finally, M and S is going well.
It's growing as a recovery after the little problem. So we suffered the last year, the second half of last year because of CPD CPR in Europe. And the rest of the business is very, very good. Last, but not least, the general cable perimeter, page 4, CV, phase in, let's see, first of all, the global and the bottom of the share, ARS 2,665,000,000,000 versus ARS 2,000,000,000 of ARS 192,000,000,000. The EBITDA that is on the right side of the line, 148 versus 167, below the previous the previously had 9 months.
That's because of the translation effect and the raw material impact effects that affected for another roughly EUR 10,000,000, the 4 months of the business, where mostly North America And you see it in the EBIT in the performance of North America because North America went to slightly up in term of sales with a 2.6% organic growth. But a 21,000,000 decline in term of performance. It's also clear that during the transition period, between deciding and the closing, the management of the company in North America may have been not Not to do it, not enough. In Europe, we have seen, vice versa, a quite good improvement in term of sales and in term of EBITDA. Thanks mostly to you see that the 654 versus the 566 is an organic growth of 9.8%.
Whereas the PDA, the EBITDA went up from $18,000,000 to $25,000,000. It was still very low, but better than the previous year. That's because the mix in Europe has been better. With projects and optical telecom that has been able to increase significantly. Now whereas for the optical telecom, we see a steady solid trend for the projects, we have seen utilization of the existing order, that's to match the numbers.
Latin America, finally, from 449 1 years ago to 407 to the name the first name as this year with an organic decline of 8% and a decline of EBITDA from 27 percent to 22 percent to 22,000,000. That's mostly because lower sales in overheads lines in Brazil was at the related margins this 1,000,000,000, but something a little bit tricky that we are looking for. And most of all, seems to be the attack of some Asian players on the other airlines in the region. I leave the floor to Francesco, but before to leave the floor, I wanted to clarify our vision for the guidance the year end because We did not put another slide for the guidance being so many slides. As to be clear, the guidance is confirmed.
86900 and 20. The midpoint is 890. We are not going to change the guidance. We are not going to tell you that we are in trouble. Obviously, the market is difficult today is not healthy as could have been expected, but we strongly believe to be able to close in the range of the midpoint.
Maybe a little bit higher probability to be slightly below than slightly higher, to be honest with you. I leave this floor to Francesca.
Thank you, Valerio. Good evening to everybody. As usual, I start with the profit and loss. Organic growth accelerated, excluding the general cable perimeter, up to 3.8% in the 9 months with a very good growth in the 3rd quarter exceeding 7%. As Valerio already commented, there was even an acceleration in the growth of the telecom business that in the third quarter was very close to 10%.
There was an improvement in the growth of the E and I business, both in T and I and the power distribution. And there was a steadily positive growth in the third quarter, both for the land high voltage. And the industrial network component for the land high voltage, even double digit for the industrial network component in the mid single digit. Adjusted EBITDA reached the 577 with a contribution on Generali Cable of $74,000,000 for the 4 months. So this means excluding Generali Cable, with an equivalent perimeter to the previous year, 503 $1,000,000, down $44,000,000 from the prior year.
This minus $44,000,000 was impacted by some headwinds, so some very obvious of the 1,000,000,000 Western Link provision and the 1,000,000 negative active currency translation effects, plus some weakness of Omanulolus, specifically in the first half On the other hand, the tailwinds was the very sharp growth of margins and revenues which drove the telecom results. But let me also underline a pretty good performance in terms of profitability increase of the land die voltage business that you have seen also in the total of energy project business and net of the West Family provision And the total growth netting the negative currency translation effect of industrial and network component business. The Q3 specifically on the equivalent perimeter was pretty good with an EBITDA, focusing on this prescient perimeter. Of EUR 189,000,000, which was even EUR 6,000,000 above last year despite the negative impact $4,000,000 of currency translation effect, specifically on the pure third quarter. Adjustments increased up to EUR 43,000,000 from EUR 33,000,000 last year.
We have a very positive effect coming from the listing of a way of see on the Shanghai Stock Exchange with which determined a slight dilution that is generating a non cash gain according to IFRS. And this, of course, was offset by the pretty IV restructuring cost, integration and acquisition costs, but we will see them fail in the next page. The special items, non cash items were also negative for EUR 159,000,000, with the main impact, which is coming from the change in the metal derivatives fair value related to the stabilization and even drop of a metal price after the rise of the metal price last year. Pretty good news on the financial charges, which are stable $73,000,000 versus the prior year, despite the important of the net debt that we had as a consequence of the acquisition. And also pretty good news of the tax rate, is slightly down to 27%, mainly as the result of the tax free gain on wire thing that I was mentioning before.
The group net income closed at 183,000,000 in the 9 months. And not too far from the $196,000,000 last year, and let me judge this as a very positive result because, of course, this $83,000,000 is impacted by the Western Link provision is impacted by the negative change in the metal derivative fair value and also by the pretty heavy acquisition and integration costs that I was mentioning and also positive from the wireless a distinct gain, but all in all, in the 1st 9 months, we have a pretty heavy one off charges, which are weighing on this 183,000,000. As a matter of fact, the 3rd quarter in terms of net income was very solid, even above 100,000,000 in the pure quarter. Let me skip now to the let me flip to Page 17, just to comment on detailed the adjustments, EUR 43,000,000 negative at the EBITDA level, which are EUR 25,000,000 restructuring costs of which $15,000,000 are related with the integration of general cable perimeter is the combined entity. We expect approximately another EUR 30,000,000 coming related to general cable integration coming in the 4th quarter.
And then you see in the line as our non operating expenses, the pretty head impact coming from acquisition and integration costs. So 6,000,000 acquisition cost related to the aforementioned execution, 20,000,000 of integration cost, which are actually the costs incurred by consulting costs for the preparation of the integration or retention bonds, just to give you some examples. And then in accounting effect, negative for $16,000,000, which is resulting from the step up of the inventory, which is part of the purchase price allocation, which is an increase of inventory level, which is then of inventory value, sorry, which is then released when we utilize inventory only the cost of goods sold. So it's a negative effect actually on in the profit and loss. And then as I was mentioning, the 1,000,000 positive gain to wirelessly listing.
Here, I want to draw your attention to the fact that the cash cost related to integration, acquisition and restructuring were even higher than the costs that we accrued in the profit and loss. Just to give you an indication in the 1st 9 months, we had total restructuring and restructuring costs plus acquisition and integration costs, which totaled $125,000,000 to be exact. And this of course is one of the reason why, as expected, our net debt increased in the 3rd quarter. Together with what Valerio had explained, meaning the sharpened phase of the working capital in the project business. Final charges on the following page, very good news and very good indication on this front.
The net interest expenses increased to 56, which is a very minor increase. If you think that we brought on our balance sheet, $2,600,000,000 additional debt. And then of course, we had also the 500,000,000 capital increase and the 1,000,000 impact coming from the convertible bond conversion, but still the net incremental debt. That we put on our balance sheet is very significant. I'm very proud that we were able to finalize the financing of the General Cable debt in a matter of 45 days after closing.
So by mid of July, more or less And I'm even more proud to say that we are fully seeing the financial synergies affect the synergies effect in terms of interest expenses our profit and loss. Just to give you an indication, if you if we calculate the net interest expenses, 2018 on a full combined base, including the 12 months of Generali Cable, I expect net interest expenses in the regional $105,000,000, again, including the 1st 5 months of General Cable, this compares to $137,000,000 if you do the same combination for 2017. So a reduction of $32,000,000 net interest expenses that I expect for the full year. Of course, this is not all synergies, but it also a part of this, which is coming from the for instance, from the conversion of the old convertible bond. But I would say that in this 2018, we will generate at least EUR 15,000,000 net synergies coming from the refinancing operational cable debt.
And that another $15,000,000, I certainly expect for 2019. This to deliver the $30,000,000 net financial synergies, net interest expenses. And as you've let, I have been mentioning a few times. We can flip to the balance sheet. Here, the most important to be commented is the dynamic of the operated net working capital.
As Valerio said, working capital went up significantly in the third quarter to EUR 1,440,000,000, we have 2 opposite friends On the general IPable perimeter, there was a drop, a drop by around 50,000,000 from the consolidation of General Assable beginning of June, which highlights the very good synergies that we achieved on the working capital already in the the quarter. Seeing that this drop of $45,000,000 or $60,000,000 is also, in a way, negatively affected lower the term of drop by the fact that we paid a lot of restructuring and integration costs. So I estimate that the working capital synergy we are able to achieve, right, in the third quarter, we are in the region of EUR 70,000,000 in 1 quarter, in Q3. And I expect another EUR 80,000,000 to come to a EUR 150,000,000 already by the end of 2018. On the other hand, I have to say we had a quite opposite dynamic for working capital on the former Prisma perimeter which increased by over $400,000,000 in the third quarter.
The large part of that coming from the increase of working capital in the project business. But to be very clear, this dynamic as I was already announcing in the Altria results, middle of September, was a total expected. I understand it's not pleasant, but is totally in line with our expectation and is also totally in line with the anticipation of a net financial position by year end between EUR 2,300,000 and EUR 2,350,000,000 as the CEO has already anticipated. I come to a stage, highlighting the cash flow. This is just to explain the bridge between the year end 2017 at 4 36 end the September 2018 at eur 2.877.
You see the total impact of the first two columns of the impact of the acquisition. For a total of $2,600,000,000. Then the cash flow generated by operations before working capital changes the very significant increase of the working capital for $570,000,000 that I have already commented than the CapEx, of course, the financial charges, the taxes paid the dividend and the positive effects coming from the convertible bond cover March 2018 for 283 and close to 500,000,000, the positive effect coming from the rights from the rights issue. Again, the debt increased compared to of course, increase if you pro form a June debt with a capital increase from the EUR 2,500,000,000 increased by around $360,000,000, and this is once again related to the negative cash flow expected generated by the project business. The payment in tech is of the, taxes related to the old LTI, instantiation.
Which was a cash in in the 2nd quarter and which was paid out in the 3rd quarter, which was a let me say a shift of debt positive in the 2nd quarter negative in the 3rd quarter for around EUR 70,000,000 and then PPI cash outs for acquisition, integration and restructuring costs for almost $80,000,000 in the third quarter. And this was offset by the very good working capital synergies on General Cable. Let me close my part. On the last page, 21, which is highlighting a simple concept. The fact that despite the debt, which increased, obviously, due to the acquisition effect, despite the increase of that.
I believe the premium group is, has a 3 feet limited exposure to the volatility of the financial And let me explain the main reason, starting from the right part of this page. First of all, we don't have any significant short term maturity in our gross debt. Which total to which amounts to a total of 1,000,000,000, as you see. The largest maturities are starting in 2022 with a Eurobond, a convertible bond, a global bond, the acquisition term loan in 2023. These are the largest maturity.
There is a there are 2 short term maturities. 1 is the revolving facility for 1,000,000,000 which is coming to maturity in June 2019, but which is, however, not utility. Of September was not yet owned. So it's a cash reserve for us. Of course, we will refinance this in the next few quarters.
Then there is a maturity in June 2020 that you see here, which is the acquisition bridge loan. Well, a part of this, we have already covered because we have just finalized a bilateral credit agreement with an Dalian Bank, which is refinancing 200,000,000 out of the total 700,000,000 And let me say that I'm very confident that the remainder of this bridge loan will be mainly covered with the cash flow generated in 2019 and the first of 2020. All this to say something very simple that we have no strict necessity to tap the capital market in the next few years. Let me say until second half of twenty twenty one, beginning of 2022, then of course, if the condition will be great, I don't exclude that we will set the capital market, but we are not under street necessity to do this. And this, of course, is an advantage because what we have seen in the last few months is a sharp deterioration of the credit spread is not an increase of the base interest rate, but the deterioration of the credit spread, but we are quite neutral to this.
On there, I conclude on the left part of this, of this slide, to highlight that we are even pretty neutral and not very much affected by a potential increase of the base interest rate. For the simple reason that our debt, our gross debt, the same as the 3,200,000,000 is almost 80% at fixed rate, either a fixed rate or swapped from variable into fixed rates. So from this point, we are very we are very confident that we may not suffer any defect coming from any base rate increase. Thank you very much. Thank
We will now take our first question from Akash Gupta of JP Morgan. Please go ahead.
Yes. Hello. Good evening, everyone. I have three questions, please. The first one is sort of a follow-up on guidance.
If I I understood correctly, then, Valerie, you said that you are still aiming for the midpoint of the EBITDA guidance. With higher probability to land slightly below midpoint and above the midpoint. If you can confirm that statement, that would be my first question. The second one is on submarine projects, both in terms of margin and potential orders this year. I mean, if I look at $2,600,000,000 to $2,800,000,000 40% share that you historically had, then I get to about $1,100,000,000 in order intake in submarine business this year.
Can you say how much of that has already been booked or announced and how much is still in pipeline? And then you've you can also say, if margins in new projects are, how that compares against what you have in backlog and what you are currently delivering?
Two questions. I understood 3. Okay, sorry. Guidance I confirm you that I said that we see the result of the year in the range. The advice I gave you is that because you are a little bit used to see us landing in the upper side of the part of the range due to even of certain milestones in one project at the end due to the drydock of unexpected dry dock of Giulio Verma.
We most probably are going to land below the midpoint, but in the guidance. That's what the advice summary margin and orders is true. The orders and the summary market has been delayed significantly. So what we see that is going to depress a little bit of the margin. For the time being, we have not been part of this fight.
And the for the time being, we are leaving competitors to fill days now. And, let's see what's happened because these are risks that is going to be win by the long term, not in the short term. We don't want it to risk to exchange the orders
for risks.
Transparency, we keep calm. The margins of the order we got till now are in line with the traditional margin. We are not going to give up the margin for the volumes. Then obviously, if there will be too much appetite by the competition, Alaguer Komalaguer, but for the time being, we try to keep us quiet and solid, consistent. Did I answer to your question, Akash?
And the one on orders, like if I look at 2,600,000,000 and 40% market share, then you should get about 1,100,000,000 in submarine orders. And I wanted to ask how much of that is already being booked and what is still left out to come?
Okay. For the time being, we are slightly below the $600,000,000. We doubt to be able this year to catch the $1,100,100,000 you are mentioning. But It stands. Obviously, the summary business is not a business that you can measure in term of market share every quarter or even every you have to see it at the in the medium time, multi year.
And on the multi year, we are quite confident.
Thank you.
We will now take our next question from Lucy Carrier of Morgan Stanley. Please go ahead.
I have two questions. I will go one at a time. The first one, I was I mean, I just wanted to confirm the comments made earlier on fiber uptick. And it was very difficult to hear the call today. Have you actually said that you expect the fiber optic business to slow down Is that correct?
No, Lucy, I didn't mention at all a slowdown on the fiber business. Maybe that I said it that the fiber business is continuing to progress very well. I apologize, but, even my colleagues here are, I'm confirming that maybe the line was bad, but I didn't tell it. Anyway, the fiber market is going well, you see. The goal is in average something like 10% year on year.
We the investments we launched are coming in the into the pipeline. The reason why for this is in the General Cable perimeter, they have been able to in the third quarter, I mean, to realize a significant volume of fiber optic cable, even without the fibers of 3rd party suppliers, they were buying in the first half. I don't mention the suppliers, but these suppliers, after disclosing popped almost completely the delivery of fibers to direct cable. And we have been able to supply the general cable perimeter with the fiber of Prisma Group. Obviously, subtracting a little bit to the fibers to the lower margin customers.
Very good. I just wanted to double check. And on the back of that, how much visibility do you have on the Y OFC business in China because, of course, for many years, that market has been particularly strong, the contribution of YFC has been strong for you. How much visibility do you have into 2019 for that?
Okay. I leave the floor to Philippe Banil, even if he is a board member, obviously, and he has to be there. Hello, Lucy.
The visibility that we have on YOC is, of course, linked to the visibility that Everybody has on the Chinese market. The Chinese market has a moment of uncertainty at this moment. Because we know that we are waiting for the enhancements of China Mobile about their needs for next year, and it's going to come in
the first most likely in
the first quarter of next year. This is uncertain Chinese market. Uncertainty doesn't mean slow down.
It means that we don't know. So by definition,
the world is not knowing about this. Why you have seen, by the way, as everybody knows, its public information is not acting only in China. It's also a large player in Asia. Outside China, which is a market that is growing. This is all I can say about where UFC, you can also, of course, ask question to the management of what you'll see they will answer, but it's more or less to where we stand.
Some uncertainty in China waiting for announcements and some nice growth in Asia in general.
Around some of the headwind we see generally at the moment in the industrial sector between tariffs labor cost inflation. You were also mentioning freight costs or transportation cost inflation. I was just curious to know what is your exposure to this different area in terms of potential headwind? And do you have the capacity see either via pricing or via cost reduction or maybe the synergies of general cable to kind of offset those headwinds as we head into 2019?
Okay. Tariffs is a completely different shop. But the transportation cost in U. S. Is a very clear chapter.
If you want, we have even Masimo here, but it's clear that the tariff in U. S. Have been rising a significant amount. I'm talking about the more or less, Central Million in the perimeter of prisoner cluster. We are trying compensate, but that's a problem of all the market, meaning that it's touching us as well as all the other players of the cable industry and not only the cable industry.
So sooner or later, as usual, is going to be is a matter of time.
I don't know if Massimo wants to add something. Yes, Santel, you see, in some cases, in some segments, we have a cost price adjustment contracts. So we can pass this price inflation to the market, I would say, in 30, 25 percent of general cable revenue in Northern America. But as far as that is concerned, we don't have this agreement. But as I have said, this is in affecting the oil market.
So sooner or later, everybody will recognize this inflation across all prices for both these segments.
What I can say, Lucy, is that, whereas the European market is very reluctant to the update unless contractually regulated to the update of the costs into the crisis. The American market is much faster and flexible
Okay. And just for me to understand here, you said you had was that in the quarter or next year, you expect a EUR 10,000,000 impact from tariffs?
No, it's an impact. We suffered almost in the 1st in third quarter. That is going to progress in the 2nd quarter most probably. Next year, I believe that we will be able to recover it. Part.
Sorry, Lucy, we missed you.
And the transportation costs, inflation?
Petition towards Solusi. And the impact in 2018 happened across all the quarters. And we try to offset with price adjustment in the portion of the business that is a contract, which is regulated by contract. Next year is going to reduce. So we won't see this much inflation in transportation costs.
And whatever will be, we will offset for sure with the synergies and with price increases.
Thank you very much.
You're welcome.
We will now take our next question from Dennis Sinclair of Goldman Sachs. Please go ahead.
Hi, good evening. Three questions from my end, number 1. Could you give us an update on Western Link Is the project now fully commissioned? Number 2, could you help us with comments on the tendering outlook in the submarine business? And I believe your comments on the market employer pickup and orders in 4Q and potentially also early 2019.
Could you help us with, which projects, more interconnected, more submarine, moment offshore and in which regions in particular? And then number 3, could you help us on your visibility in your short cycle businesses and the cyclical businesses? What growth do you see in early 2019? And do you see a slowdown in your businesses?
First question, update on Water Link. Water Link is, since 16th October, in the hands of the customer is running. And the link is now available to operator delivering up to 2.2 Gigawatt from Scotland to England and Wales. He's running with no problems, depending on the demand of energy the customer wants to transfer. That's it.
We are happy. And The second question, vice versa, is the sorry?
Does that mean the project fully commissioned and there's no more tests ongoing?
No. The fully commissioning is going to happen in the next quarters, because we need And we believe that will happen in a reasonable time, some months. I don't know if within the year end or within the next year depends on the needs of the customer because to make the full commissioning, we need to put the line out of service for a certain number of days. And that's it depends on the customer. Then question to tendering the outlook in the submarine.
Obviously, 9 months of almost no orders or 6 months of almost no orders in Sabrina has created a certain anxiety. We see now coming and part of the approach I have already come, that are coming into place. And there will be the usual It depends on the appetite. As of now, also thanks to the order book we had at the beginning of the year of EUR 2,000,000,000. We are not pressing too much or accepting the too low margins in order to catch profits.
That's the strategy, also because Once you get an order with the low margin, if something happens, you are going to have a very big and we'd like not to incur into it. But the tendering is going ahead. The third question, frankly speaking, as you understand.
What is your outlook for the cyclical businesses in early 2019? How much visibility do you have in growth this year's slowdown?
Are you talking about the other businesses, other cyclical business? For the hydroelectric. Frankly speaking, the cyclical businesses are growing a little bit. T and I, the construction market in Europe, at least for the time being, is going well. In U.
S, too, ultimately, we are quite comfortable we are quite happy. The growth is not extraordinary. It is a, but it is a found growth. Because once we talk about a few percent, a very limited percent of growth, it may be steady growth for quarters and quarters. Once you see the peaks of 10%, 15% growth in two quarters, is better to have.
It means that since not to be speculation around the construction market again, The growth seems to be solid, is in the range of 2%, 3% in the sense, obviously, of the markets, but solid. For us, it's fine. We are growing with the market, and we are happy also because obviously, in the meantime, the actions we did in term of improving the mix with the CPR, is helping the profitability of the business. Did I answer to your question, Ernie? Yes, it's very clear.
Yes, it's very clear. Thanks very much.
We will now take our next question from Alessandro Touora of Mediobanca. Please go ahead.
Yes, thanks. Good evening to everybody. I have four questions, if I may, very brief question. The first one is on the, let's say, used dollar exposure. You have, clearly, the, let's say, instituted on the combined entity on the used dollar is, let's say, quite new, even, let's say, me.
What I would like to understand is if you can share with us some sensitivity on the used dollar given the sharp strengthening we saw on the green dollar. The second question is on just a clarification from an accounting standpoint on the one off gain you had on the listing of YFC. Basically, the gain we saw around the 30,000,000 and something is, let's say, positive item accounted on the EBITDA reported, but I didn't see the impact on the adjusted EBITDA. The third question is on the integration cost. Sorry, the line was not, let's say, perfect.
Therefore, I missed the indication for the integration cost for this for the full year. And the last question is on the order intake, as you mentioned before, that you had, let's say, some of this award that the battle with the Northeast to proceed still have to come. Can you, let's say, give us an idea of when technically, you get these notice to proceed? Thanks.
Okay. Charter
1, exposure to U. S. Dollar relief, the floor to Francesco, that is much more constant than me.
Actually, on the sensitivity we are working right now, so I would avoid to give you any number, frankly speaking, because we are putting together now our management plan, starting to put together our management plan. Of course, the sensitivity to the U. S. Dollar is higher. Than in the past, but not very easy to tell you what will be the impact depending on certain changes on the exchange rate.
For sure, this level of U. S. Dollar to euro will be maintained. I believe that we can have a quite significant impact and certainly larger than in the past due to the exposure of general cable perimeter in U. S.
It may be we are going to recover part of the $36,000,000. We lost it enough. This is an absolute not to forget, absolutely.
On the wire of silisting, it's a very simple according to the IFRS, a dilution, I mean dilution that you have as a consequence of a listing is treated as a sale. Is like we had sold 2.5 percent, so meaning 10% of our stake in YOC. And actually, according to IFRS, the price of this sale is the price, the subscription price of the IPO. So it's the market value, which is reflected by the IPO. And that this is compared with the book value, which is much lower of our participation in YFC.
And if you take Page 17 of our presentation, You see that this $36,000,000 is clearly included in the other nonoperating expenses, of course, as a positive, actually the other non operating income, which is not contributed to our adjusted EBITDA, but which is impacting positive positively their reported EBITDA, so below the adjusted EBITDA line. So just to be even more clear, the other nonoperating net expenses are $17,000,000. Visa17,000,000 is benefiting of a $30,000,000 gain without this $36,000,000 gain, we would have had other non operating expenses of $70,000,000 plus $36,000,000, just to be so it is not benefit in 88, it's not impacting positively on our adjusted on our adjusted EBITDA. The 3rd, the 3rd question was on the integration for full year.
We can say that could the integration of Sorry? [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] I was mentioning that the during the presentation, that I expect restructuring cost in the fourth quarter of approximately 30,000,000. This is in line with our reorganization plan. Whereas the additional integration cost, in the fourth quarter should be tricky limited. So let me say that most of these will be the planned restructuring cost for the fourth quarter.
Finally, you put a question on the order intake and the notice to proceed for the sub margin. Let me leave the floor to on the $400,000,000, plus there is half of that will be we'll have not to proceed before the end of this year. 1 quarter of this approximately EUR 100,000,000 between Q2 and Q3 2019 and the rest of the other $100,000,000 Q1 2020.
As you can see,
please. No, I was saying that as you can see, other than a delay in giving the orders, there is, in the market, in the market, for the time being an uncertainty in giving the green light that go ahead with the the offshore wind, but the offshore wind is improving. Did I did we answer to your questions, Alessandro?
Yes, you
We will now take our next question from Sean McLoughlin of HSBC.
Thank you for taking my questions. Can I just clarify, you said see orders in 2018? Does this include the CHF 220,000,000 French offshore wind order and the CHF 120,000,000 1,000,000 crease interconnect?
Yes. I included. Yes.
Yes.
But they're not in the upper pack. Yes. Okay. So that's the size of the market and the related market share. The order backlog is different.
Okay. Next question on just follow-up on Western Link. Can you confirm that the cable is operational in both directions and that you're able to invert polarity?
The cable is in operation. It is running in one direction simply because the customer needs the power in that direction from north to south. For the polarity the vessel. It will happen once the customer will redirect.
Okay. But is that a how can I say? Is that necessary for the total commissioning?
Yes, yes, obviously. And that's the reason why it is subject to the customer to decide if and when to complete the testing procedure, because we have to stop the line for a number of days.
Understood. And my last question on, you mentioned, Asian players had been in the LatAm market. Is this an isolated case? So is this an area where you're seeing a lot more Asian competition? And where else do you are you seeing maybe more Asian competition, which market segment?
Well, frankly speaking, Sean, I tell you what I think makes not a lot of sense. What happens? Consequently, there is something that for the time being, maybe we missed but let the Chinese to enter with the red lines from China in a very competitive way to South America. In our we have, obviously, the Chinese subsidiaries in our understanding, that's a good would not be possible. Having the duty to be paid into South America.
The overhead lines is a so poor product, and the price is not so high, that is now seems not to be easy to justify the fact that the Chinese are coming at a very low price into South America. We have to analyze it. We have not yet announced it. These are phenomena that happened at the end of the first half.
Okay. And so you're not seeing, let's say, wider penetration of the Chinese competitors into other areas?
No. There has to be something special for the aluminum flow from China to South America. That's something that we are analyzing that we have not signed yet. There is no reason for the Chinese supplier to pollute Hold on. Did I answer to your question?
Yes. Okay. Thank
you.
It appears there are no further questions over the phone at this time.
Okay. Thank you very much to all of you. And thanks for participating to the 9 month conference call of this network. Goodbye.
This concludes today's conference call.