Welcome to Prysmian nine months 2026 integrated results webcast and conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question and answer session. To ask a question during the session, you will need to press star one and one on your telephone.
You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to Massimo Battaini, Chief Executive Officer of Prysmian. Please go ahead.
Thank you. Welcome, everyone. This is again our best quarter yet. We had a great quarter in Q2 2026, but we've beaten that record with EUR 120 million EBITDA additional in Q3 2026. EUR 851 million marks a new level of profit for this company, is well ahead of the Q3 last year, 2025, with EUR 200 million additional. You see the numbers are very good from every angle. You see the EBITDA sequentially, over last year. The EBITDA margin close to 17%, so 2 percentage points higher than what it was one year ago.
You know what is particularly interesting, and is not yet visible in the number, but it will be visible through the rest of the presentation, is the outstanding unique performance of I&C United States, where we beat all expectation in terms of absolute EBITDA and in terms of EBITDA margin, well above 24%, 25% in that quarter.
I'd like to move to the second page where you see a trajectory of what we've done the last three years. EUR 1.6 billion was the starting point at our Capital Market Day 2023. EUR 3.1 billion is a milestone. It's not the end of the journey. The end of the journey is much better in three, four years according to what we will be disclosing at the Capital Market Day 2027.
You see the acceleration of the company from an 8% CAGR over 2022, 2023, to a 3x higher CAGR over this figure, 2024, 2026. I know you can sum up the numbers of the EBITDA coming from the five acquisition, or let's make that four that at least impact in the 2026. You find EUR 1.5 billion incremental EBITDA from 2023, 2026.
The great news for us, and also for you I hope, is that 1/2 of the number came from inorganic moves, acquisitions, 1/2 of it came from organic decision. Obviously we made the right choices on both fronts for M&As and for CapEx and for deployment capacity increase to support the growth of the market, to support our customer and capture as many opportunities as possible to make this growth sustainable in the long run.
Lastly, you see we've beaten already, as usual we should say after a few years, the target of 2028 Capital Market Day target, we've beaten it in 2026. Atkore and Xtera are the two last relevant acquisition. Relevant because they are all playing an important role in driving the growth of Prysmian towards this solution provider object.
We sit now on a 45%-48% revenue as the company that we can consider solutions, so not just pure cable. This is relevant because the more you shift to solution, the higher your EBITDA margin becomes. This was pretty well visible in the trajectory of the EBITDA margin that you see in the prior page. Atkore give us additional components to make the installation of cable possible.
Xtera give us the repeaters that combined with cables, make us real players in the submarine telecom data business, which is growing faster, which is a space that we would like to own some important share of. Investment in Xtera and the organic capacity increase in cables, and the organic capacity increase in installation vessels will open us to an important role in this space.
Transmission continue with a strong growth, which has actually accelerated. 22% is the growth year-over-year. EUR 60 million is additional EBITDA in this quarter versus last year, Q 3. EBITDA margin is extremely solid, 20%. We will have a further enhancement of the margin in Q 4, and the organic growth of the full year will be in the high teens level for the full year. EUR 213 million is the highest ever EBITDA delivered by this business in a quarter.
The remarkable number would be the full year result 2026, which sets another important sizeable improvement over and above the already outstanding EUR 580 million that we delivered full year last year. Power Grid, middle single digit, high single digit growth. We are a little bit constrained by our decision to reallocate some of the medium voltage capacity that we have in Power Grid to I&C, because the demand of the center is so overwhelming that we didn't want to miss that opportunity.
So the organic growth is limited by this. EBITDA margin continue this trend, the journey to catch up with the original 14.5%-15%. As soon as the inflation will stop growing so fast, the formula will recognize the full price impact of the cost, so that we will be able to restore the 14.5%-15% EBITDA margin in probably based.
Demand is strong across the segment, across all geographies. You will see this in the coming quarters. This is the start of the quarter. You see EUR 304 million, EUR 100 million higher than last year. 17.6% EBITDA margin for the I&C business is totally unprecedented. Even more unprecedented is that inside this EUR 304 million, there is Encore or legacy Prysmian plus Encore business which outperformed all the historical numbers of this business with a 27% EBITDA margin in Q 3.
The organic growth at the group level marked a 14% increase, but North America grew 24% in this quarter year-over-year. Behind the growth that you see in the prior page, there are choices, decision we made in the past years. Of course, Encore Wire is the most evident reason for making Prysmian a leader in the space.
Last year, we invested in capacity, in metal-clad cable, so special cable for data center. We invested in medium voltage capacity, and this capacity will come online in Q1, Q2, Q3. For the next eight quarters will be one additional line per quarter coming online to serve data center, electrification, and path to Power Grid. It is also the result of the choices we made in the past to vertically integrate Encore with rod capacity and compounding capacity.
Never has the rod capacity in-house been so critical to the expansion, to the growth. The market in U.S. is super tight. Copper rod is charged, imported from outside is charged with a tariff of 50%, making the rod coming from importers not accessible to local players. Market is tight. Having a rod capacity in-house is essential.
Adding a second rod, that is the decision we made last night, the board, is crucial to avoid to constraint the growth of the business because we lack raw material. The rod in-house will allow the chance to buy more cathodes to serve this rod equipment and buy more waste that is available in the U.S. to make this rod cheaper and also friendly from an environmental point of view.
The medium voltage capacity I mentioned, a line is coming. There is a new investment in metal cladding, so specific cables to serve data center that is going to become live towards the end of 2027. This investment approved again last night by the board.
We are deploying more or less over EUR 700 million capacity increase, vertical integration, medium voltage and specific cable for data center because the demand is overwhelming, and because Encore, McKinney and Prysmian U.S. is best suited anybody else to serve large project with our scale and our best service. This is what data center want, scale, volume, and lead time as short as possible.
We act, and we outperform everybody else with regards to these two KPIs. Super critical. Specialties. Here we enjoy stability if I say. It is moderate organic growth, EUR 60 million-EUR 70 million EBITDA per quarter. Decent profitability. The market is not growing fast in this segment, but part of this product going to be redirected to data center.
I expect to see some additional better growth in the coming quarters, thanks to this combined opportunity of expanding our portfolio inside data center also with special cables. Digital Solutions is also outstanding in terms of performance. We had this 19.6% EBITDA margin last year, which was the result of the first quarters coming from after the acquisition of Channell.
Before then, the EBITDA margin has been hovering around 12%, 13%, 14% max. We are now twice as much the number, 25%. Our journey will bring the 25% to 28%, 29%, 30% , probably. Of course, we need more volume, which is what we will unlock with the new capacity in U.S., in the South U.S., and thanks to the agreement that we signed. That numbers is written in a stone.
We will have 28%-30% EBITDA margin, thanks to the backlog of revenues in our hand. Outstanding performance also in terms of innovation and sustainability. You see all the KPIs. Recycled content is not just a matter of a green product, it is also a matter of making us able to deliver more volume to the market, thanks to the ability to recycle waste in a situation where the market is tight, especially in U.S., but in general, across all geographies due to the geopolitical situation when it comes to aluminum and copper.
We have signed an important agreement with Amazon to provide them with green cables, low carbon aluminum. Hollow Core Fiber has almost finished the industrialization phase where some volume. Produce some volume ready for sales. We will start selling this product to the market as early as January next year.
The long-term agreement with our scope supplier speak for itself to provide solidity to our supply chain in this constrained world in terms of geopolitical tensions. Let me defer now to hand over to Francesco for more financial insights and the figures for working capital trends.
Thank you, Massimo, and good morning to everybody. A quick wrap-up of the profit and loss. Organic growth has been very strong. The third quarter, a +1 3%, a very sharp acceleration from the first half, mainly across transmission, I&C North America, as Massimo said, and definitely Digital Solutions. Best quarter yet in adjusted EBITDA. You see on the right part of the slide, EUR 851 million, growing more than EUR 200 million from last year, and an outstanding margin, very close to 17% for the quarter at standard metal.
You see that the progression is quite spectacular, I would say, in transmission. You see the progression over the quarters in electrification driven by I&C, specifically North America and also in Digital Solutions. Going to the bottom line, same message, I would say. The group net profit is very close to EUR 1 billion. It is outstandingly in line with last year.
If you think that last year, nine months 2025, was impacted by more than EUR 350 million gain on the disposal of our YOFC stake. So despite this huge positive impact last year, we are in line with that, and this will translate into an estimate of earning per share for the full year, which will be my estimate around EUR 4.6 per share, which is very similarly to the EBITDA, in line with our 2028 targets two years earlier, two years in advance. So very similar trajectory.
Maybe we are setting target too easy for the future. From our next Capital Market Day.
Could be. Okay, let me move quickly to the free cash flow. Over EUR 1.4 billion free cash flow in the last 12 months. Boosted obviously by the inflow of the Molex down payment for approximately EUR 550 million in euro equivalent. Of course, boosted by the very strong third quarter in terms of cash from operations driven by EBITDA, but also impacted by sharply rising metal prices, which kind of reached the peak in terms of impact in the third quarter compared to the prior year. Let me hand back to Massimo for the guidance.
Simple and easy numbers here. EUR 3.1 billion is the midpoint of the new EBITDA. You see on the right side a bridge that is explaining that this number does not come from Atkore. It comes from Atkore for a minor portion, namely EUR 50 million. The rest of the EUR 250 million roughly is business performance, is business growth, and you see it in Digital Solutions, in transmission, and in I&C.
Free cash flow enhanced from EUR 1.7 billion to EUR 1.8 billion is EUR 100 million out of EUR 250 million additional EBITDA. But you have to know that apart from the metal cost that has impacted adversely our net working capital, we are investing more. We are investing more because we see a huge spectrum of opportunities in U.S., but also in other regions.
Those investment will help us pave the way for a solid and robust growth in the next three, four years, which again, I repeat, we will disclose you more about it in quarter two, I think 2027 at the next Capital Market Day. To conclude, solid growth achieved in quarter three, but high quality growth.
It did not come from one-off, it did not come from something that is what we focus on, is something that is paying off for the investment, for the relationship with customer, for the M&A that we have done in the last three years. So well return on what we have done so far. Atkore will help us additionally strengthen U.S. position. Xtera gives us the opportunity to expand a submarine telecom business that for us has been negligible for years.
Beating the 2028 target, the Capital Market Day's target two years ahead of schedule is a big reward for the work done by the company in the last three years. Thank you. Now we will hand over to you for your Q&A.
Thank you. To ask a question now, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, that's star one and one for questions. A moment for first question. We will now take our first question from the line of Daniela Costa of Goldman Sachs. Please ask your question. Daniela, your line is open.
Hi. Good morning, everyone. Thank you so much. I have three questions. I will ask them one at a time. First, just digging into the transmission backlog, which went down slightly sequentially. Just wondering, as you look at the coming next 12 months, do you see that going back up? How does it look basically in terms of contracts for 2027, I guess especially on the faith of the recent regulatory shift in Germany from underground towards overground? How do you see the progression?
Thank you, Daniela. You are correct. Backlog went a little bit softer this quarter due to the lack of order intake. The market is not as strong as we anticipated, first showing the first nine months. There has been one important driver of reduction in order intake. There are some technical delays, nothing to do with business performance.
Some projects coming from Italian TSO. We expect those projects not to be awarded this year. They will probably be awarded, important one, next year. That's why if you read the order intake of the market in 2026, you will find it slightly down on the expected EUR 10 billion-EUR 12 billion level. There will be the catch-up next year due to the phasing of the specific order.
Then don't forget that our EUR 16.5 billion is still a bit higher than what we like to have, given the fact that, in some instances, due to the saturation of the current asset and the additional asset that come live in the next 12 months, we can still not participate to some of the bids. So EUR 14 billion backlog is the healthy level.
Now we are building a new backlog inside the EUR 16.5 billion. Now, the backlog coming from submarine business with Xtera. We won a EUR 200 million project to connect New Jersey to the U.K., even before we signed the closing with Xtera, and we are going to build on these capabilities, adding cable capacity and vessels to become a real player in the space that is growing fast.
Thank you. That was actually going to be my third question, so I'll ask them as the second.
Okay. Then keep to one.
When you see submarine telecom, is there a scope to do more inorganic activity there to get bigger? Is this mainly an organic journey? How large can this be for the group in a couple of years' time, or what's your desired position there?
Yeah. Until now, this business has been a EUR 50 million-EUR 60 million revenue business. We are planning to grow it at EUR 200 million-EUR 250 million, thanks to the Xtera acquisition and the organic expansion. Inorganically, yes, it is an option, but you know there are three large players in the space. We are working, and we will see.
It is not simple because the three large players are pretty large, and also they enjoy the moment. Market is booming on the back of data center expansion, the oceanic interconnection needed to connect the European data center to U.S. data center. Organically, we will achieve a very good level. If we are able to do something else, we will see in the coming months.
Got it. Thank you. A final one is just in the new capacity additions that you have in medium voltage. Can you talk a little bit about what is the kind of uncertainty on the payback on those investments? Do you have all those lines already, some business committed for it? For how long? What is the visibility? I guess, what are the risks to margin of opening new capacity? I imagine you are not running at 100% from day one, so does that delay a bit when the margins can get above 15%?
Yeah.
Thank you.
The margin, when you read the medium voltage, we need to start learning that you need to read that two segment of business, Power Grid and I&C. We have said that we prefer, in the last two quarters, certainly the last one, when we were overwhelmed by this huge demand of large product from data center, we were bound to ship medium voltage capacity to data center.
Eight lines will come to fruition in the next eight quarters, one per quarter, starting from the end of Q1 2027. We have been pretty fast in approving and executing this expansion. The approval came in early 2025, the phase I, the phase II in 2026. In two quarters from now, you see this volume mounting. Most of this volume will serve data center because we see strong demand there, totally unsatisfied.
We are the first to invest in medium voltage capacity for data center. Also combined the medium voltage investment in McKinney for I&C, for data center, with metal clad. Those are special cables, reinforced cable for data center application. The two things go hand in hand. This will be the additional portfolio and additional capacity available to serve data center. We don't have written agreement for long term. We have strong demand, strong commitment.
We see this strong commitment really solid. The level of prices today even higher than what it needs to be due to the tightness to the market. This level of pricing will certainly continue for a few quarters. Then, for sure, there will be some normalization. Of course, you cannot expect to have 20% margin in I&C business North America as a normalized margin.
There will be some normalization. But we are the only one which gained the dominant position data center, and we will defend this position, and we will leverage the strength, having more asset, having more capacity, having the full portfolio to serve them. That would be our way to make this margin long-term sustainable. Alongside the stronger partnership with hyperscalers that we sign with the center in the telecom space.
Got it. Thank you very much.
Thank you.
We will now move to our next question from the line of Vivek Midha of Citi. Please ask your question, Vivek, your line is open.
Thank you very much, everyone, and good morning. My first question is a follow-up from the second quarter, where you commented there was potential to sign further deals in Digital Solutions in the subsequent quarters, given ongoing requests for more capacity from customers. Could you maybe give us an update on the progress of these discussions? Thanks.
Thank you. Vivek, we are in negotiation with, in this case, directly with a couple of hyperscalers for additional volume and commitment. Similar deals as the one that we signed with Molex, so take or pay on payment security margin for long run, for long term. We feel like we will be able to sign and finalize those two major deals by December or January, the latest. Those deals will require additional capacity deployment, again, in U.S., in fiber, and the cables.
Thank you very much. My second question is just following up on the comments around power grids, and medium voltage. The margin is only stable sequentially versus your prior commentary that we should see an improvement in margins in the second half. Just following on from the prior question, should we think that some of this was because of this diversion of capacity towards data center? It would just be helpful to understand what the drivers were in the quarter and what is going on going forward. Thank you.
Thank you, Vivek. A very pertinent question. The volume of the organic growth is the reflection of the volume shifted to I&C. The organic growth was only high single digit because the volume went to other direction, to other segment of business.
You will get the EBITDA margin at 13.8% and not a 1 percentage point higher or 150 basis points higher is because we are still in an inflationary situation, and formulas work that we can pass on today to the price, the cost that we see in the last three months average. But when we produce the products, we have the current cost. If the current cost continue to go up, we continue lagging behind the level of price they need to have to stabilize the margin at 15%.
As soon as this soaring cost curve normalized, we will catch up with the 15%, because the drivers of the 15% is that the market demand and the tension on capacity is there. There is pricing benefit. There is volume demand for all customer. Power Grid is an essential element of the electrification expansion in Europe, in North America, in all the other regions.
Perfect. My final question is just a follow-up on submarine telecom. You have announced already the EUR 200 million EXA Meridian deal. How many such deals of similar size do you see in the pipeline in submarine telecom, which could maybe convert in the next year or so? Thank you.
There are similar deals. The one we signed is one or two deals that the same customer would like to award to the market. Now we became visible. We have capabilities that do not just go back to our cable asset that we have in Germany, it goes back to the long history of performance of Xtera in the space. We combine the two champion. We have cable experience, we have installation experience with the energy submarine business. Xtera is a champion in repeaters.
The combination of the two make us a strong player. Of course, we do not have yet the scale of the three main one, ASN, SubCom, and [inaudible]. But there are room in a market growing fast for us to gain a share of wallet in the market. Now, how far can we go? We will see in few quarters. But there are additional options and projects that we are working on to add portfolio and backlog to the submarine telecom business.
Thank you very much.
You are welcome.
Thank you. Our next question comes from the line of Uma Samlin of Bank of America. Please ask your question. Your line is open.
Hi, good morning, everyone. Thank you very much for taking my question. I first want to follow up on the additional fiber contracts you just mentioned. I guess it seems like you are planning to have two or a couple of additional relatively large fiber contracts. What are the current capacity ramp-up timeline? Has anything changed? How should we think about in regard to your capacity planning into the end of the decade, especially if you get these two deals down by January next year?
Thank you, Uma. If you take 100% of current capacity, we will almost double it based on the current agreement signed within June 2026. The new deals will add something on top of this doubling of the volume. All this additional volume will start kicking in from second half 2028 through 2030. We will have the run rate level of new capacity fully deployed by 2030. Both, the one assigned to the agreement that we signed already, and the one related to the new agreements.
That is super clear. Thank you very much. Another one on Digital Solutions is, I guess you mentioned, if I heard correctly, 28%-30% EBITDA margin in the backlog for Digital Solutions. How should we think about that translating into the divisional margins into 2027, 2028, and then also that for the new deals, given fiber prices continue to be very strong, should we expect similar kind of margin profiles there or should we think there could be some potential upside there?
Sensitive question, Uma, the second part. I will not be able to answer the second part, but I will give you some hints. The market is tight. You are right. Level of prices today is better than what we had three months ago. It is likely to be the case that we will be more profitable in the new deals than what we had in the current backlog. But appreciate that this is something that we are still discussing with our customer, and we cannot give you more details.
In terms of the EBITDA margin profiles, the journey from 25% today to 28%, 30% implies additional volume. But the additional volume will bring operational leverage, and will bring a larger portfolio business at a very high margin. You should take a linear line from 25% today to 28%, 2030 by 2029. Next year would be at 26%+, in 2028 could be between 27% and 28%, and certainly meeting the 28% margin by 2029 in 2030.
That is super clear. Thank you so much. My last one is on the U.S. listing. I guess, after Atkore, especially after closing Atkore, the group's exposures are increasingly weighted towards the U.S. What are your thinkings there? Is there any sort of timeline you are expecting into next year?
We are not ready to show any timeline. We continue working on it. We need to find the right moment, and we see the value, and we will disclose the timeline at the proper moment, once ready to go ahead with the official decision.
That is all from me. Thank you so much.
Thank you, Uma.
Thank you. We will now take our next question from Akash Gupta of JP Morgan. Please ask your question. Your line is open.
Yes. Hi, good morning. I have three questions as well, and I will ask one at a time. My first one is on guidance. So when we look at the midpoint EUR 3,100 million, that would imply EUR 918 million for Q4, and then if we take out EUR 30 million from Atkore, then organically we have EUR 888 million, which means EUR 37 million sequential growth. Now, if you look at historically in your business, Q4 has been weaker than Q3. So maybe if you can talk about what is driving this sequential growth in Q4. Do you see this data center growth being not as cyclical as we have in other part of business? So maybe first one on the guidance.
Thank you, Akash. Your maths capability are fantastic. You have certainly spot on. There will be, for the first time, I think, in our life, a quarter four stronger than quarter three. Rather says the usual transmission, which is normally higher in quarter four than quarter three. What the exception is that while in the past year, we have seen seasonality impact in I&C space.
Seasonality impact means a normalization of demand in November, December, weaker months compared to quarter three. We have now a completely unpredictable situation until a few months ago, driven and skewed by the data center needs in U.S. So it I&C the one that will support the growth in quarter four, making quarter four, if we continue with this pace, again, the best quarter yet.
Thank you. My second one is on Atkore deal. I think you closed the deal ahead of what you communicated at the time of announcement. Maybe on the financing side. When you announced the deal, you said you expect the debt financing to be below 4%, with higher cost on hybrid and lower cost on senior debt.
Given since the announcement, interest rates in Europe has moved quite a bit, I am just wondering if there is any update on financing costs that we should assume for Atkore. Maybe another one on Atkore is that you closed the deal a couple of months early, so does it change the timeline for synergy realization?
I will leave Francesco for the first part of the question, then I will take the second one, Akash Gupta.
I think there is no big change on the financing in terms of timeline. We completed the equity raise in September. We will go for the hybrid bond component in the coming months, and then following that, we will certainly go for senior bonds take out. Of course, you are right, interest rate are a bit higher. We cannot deny this, but I was reviewing some indications in terms of pricing from the team. I do not think that realistically this will make a big impact, for instance, on our EPS, just to mention the key metric which will be impacted.
Thank you, Francesco. The second part is, yes, we are ahead of the original schedule in terms of closing, and we are moving very fast. We broke another record here because we have been able to establish and define a new agents base. When I say agents, do not read people. These are companies representing Atkore and Encore and Prysmian in the market and selling products to the final distributors.
We had already implemented a new organization of agents from day one, so the October 19th was the closing. On the October 20th, we had a new structure in place. That means exactly what you are alluding to. We are going to be faster in achieving commercial synergies because the sales force is in place already. They know that they have to sell both cables and components from Atkore.
Some of them are already used to having this capability of selling cables and components. This is what we will leverage to accelerate the commercial synergies. As far as the operational and procurement synergies are concerned, we had to do some fixing. First of all, consolidate the cable activity that used to be produced in Atkore into Encore, and also to fix the service level, which is essential to support the business model of Encore.
It is essential to allow Atkore to have access to data center. We need the scale, Atkore has the scale. We need also the service to be a player of Atkore component inside data center. This is probably the largest and best opportunity from a commercial perspective that we have, opening Atkore to this use case data center. On the commercial side, we set it already. We had to improve the service and reorganize the supply chain to achieve this as fast as possible.
Thank you, Massimo and Francesco, and last one is on potential U.S. listing. I think this is a topic that always comes on table. I think there was some comment you made earlier on the press call. Given you closed Atkore deal and now North America is by far your even larger exposure than before, what's the latest thoughts, and should we expect something in 2027 on this? Thank you.
You're right. The U.S. now represent more than 50% of the results of the company, so we have even more than before a strong entitlement to be dual listed in U.S. We will work on this case, and we will continue working on the case, and we will announce as we are ready to move forward with the final actions.
Thank you.
Thank you, Akash.
Thank you.
Thank you. Our next question comes from the line of Alasdair Leslie of Bernstein. Please go ahead. Your line is open.
Oh, thank you. Good morning. I had a few questions on the new copper mill at Encore. Firstly, I was wondering whether you could clarify how you are securing the raw material, the additional copper cathode. Is the majority of that from expanded domestic supply agreements, maybe more recycling of copper scrap, or does it also rely on some imports too?
I guess security of supply is going to become even more of a competitive advantage here. Is that something that could potentially trigger a framework agreement with a data center customer on the power cable side as well going forward? Maybe just a simple question. In terms of the incremental extra rod output from the second mill, do you expect to double capacity, triple it? Any numbers there? Thank you.
The rod mill requires cathodes and waste scrap. We already have agreement with the number one supplier of cathode in U.S. It is a U.S.-based company. The fact that we have the ability to recycle waste up to 40%, 50% of the metal value is a big plus because we do not depend only on cathode. The market is open in a way in terms of cathode.
It is not that tight, it is loose because there is no import tariffs on cathodes, while there are on rods. That is why the market became tight on rod. Nobody is importing cathode from abroad, but the market as a whole is importing copper from outside, and we signed agreement with this supplier to secure the volume. On the Power Grid side, we do not have agreement in place. We are working on them.
But we have companies committing in a serious way, we can tell you more about the serious way, to buy megawatt cable from us, to buy the MC cable from us. But beside the commitment, what matters is that there is no alternative. We are the only one with the scale and the service level and the portfolio breadth. So even if they did not commit, they cannot find the whole product range at scale with short lead time from anybody else.
That is why we are so much convinced to go ahead with the EUR 700 million additional investment to strengthen our supply chain, product range, vertical integration to serve data center expansion. Not only data center, the investment will also play a role in the non-residential business space, excluding data center. Incremental output of the rod mill will be basically 1.2 x, 1.3 x the current output of existing rod mill.
So we will add additional volume to McKinney to serve McKinney and support the growth of McKinney. Also to replace what we buy rod wise for our legacy Prysmian plant from other supplier. So it is a make to buy, make versus buy project. But the main driver behind this is not the saving in itself or the tons produced inside versus the standard cost. It is the service. Again, with the equipment in-house, fully connected to the rest of the value chain, you can serve the market with the best service and again, amplify the benefit of the additional demand coming from data center.
Thank you very much. Thank you.
You are welcome.
Thank you. Our next question comes from the line of Max Yates of Morgan Stanley. Please ask your question, Max. Your line is open.
Thank you. Good morning. I have two questions. The first one is around the data center exposure within I&C. Could you just give us a feel for how big will that be as a share of revenues in 2026, roughly? How fast has it grown, so far year to date or maybe year to date and in the third quarter would be helpful. Thank you.
If you take North America I&C, data center now represent 25%-30% of that demand. If you take the global company, this 25%-30% goes down to 15%, more or less in I&C space.
Sorry. Just to be
Yeah
Yeah, sorry. How far? Just to be clear, 25% of your North America business in I&C or 25% of I&C?
25% - 30% of the North America I&C is exposed to data center, is revenues coming from data center.
Okay. And how fast?
How fast did it grow? Let's take this, let's qualify this at 25%-30%. This should call it EUR 1 billion-EUR 1.4 billion worth of revenues is data center business in U.S. in 2024. When we acquired Encore Wire, that number was at EUR 250 million.
Okay. That's helpful.
Thank you.
Secondly, just thinking through your Digital Solutions business. Your organic growth has been kind of relatively stable this quarter. I guess my question is, given the kind of prices and renegotiations that you're putting in place, would you expect to see this division accelerate in terms of organic growth as we effectively get that kind of better priced sales coming through? Should we see the 17% organic growth that we're seeing now as kind of the right level, or should we see an acceleration from that level maybe over the next two to four quarters? Thank you.
I think there are two consideration here to be made. When you say the organic growth, there is the organic growth of the entire Digital Solutions division, and the repricing opportunity is applied to the optical space, which equates to one third of the total Digital Solutions business. The rest of the business is connectivity, where the level of price and business through the channel is really pretty high. We are 40% plus EBITDA margin.
The third bucket is made of MMS, Multimedia Solution cables or data cables, which are pretty stable. So this 17% at the group level Digital Solutions equates to, call it 35%, 40% at the optical level. So it's pretty high when you read it from this perspective. It will continue along the same line until we add additional volume. The additional volume will not come too far. In second half, towards the mid-2028, second half 2028, it would be the volume, additional volume kicking in and adding volume growth to the repricing benefit.
Okay. Just very final one. Just thinking through your kind of plans for M&A. I guess, how would you frame where you would need to see leverage get back to before you start thinking about M&A again? Or do you look at opportunities out there? Would you continue to do deals and utilize equity? Maybe then when you think about your divisions, what would be the obvious white spots to you where you would be very keen to kind of add an acquisition?
We continue working on M&A. We don't have a particular issue in terms of leverage. Of course, it all depends on the size. We are looking at bolt-on, mid-size and large size acquisition. We're not holding back any opportunity because of the leverage or the equity. We'll have the power, we have the power to do it. What matters is to identify and land the right target.
So the strategic fit, and when I say strategic fit, I mean the possibility to give us the value that we created with the last five acquisition, namely to make us more robust in terms of right of win in some businesses, enhance the leadership, open us to new trend of growth.
These are the levers, these are the direction, these are the guidance that we apply to the assessment of the market when it comes to M&A in U.S. and outside the U.S. Really telling you we are really working hard, scouting, working, negotiating, reaching out to companies to pursue our growth and support it with M&A.
Okay. Thank you very much.
You're welcome.
Thank you. We will now take our next question from the line of Chris Leonard of UBS. Please ask your question. Your line is open.
Yeah. Hi, there. Hopefully you can hear me. Please may I go in with two questions as well, and focusing still on the fiber opportunity and Digital Solutions, and following off your comments there, Massimo, in terms of optics going up by 35%-40% on revenue growth in Q3. How should we think about how far through you are in terms of repricing the existing portfolio within the optics, and whether or not we could see further pricing momentum there, or it's close to 100% done in terms of your reprice? Thank you.
It is, like I said, we are at 75% of the repricing opportunity. In some cases, we cannot reprice because we have a relationship, a strategic partnership that we don't want to hurt. But across the board, we reprice everyone. Now, but there are some company that we reprice with a significant price increase, fully reflected and going beyond the level of price in the market. In some cases, we are holding back this ambition.
But repricing has happened across the board. There's still a 25% where we can go for a second or third or fourth time. Because the repricing is a dynamic process. We started repricing as early as March of this year, and the market was set at around $10 fiber price in the market. Then the fiber price went up in quarter two, went up in quarter three.
So we are continuously reaching out to customers, saying, "Listen, the fiber is not available. I need to add additional price." So to a certain extent, we've done what we wanted to do, but there's still a continuous need that we think will remain in place for the next two years, given this lack of capacity or large imbalance between capacity and demand. So it's a never-ending process to a certain extent.
Thank you. As a follow-up, maybe on the further longer term fiber contracts you might look to be signing. As you said, there's a couple in the pipeline here you're hoping to do by December, maybe into January. Is there any update you could give from where you were in Q2, where I think you said this pipeline is maybe worth EUR 10 billion and you've secured EUR 5.5 billion? Has that EUR 10 billion now changed relative to the pricing you've seen in the market?
Sorry, the EUR 10 billion agreement you're referring to, the one that we signed. The EUR 10 billion is related to the agreement with Molex and hyperscalers. The new deals will add firm revenues to the EUR 10 billion that I mentioned at the end of Q2 .
Sure. I was just checking, there's been no additional guidance change on that EUR 10 billion. You don't think there's further upside to the EUR 10 billion versus where the fiber price is headed to recently?
No. Sorry. The question is not. The EUR 10 billion is firm in terms of pricing, in terms of margin. The EUR 10 billion can grow because there are cost plus adjustment formula in the existing contract. So the EUR 10 billion, as the cost goes up, will go to EUR 10 billion, EUR 11 billion, from EUR 10 billion to EUR 11 billion to whatever. But what is relevant is not that, because the margins inside the EUR 10 billion or whatever the number will be as a result of the cost price adjustment is firm up in our contract. On top of this EUR 10 billion, as we stand today, there will be additional billions coming from new deals. That is what we'd like to sign in the next two, three months.
Thanks so much.
Thank you. We will now take our next question from Monica Bosio of Intesa Sanpaolo. Please ask your question.
Good morning, everyone, and thanks for taking my questions. I will ask one at a time. The first question is on the Industrial & Construction business. Would it be possible to break up the adjusted EBITDA between NAFTA and the rest of the regions, mostly Europe?
Yes. For sure it's possible. And Monica, I mean, yes. For sure it's possible.
Just around.
Yeah, you probably should see this 27% in North America, coupled with an average of around 10%, 11% in the other regions. But again, the other regions have some different level. Now, there is LatAm, pretty high with 13%, 14% EBITDA margin. Some European country pretty low, some Nordics country in Europe are pretty high. But if you want to split between North America and the rest, I would say the 28% to 27% North America and 10%, 12% the rest is a good proxy of these numbers.
Perfect. Thank you very much. The second is on the investment plan. Just for housekeeping, can you please quantify the yearly total CapEx for 2026 and above all for 2027?
Monica, I can tell you.
Thank you.
I can tell you more about 2026. We started with a budget of, let's call it EUR 150 million, more or less, and we are going to beat the EUR 1 billion and 100 this year. Part of it is due to the Molex and hyperscaler agreements and part is related to what we discussed before and what we discussed in prior quarters. We are expanding capacity mostly in [inaudible] to serve the strong demand from customers across the board.
2027 and beyond, we would like, if you do not mind, we keep this for the Capital Market Day next year. The CapEx of 2026 have been fully reflected in the guidance. That is why I mentioned before it is EUR 100 million increase in free cash flow in spite of the metal increase and the significant additional CapEx deployed to support the growth in 2027, 2028.
For the future , if you can hold back until Q 2 next year when we can give the full picture now, the growth, the driver growth through 2030, the EBITDA margin, investment, free cash flow, and all the other important KPIs.
Okay, got it. I will wait. Just, if I may please, a final one. Looking at the capacity increase, there is also transmissions. I have read somewhere that it could be possible to add another vessel, and I was wondering if you can just give us an update of your planning capacity increase in transmissions. Thank you.
The plans that we approved will come to full completion by end of 2027, with the final implementation of the capacity expansion in Arco Felice, Naples and in Pikkala, and in Gron, especially in Gron. The other vessel would be a transformation of one of the vessels that we currently use into a more performing vessel in terms of dynamic positioning, so standing still when there are strong weather conditions.
There would be an upgrade, an important upgrade. So we upgrade an important vessel. The current fleet is fully balanced with the current production capacity, so that we can still confirm that all the cable we produce are installed by our assets. But we will further invest in asset for burying cables, so the plowing, the jetting of this machine.
We are launching a new wave of investment to upgrade the capability of this asset because burial depth becomes essential. Essential in terms of execution speed, in terms of efficiency, in terms of winning new opportunities. So this is where we're going to invest the money, not the investment in itself, but in burial equipment.
Perfect. Thank you very much, Massimo.
More about transmission will be disclosed at the Capital Market Day for future plans of capacity expansion. Thank you.
Okay. Thank you very much.
Bye.
Thank you. We will now take our next question from the line of Sean McLoughlin of HSBC. Please ask your question. Your line is open.
Thank you. Good morning. If I can just return to the submarine telecom opportunity. You mentioned in the press release that you would be considering a new installation vessel. Is this dependent on more awards? Is this enough also to get you to the EUR 250 million revenue ambition? And what kind of CapEx would we be talking about? That's the first question.
Thank you, Sean. The vessel is an essential part of the turnkey business, and submarine telecom is a turnkey business. The crucial part of this business are cable and the repeater. For the time being, we are focusing on expanding capacity in repeaters and cables. The vessel will use a market vessel for the installation of the first project. It is a New Jersey, U.K. project.
So we can still resort to the market for the installation. The plan is that as we advance our position in this market, second quarter, third quarter next year, we will make a decision about a vessel owned by us. It would be not as expensive as a submarine power vessel. It would be in the range of EUR 150 million investment to consider for a telecom submarine investment in the space. Sorry, vessel in the space.
Fantastic. Thank you. The second question on you mentioned Hollow Core Fiber industrialization. I was interested to understand where you believe you are in the industrialization path compared to peers, and what kind of timeline to revenues. I think more longer term, I suppose, what is the appetite for this product? Is this accretive to volumes? Does this help you get hyperscaler lock-in over the long term? Just thinking about long-term margin opportunity on this technology. Thank you.
We are the early stage of the commercialization. As I said, we will start selling those products that we produced in the last few weeks, and we continue producing through December, in January. We have a customer that is very keen on having those products, both for interconnectors but also for inside the campus. The appetite is there.
The product is pretty difficult in terms of process, and that is why the industrialization took almost one year. We are now at the stage where we can further expand capacity to make the production at scale for this product. It will become visible late 2027 with more volume, when we will have more capacity devoted to the Hollow Core Fiber. It is semi-visible in terms of profitability because level of price is not comparable to that of the standard fiber. It is tenfold. Even more.
It is a very visible and appreciated segment of business. We think we are ahead of the others in terms of readiness to commercialize it. The volume will be becoming more visible from Q 3, Q 4 2027 onwards. Because as I said in the past, this solution serves one important need, to further spread out data center without losing the power of the signal. This help the data center avoid the famous cooling water and energy constraints that are currently affecting the deployment, the expansion of the data center build-out.
Understood. Thank you.
Thank you, Sean.
Thank you. We will now take our next question from the line of Alessandro Cecchini of EQUITA for his questions. Please go ahead.
Hello, everybody, and thank you for taking my questions. The first one actually is on transmission business. If you can add just some color on your expectation for margins next year or looking at the current corridor that we are running on 20%. Just to understand with additional capacity in 2027, you expect further improvement in terms of margins.
This is my first. My second is just a clarification on the Digital Solutions top line growth expectations. Just to check if I understood correctly, that you expect mid-teens organic growth, so 15%, 16%, 17%, so the current growth rates to continue without additional volumes capacity that will come starting from half 2028. Just to check this. Thank you.
Thank you, Alessandro. I will answer pretty fast the transmission question. The trajectory is to bring us to 24%-25% EBITDA margin in two, three years. The 20%, 21% is a level that we already consolidated in 2026. The backlog with high margin will help us enhance this level. The additional vertical integration, ACSM is part of it, will help us also there.
The expansion in submarine telecom, again, is a very critical addition, the submarine telecom business with Xtera. Our goal is to reach 24%, 25% by 2030. Having said that, I already disclosed the Capital Market Day target. Let me stop here. Digital Solutions top line growth, yes, is 15 high single digit. Sorry, teens digit is the growth that we expected. In the next two years, the price will be the driver of the growth.
Beyond the next two years, the price will not represent any more driver of growth. The driver of growth will become the additional capacity. So you can take this 15%-20% for the next five, six years, but with a different sheet. Price in the first to three years, the volume from 2029 onwards.
Okay. Many thanks.
You are welcome. Thank you, Alessandro.
Thank you. We will now take our next question from the line of Nabil Najeeb of Deutsche Bank. Please go ahead. Your line is open.
Good morning. Thanks for taking my questions. I have got three. I will just ask them one at a time. The first one is on Digital Solutions, just coming back to the margins, but more short term. I know you kind of touched on this a little bit, but I am just wondering if you are confirming the margin guidance for Digital Solutions for 2026, which I think was 24%-25%, because that implies a sequential uptick in margins in Q4. Q4 is typically somewhat weaker seasonally. I know you said Q4 will defy the typical seasonality, particularly at I&C this time around. Should we expect the same for Digital Solutions?
We should expect this 24%, 25%, 24% full year, even if you remember that quarter one was still prior to the pricing benefits and the additional demand benefits. This is what we expect to see at the end of this year.
Okay, got it. Just to follow up again on Digital Solutions, on the hyperscaler deals that you are currently negotiating, do you think you can give us any indication of roughly how big these deals are going to be, the two deals that you are talking about? Maybe relative to the EUR 5.5 billion Molex deal that you signed?
Let us say that the sum of the two can become similar. The sum of the two, or the two major one and a few small ones. The sum of this package would be pretty close to the size of the Molex in itself.
Very clear. Understood. Then in terms of cash flows, Francesco, I think the new free cash flow guide implies a pretty strong performance in Q4. Just wondering what the drivers are here. Just wanted to confirm if you got the down payment related to the Molex deal already in Q3, or is that for Q4?
No. It implies what we commented in terms of sequential growth of the EBITDA, first of all. It implies the fact that the metal price impact is still there in Q4, but maybe softer than it's in the Q3 because of the dynamic of the metal price through the quarters. It implies the fact that we are running very fast on achieving further efficiencies on all the lines of our working capital, and this is well on track. Then, of course, it embeds also some little contribution coming from our new colleagues of Atkore.
Thanks, Francesco. If I can just squeeze one last one in, just on Atkore. Just wondering if you can give us an update on the standalone performance there. I know Encore Wire has reached a record, about the margin. How about the margin at Atkore? Do you see an improvement there as well in Q3?
The Atkore margin in Q3 is in line with the full year or year-to-date margin at 14.5%. It is, again, a big room for improvement, especially given the fact that we have now a serious opportunity to expand the Atkore presence inside of the center, given that they have a scale. What we just have to work on is the bundling with our cables. But the bundling will happen as we speak because the agents are in place already with this capability set. The service lab is the last bit that we have to fix. So the potential is very high. Give us few months to improve the supply chain and make this happen.
and of course Nabil,
Got it. Thanks.
Molex is already included in our cash flow in Q3. I missed your
Okay
last part of your question. Apologize for that.
Got it.
Okay.
Thanks for that.
Thank you. We will take our next question from the line of Alessandro Tortora of Mediobanca. Please go ahead, your line is open.
Yes. Hi. Good morning to everybody. I have three questions. First question. The first one, if you can help me a little bit to reconcile the year-end net debt, considering also your comment on the hybrid bond, because as you can get, if you are going to issue the bond by year-end, so to understand the year-end net debt and leverage. That is the first question. The second question is on, let us say, about the term and condition for the new potential frame agreement.
Compared to Molex agreement, do you see significant differences or, let us say, do you see the possibility for this first to improve the terms and condition of, let us say, new agreement? That is the second question. The last one, I recall it in the past that you still have, let us say, a huge portion of underground corridor and project into the transmission business. Is this a kind of technology where do you see some application in some other countries? Because after Germany, you basically had zero project related to that. Thanks.
Can you take the first part?
I take the first part of your question, [Non-English content], Alessandro, on the debt. The debt is quite simple, I would say. Let me say that without considering Atkore acquisition, our net debt would be in the region of EUR 2.3 billion. So you should add approximately EUR 1.7 billion debt to that for the impact of the acquisition of Atkore.
And the assumption here is the same assumption that we have done when we presented the deal of Atkore. So to have, as part of the financing, a hybrid bond in the region of EUR 750 million. That's an important assumption because the EUR 4 billion, if you add up EUR 2.3 billion + EUR 1.7 billion, the EUR 4 billion, which is a realistic estimate of our net debt, is of course IFRS net debt. So is excluding the hybrid, which is treated as equity, as you know, according to IFRS.
Thank you, Francesco.
Okay. Perfect.
The terms and condition. The contract we signed with Molex and the others is what we call a watertight contract. So super strong in terms of guaranteeing security of the margin in absolute value per volume delivered with volume commitment supported by take-or-pay. What could change in this contract is the current contract that the current level of price is higher than what we had in the market back to Q1 or Q2 this year.
We would like to represent in the same T's and C's when it comes to volume, take or pay, down payment, parent company, all the rest. We hope we will be able to have a better price, which is likely to happen. The underground advantage, Germany is the first country where the HVDC 525 is being deployed, and we are in advanced installation phase for the German corridor.
525 technology is the standard now in the market. We are not selling any longer the 320 kV. For all interconnectors, be they submarine or land, this is the prevailing technology. This is not just the 525 kV. As you know, we innovated here with a 20% power upgrade on the 525 standard technology.
So that now we can transmit with our solution from the 2 GW power, typical of a standard 525, up to 2.4 GW power. This will be giving us a competitive edge over the others. More power means that you pay less for megawatt transmitted, which is an important KPI for TSO product . Thank you, Alessandro.
Thank you. As a reminder, before we move to our next question, please press star one one on your telephone keypad if you wish to ask a question. We will now take our next question from the line of Jean-François Granjon of ODDO BHF. Please ask your question. Your line is open.
Yes. Good morning. Thank you for taking my question. I have three questions, please. I just want to come back on what you mentioned for the data center. I do not well understand what you mentioned. The amount of the data center you made currently and the percentage of the sales for the group. The second question concerns the new investment expected. You mentioned that more than EUR 700 million for the medium voltage business.
When to expect this new plan, this new investment should be operational for the company? The last question, I would come back to the I&C excellent performance for the Q3. We saw a very surprising growth margin, I would say more than 300 basis points compared to last year and 400 basis points sequentially compared to the Q2 2026. I just wondering, can you come back to explain why so huge improvement for the margin and do you expect this margin is sustainable for Q3 and for Q4, sorry, and for 2027? Thank you.
Thank you, Jean. I will give you a comprehensive answer on the data center. When I answered before, the question was the size of data center revenues inside I&C. Now I give the size of data center revenues out of the total revenues that we make at a group level. We do sell to data center across the business, the transmission, Power Grid, electrification, Digital Solutions. We can say that EUR 2.5 billion today is the level of, in 2026, is the level of revenue through data center across all the segment of business.
Let us call it, 10% +, 12% of the company revenues is in the data center space. This EUR 2.5 billion were, I said it before, less than EUR 200 million two years ago. So significant growth, significant uptake. The medium voltage in CapEx that we presented, the EUR 700 million, will become operational in different moments of the run.
Mill will be fully in place by the end of 2028, January 2029, namely. The million watts capacity will come in one line per quarter from quarter one 2027 onwards, and there will be eight lines added to our capacity. Over the next two years, you will see those eight lines coming live. The metal cladding, so the specific investment for making products for data center, will become available from the end of second half of 2028 onwards.
Again, all those investments are to ensure, when we combine those investment with the relevant investment in Digital Solutions space, we ensure that we fully support data center expansion throughout the whole value chain, power and our people business. Back to the quarter three excellent performance, it is certainly driven by I&C, North America, with the upgrade of EBITDA margin in U.S. from a standard to historical 20% to 27%.
It's also supported by the expansion margin Digital Solutions. It is the first quarter three in digital, where you see more depth in as a question of the repricing on the customer base. This we expect to remain sustainable in quarter four and to continue next year, as long as there's demand from data center that we see growing week after week continue to remain strong in the market.
Okay. Thank you so much. Very clear. Thank you.
Thank you, Jean.
Thank you. There are no further questions. I will now turn the conference back to the room for closing comments.
Thank you all. Thank you for your time today. I hope we have been able to explain how successful the last three years has been and this quarter three outstanding record result speak for itself. We will continue supporting the growth in the future with the M&As organic growth, and we will give you more visibility of those ambitions at the next Capital Market Day. Thank you. Thank you all for your time. Thank you.
Thank you.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.