Good day, thank you for standing by. Welcome to Prysmian Full Year 2025 Integrated Results Conference Call and Webcast. At this time, all participants will be on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please note that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Mr. Massimo Battaini, CEO. Please go ahead, sir.
Thank you. Welcome all, thank you for taking your time to attend the earnings call for 2025 full year result. I will like to highlight the main achievement 25. You see a record results across the whole KPIs. A strong performance in EBITDA with EUR 2.4 billion, which is itself a EUR 500 million growth in terms of the EBITDA over the 2024 performance. A strong net income, EUR 1.3 billion, of course, supported by the disposal of the YOFC share, but still remain an outstanding net income result. Our cash generation at with a 50% conversion vis-à-vis the EBITDA, EUR 1.2 billion, again, a record result in free cash flow generation. EBITDA margin growth over 2024, to appreciate it, we wait for the next slide.
Strong growth EPS also with 18%, which is well above the range that we committed to achieving at the capital market day. That was 10-15, 17%. I will jump to the next one to display the significant acceleration in our performance. You see stability with slight growth in 2022, 2023, then the first step up, EUR 1.9 billion EBITDA, and EUR 2.4 billion this year. This EUR 500 million is a significant hike in EBITDA, mainly coming from perimeter change, the full recognition of Encore Wire input in 2025. The new acquisition Charnwood and the strongest EVA performance that come from transmission, with EUR 200 million growth in EBITDA.
To be honest, there is another EUR 80 million benefit in terms of organic growth in the 2025 result that is hidden by the Forex. That was EUR 80 million, EUR 75 million, to be specific, adverse in 2025 as 2024. I will not comment on the guidance now, but you see that EUR 2.7 billion already position as, I would say, slightly height of what is the target that we have to achieve by 2028, considering that we still have two years to go. Free cash flow, similar trend, significant acceleration. EUR 1.2 billion is a very good conversion rate for the current EBITDA. EUR 1.35 billion is again another step up. This definitely position us ahead of the target of 2028.
Let me move to the important contributors to the growth of the company in the last 18 months. This is 18 months worth of effort in reshaping our portfolio, making it more suited to our goal of become a stronger solution provider. You see, in 2024, unification Encore Wire give us the access to electrification space in United States, and thanks to that access, now we have a unique asset and unique opportunity to leverage the expansion of data center. We followed this with the Digital Solutions expansion of portfolio with connectivity, with Warren & Brown Technologies in 2024 in Asia Pac and China, in U.S., and also outside the U.S. Lately, we had this 2 important acquisition of those small, the Xtera and the SES-SM.
Xtera give us access to the submarine telecom long-distance connection helping us complement the strength that we have in the submarine energy business with submarine telecom opportunities. SES-SM is again an important step up in verticalizing our capabilities and in sourcing one of the most critical phase of the execution of the project, the survey assessment and the route preparation. Which will help us become more efficient on the one end, but also able to stand the possible risk, the start that comes from the burial depth, that always rely on customer survey and not on survey. We also work on our portfolio in terms of disposing shares of YOFC, which is not considered any longer a crucial asset for us.
We made a couple of, actually three factory reduction in the automotive perimeter to help us avoid dilution coming from the difficult time that automotive is living worldwide. Also outstanding, a remarkable achievement. On the sustainability journey, our newly defined target is to move to sustainability-linked revenues, so revenues that are associated to low carbon products, so sustainable solution. 44% is the target, is the achievement for 2025. Our target for 2028, that we declare the capital market day is 55%. More than EUR 11 billion-EUR 12 billion revenues in 2028, and who knows whether this will be 11 or 12 or more, depending on the perimeter change, will be solutions that can offer benefit to our customer in terms of sustainability.
Significant hike in the recycled content from 16% to 21%. We continue our consistent journey of reducing Scope 1, 2, and 3 to achieve and meet our commitment to be net zero by 2035. We are also particularly proud that there is a record of 30% achievement in share of our employees that hold shares in the company, which is a sign of consistent and growing confidence in the future of our company. Let me start with the start of 25. There are many KPIs, but I will draw your attention to the right-hand side of the page, 30% organic growth, which equates to almost EUR 800 million revenues in one year, in terms of capacity expansion and execution on the projects.
EUR 582 million EBITDA, EUR 220 million additional to 2024. The step increase is amazing. The EBITDA margin, 18.3% full year 2025, supported by a 21% in quarter four, explains and give confidence and actually show that we are going to beat the target that we set for 2028, that was set at 18%-20%. We are already there in 2025, with an exit speed that goes beyond the range that we set for 2028. Amazing also the growth of the backlog, EUR 17 billion, with EUR 2 billion or more worth of project has been awarded to us. They are not in the backlog because they are waiting for the order to proceed. That will come in the next few quarters.
By distribution, we continue with a sustained growth, in the quarter was pretty strong, 13%. In the full year, still very strong, 8%. Certainly supported by two large regions, U.S. and North America and Europe. The EBITDA margin full year is slightly down on 2024, because the quarter four is slightly down year-over-year on quarter four 2024. Again, the same point that I mentioned last time, there is this Midwest spike in cost due to the tariffs, unfortunately, that we could not pass to customer in the overhead transmission space in U.S., because this is a fixed price business.
We're trying to define different solution, but until we have flushed out the whole backlog, which was set when the Midwest was lower than this, we will suffer some contraction in the overhead transmission line that has a repercussion on the total power grid space. Electrification is showing a sluggish INC growth overall, but with a promising growth in quarter four in North America, with almost 6% year-over-year growth, which is supported by what we see already in quarter one, 2026. We suffer a lot in terms of organic growth in 25, in this space in North America, because the whole market, with the exclusion of data center, the residential and the non-residential market was 6% down on 2024.
These are probably number of the spend occurred in U.S. in construction business. The expectation, the outlook for 2026 is much more promising, the start of the year, as well as the exit of the last month of 2025, are extremely promising. The EBITDA margin full year grew by 900 basis points over 2024, this is again the level and the value of the accretion due to the acquisition of Encore Wire in our perimeter, full perimeter. Specialty is nothing that was not foreseen, is still disappointing. We have full year 2024 reported EUR 310 million EBITDA, now EUR 280. There is a EUR 10 million Forex headwind, of course, besides this, there is a weaker demand in automotive, in elevator, U.S., and in oil and gas.
Contraction on margin distribution business has caused this, let me say, EUR 20 million organic decline. The rest is the Forex effect. The profitability full year remain pretty consistent with the past, and we have finally disposed the asset that we want to dispose in automotive towards the beginning of this year, January and February. So we should not see any longer the dilution coming from automotive, and we hope to see the rebound of the business in the rest of the verticals that we play in the different regions. Digital Solutions speaks for itself. Is a significant growth, organic, 7% full year supported by the rebound in business in United States, with stability in Europe and other countries.
There is the perimeter change that inside the EUR 168 million equates for more or less EUR 100 million is the channel. You see how accretive channel is, with a quarter impact, which brought the EBITDA margin 5 points higher than what it was 24, and overall EBITDA margin at 17.2% for the full year. Core channel will continue. It will also, as we did in the optical business, U.S. benefit from the rebound of the market, and now we can finally work on the integration and leverage the bundling of connectivity cables, and leverage the synergies that we would like to achieve, thanks to the cross-selling opportunity. Let me hand over to Francesco for more insight into the financial details.
Thank you very much, Massimo, and good morning to everybody. I'll be quick. The profit and loss statement, as Massimo said, EBITDA closed at 2.4 beyond exactly in the midpoint, our guidance with a great margin expansion at standard metal price, an expansion of 130 basis points up to 14.2%. Driven inorganically by the full year inclusion, the full year effect of the accretive Encore Wire acquisition in terms of margin, and also by the inclusion of Charnwood acquisition since June 2025. Organically, mainly driven by the outstanding margin expansion of the transmission business, on a full year base, around 400 basis point, 4 percentage points.
drawing your attention on the right part of this slide, you see the bridge of our 2024 to 2025 adjusted EBITDA, with a total growth of close to EUR 500 million, EUR 470 million, despite the adverse Forex effect worth EUR 75 million. Business by business, the transmission was the strongest part of this growth, almost EUR 230 million, driven by an almost 30% organic growth, and as I said, an excellent margin expansion. Power grid also performed well, EUR 24 million growth, net of course, cleaned of the Forex effect. Performing very well in power distribution and in high-voltage AC across all the regions, with only an adverse effect in North America overhead line business. Despite this, performed a significant growth.
Top line organically grew by around 8% on a full year base. Electrification grew by EUR 176 million, of which INC contributed more than EUR 200 million, whereas specialties dropped, driven by weak oil and gas, in elevator and automotive. As Massimo mentioned, a very promising execution speed and start of the year in the INC business in North America, after the challenging first half, the first 2 quarters with pretty tough market conditions. Digital Solutions up almost to EUR 130 million, obviously here we benefit of the inclusion since June of The Charnwood Company acquisition. I like to stress that also organically, and mainly in the U.S., EBITDA grew significantly on a like-for-like basis.
The little adverse perimeter effect of YOFC, we gradually exited in the second and Q3 . As I said, the Forex effect. The other outstanding achievement is obviously net ink, close to EUR 1.3 billion. Of course, this includes the gains from YOFC, net of tax in the region of EUR 345 million. Still, taking out this effect, the growth from 2024 is really outstanding. By the way, the 3.31 EUR share of EPS, growing 18% since last year, that Massimo already mentioned, I want to be very clear, is totally cleaned of the YOFC gains effect. Is a normalized growth of our earning per share.
We can move to the cash flow generation. One more outstanding achievement of this 2025, close to EUR 1.2 billion free cash flow generation. This was also benefiting of some extraordinary low level of paid taxes in U.S., benefiting of a couple of positive one-off effects. As you see, we perform really well in terms of working capital changes, down by almost EUR 200 million, mainly in the transmission business. Despite the adverse effect of the rising metal price, that unfortunately may be there also for this year, 2026, impacting our cash flow.
You see that we deleveraged down to a EUR 3.1 billion debt with the acquisition, which is almost entirely or entirely the acquisition of Charnwood, including the earn-out of EUR 1,069 million, which is almost fully covered by the issuance of the hybrid bond, close to EUR 1 billion. You see here totally taken out from the free cash flow, the effect of the disposals proceedings, EUR 675 million, out of which EUR 565 million are related to the YOFC disposal. That's it. Back to Massimo for the outlook.
Thank you, Francesco. The outlook is pretty straightforward, and it is actually very outstanding in terms of confidence and commitment of the company to make it happen. EUR 2.7 million big point in the EBITDA guidance, which sets a EUR 300 million EBITDA increase over the ending point of 2025. In reality, considering there is EUR 80 million perimeter adverse impact between sorry, there is EUR 80 million Forex effect adverse, it is actually a EUR 380 million EBITDA increase if you neutralize the Forex. You see on the right-hand chart that the bridge is playing, that there is a significant organic growth on top of it, there is the perimeter effect that is more or less EUR 80 million.
By coincidence, is that size that needs to be in place to offset the Forex impact. I think it's very, I would say braver, but we are very confident to achieving it, is much better than what we've seen across the other peers. Not necessarily in the cable space, but in general. We are very committed to achieving it. The figures for even stronger, again, 50% commercial rate, EUR 1.3 billion, EUR 1.35 billion, well ahead of what we need to be or where we need to be in 2026 to underpin the 2028 capital market target. We're confident to achieving both and continue the journey with organic growth and the M&As. The sustainability-linked revenues will move from 44%, 2025 to 48% midpoint.
One important remark, in our EBITDA, there is not any possible benefit coming from the tariff situation. We haven't seen it yet in the past month. As I told you, it will take a little bit for the importers to change behavior in the market and allow us to gain share, and we didn't want to build any speculative benefit coming from the tariff situation, which has changed in certain extent, but not much at all. We will see upside, possibly coming from tariff in the coming months or coming quarters. Having said so, a close saying that we confirm the stronger drive in transmission business also for 2026.
The China integration is a successful integration, considering that after concluding the amount payment, that we had paid this company with a multiple less than seven, and the synergy will kick in in 2026, adding additional accretion to the Digital Solutions EBITDA margin. The outstanding cash generation 2022 will, in 2025, will be supported and in 2026 with additional cash flow. The dividend will increase from EUR 0.80 to EUR 0.90. Of course, this is what we see organically, you know that we keep working on the M&A. When this will happen, we cannot tell you yet, there will be something happening in the next short term, let me say this. Thank you for your attention. I'd like to move on to the Q&A session.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, it's star one one for any question, and wait for your name to be announced. Thank you. We are now going to proceed with our first question. The questions come from the line of Akash Gupta from JP Morgan. Please ask your question.
Yes Hi Goodmorning, and thanks for your time. I have two. The first one is on guidance. At the midpoint, you target roughly EUR 300 million increase year-over-year in EBITDA. I guess EUR 140 million of that could be coming from transmission to get to EUR 1 billion by 2028. I think you said EUR 80 million is coming from perimeter. So maybe if you can talk about how should we think about the remaining EUR 80 million between the three segments, grid electrification and Digital Solutions, on an organic basis? Same on guidance, your free cash flow guidance implies 50% FCF conversion at the midpoint, which is higher than what we have seen historically. Any color on that? That's the first one
Thank you, Akash. Yes, you're right. Let's call it EUR 300 million net, but in reality, organically, in terms of the offset of the four, because it's EUR 380 million, EUR 150 million, yeah, more or less, will come from transmission. Remaining is the EUR 80 million, this brings us to 230%, there is another EUR 150 million organically coming from the rest of the business. There is some organic growth in Digital Solutions, because we will continue to leverage on the strong demand in the United States, which is driven certainly by broadband deployment, but even more by data center expansion. They are desperate for additional volume, additional supply in optical space, likewise in the energy space. There will be strong growth in power distribution.
Despite the blip in EBITDA margin, as you've seen in quarter four, which was totally anticipated, the market demand in U.S. for medium voltage and high voltage is extremely strong. We can't cope with this demand. If you had more capacity available, we would sell it. Luckily, in January 27, we will have the first wave of new medium voltage capacity coming on stream in the Anchor site. This will be a powerful combination, the service level of Anchor with the power of medium voltage cable for INC, Industrial Construction and Power Grid. Power Grid will also grow, and electrification has said that we exit quarter four with a strong rebound in INC, North America. Not followed by Europe. Europe is pretty weaker in INC currently, but North America rebounding quarter four is what also we notice in quarter one.
I don't think this has nothing to do with the tariff. If anything, it's due to the contraction that the market suffered in 2025, that finally is resulting a surge in demand in 2026. To cut the story short, there will be organic growth planned in our EUR 2.7 billion, coming from all businesses. Of course, with much more visibility in transmission, but with strong market demand in INC North America, in Digital Solutions North America, and in Power Grid, Europe and United States. I leave I defer to Francesco, the answer on the 50% conversion.
Yeah.
Thank you, Massimo. Ciao, Akash. No, definitely, a, let me say, an ambitious, still, a totally realistic target on which we are very confident. Let me first of all remark that already 2025 is very close to the 50% conversion rate. This improvement in the free cash flow at midpoint is around EUR 180 million, versus the 2025 actual, will come, first of all, from the additional EBITDA. If you take the EUR 300 million additional EBITDA net of tax, this contributes around EUR 220 million, EUR 230 million. Then, we will certainly have a higher cash taxes. I mentioned that the 2025 was kind of supported by a particularly low level of cash tax in the US.
This will come back in 2026. We are committed to further improve our working capital. In 2025, most of the improvement came still from transmission. This will be a little bit different in 2026. In 2026, we have a pretty significant room to recover and to gain efficiency in terms of working capital. This will be a key in order to deliver the EUR 1.35 billion free cash flow guidance.
To give you a little bit of more nuance, there is no any reduction in CapEx that support the free cash flow generation. If anything, 2026, we continue with a strong CapEx deployment across all businesses. This time we continue with transmission, we continue with Power Grid. We need to add Digital Solutions. We are at capacity in fiber and in cables. So we will maintain a level of EUR 800 million CapEx also for 2026 to support the organic growth across all the three businesses that I mentioned.
Let me also add one point that I missed, that the debt, with this kind of cash generation, in 2025 and expected for 2026, our net debt will be in the region of EUR 2.6-EUR 2.65, including, by the way, the two already announced acquisitions, which are worth, in effect, increasing our debt by EUR 210 -EUR 220 million. This means that year-end 2026, our leverage will be lower than 1, based on the midpoint of the guidance, and that's really a great situation to be in, and I would say a better situation than we expected.
Much more better than expected. Yes.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Daniela Costa from Goldman Sachs. Please ask your question.
Hi, good morning. Thank you. I have three questions. I'll ask them one at a time. The first one, just wanted to ask on Power Grids and on these, what you call the temporary metal headwinds. Should we maybe can you quantify how much the hit was? Then should we expect that they will no longer be there from 1Q onwards?
Thank you, Daniela. Yes, the temporary effect is temporary because it's due to the Midwest spike in the overhead transmission, where the margin, sorry, where the price is fixed. I can tell you the number. Was for the full year, but basically impacted the quarter three and more, and more quarter four, was a $30+ million worth of costs or margin contraction. The hit is visible at the group level because, you know, the Power Grid North America accounts for, let's say, two-thirds of the total EBITDA margin of the group.
It will be there also in quarter one, because the Midwest keep increasing, and we still have a significant volume associated to backlog that we landed in quarter one and quarter two, 25, when the Midwest was pretty low prior to the spike due to tariff. We see it in quarter one and mild in quarter two. Gradually, we will come out, because what we are quoting today, the project that we are landing today for execution in quarter three, quarter four, have a fantastic margin, as you can imagine. Until we flush out the order backlog, we will be in the same situation. That's why we call it temporary.
Got it. Thank you. And then just on, I think you very clearly don't have in your guidance the tariff benefits. We have already seen, I guess, on the, on the market data in copper wire and cable imports into the US, like the November data, was down massively on the imports. We don't see very strong growth in your US electrification business yet in Q4. Can you explain, is it because it's a different mix, maybe, or more indexed to things codes which haven't been included in the tariff yet? Is it just timing with distribution? Sort of, how should we think about that data versus what you are printing in the US?
To full answer, in the copper space, there are no tariff at all. The tariff are applied to metal and not to the derivative products, and this seems not to be the intention of the administration, so the market is still free as it was before. Everyone is bearing the extra cost of the copper, of the cathode premium and the copper COMEX, and the market is same as before. This is the space where we would never expect, where we didn't expect to have any potential gain from the tariff. On the contrary, in the aluminum wire, we still have this 232 tariff applied to the metal content of cable imported from importers. But for the time being, we haven't seen a real change in behavior. They basically swollen.
The costs or the 50% in their margin, their price, the importers, the distributors importing cable from overseas. That was my point. I don't know how long they can continue with this margin contraction. They haven't increased significantly the price. Yes, it is true, they have increased a little bit their price, we still have a significant price gap, like 15%, 10%, 15% between our price in the US and their, and their price coming in. Maybe, maybe they will not be able to bear the current margin compression for too long, which is what we hope. That's why we didn't speculate on the possible advances coming from this tariff.
We are seeing it, to be honest, in the last two months, a different trend in the aluminum building wire space inside Anchor, whereby we've been able to raise prices, and we didn't lose volume, and we didn't lose share of volume. This is a first time sign of possible advantage, but again, give us two, three, four more months to see if this trend materializes as a strong trend.
Got it. Thank you. Then just on some of the recent M&A you did. It seems like you've been these two deals, bolt-ons on submarine, telecom cable or submarine fiber cables, which is an area you weren't very present in the past. Can you talk through about sort of the synergies you see on that area, the potential for growth there is out there? Why, yeah, maybe give us a bit of context of sort of like how.
Yeah, sure.
relevant this might become in the future in the group.
Thank you, Daniela. Interesting question. The space we were in, we were in submarine telecom was only the regional connection without repeaters. The market is made the market 100, only 10% of the market is confined into regional short distance connection. Without repeaters, we cannot play in the big market, so the long-distance interconnectors. The market has grown a lot on the back of the expansion data center and AI build-up. We will, with the repeaters provided by Xtera, be able to amplify the optical signal in our cables and be a player also in the longer haul connection. We have access, thanks to this technology, to a market that was before forbidden to us. We have all the rest of the know-how, the cable we have, the installation capability we have.
This was the piece that we needed to be considered a player in the market. Today we make not big number, we make EUR 100 million revenues in this submarine space, telecom space without repeaters. The additional Xtera will help us grow significantly this scale in the submarine telecom.
Got it. Thank you very much.
Thank you, Daniela. You're welcome.
We are now going to proceed with our next question. It comes from the line of Vivek Midha from Citi. Please ask your question.
Thank you very much, everyone, and good morning. I have three, and I'll go one at a time. Thanks very much. The first question is just a follow-up on your comment around the aluminum cable business in the U.S., potential for upside there, driven by tariffs. Some of the press reporting from the Financial Times had suggested the U.S. government had been considering rolling back some of the metal derivative tariffs, given the difficulty of implementation. In your conversations with the administration, do you get any sense that the current situation could change? Thank you.
No, we have no sign of possible changes to the current discipline as far as the 232 tariff is concerned. The only change would be the reciprocal country tariff, I just said, due to the Supreme Court ruling. This will have a minor impact to our competition or to our situation in U.S. I think we're still positive about the fact that being local with a strong asset in terms of capacity and also lead time. Bear in mind, I'm not saying this for the sake of saying it. Data center requires significant service with scale, large-scale capacity.
If you could take share in the market of the others, is because we can respond, thanks to the spare capacity we have been making, to this demanding data center requirement in terms of volume and service. We are really not worried, and we don't care much about importers. First of all, the aluminum building wire is a small space in the total agency space in United States. Secondly, the strength that we have, thanks to acquisition, are unique, that no one inside the United States, any of the players in the United States can copy, nor anyone from outside.
Thank you very much. Very clear. My second question is around the very healthy demand in the US for fiber, particularly from data centers. Could you give us an indication of what you expect, the potential growth in the US could be? Also just a view on where you stand versus your capacity. Are you capacity constrained, in the US, given that you're investing in capacity right now? Thank you.
Yeah, the demand remains as strong as it was in 2025. We continue with the same pace, and if anything, we see even more demand from data center, because now they're worried about the ability of customer or suppliers to supply energy cable and optical cables. We're entering into some deals with those hyperscalers to provide security of supply in, and receive some down payment in return. Energy demand is stronger, cable demand for energy cables is stronger. Cable demand for optical cable is even stronger. We are about to unlock investment in fiber capacity and cable, optical cable capacity, because we, as everybody else in United States, are at capacity. If you search, if you wanted fiber in U.S., you don't find it.
If you wanted fiber outside the U.S., you don't find it either. Not only from U.S. player, but also from Japan, from China, from anyone. The market is extremely tight, and this is the best condition for us to leverage it on the one end, pricing power, and also technological leadership that we have in the optical space, which is well recognized by the other scalers.
Very clear. My final question is on the technology side again, for data centers. Do you have any sort of more views or color on the potential implications for your business from the transition to 800 VDC architecture? Any sort of views around the impact on sort of the length of cable required, the value of the cable, and so on. Thank you.
Yeah, it's a technology that we developed already, the time that the volt direct current solution. Yes, it is true. If they was shifted from AC to DC, which is a kind of no-brainer because they will save a lot of losses that occur in AC solution that incur, there will be a reduction in volume. But at the same time, the growth of the data center is so large that even if specifically per megawatt, we see a reduction, there will be more compensation coming from the additional demand. Anyway, we own this technology. We were one of the first to develop, so we'll be happy to see and to participate to this conversion, which will never be deployed at scale, by the way.
Okay. That's great. Thank you.
Thank you, Vivek.
We are now going to proceed with our next question, and the question come from the line of Monica Bosio from Intesa Sanpaolo. Please ask your question.
Hey, good morning, everyone. I hope you can hear me. I have three questions. Ciao, ciao, Massimo, ciao, Francesco and Cristina.
Hi.
The first question is on the data center revenues. Massimo, you anticipated that the weight of the data center revenues will achieve 10%. What is the time frame do you have in mind for this weight? What kind of margins should we figure out for the data center? This is the first question. I will move to the other.
Yes, we achieved already in 2025, a level of EUR 1 billion data sale and half a billion in direct sales. We believe that at the current pace, we will hit the EUR 2 billion target in 2026, 10% of the total revenue. The margin is a bit of a complex situation. It is very high margin in Digital Solutions with those sophisticated optical cables. It's also very high margin in medium voltage, powerful cables to interconnect buildings and connect data center campus among them. It's, of course, lower margin in low voltage cable, but it's lower relative to medium voltage. In electrification with asset like Enel, we supply low voltage cable to data center, we make 15%, 16%, 17% EBITDA margin.
It's a very accretive margin, in one word.
Okay. If I may ask, maybe I didn't get, within the INC USA business, in the Q4 , can you outline the margins in North America? The exit speed was strong, but I didn't manage to-
Uh, I, I-
extrapolate the margins.
I didn't mention the margin, I believe, but it was as strong as quarter three. Quarter three was particularly strong due to the spike of tariffs that played in our favor when the copper tariff were removed. Given the strong demand in quarter four, and despite the normalization of the copper price due to the tariff removal, we still had... I mean, when I say high, it means in the high teen digit numbers.
Perfect. Thank you. The very last is more qualitative. Let's say that the consensus is closer to the midpoint, even a little bit higher to the midpoint of the new guidance. What are the main assumptions behind the upper part of your guidance range that could move toward the upper part?
Yeah. There are two strong variables that, in a way or the other, have an impact on our result. One is the Forex. Should it strengthen, we will have, of course, much more chance to beat the midpoint and go beyond the top of the range. Second, more organic growth, which we think is what we see in January and February. I said before, I mean, two months doesn't tell us the whole story, so we have to wait a few months to see if there is a stronger growth continuing in the coming months. As I said before, we didn't bank on any tariffs, so if tariff come in, we will be in a different scenario.
If the tariff benefit, someone imagine, and I think that some of you imagine hundreds of millions of benefit from tariff, and I think this is a bit ambitious as a consideration. If tariff were to impact the business in U.S., there will be a significant upside beyond the current guidance.
Yes, correct. Very clear. Thank you. Thank you.
Okay. You're welcome, Monica.
We are now going to proceed with our next question. The question comes from the line of Uma Samlin from Bank of America. Please ask your question.
Hi. Good morning, everyone. Thank you very much for taking my question. My first one is a follow-up on the on your tariff comments earlier. I think if I heard correctly, you said that you haven't seen much of behavioral change from the imports, but you have started to raise prices without losing much market share there. What's your strategy going forward in terms of the balance between the market share and pricing? You know, if you are raising prices without losing market share, then can we expect some margin tailwinds here?
We sit today on a very good margin in INC North America. This margin is split between different segments. In copper business, it's extremely high, regardless of tariff. In the aluminum business, it was not that high in quarter four. I said before, we raised the prices and the market follow, and we didn't lose market share. This all depends on the balance between price and market share depends on the market demand. The market demand has said they're bounded. We foresee, talking to our customer and talking also to data center customer, a stronger outlook for 2026. All the conditions are there for us to benefit from a continued strong growth with high margin across the board for all the INC segment of business.
That's super clear. Thank you very much. My second question is on M&A. I guess you are interested in doing a bit more deals in the, in the next year or two. What are the types of targets you're interested in, and what are the top key markets you have in mind?
We have explored, we are still assessing different geographies and different opportunity in 3 main regions. Let's start from priority 1, US; priority 2, Europe; priority 3, Latin. Different size of business, different size of opportunity. In which businesses? I mean, we have electrification as, of course, interesting space in US, but equally also power grid. In Europe will be also electrification and power grid, Latin is pretty much the same. The businesses that are involved in this M&A are the ones that I mentioned. Priorities are not priorities. We have to find the right one and proceed with the negotiation of the rest. These are the area where we focus on business-wide and geography-wise.
Thank you very much.
You're welcome.
We are now going to proceed with our next question, and the question comes from the line of Sean McLoughlin from HSBC. Please ask your question.
Good morning. Thank you for taking my questions. My first is on transmission. The margin trajectory continues to surprise. You're already over 18% in 2025. I mean, what kind of Well, first of all, what is driving this? Is this just execution? Is this just better operational leverage on your increased capacity? What kind of further improvements can we expect in 2026, and how far ahead could we be coming versus your 2028 targets? Thank you. That's the first question.
Thank you, Sean. You mentioned two key factors. Certainly, the operational leverage and the execution, which is an important driver margin increase. The third one is the projects margin that we have in our backlog is better than what we executed in 2025 or 2024 or 2023. We will continue leveraging the three factors and, yeah, where we could be in 2028... I mean, at a certain point, we will go out with a new capital market day, not because we organically want to change 2028, but because hopefully there will be a perimeter change. At that point, we can, we will unveil and reveal the expectation for this EBITDA margin in transmission business.
Of course, as you said, if you achieved already the, let's say, 20-ish level of EBITDA margin in Q4 2025, the expectation that will go well beyond what we committed to at the capital market day. By the way, there's another player here that in Europe mentioned a very ambitious margin in transmission by 2030. We want to beat that player, just to give you a sense of the ambition.
Fantastic. Thank you. If I can just continue on transmission, just if there's any sign of change from your transmission customers in terms of absorbing the 30% increase in copper prices over the last 3 months, thinking out over the next years, if there's been any change in terms of CapEx ambitions, project, timelines, as a result of that?
I think the transmission, or TSO, transmission system operator, has to digest the wave of order and the significant surge in order, intake orders that they assigned to the market in 2023. We don't see a slowdown in itself. We see that for the next 5 years, we are flat out in terms of capacity, and we are flat out in terms of delivery of the backlog. The level of market we see will remain around these EUR 15 billion in the coming years. Of course, project cost has increased due to the copper, but also some projects are in aluminum. Don't get me wrong. I think the point is, we are all focused on the execution, us and the transmission system operator.
That's why we don't anticipate to see another wave of a EUR 30 billion market intake, as the one that we've seen in 2023. If the market continue with this EUR 15 billion per year, we will be able to read beyond 2028 with sustainability of the EBITDA margin, sustainability of EBITDA, and possibility to further expand the capacity to absorb this continued demand in transmission business. You never know, one day-
Yeah.
Sorry, trying to get across. One day we might have more transmission opportunity also in U.S. I appreciate that the offshore wind is off the table in U.S., but thanks to data center, transmission interconnectors are becoming the key priority to spread the electricity capacity across different network and allow data center expansion to continue.
Thank you. Just lastly, on M&A, I saw a press quote earlier where you were quoting saying, "You're ready for large targets." I guess, you know, higher free cash flow is driving this ambition. Just in terms of, is this a change maybe from previous communication? You talked about, you know, deferring large M&A out for the next couple of years. Should we infer that you're now a little bit more ambitious on larger targets sooner?
Yeah. Yeah, good question. It's, to be honest, it's, for sure, it's a change, but we have many factors making us open to this change, like the disposal of YOFC has been a particularly successful operation. Second, the performance in EBITDA in 2024... in 2025, sorry, and performance in free cash flow. We add the leverage in faster than anticipated, as you know, as we deliver faster, we have more power ammunition to address large M&As. The larger, as you said, as we always say, is something similar to Anchor Y. Don't think of something that is like a cost of acquisition. We are ready.
We are ready, and also be aware that between starting the M&A and having the opportunity come on stream, will take six, eight months, but we are ready to go for large ones.
Thank you.
No, no. Sorry, I said, Costco to say, and not trying, Costco is a large M&A that we analyzed 1 year ago, but was too large. We will not go for EUR 10 billion M&A. That's to clarify, the EUR 3-EUR 4 billion M&A is something that is within reach.
Brilliant. Thank you.
You're welcome.
We are now going to proceed with our next question. The question come from the line of Christopher Leonard from UBS. Please ask your question.
Yeah. Hi there, two from me as well, please, and starting on the M&A point. Could you maybe, I know you said Europe was maybe second in line in terms of geographies of priority for you, comment if you can see the opportunity for margins to improve and expand across the power grid and electrification business within Europe, without M&A? Do you think M&A, and the consolidation in the market, M&A could offer would be an important driver for you to improve that European margin? Thanks.
I think your comments are correct. Organically, we can do a lot in terms of increasing the EBITDA margin because the demand is so strong that we are working in expanding capacity. There will be pricing power, more pricing power. There will be more efficiency, more operational leverage. Of course, the M&A remain the main catalyst to for a significant step change in profitability. When you combine two companies, there are plenty of synergies, cost synergies, and commercial synergies that will help the EBITDA margins enhance pretty fast.
Thank you. It's really helpful. Just the second one was a follow-up on the fiber market and optical cables in the U.S. Can you speak maybe about... I know you're investing more here, but could you speak about any kind of metric for what your capacity is today in the U.S.? What you're seeing in terms of what the potential increase could be. Secondly, I think historically, you said, you're in the data center market, you're slightly different to Corning up here in the U.S. I wonder because now there's a lot of capacity booked out, is there scope for you to maybe win share, to move inside the data center?
I think previously you said you were more outside the data center on the fiber business, but yeah, that, any color there would be helpful. Thanks.
Yeah. We will not share much about our capacity and the increase, but definitely, the market has grown by a factor of 30% between 2025 and 2024, and we would like to maintain our share of wallet. You can derive what would be our capacity effort increase to meet and maintain the market share. Data center is not that we are not in the data center, we are not in the inside building. We deploy a lot of optical cables to connect the individual buildings of a campus among them. Inside the building there's a lot of connectivity and less cables. In that space, there are basically two players, Corning and CommScope/Hanwha and AFL.
We have opportunity to grow in this space, but not in upper scale data center, but in enterprise data center.
Excellent. Thank you.
We are now going to proceed with our next question. The question come from the line of Alessandro Tortora from Mediobanca. Please ask your question.
Yes, hi. Good morning to everybody. I have three questions, okay, if I may. The first one, if you can come back a little bit to the, let's say, profitability expectation on the Digital Solutions business, considering that in 2026 we will have the full consolidation of China, but also now the synergies that you mentioned. Because now you were expecting also now some organic improvement into, let's say, the legacy business. The second question is related to your comment on the approach that discussion you're having with the US at the scalers. We also saw in the past, in the recent past, some deals signed by Benetton with Corning. Is it something, considering your product portfolio, that you could do?
In the sense, do you see, let's say, the same business possibility for you for just signing some multi-year frame of agreement? This is, let's say, the second question. The third question is on the perimeter effect. Can you just, let's say, tell me exactly, because if understood well, clearly we will have now the months consolidation of channel, then AC, ACSM, now the Spanish one, also Xtera now should be there. Just understand the now the perimeter, how the contribution, let's say, between the now, the acquisition you make. Thanks.
Okay. I take this, the first one on profitability of Digital Solutions for 2026. It's not only Channel. Certainly, Channel is a great accretion, by the way, Channel obviously will impact on a full year base on 2026, adding 5 months to the 7 months of 2025. We definitely expect a growth organically also, driven by the very strong U.S. market that we are seeing, which is not only volume, we expect also pricing to improve. We have a double, dual component of this profitability enhancement that we expect for a Digital Solutions. And of course, the synergy is also coming from the Channel deal, which are definitely interesting in terms of cross-selling opportunities.
Maybe this is more potential expansion of our top line than margin accretion on the synergy side.
Mm-hmm.
The second one on, U.S. hyperscaler. U.S. hyperscaler, I think that certainly for the inside data center, we would need this to strengthen our product range. The discussions that we are having is more for outside the data center, so driving basically all the fiber connections to transmit data to data center. This is also-
Mm-hmm.
the so-called long haul business. This is also a very strongly growing business, eh? Not only inside, we're definitely to improve our product range, we would need maybe also a perimeter change, but we are organically, mainly focused on long haul growth, also talking directly with the hyperscaler.
Yeah, as for understanding, we are going to have, we are having discussion about frame agreements or capacity reservation fees or kind of, the stuff down payment to provide security supply to these, hyperscaler customer. Not necessarily only in the optical space, as coordinated with the, with the. By the way, it was Meta, not Microsoft, and, but also the energy space.
Okay, thanks. Yes, sorry, and on the perimeter effect, just if you can help me, let's say, to reconcile now the contribution you expect this year?
Your question is about this plate of the components? Is, okay, I don't know, the channel is pretty simple. You take the EUR 100 million we mentioned for 25, 7 months, and you extrapolate it to full year. It will basically end up with, I'll give you the answer, EUR 60 million additionally, be that coming from channel.
Mm-hmm.
There is a kind of EUR 25 million coming from the combination of the two, ACSM and Xtera. You also take into account another change of perimeter, adverse, which is the YOC disposal, which account for EUR 10 million. You end up with a number that we mentioned, EUR 80 million, EUR 60 million plus from channel, EUR 25 million from Xtera, ACSM, minus the YOC share.
Okay, okay, thanks. Sorry, just because I forgot, let's say, one point to ask. Can you help me, let's say, to understand the level of pricing effect, you know, we are going to see this year in, let's say, in the power grids due to the recent increase in copper prices? I see some wire now mentioning basically every week raising prices. I recall that you are some kind, you know, of price setter in the field. Just to understand, if you're talking about a high single-digit price component, a top-line level for you in this division. Thanks.
I know. The level of price is difficult to say because it depends on the cost. We have a formula in the power grid that helps pass on, power grid, power distribution, and about, help us pass on entirely the cost effect to price. Given but in terms of the demand, we see strong power grid demand in North America as well as in Europe, and so the level of pricing will be pretty robust, not only due to the cost-
Mm-hmm
-pass on, but also due to the demand. INC, I said is still weak the performance of Europe. We see it stable in Q1 2026 over Q4 2025. In INC, but in the U.S., the market is pretty buoyant. I said before, there is a combination of two factors: the rebound of the non-residential business in the U.S., compounded by the strong demand data center, making the INC and medium voltage business for INC customer in the U.S. very strong.
Okay. Thanks also for the extra question, guys.
Thank you, Alessandro. Welcome.
Thank you. As a final reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, it's star one one to register a question. We are now going to proceed with our next question. The question come from the line of Jean-François Granjon from ODDO BHF. Please ask your question.
Yes, thank you. Good morning. Just one question regarding the CapEx. Could you give me an update on the CapEx been expected for 2026? You have communicated on the cumulative accumulate CapEx until 2028 to EUR 2.6 billion. What would be the range on the CapEx expected for 2026? Could we expect an average between EUR 6 -EUR 7 million or a different amount for the CapEx expected in 2026? Thank you.
Didn't capture that, so the question is about 26 or the future? Sorry.
Yes.
January, yeah. 26.
Also.
EUR 800 million. Sorry, Jan, if you want, if you can repeat the question. The number for 2026 is EUR 800 million, which is in a slight increase over 2025. 2027 number would be pretty much the same. We would probably exceed a little bit, given the additional organic growth needs that we see in this 3 years, the capital market overall cumulative numbers. Because the demand in transmission is stronger than expected, in power grid equally, and in telecom is definitely, Digital Solutions definitely much stronger than anticipated in the original CapEx commitment for the capital market day. If that was the sense of your question, sorry.
Okay. Okay, thank you.
Thank you.
Thank you. We have no further questions at this time, so I'll now hand back to you for closing remarks.
Thank you for attending this call. It was a very, it was a pleasure to share with you the exciting result of 2024, and more importantly, the outstanding commitment for the 2026 target for our company, which we ensure will honor and we commit to achieving, and possibly let's wait a few months to understand how the market will respond in United States, especially, and for further update, we'll meet you in the end of quarter one. Thank you.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.