Good day. Thank you for standing by. Welcome to the Prysmian Group 1H 2023 Integrated Results Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone, and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised, today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Valerio Battista, CEO. Please go ahead.
Hello. Thank you. Hello. Good afternoon to everyone. Welcome to our first half of 2023 integrated results. Let's start. First half 2023 highlights. Two main chapters. First of all, EUR 8 billion sales, EUR 8 billion and three, with an Adjusted EBITDA of EUR 878 million, a Free Cash Flow of EUR 567 million. Organic growth, 4.8%, declined compared to Q1, I have to admit, even if it's still quite strong. Adjusted EBITDA margin, 11%. Net debt shrinked to EUR 2 billion 65. In addition to these indicators, we added the indicators related to the greenhouse gas emissions. We have been able to reduce almost 10% compared to the first half of 2022, our equivalent CO2 emissions, and we have 12.6% of materials that comes from recycled materials.
Overall, a very good result, with a investment grade rating assigned by S&P Global Ratings. That has been a outstanding result for us. Let's flip to the next page. The margins are expanding all over the businesses. Let's analyze more in detail. Projects. Projects rose 23.5% organically, with moving from EUR 922 million up to EUR 1,177 million, with the Adjusted EBITDA that moved up from EUR 87 million to EUR 129 million, reaching the already commented 11% of EBITDA margin. That is not the goal. The goal, as we said, is roughly 20%, has to be reached by the year-end for the full year. What can we comment on it, on this segment? That the improvement is very solid, the orders are coming, now we have to execute it.
The execution is the key of the success, of the real success. Today, I can inform you that we have almost completed the Viking Link installation testing. We have not yet taken over certificate, because we are waiting for it in the next days. Let's move to Energy. Energy overall increased from EUR 6.118 billion, 3.4% organic growth. The turnover, in reality, due to the metal price, went down, but not so much, EUR 5.969 billion. The results have been, again, outstanding. What I mean, the performance on ENI has been pretty good, with an organic growth of 2.8% at EUR 4.080 billion, and with a EUR 446 million EBITDA, 10.9% of EBITDA margin. In the ENI, what can we comment?
The comments are that the growth is fine. Of course, we are seeing a little decline in the T&I. May I say, more than compensated by the PD and the overhead, the transmission line increase. Whereas the construction market is reducing a little bit, all the rest of ENI is continuing to grow. It's written in the footnote, P&I normalization in North America. Normalization, not collapse. Industrial & Network Components, the turnover moved from EUR 1.714 billion to EUR 1.728 billion, with an organic growth of 5.3%. The EBITDA ramped up to EUR 182 million, compared to EUR 130 million, the 1H 2022, with a pretty good EBITDA margin, 10.5%. Overall, the improvement has been in OEM and solar, as well as in wind.
Solar is growing, OEM is continuing to be stable, and the wind is growing, too. All the businesses that are related to renewable are growing. Last, and the least, unfortunately, the telecom. Telecom has been the sole segment that has been shrinking in the first half, from EUR 911 million sales in the first half 2022 to EUR 857 million in the first half 2023, with an organic decline of 5.2%. The performance has not been extremely good, I would say, but the EBITDA margin is still pretty good, 14.8%. Now, as I used to say, the percentages you cannot put in the bank account, and consequently, we are not very happy. We have to analyze the reasons why this is happening, and not only to us.
The volumes are slowing down, mostly because the North American market. Why? That's my perception, frankly speaking, because last year, on the wave of the enthusiasm for the coming rural broadband and expansion of the network, our customers have acquired a lot of skills. As usual, the telecom players do not have the control of their stock, or they have a control that is a little bit poor. Why, when they saw the stock at the roof of their warehouse, they stopped buying. That's what we are in today. It has to be noted that in the telecom business, we have experienced in 2019, in Europe, the frequency and the frequency is much higher, the frequency of the swings is much higher than the energy business. I'm not scared of it.
Today is as it is. I'm quite sure that during 2024, the market will restore, and we'll rebound. Overall, outstanding results, let me say it. EUR 8 billion sales, EUR 878 million EBITDA, with an organic growth of 4.3%. Let's flip to the next page. The next page is telling the story of the Projects. Projects that, as you have seen, is growing very much. You'll see from our balance sheet, we have invested almost half a billion EUR in the last twelve months. Why? The orders, the firm orders in the backlog are at EUR 9.1 billion, we got even other EUR 5 billion, almost, of new orders, EUR 5.4 billion of new orders.
In those EUR 5.4 billion, we have included the two UK projects, EGL1 and EGL2, that counts for EUR 2.56 billion. It's a significant chunk, the contract is not yet defined completely. We are almost sure that by the year end, we will be able to sign the final contracts for these projects. Overall, the project business is going very well. The problem is the execution. We have not to fail in execution. Across the regions, I can say that EMEA went pretty well, 5.5% organic growth, moving from EUR 3.3 billion to almost EUR 3 billion again, with a 7.3% EBITDA margin, EUR 240 million EBITDA. Not so bad for Europe.
North America, definitely richer than Europe, has generated an organic growth, moderately negative, -6%, but still a very high EBITDA margin, 16.9%. EUR 406 million EBITDA. Latin America, almost stable, let's say. Asia Pac, growing a little bit, with a almost negative organic growth, but growing in term of results from EUR 32 million to EUR 40 million. ESG. We introduced, being an integrated report, we introduced some parameters that we use to monitor continuously, quarter-by-quarter, and month-by-month, obviously. The first line is reporting the CO2 emissions, that, from my point of view, is the most important chapter of the ESG KPI. Most of all, what is crucial are the tons of CO2 that, or CO2 equivalents, that we are emitting in the atmosphere. Last year, we counted for 665,000 tons.
In the first half, there were 342. This year, in the first half, with equivalent volumes, we have emitted 309,000 tons. Are still a lot for the people and for our children. We are absolutely engaged to reduce it. The other important chapter from the ESG point of view are the recycled materials. Basically, what we are able to recycle is the polyethylene for the jackets, and the copper and aluminum for the conductors. Last year, we closed with 10%. This year, we rose at 12.6%. Let's say that we are still at the beginning. We are on the right way.
There is the other chapter that is represented by the number of women in the job grade, over 20, and the percentage of white collar women overall in the total hired people. That's the sole parameter where we have not been able to improve. I have to say that sometimes it's not easy to find women available to be hired in an industrial group. Outlook. What are we going to propose? We are upgrading the guidance. You may remember that our original guidance we gave at the beginning of the year was EUR 1.375 billion, EUR 1.525 billion, with a midpoint at EUR 1.45 billion, compared to the EUR 1.488 billion, I go back now, correct, that we realized last year. We have been debating internally, but also with some of the investors, about the guidance.
Now, finally, we feel more comfortable to give you a new guidance, even if, of course, is a challenge. We are ready to rise to EUR 1.575 billion as a minimum, with a maximum at EUR 1.675 billion. Of course, the range is littler than the past. Why? Because simply, we have definitely a higher certainty of the result. Having increased the guidance of the EBITDA, makes sense to review also the guidance for the free cash flow. The guidance for free cash flow, that was EUR 450-EUR 550, with a midpoint at EUR 500, is now settled at EUR 550-EUR 650, increasing the guidance of free cash flow by EUR 100 million. The increase of the guidance is not negligible, gentlemen.
Are EUR 175 million on the midpoint at EBITDA level, and EUR 100 million net on the free cash flow. Seems to me that we are on the right way. Finally, even if I, for many years, have been postponing or neglecting the Capital Markets Day, I'll have the pleasure to host all of you that want to participate to our Capital Markets Day, the 5th of October, 2023, in Naples. Having the pleasure to see our ship, our Leonardo da Vinci cable lane. Cristina is crossing the fingers because, of course, the ship is working, and the risk is that may not come on time. Okay, I leave the floor to Francesco for the details of the financials.
Thank you very much, Valerio, and good evening to everybody. As usual, I go quickly through the profit and loss statement. As Valerio said, organic growth reached 4.8%, declining a bit from the 9% organic growth of Q1. As anticipated, the main decline came from the telecom business, which posted a quite significant drop in the second quarter, driven by the North American market, and also a softening in of the T&I business, mainly in US, as a combination of volume and price. On the contrary, in terms of organic growth, Projects performed really well, high double digits. Also the other businesses of Energy, power distribution and overhead line, and Industrial Network Component, achieved a very sustained pace of growth.
EBITDA achieved a very satisfactory result, as Valerio anticipated, EUR 878 million, 11% EBITDA margin, a strong Q2. You see in the top right box, the evolution of the quarters, Q1 and Q2, in relation to the prior year. You see that Q2 was EUR 451 million, EUR 40 million above, and already pretty strong second quarter of 2022. Projects posted a very significant improvement compared to a much more challenging Q2 2022 than the first quarter 2022, that you all remember, was a bit weak in terms of margins, specifically. Energy, also in this case, compared to a pretty challenging base of Q2 2022, performed a further EUR 33 million improvement. As Valerio anticipated, this is coming from a, this is highlighting the result of a very well-balanced portfolio within Energy.
Is the result of the softening of T&I that I was anticipating, in particular in North America, more than compensated, as you see, by the growth of results or in power distribution, overhead line, and also Industrial and Network Component, and this delivered an additional growth of EUR 33 million. The drop of telecom by EUR 13 million is the consequence, of course, of the drop of volumes that I was already commenting, which took place in the second quarter. I also like to note to you that the forex effect is starting to be slightly negative in the second quarter. This highlights further, in my opinion, the quality of our results. EUR 11 million negative compared to last year, versus a positive translation effect, which was in place in Q1.
Most likely for the second half, if we consider the current level of the US dollar, euro exchange rate, we have to expect a slightly negative impact compared to the first half, which is however, embedded, of course, in the guidance that Valerio anticipated. Going to the lower part of the profit and loss, you see that financial charges have been very stable at EUR 54 million. I expect a moderate increase in the second half, because of course, in the second half, we'll discount a bit more the increase of interest rates on the pretty small portion of our indebtedness, which is at variable rate, which is not swapped to fixed rate, which is in the region of 25%, however, quite a small portion.
Taxes, the tax rate is stable at 29%. Group net income achieved a very significant level in 1H at EUR 405 million, which is not doubling, but not very far from doubling from the prior year. Let me flip now to the following slide, statement of financial position, balance sheet. The Net financial debt came down to EUR 2,065 million, down by EUR 265 million compared to the equivalent period, June 2022. The net working capital, as you see, was quite stable, around EUR 1.4 billion, quite stable compared to June 2022. This stability is positively affected by an impact, which is material, and that I like to mention, in the region of EUR 130 million of the sell to cover.
This basically has to do with the sale of Prysmian shares, which was done by Prysmian in order to face the tax liability, the tax payment of the on the manager of LTIs, which is due in July. Basically, these proceeds of the sales were transitorily sitting on our balance sheet from mid of June to mid of July. This was a significant amount, EUR 130 million, and it was translating into a payable, into a tax payable, to be exact. This was deflating, was reducing artificially, if we can use this word, the level of working capital. That's why, I will come to this in the last twelve months free cash flow, we prefer to exclude this EUR 130 million impact from the last twelve months free cash flow.
The number that Valerio was already anticipating, EUR 567 million last twelve months free cash flow, is excluding the EUR 132 million positive sell to cover effect, which is, in a way, already gone because end of July has already disappeared. The stability, the increase of the working capital, taking out the effect of the sell to cover, is mainly driven by an increase of the inventory level, increase of receivables, also as a result of a lower level of receivable factoring, which is partially compensated, but almost entirely compensated by the drop of working capital in the project business, which, of course, is benefiting from very large and positive down payments because of all the awards. Let me flip now to the cash flow. EUR 567.
As you see, the EUR 132 million positive sell to cover effect in the working capital is excluded from the sum, which leads to the EUR 567. This last twelve months free cash flow is substantially in line with the last twelve months of Q1, was EUR 580, if I well remember. It's discounting a level of CapEx, which is growing. You see EUR 498, already very close to the EUR 500 million level. The EUR 222 million increase of debt, which is highlighted in the last column, and which is not related to cash outflow, is mainly related with the impact of IFRS 16 for half of that, more or less.
The other half is related with the currency translation impact on our cash and cash equivalents. This has to do, of course, with the treatment as debt of all the leasing facilities, both financial and operating leases. Let me conclude with some closing remarks. As Valerio said, solid, even outstanding, I would say, 1H results, a very significant upgrade of the guidance, both EBITDA and cash. This, in my opinion, highlights the quality of our business portfolio and the balance of our business portfolio. We have a clear example in these results of how the strongly performing project business and power distribution and overhead line business, strongly performing industrial business, more than offset the weakness of telecom this quarter, and also the start of softening of the T&I business, mainly in US.
That's very important for us, this kind of... I don't call it diversification, I call it balance of the business and geographic portfolio. Strong cash generation. Let me say very simply, that we are getting into a new scale here. You certainly remember Valerio and myself mentioning many times the EUR 500 million free cash flow dream. Now we are at EUR 600 million, and it's not a dream because it's already an achievement.
We have to rise again.
Exactly. This is by definition, by definition.
Yes, we are getting really into a new scale. as Valerio explained, I consider a very good achievement to have reached an investment grade rating with the S&P Global Ratings specifically in Q2, which is even more important in this period of time, which is a little more challenging from the financial point of view, with the high inflation and rising interest rates. for us, it's absolutely important to rely upon this investment grade rating now. Last but not least, we focus very much our ESG performance, and these is all delivering very tangible results. For instance, very tangible results in terms of CO2 emissions and in terms of circular economy. the portion of recycled material, which is so important for our customers.
I also like to say that this also one proves how these strong ESG results and focus is highlighted and disclosed in a more and more integrated reporting, where we are, as you see, more and more combining financial performance and ESG performance. Perfect. I think I'm over, and we can go ahead with the Q&A session now.
Thank you. If you would like to ask a question, you need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, you can press star one and one again. Thank you. We'll now take our first question. Please stand by. First question is from the line of Max Yates from Morgan Stanley. Please go ahead.
Thank you. Good afternoon. Could I just ask firstly about the North American business? You've had another kind of good step up in EBITDA in that business by about EUR 70 million, yet you're talking about the kind of construction business in North America starting to slow. I just wanted to understand, kind of should we assume that most of that EBITDA improvement has come from businesses other than North America T&I, or how would we sort of think about that step up? Where does it really come from?
Okay, Max, just, I'm going to give you a very simple answer. Doesn't come from North America only, but still North America has a quite significant position. Massimo, would you like to give more details on it?
Thank you, Aledo. Yes, Max, the question was actually on North America, not the T&I is softening, as we said, in North America in quarter two relative to quarter one. The other businesses that are coming along, naturally in terms of profitability and volume improvement is power distribution and special cables. As you notice, you will notice maybe in quarter two compared to quarter one, North America has rather been stable, indicating that despite the softening in T&I happened, the stuff happened in quarter two, we had a full offset of this softening with additional margins generated by power distribution, namely grid enhancement, grid expansion, and special cable business, despite also the softening that's happening in telecom.
PD, stronger driver related to grid hardening and the special cables related to businesses, equipment, awareness, information, and so on, have been able to offset the other two slight decline in the business, indicating how strong these businesses are in North America. The North American normalization, T&I, is a result, because we are not, as well as we keep saying, into the residential space, on the industrial plants, buildings, reshoring activity space, which is still very resilient, price-wise and volume-wise, despite the cost of capital and despite inflations. I hope I answered your question.
Okay. Yeah, that's helpful. Just maybe a very quick follow-up, because I think it's the question that sort of we get asked the most, which is just around, if you look at the step up in your North America business, is there any way we can separate what is related to some of those structural drivers? Whether it's solar, whether it's reshoring initiatives, and whether you can frame for us the portion of EBITDA that is maybe at risk, that you think about potentially normalizing maybe in the coming one, two, three years. Is there any way we can break out of your guidance, what you see as extended potentially over earning and what you view as more structural?
Our view, Max, is that the growth of the grid hardening and the special cable business will continue. It is very solid. Our view is that also in 2024, we see full offset of the T&I continuous normalization, or is the carryover of what has happened late in Q2 this year into next year, with the grid hardening, power distribution, power over lines, and special cable business. We cannot tell you the split in terms of share of business, but you will see, you will not notice the underlying trends, because the overall results will remain solid and stable. Actually, we believe that with the reshoring activity and the other electrification cases, data center, 5G, and all the rest, the T&I volume will further strengthen in the coming years.
We might see an upgrade in North American overall performance, driven by a recovery of the volume in T&I and the strong profitability increase in the other segments of business.
Okay, helpful. Just one final quick one on Projects. You talked about a 12% approximately Projects margin for this year. I guess what I wanted to understand is, I think you've talked about Viking Link, sort of potentially having a margin impact. You've also talked about some inter-array contracts, which will be rolling off in the third quarter. What I'm curious to understand is, if we exclude those from the margin this year, and we think about those being replaced with more profitable backlog, is there any way you can frame to us what kind of margin improvement that would drive going into next year, just by function of those dropping out?
I leave the floor to Hakan to serve you the answer.
Thank you, Valerio. Thank you for the question. Yes, you're right. Inter-array cables are the lower range of our, let me say, margin offering into the market and to our investors at the same time. And these orders were taken quite some time earlier, and also, the Viking was a big undertaking before all the inflation effect and also, the difficulties of the long execution time that we had. Now, if I exclude these two, I would not be completely, let me say, correct, but I can give you an approximation. These would affect our percentage, at least by one point.
Of course, the question is, if there is another upside, replacing these, versus our normal rate of %, we could see another % on top. It is very early to give you an approximation for the coming year. The only thing that I can tell you, as we had said also in the past, this business deserves 13%, 14% of margin in the mid-term, and we are opting for that. If the market is staying as such, we can go also beyond. It is early to say the beyond part, I can say that we have a solid 12% with the existing portfolio for this year.
That's helpful. Thank you.
Thank you. We'll now take our next question. Please stand by. This is from the line of Akash Gupta from JP Morgan. Please go ahead.
Yes. Hi, good afternoon, everybody. I have a few as well. The first one is also North America. Valerio, when I look at the slide number five, and look at your first half margins in North America, 16.9%, I mean, probably you and I both know that these margins are unlikely to be sustainable in a medium to long-term view. Maybe I was wondering, like, when it will normalize, what do you think could be a good level for us to think about in this, in this business, in the medium to long term?
On the same topic, I also wanted to ask, one of your listed U.S. peer reported results yesterday, and they had 500 basis points gross margin decline in second quarter, while if you look at your North American margins, you're still pretty good. Maybe if you can also explain the discrepancy between what is driving this performance at yours, while some of your competitors are turning a bit more cautious on U.S. outlook. That's question number one.
Okay. Hi, Akash, thank you for questions. If you consider the other big North American competitor, of course, we are acting in two different segments, namely, T&I, Distributors for Construction. Whereas we are working on distributors, serving them with aluminum cable, the voltage and medium voltage. The competitor you are referring to, I suppose, is acting on copper. Copper construction, copper cable for construction market. Consequently, a much more volatile and potentially low margin. Sooner or later, the cycles goes to an end. That's the end of the construction market in U.S. For us, it's mitigated because our participation to the industrial business. Is written in the numbers, that the market is reducing the speed. How long it will take? I don't know. I don't know you either, I suppose.
The US economy has always been able to change quickly the approach, revamping rapidly from the bottom and increasing quickly the performance. I'm not scared very much. Of course, we have to consider it, because it's something that we have always to take into consideration. Today we are happy, but cautious that in North America for CNI market, the party may be over or may become softer. Frankly speaking, I'm not scared at all, because on the contrary, the power distribution is growing very well, and the overhead too. Energy in North America overall, has a long way to go, because of the network in the US is pretty unstable and unhealthy. The investments there have to be realized. Did I answer to your question, Akash?
Yeah. No, I think that helps a lot. The second one I have is on Projects, I like to look at this more on a rolling 12 months revenues. Here, if I look at rolling 12 months revenues, now you are at EUR 2.4 billion compared to EUR 1.8 billion a year ago, and we have seen very, very strong growth already in last four quarters. The question I had was that when we look at the next four quarters, can we replicate this type of growth in the next four quarters, or what is the indication? Because you have a very high backlog, so I suppose you have a good visibility, but just wondering if you can help us, what sort of growth we are going to see in revenues of Projects in the next 12 months.
I said to you during the presentation, it's clearly a growth that is written in the stone. It will take a while to shrink, but the growth of Projects is secured. Is secured by the order backlog, but moreover, by the continuous debate, we, at all level, are having with customers. Customers are really keen in securing the capacity. The problem is, how fast are we going to follow? I don't like very much to be fast in that, because the risk is that if the market is going to turn, sooner or later, it will. We have not to be too much exposed, simply that. For the time being, in the horizon, I can see today, I'm not talking about orders, I'm talking about the horizon of the business. My opinion is that five to 10 years are secured. Hakana, would you like to add some?
Yes, Valerio, you said it very well. The beauty of the project business is that you have visibility, and the backlog is the guarantee of the visibility if you execute well. You see that we have a strong backlog, and there is a strong backlog, not yet, converted into real backlog, but it is still waiting some conclusions of terms agreement, which will also add to the backlog in the coming months. If we say this, the next 12 months is, I can say guaranteed versus, you know, 5 years or more horizon, because we have a visibility, which is pretty, pretty long. Therefore, the 12 months, I think, is there. I just want to underline, the backlog is not only the only driver, it's also the capacity.
The main ramp up in the capacity is not going to be next year, but the year after. Of course, next year, we are seeing some, of course, growth, but the main growth, we are expecting after next year.
Execution. Akash, the real goal is to make a perfect execution.
Correct
Now.
No, I think that's, that's very loud and clear. The final one I had was in North America, telecom CapEx outlook. I mean, I am sure you have seen the press reports that some of the large telecom operators are maybe facing big costs to clean up the lead pollution coming from the very, very old telecom wires or cables. How do you see this maybe adding to the slowdown in North America we are seeing, and how any implication on Prysmian telecom business, any thoughts there would be appreciated? Thank you.
I leave the floor for the answer to Philippe, that is here.
Hi. Hi, Akash. Yes, of course, we've seen that. It's a bit early to answer, but the investigations are ongoing by our customers in the US. What I, what I know for sure is that first, it's about very, very old products. Second, I understand that it's less than 10% of the installed cables that they have in the US, and we don't really know the consequences that this lead could have actually on the reality of the field. It's a bit early. I do not expect an impact on us from what I know today. I think it's it would be more a bit prudent to take an appointment
I n the next quarters to update you on this, because it's very recent, and it's a quite technically a bit complex item. Let's be careful here and say we, we discuss in the next quarters, because I don't think anyone really knows what it's about. For sure, it's very old products, and for sure, it's limited impact compared to the, the footprint that our customers have in the US. That's all I can really say today.
Overall, Akash, I'd be very surprised-
Me too.
If, it will create to some of the player, to our customers, losses.
Yes.
Maybe that, will they be forced to substitute those cables that are at least, 30, 40 years old.
Even more.
Even more, more rapidly.
Yes, I think that could be the conclusion. We will update you.
That's with common sense.
Yes.
Thank you.
Thank you. We'll now take our next question. Please stand by. This is from Daniela Costa, from Goldman Sachs. Please go ahead.
Hi, good afternoon. Thanks for taking our questions. I have three. I will ask them one at a time, but starting out, you mentioned sort of the EUR 500 million historical dream on free cash flow. Now, you have way bigger backlog. You mentioned on the, what run rate, where the margins could get to in projects. Do you have a reference point that you can give us now, where do you think when this backlog, it's, you know, when we're at 2025, 2026, and this is in sort of steady state execution of the backlog, where do you think should be a fair place to be? That's my first question.
Daniela, you know me since years, hmm? Never enough. Now, we are at EUR 500 million. A new target for free cash flow have to be the net profit.
You mean 100% cash conversion?
No. The net profit.
Of net profit is logical.
Yeah.
Should be, close to 100%.
One, I think, Let's enjoy the EUR 600 million level. Let's also keep in mind that, in, of course, we are on a very nice and satisfactory path in terms of cash generation, because it's a very positive combination of elements, very high margins, strong volumes in some businesses, but as you have seen, not overall huge growth, which is also pretty good for working capital. We have also a slightly declining level of raw materials, metals, for instance. We have large awards in the project business, which is, of course, now reaching our cash position and our cash flow very significantly. All this is very positive.
Let's also keep in mind that in the next years, we will need to take significant investments to face all this. This is very positive. I mean this positively, because will be certainly a very good use of cash. I tend to believe that there is no organic CapEx, which can, which can deviate us from a steady growth of our free cash flow. But let's wait a little bit before fixing or setting the next level, next from the EUR 600 million, which is already a fair achievement, a fairly secured achievement for this year. I think that the Capital Markets Day that will hold in early October, will be the good occasion to update this.
Daniela, anyway, you know that, I like the very simple mathematics, okay? If it's true that we are gonna reach EUR 2 billion EBITDA, the same way I did the EUR 500 million free cash flow. EUR 2 billion EBITDA, minus EUR 500 million CapEx as a minimum, minus interest and taxes, is something around between EUR 500 million and EUR 700 million and EUR 1 billion. That's my opinion. Obviously, I leave the floor to my colleagues.
To execute.
To execute.
All right.
I did. I did my job. Now is your turn.
Thank you very much. This is a great call. Thank you. Actually, so the other question I wanted to ask is, as you mentioned in the beginning, very different cycles, and volatilities between telecom and energy. Can you remind us, sort of, what are the cross links between these businesses? Why does it make sense to have them together?
It's a matter of synergies. Listen, when I took over the Energy, telecom was completely separated. We merged before the transaction with Goldman Sachs. In the merger, we have been able to reorganize the combined identity quickly, reducing the cost of the structure. Now, the size of the telecom is not big enough yet to sustain its own organization, because the independent organization from Energy all around the world, needs of a lot of people, a lot of organization, and consequently, costs. That's why we are keeping it together. Maybe that if the size of telecom will grow, and can grow only via acquisitions, I believe, we can consider the hypothesis at this point. Philippe has a suggestion.
No. Daniela, in terms of markets, there are also some synergies, I have to say. It's not only about cost. We see the emergence of some hybrid solutions that need both telecom and Energy products in the market. Also, everything that is related to sensing, for instance, is important for the smart grid, for Hakan's business, for one's business, and we need fiber in these solutions. There is also a product synergy on top of the cost synergy. Just to add some color.
Yeah, sorry, to complement, Philippe. There are real use cases in the market, where both energy cables and telecom cable are needed for the use case. Data center is the main one. Data center needs electricity to be run, to run the service, and optical cable to exchange information. 5G deployment is also a strong use case, where electrification is required for the device on top of the antenna. Beside it, the use case is that most of our customers in the United States, distributors, would like to buy common products, so the full spectrum of product from one supplier. We are unique in this sense. We can provide this customer with telecom cables and energy cable, not necessarily for the common use cases, but because the customer want to have a one-stop shop position with suppliers.
That is the main reason, business-wise, why we keep this. On top of the internal synergies, factory footprint, operational services. The market is converging in this sense, thank you.
Daniela, are you satisfied with our answer?
Yes, very satisfied. My last question is quite quick, and it's just a clarification. I mean, when you mentioned the high voltage, 13%-14% or maybe higher margin, you're talking project margins there that you're seeing in the backlog, or you're talking the division? I'm thinking specifically, you have to ramp up a new plant around that medium time frame that you talked of 2025, 2026, I guess, when you were talking about the EUR 2 billion. This is also coincidentally, when probably your US factory comes on stream, and we've just seen your main peer trying to ramp up their own US factory, and having sort of temporary, you know, lower margins.
I just want to make sure the timing, this sort of 26 timeframe when U.S. comes, is when you are what you are kind of talking about, that there's no hit from bringing new capacity on into the margins.
Daniela, ramping up a factory for submarine cable is never an easy task. It will take time and a lot of problems to be solved. I'll not be surprised if we are going to try to avoid, but if there will be some delay or some reduction of the margins temporarily. That's the life.
Okay, Philippe, if I may add to the question. The 13, 14 is, of course, in a stable condition. We are targeting this not very long, very far. First, we have to go up to the 12th level, and then the 13, 14 is going to be on a capacity that is up and running. There are, of course, also some considerations, as Valerio was saying, if the production is going to have some hiccups, but we are also counting on some, you know, precautions that we will avoid to have these. On top, it's not only the plant, but you have to have good contracts. You know, the delays of the plant can create problems into the contract.
If you have better position in the contract, then you can avoid also these effects, in your P&L. I think our capacity, if everything goes right, the coming, let me say, 25, is going to be the year where we are going to have capacity increase, the first step up. These are for the existing, let me say.
... facilities, we are adding lines into the existing facilities, which is relatively, I say relatively, it's not easy, but relatively easier than a greenfield facility. Therefore, we are counting very much on the step up on 25, then hopefully we will see 26 and 27, another step up. That doesn't mean that in 25 we are going to stay where we are in 23. We are also going to grow, hopefully, if everything goes right, the big step up is on 25.
Got it. Thank you so much.
Thank you. We'll now take our next question. Please stand by. This is from the line of Monica Bosio from Intesa Sanpaolo. Please go ahead.
Good afternoon, everyone, thanks for taking my questions. I have three. The first is, now the company is fully deleveraged, and I was wondering if you can share with us some considerations regarding the capital allocation ahead in term of external growth, and if you're going to plan some acquisition, in which field would you be keen to finalize an acquisition? The second question is on the telecom segment. When do you feel that this talking might come to an end? Could be beyond 2023, or maybe just at a close to the last quarter of the current year. I have another one as for the solar business.
Can you please quantify in the industrial renewables segment, which is the portion of the solar business for you? Thank you very much.
Thank you, Monica, for your question. Point number one, it's true, we are going down in term of leverage. I like a lot, because I don't like a very high level of debt, and most of all, I like if the company generates cash. If the company does not generate cash, the results are not results. What about the capital allocation from now on? First of all, we have to deal with the increase of CapEx. You have seen that in our balance sheet, the last twelve months has already almost EUR 500 million.
Mm-hmm
CapEx. It may be sufficient, it may be even insufficient. It depends, the development of projects, basically. For the time being, I used to keep the max level of CapEx around EUR 500 million. When we are going to see that the market is continuing to grow, of course, we have to review it. M&A, once you have the cash, you have the pleasure to think about even M&A. Till yesterday, it was a suicide because the first goal is buy cheap. That is a teach that Goldman Sachs made. Buy cheap.
Mm-hmm.
Maybe that you are going to increase the value. If you buy high, you have good probability to lose money. In M&A, till yesterday, everything was very expensive, and the counterparty were looking at valuations that were out of the moon.
Okay.
If we have the money, and you have to have the money at the proper time, we can look around and see if there is someone that is in financial problems. Listen, we closed the 2 big deals. The first one, Draka, the second one, General Cable. When? The first one, Draka, comes after the big bubble of 2008, and the consequent slowdown of the market, the year after. In 2010, end of 2010, beginning 2011, we have been able to close the deal. More or less the same for General Cable. It's only when the market change, the interest rates are high, and the debt for someone is too high. That's the good season to buy.
Okay.
We are not having yet anything substantial in hands, but we have the balance sheet to do it. That's the point number one. In which fields? That's more difficult to say. I prefer not to tell you, because otherwise.
Okay.
Our competitors will understand maybe will act against us. Thank you.
Okay.
Point number two.
Okay, yeah.
I leave the floor to Philippe.
Hello, Monica.
Mm-hmm.
the slowdown of the American market, as we understand it, is due to three things. First, an overstocking during 2022, as Valerio said, is the first main reason. The second reason is that the public funding in North America for broadband networks have been taking more time than expected to become a reality. The first one, in terms of time, is still going to take a few months, so I'm expecting still a couple of quarters of destocking. On the second one.
Mm-hmm.
the President Biden said that it should be all available concretely on the field by mid-2024, the $42 billion of public funding for the broadband network. This, the second one is more mid-next year. The third element, which is much more, much more difficult to predict, is that there is, of course, also an effect of the cost of money on the investments. .
You know the interest rate, you know better than me, than the interest rates are still being increased regularly, and that can delay further. The ballpark answer to you is, I think it will last until more than the end of 2023.
Mm-hmm.
My best guess today would be mid-2024, seen from today, with the uncertainty linked to the cost of money that is not of course, under our control at all for the U.S. market.
Third question, the solar. Juan, would you like to give an answer to Monica?
Thank you, Valerio. Hello, Monica, this is Juan Mogollon. In regards to the solar, I want to expand a little bit on that so that you can get right to yourself on the answer to your question. If you think about our segment of renewables, that includes solar and wind, we think of it in three pieces: the photovoltaic cables that go into the panel, then the specialty cables that are in the tower and the nacelle of the wind turbines, and then the medium voltage cables that connect the parts into the grid. That whole chunk is about EUR 800 million.
is solar. Excuse me?
Sorry, can you repeat the EUR 800 million?
EUR 800 million.
Okay.
Again, in the segment that I just mentioned, with the Solar and the turbines and then the medium voltage. Specifically to your question on the Solar, it's about half of that, and that includes the photovoltaic cables that are close to the panel, as well as the medium voltage. Before you start doing the math, we sell some of that through the PD channel and some of that through the industrial channel.
Okay.
Also a small portion of that, specifically in North America and South Europe, through T&I.
Okay, got it. Thank you. Thank you very much for the granularity. Thank you.
Thank you. We'll now take the next question. Please stand by. This is from the line of Alessandro Tortora from Mediobanca. Please go ahead.
Yes, hi, good evening to everybody. I have, let's say, three question, also some follow-up. The first one is on the telecom that you discussed just before. Considering what you, what you told on the destocking in the US, but also the other factors, is it fair, let's say, to assume by your end, probably that telecom could get, let's say, organically speaking, a decline in the high single-digit area? Just to have an idea of what's your updated expectation on telecom. That's the first question. The second question is on the CapEx.
Considering what you already spent in the first half, clearly I see the LTM, but just a confirmation that this year we are gonna have this, let's say, EUR 500 million impact in terms of cash out for CapEx. The last question is on Germany. I read the newsletter, okay, from Prysmian, where it seems that installation in German corridors should start in the second part of the year. I would like to have, let's say, the confirmation of this, of this message. Thanks.
Thank you, Alessandro, for the question. First question, telecom. It is fair to assume that, year-end, we are gonna have a single digit organic decline? Philippe?
The answer is yes. The answer is yes.
Brutal. The brutal answer is yes.
It's a simple and clear answer. The answer is yes.
Yes. Thank you.
In the second half.
Second one.
Second, CapEx. This year, EUR 300 cash out. EUR 500.
EUR 500.
$500.
Third question, Germany, installation is going to start in the second half this year. Again,
Okay.
Question is for you.
The installation is going to start next year. We announced this in the news letter that we have sent out, but specifically, third quarter 2024. There are still discussions about if we can anticipate, because the German politicians are putting a lot of pressure to the TSOs, and we are trying to find solutions together with the customer to enable their targets. Officially, I can say that 2024 September is the current what we can see as a, let me say, in our programs.
I would like to start the installation this year, but unfortunately, it's something not viable for our customers in terms of permits. As simple as that.
Okay. Okay. Thank you.
You're welcome.
Thank you. We'll now take the next question. Please stand by. This is from the line of Sean McLaughlin from HSBC. Please go ahead.
Good afternoon. Thank you for taking my questions. Firstly, on returns on cash flow, would you give back to shareholders, in the absence of M&A, cash that you generate above CapEx? Secondly, a broader question around the Investment Grade credit rating. You've talked of this as an enabler of strategy. Just to understand a little bit, what does this actually change, apart from, I guess, cheaper debt or maybe wider availability of debt instruments? Are there maybe some concrete areas or examples that you can give where that would make a benefit? Thank you.
Thank you, Sean. Return to the shareholders, of course, are not our money. We cannot split between the management, are the money of the shareholders. As a consequence, if no M&A, I doubt we want to keep too much money in the pocket because we can become a target, and consequently, a buyback or other instruments may have a sale. Frankly speaking, I believe that in the next 12, 24 months, someone will come to the door. Some of our competitors may come to the door looking for a melt, and in that case, the cash is gonna go. For the second question, I leave the floor, my successor, to Francesco.
Hi, Sean, benefits of investment grade are very clear, I give you some practical examples. First of all, there is an issue, or there may be an issue of access to capital markets that we have seen very recently. When the war Russia-Ukraine broke out, it was totally impossible for a non-rated issuer to issue a new capital market transaction, like a Euro, a straight Euro bond, for instance. Now, even now, the accessibility would be extremely limited for a non-rated player, and certainly at a very significant cost. A little bit differently from the convertible bond market, which traditionally is more accessible also to non-rated players. Secondly, there is a clear issue of cost. Whereas for the loan market, I refer to the bank market.
Yes, there is an advantage coming from being rated, but this advantage is not huge. I could quantify this in a few tens of bits, 20, 30 basis points. In terms of capital market issuance, again, Euro straight bond in Euro, I think that the difference between an investment grade issuer, a non-rated issuer, now is certainly higher than 1 percentage point, which is huge. Think on our last bond that we didn't, by the way, refinance, which expired last year, was EUR 750 million. Of course, now we have no real need to resort to the capital market for bond transactions because we are generating a lot of cash.
We are very much focused on our earnings and organic growth that we can self-sustain ourselves. Of course, strategies evolve. In case of need to issue a bond, the advantage that we face in this environment is very, very significant. If we look back a few years ago, the advantage was not this big. This, by the way, explains why I take the responsibility of this. I have always a little bit postponed.
the rating process, because the concrete advantage that we would have achieved two, three years ago was not as evident as it is now. Now is very big.
That's clear. Thank you.
Thank you very much Sean.
Thank you. We'll now take the next question. Please stand by. This is from the line of George Featherstone from Bank of America. Please go ahead.
Hi, good afternoon, everyone. Thanks for taking the questions. I'd just like to start, if I can.
Sorry, George, we cannot hear you very well.
Can you speak up, George?
How about now? Is that better?
A bit better.
A bit better.
Okay. Hopefully it comes through okay.
How about now?
I just like to follow up a little bit on the comments that you've been making about the U.S., in particular, the T&I business. You talked of normalization. Where do you think that normalization goes from here? Do you have a sense of where the market ultimately ends up? Also, can you talk a little bit about, you know, sort of competitive dynamics in that environment? There is at least one peer of yours who've cut prices again, I think, in the quarter at a double digit rate. That seems to be to kind of satisfy a certain level of volume. I'd just like to hear from you what your thoughts are on that.
Okay. Thank you, George, for your question. At least for the first question, I leave the floor to Massimo.
Yes. George, thank you for the question. The normalization, we think, will continue for the next couple of quarters. It is worth saying that what you said before about the competitors is not applicable to us. We haven't seen a certain 30% reduction in price that the competitor that you are hinting at so from in second quarter over quarter one, because we are in a completely different space. We are not in the residential market. We are actually in the residential market for a limited share. We monitor the market, and we can confirm that the price reduction in the market has been the one the competitor has mentioned actually so far. Luckily, we are only 5% in total revenue exposed to the market. What we've seen is a completely different scenario.
We've seen a 5%-10% price erosion in the space we are in. We think that this 5%-10% will continue with another 5%-10% over the next six months, then that could be the end of the story. Bear in mind that we are in different spaces. The residential market in Canada, of course, very much under pressure, in U.S. as well. It's a different market than the one we are in. The industrial plant business, the commercial buildings, the infrastructure market is a different business space. The market demand is still very strong, supported by infrastructure investment by the subset from the government, the price erosion is only happening because the supply chain has normalized, not because the demand is weakened.
That's why we think that the trend of price erosion that we see so far will continue, but to the extent that I mentioned.
Thanks. Can I just follow up on that? Yeah, there's a couple of things I didn't quite get then. Firstly, the competitor I was talking about, they have about one third of their business in the U.S. is residential, so it was, I was kind of hoping that you could give us a little bit of indication what you're seeing in your other markets. I think I heard you say 5%-10% price erosion. Is that right, that you saw in the last quarter?
Yes. In our space, George, in the residential space, I confirm what your competitor has said. With 30, 25%-30% reduction of prices in the compact cable business for residential use. As I said before, we are only 5% in revenue exposed to the market, but we watch it. In our space, so in the 94% remainder of our revenue, we've seen only 5%-10%.
Okay, thank you. That's really helpful. Thank you. Then in the project business, there's been a lot of news flow recently about offshore wind project cancellations and delays. I just wondered if you see any risk in your backlog and that maybe you could talk to what customers might be saying to you around this?
Again.
Okay. Thank you, Emilio. We are talking about a big, let me say, market, where there are some waves in that big market, which does not affect the size of the market. I don't know if I was clear, because the market of offshore wind is growing significantly. Therefore, you're going to hear some project delays or some project cancellations, which you are mentioning, and you are referring to, I guess, but it's not going to affect the total market overall. From our perspective, we don't see any, let me say, significant fluctuation affected by the single event that is happening. We have a solid backlog. Of course, when you look to our backlog, which is very, very strong, there may be some one, two small changes, but it will not affect the substance.
This is the same effect also in the market. I don't, we are not affected by these changes as of today, and I don't see that this will have a significant effect also in the totality of the market, of the world market. Of course, we will see, we will hear, and we are hearing some cancellations, which is normal after the inflation and also the interest rate. The market is very solid. This is what I can say, and our backlog is also very solid.
At the end, Miguel, that's the result of our prudency in showing a backlog that is based only on projects with notice to proceed and advance payment. The worst case is that we are going to keep the advance payment.
Also cancellation fee.
Cancellation fee. We have not sold what was not in our hands. That's our style.
Okay, thank you very much. I guess the one project that sort of would come up with the Commonwealth Wind offshore wind farm, I think some developers there are actually paying to have that PPA canceled. Is that something that? Certainly, it's rumored in the press, anyway, but it's not official. Is that something that, you know, customers are when you think about the slots that are available, you can work around if they want to defer and maybe come back at a later date?
Okay. I can comment on Commonwealth Wind, but of course, you know, offshore wind is has different stakeholders. One stakeholder is the lease owner, the other stakeholder is the buying party, the PPA contract holder, and it's a complex environment. What is happening with Commonwealth Wind is very well known in the market that the PPA has been canceled, and therefore, it's under renegotiation through the new tender that is coming out in Massachusetts. The lease area is there, so that means the energy is going to be produced, but who's going to be the buyer is going to be decided by these tenders.
From our perspective, first of all, Commonwealth Wind is not in our backlog, just to underline, because as Valerio said, we are only putting into our backlog, the projects that have NTP. There is a large chunk of, let me say, projects that we are having on top of the backlog that is waiting to be transferred to the backlog, and therefore, this is for us, it's not effective on all the, let me say, projections that we make. Regarding the Commonwealth Wind, I am sure that in the beginning of next year, the, let me say, the picture is going to be clear, and we will see.
Still, we are part of the contract, we are still, if there is going to be built a wind farm and the energy is going to be sold to one of these states, not necessarily to Massachusetts, because it's a strategic area, we will be building that with our cable, and we are going to do that. It's a little bit complicated to understand the mechanisms of offshore wind, but especially in the U.S., because it's very new, and it's a little bit different than the other countries. Overall, first of all, it's not in our backlog. Second, if there is going to be a wind farm, we are the ones who's going to connect it.
That's really helpful. Thank you very much for the color on that.
Thank you. We'll now take our next question. Please stand by. This is from the line of Miguel Borrega from BNP Paribas Exane. Please go ahead.
Hello. Good afternoon, everyone. Thanks for taking my questions. I've got one on ENI and the second on high voltage. Let's first with ENI. I just wanted to understand the sequential margin increase. From Q4 to Q1 to Q2, we've seen sequential margin increases in ENI. What drives this? If I look at Q2, organic growth was negative, and even in North America, in the first half, was also negative. You've been talking about pricing coming down for some quarters now, and you mentioned down 5%-10%. What about volumes? Are volumes also down in North America, in ENI specifically? That's my first question.
I leave the floor to my friend, Juan, to give it to you an answer.
Hello, Miguel, this is Juan Mogollon
In your question, there is about 3 questions embedded, I'll try to break them down into pieces, okay. The first part of the question is in regard to the sequential price. I'm sorry, the sequential growth from Q4 into Q1 into Q2. Then there is another piece of it that has to do with the growth in terms of how much is volume and how much is price. Okay, let me break it into 2 pieces. In the ENI business, essentially, we have two segments, which is the T&I and the PD, and the Overhead Line. The PD and Overhead Line, in the last three quarters that you mentioned it, we have seen sequential growth, primarily on price.
Volume has been about flat, because remember, we have said in the past that if the volume in PD has been constrained by capacity, capacity which will be expanded next year. We continue to gain a structural price. It's price that is embedded in the contractual agreements that are in our order book. The piece of T&I, yes, we as my colleagues and Massimo and Valerio have said in the last few minutes, we have seen some deceleration, in fact, some softening of the T&I piece in Q2. The volume has been about the same, I would say, maybe a little bit of softening in Q2 in the, in the volume. I'm gonna stop now because I just wanna make sure that I address your, your specific question.
Yes, that's great. Then a follow-up, just to confirm on your guidance that it doesn't integrate the big normalization in the second half, so kind of stable performance in the second half versus first half?
You know, first of all, I don't like the word normalization because it's defined differently by different people. But let me tell you what I call normalization. It's essentially more like a moderation of the price based on the tension between supply change and demand. In the US, we've seen some of that, and as Massimo said a minute ago, our US market is not the residential. If you compare it with our peer companies, they have seen a more dramatic, but that's because they're closer to the residential piece of construction. Our T&I in North America is primarily infrastructure and a big chunk of data centers. On that, we don't see a dramatic, what you call, normalization. I don't see that coming back in the near future to the pre-COVID area, as an example.
Yeah, there is a point, Miguel, to make. You were commenting the stabilization of second half versus first half in relation to the overall guidance. If you look at the guidance, that cannot be true, no, because we've done almost EUR 100 million first half. Even if you achieve the top of the range of the guidance, this will imply another EUR 800 million in the second half. There is some normalization in the overall company performance, which is, as we said before, related and associated to this T&I normalization, which will be partly offset by the other segment. Telecom will come in with some continuation of the softening.
The second half doesn't at all confirm stability, although we believe that we might end up with better numbers than what we see today. I think that was important to set an overall context for the guidance, Mike.
That's very clear. Thank you. Then secondly, on high voltage. You had a few big awards recently. What can you tell us about the implicit margin of those projects? Would you consider them higher margin versus previous ones, when at the time you were tendering? Or is it more a question of being fully loaded in the future that makes a difference to get to that 14 and perhaps beyond margin? Then maybe some thoughts on the terms and conditions of these awards that are going to be commissioned in 2028, 2029. Obviously, a long time away. Have terms and conditions changed in any way? Just to understand how comfortable you are to fix the price on those projects so many years away. Thank you.
Hakan, you free to give an answer?
Yes. Thank you. Miguel, first of all, everything is relative. I mean, if we look to the pricing four years ago, of course, there is an improvement. And when we are targeting 13%-14% of EBITDA margin, yes, these projects do reflect flawless in case of flawless execution, a superior, let me say, EBITDA margin in the range of 13, 14. If everything goes well, as we said, it can be also more. Having said so, let me say, the I cannot specifically tell you about how much the margins are, how much they are better, but I can confirm that they are because there is a different market. As you know, three years ago, it was a, let me say, a buyer's market.
Now we are in a seller's market because of the demand and supply situation. When you look to the T's and C's, of course, they are reflecting the same. The conditions, of course, as Valerio said, we are very selective in taking orders. We are selective not only in the price, but also in the terms and conditions. If the projects are not reflecting, the required terms and conditions that we are seeking, or the price is not enough, in according to the market conditions, we prefer not to take it.
In terms of the, those contracts to be awarded in 2028, 2029, I mean, just to understand how comfortable you are, with those fixing the price so, so many years away?
I can tell you, we have learned a lot during this inflation season. You know, we went through an unprecedented inflation season. We learned and we integrated into our contracts, and also our customers have learned a lot from that situation. Our customers learned that they need us to complete their ambition, their targets. I think, with the new contracts we have, first of all, we are more precautious. Second, we know what can happen with the inflation. Third, we have some mitigation measures inside the contract. Therefore, we feel comfortable for the future. Again, you never know what is going to happen in the market.
It can be that we are going to see another unprecedented situation, then we will face that at this time. As of today, we feel very comfortable.
That's great. Thank you very much.
You're welcome.
Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your keypad. That's star 1 and 1 to ask a question. We'll now take the next question. Please stand by. This is from the line of Vivek Midha from Citi. Please go ahead.
Thanks very much, everyone. Good afternoon. I have one question following up. You have exposure to data center vertical in your different businesses. What trends are you seeing in this vertical in the near term? Do you expect any midterm benefits from investments in artificial intelligence capabilities? If so, when do you expect this to kick in? Thank you.
Vivek, I'm sorry, but I did not understand very well your question. I don't know if Philippe has understood, because the line is, your line is a little bit disturbed.
I think, I mean, you asked about the trend in the data center, whether the artificial intelligence development will.
Of course.
booster it, that's for sure. We see a growing trend in data center, especially in U.S., in some European countries. It's a trend that we monitor closely, because as we said, we are the unique player able to service this segment with energy cables, low voltage, medium voltage, to electrify the buildings, the campus, the upper scale data center, and with the inside plant, optical cables and copper cables. There's a great market opportunity for us, and we are on top of it.
Okay, Massimo, go to the point.
Yes, I could add, Vivek, that we are already addressing very much this segment, and we see it growing. We see also growing projects that are about interconnecting hyperscale data centers, one to the other, that are already on and very public, and we participate into this market. Yes, we consider that one of our main engines for both telecom and energy in the coming years, as Massimo just said.
Thank you very much.
Yep.
Thank you. There are no further questions at this time, so I will hand the conference back to the speakers.
Thank you very much. Thank you to all for having been participating to our first half conference call. It has been a pleasure as usual, and next time it will be...
See you in the capital market.
See you in Naples at the Capital Markets Day. Bye-bye.
Thank you. That does conclude the conference for today. Thank you for participating, and you may now disconnect. Speakers, please stand by.