Ladies and gentlemen, good morning, and welcome to Nexans third quarter 2021 financial information conference call. As a reminder, this conference call is being recorded. Please note there will be an opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. I would now like to turn the call over to your host for today's conference call, Mr. Christopher Guérin, Nexans CEO. Please go ahead, sir.
Thank you. Thank you. Good morning, ladies and gentlemen, and thank you for participating to this Nexans conference call for the third quarter result. I'm Christopher Guérin, CEO of Nexans. We are here with Jean-Christophe Juillard, Group CFO, Aurélia Baudey-Vignaud, Head of Investor Relations, and Elodie Robbe-Mouillot, Nexans' Investor Relations. I will turn over to Aurélia to go over the conference call rules.
Thank you, Chris. I would like to remind participants that statements made during the conference call which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers and listeners are strongly encouraged to refer to the disclaimers which are an integral part of our universal registration document, along with the audio replay of today's call that will be posted on our website, nexans.com. I now turn you over to Chris, who will go over the third quarter 2021 highlights.
Thank you, Aurélia. Thank you. Once again, Nexans demonstrate a great performance in this third quarter. As you can see on the document, the Nexans performance is about an organic growth of 8.2%. Despite an important business selectivity, you know, it's part of our SHIFT program to be extremely selective on the margin level, risk level, customers by customers. Some supply chain challenge, of course, like every business, specifically in automotive sectors. On the first step taken in reducing our metallurgy business, so maybe JC will comment a bit further on this element, which is because metallurgy business exposure is external exposure is part of our NEX equity story. Overall, a very strong backlog of 9% year-over-year, extremely selective.
For high voltage, the order backlog is about EUR 1.5 billion. I'm sure you will have question about it, but we are still awaiting significant awards in the coming weeks, and those are close to the end, some should be announced before the end of the year. That's for sure. The backlog for other business is firmly up. Building and Utilities business backlog is +26% year-over-year, only with our selective customers on the project. Industry is up 32% on a slight rebound on telecom of +9%, but the signal for telecoms remains strong for the next quarters to come. More importantly, I keep reiterating because we are not guiding on the organic growth as you know since 2018.
This backlog growth is not only driven by volume, but as well by the launch on the monetization of our recent innovation. We have one innovation announced on deploy every quarter. The last one took place in all South America, in all the main European countries, as well Australia, all the way to Qatar, crossing North America and Turkey. Solving customers' problem because that's of course the first intention. In as nothing is for free, it's as well the monetization of those innovation improve our margin.
This organic growth is not only reflecting very strong market dynamics in all sectors, but also importantly, our SHIFT transformation model to move to a more value-driven business versus volume, and as well supported by what I have just said, the solution from our Amplify program, which is a cornerstone to our strategic ambition for 2022 to 2024. Importantly, we confirm our last upgraded guidance for 2021, thanks to the great visibility we have on the strong dynamics of all our action plans for the months to come. These coming months are important for Nexans as we are opening as well a new chapter to become a pure player of electrification with the visit of 100 customers, for example, our stakeholders to the Aurora vessel celebration last September in Norway.
We have a similar event taking place next week in U.S. with the official Charleston opening, for which we're expecting more than 100 customers, suppliers and government key officials. If we move now to slide four, of course, raw material access and cost inflation remains a hot topic for the period. Believe me, it will remain for the next coming decade. It will be a hotspot. Let me just remind you the following because we have seen as well the result of some of our customers that are suffering from cost inflation. In the case of Nexans, I remind you that metal price inflation is 100% passed through to customers, enabling us to protect our margin.
There is as well, of course, polymer inflations that we follow with tight control and collaboration between purchasing teams and sales teams in order to implement straight away with a very disciplined approach, the pricing impact to pass through to all our contracts, following price indexation. We also amplify our supply chain model by contracting more and more shorter routes for supplies below 500 km to avoid the congestion of container ships and as well to reduce the carbon footprint. On this slide, again, we draw your attention on our unique vertically integrated manufacturing process on metallurgy that in case of scarcity is a very strong competitive advantage and as well in terms of lead time.
Quickly on slide five, sorry, you can see that a very intensive Q3 with many events. We wanted to give you an overview of all this quarterly achievement. We have Nexans has continued to engage with all stakeholders on ESG commitment. We joined the COPEMAP, but we have as well hosted in Stockholm our second Climate Day with 100 customers and expert. The next Climate Day next year will be in New York. Secondly, it's strategy to electrify the futures, inaugurating the state-of-the-art Aurora cable-laying vessel, which is of course a cornerstone of our electrification pure player model. As well the fact that we have signed these sales purchase agreements to acquire Centelsa in South America.
Another point, successful dialogue with investors. We have been recognized by institutional investors. We thank all our investors for their trust in Nexans and for this recognition. Operational roadmaps. We have signed various contracts with Seagreen, Equinor, some others to come. We'll be announcing in coming weeks. We are pursuing this innovation implementation, as I mentioned in the beginning of my speech, everywhere in the world. Moving to page six, of course, it's this Nexans first M&A milestone, aligned with the group strategy condition to become a pure electrification player. The group signed a share purchase agreement with Xignux to acquire Centelsa, a premium cable manufacturer based in Colombia, active in building and utilities applications.
Centelsa is a world-class player in Latin America with total turnover of more than $250 million in 2020. Enterprise value of $225 million, resulting in an EV/EBITDA multiple of about 9.5x. Closing of the transaction is subject to regulatory approvals and is expected to take place in the first half of 2022. Now moving to slide seven is our quarterly rendezvous regarding innovation. Believe me, maybe not always clearly understood by some analysts and investors, but believe me, the customers have a very strong appetite for everything we announce in regards to innovations.
I thank all of them because what we have been able to develop in the last six months is just astonishing. Slide seven, Amplify by Nexans, the innovation of the quarter, will be launched tomorrow in all main countries of Nexans for building and territories business, is an adaptation of our MOBIWAY drum solution. This adaptation called MOBIWAY UN'REEL. The new system saves time and money for customers for reducing installation costs. This is one of their big topic. On removing the need to purchase additional tools to unwind the cable. Thanks to this integrated locking system, which is part of the UN'REEL system.
MOBIWAY UN'REEL enables customers to unload cable directly from drums with improved safety on site, thanks to no need for handling, no need for heavy lifting, and reducing the risk of injury. That's part of the process of customers' questionnaires and survey we've done in the last months on this innovation is expected with a great demand in the coming months. Maybe now let's go to the numbers. JC, I'll let you comment.
Sure. Thank you, Chris. If we move to the presentation on page eight, you see that, for the company as a whole, we're reporting a nine month organic Q3 organic growth of 8.2% year-on-year, and a Q3 organic growth of 0.4% Q3 2021 versus Q3 2020. If we exclude the metallurgy impact, because you know that, as Chris mentioned, as part of our strategy, our aim is to decrease the metallurgy impact to reduce the, I would say, dilutive effect of this business and focus on Nexans with our metallurgy business.
If we exclude the decrease of the sale of metallurgy, which is part of our equity story, the Q3 organic growth, Q3 2021 versus Q3 2020, is then not 0.4% but +1.9%. On a nine month year-to-date basis, all businesses of the group, except High Voltage, and I will get back to that later in the presentation, have posted solid recovery versus last year despite the consequences of the COVID, which are still impacting some area of the economy, semiconductor shortage, raw material price inflation, transportation and logistic disruptions. Organic growth on the nine months basis, as you can see on the slide, between 2021 and 2020 for the cable business is 10.4%, supported by strong volume increase, mainly Building, Automation and Automotive Harnesses.
As you can see on the map, the strong recovery in South America and generally all of the region was quite impressive. Again, mainly South America and the Andean region, where we just announced this acquisition. The only area in the world that has shown some volume decrease is Asia-Pacific, where Nexans businesses generally was less impacted by COVID in 2020. At a different pace, I would say, in terms of recovery versus the other region. Finally, the good news is what Chris mentioned, is that our backlog is up 9% versus September 2020. All business have increased our number in terms of backlog at the end of Q3 2021, which is, of course, a very positive news for the last quarter of this year, 2021.
If I move now to the next slide and we look at the High Voltage and Projects Q3 sales. We report a -6% organic growth on a nine month basis, 2021 versus 2020. It's mainly explained, and this is not news, but it has been through most of 2021 the main explanation of, I would say, the not strong organic growth, is a high level of repair and maintenance that we had last year, mainly in the first half of 2020, that generated incremental sales that did not repeat itself in 2021. If we exclude the IMRs, which are the repair and maintenance additional work in 2020, the organic growth of the High Voltage Group in 2021 equals to +8% on a nine month basis, which is obviously a very different story.
Strong return to growth in Q3, as you can see on the graph, +8% organic growth in line with the project phasing, Charleston ramp up and the Skagerrak maintenance. Q4 is very intense, both in terms of production and installation. Our adjusted backlog is at a record high EUR 1.5 billion. Significant award, as Chris mentioned, will be announced in the coming weeks that will likely inflate significantly this number. We continue to enforce strong discipline in project selectivities through the SHIFT project program, balancing risk and returns to one, keep a healthy backlog with limited execution risk and acceptable contractual terms. Two, warrant a backlog depth of two years to keep visibility on execution. And, three, keep capacity in 2024, for which our yield model display opportunities for more appealing profitability due to market cable capacity well below potential demand.
If I move to the next slide and we look at the activity of Building and Territories, good organic growth for our Building and Territories business on a nine months to nine months year-to-date basis, +3%. If you recall, we closed the plant in North America, in the U.S., in Chester. If we exclude from the comparison Chester, the organic growth amounts to +8% for the Building and Territories business. The growth has mainly come from the Building segment, +7.2% on the nine months comparison, while utilities have been slightly shrinking, -3%.
When looking at geographies, the growth has mainly come from South and North America, respectively +27% and +14% versus the nine months of 2020, while Asia-Pacific, for us, Nexans, is mainly Australia and New Zealand, have seen a decrease in volume in Building. Backlog for the Building and Territory division continues to expand, +26% versus September last year, which continues with continued strong backlog in Building and especially in Canada, and a good recent award in the Utility business that should see, I would say, a takeoff again of that segment of business in the division. This backlog obviously it's a short-term backlog for Building and Territories. This growth in this short-term backlog give us a strong confidence for our Q4 numbers.
If I move now to slide 11, and we have a look at Industry Solutions and Telecom & Data businesses. Start with Industry Solutions. As you can see, very strong recovery on the nine months 2021 versus last year nine months, 13% organic growth. On a quarter-to-quarter basis, the organic growth is +3%. Business segment like Auto Harnesses and Automation have seen a spectacular recovery from 2020, with respectively +30% and +38% organic growth on the nine months to nine months comparison. Auto Harnesses growth has been slowing down in Q3 this year, slightly impacted by the semiconductor shortages that push few car manufacturers to cancel some volumes, but it remains quite limited. Our Aerospace & Defense, that was, as you recall, brutally hurt in 2020 with the COVID crisis.
It's bouncing back with a +41% organic growth in Q3, versus Q3 of last year, and +9.1% on the nine month basis. Part of the sales of this business segment, Aerospace, has been shifting from traditional customers like Airbus to Chinese aerospace companies like COMAC and AIJ. On the other side, businesses like shipbuilding and rolling stock have been declining, effectively 30% and 7% versus 2020. Mainly explained by lower demand in China. The impact anyhow of those two sub-business segments remains limited as their share in the total sales of the division remains quite low. The backlog finally of Industry & Solutions at the end of September is up 32%, compared to last year at September.
Mainly driven again by automation demand in Europe, which is giving us strong confidence again for the Q4 last quarter of this year 2021. Finally, Telecom & D ata. On the nine months to nine months comparison, Telecom & Data sales grew organically +5%, thanks to strong demand in the LAN cable +20% versus last year, and also special telecom equipment +11%. The organic growth is more significant when comparing Q3 2021 versus Q3 2020 +11%, thanks to the slow recovery of the Telecom Infrastructure business +11.5%. The strong demand in line cable in Europe +10%, and especially the continuous increase in demand for special telecom cable, +14%. Finally, the backlog is also up in this business, +9% in September 2021, thanks to strong demand in special telecom cables.
I will move to the last slide, which is our guidance. We confirm our 2021 guidance. I remind you that we narrowed and improved last July our guidance for this year 2021, and we confirm that improvement. On EBITDA, our action to de-complicify the portfolio, seeking value not volume, are paying off, and we are confident we will reach between the mid to the upper part of the range. On return capital employed, likewise, we are confident we will see a significant improvement on return capital employed in 2021, and we will be close to achieving the commitment we gave in 2018, which is a ratio at 15%. Free cash flow, we confirm the range of EUR 100 million-EUR 150 million.
I remind you that we continue to have strategic CapEx for the High Voltage business that remains high in 2021, with the completion of Aurora and Charleston, plus the start of the new investment in Halden for the two additional high voltage lines as part of our equity story. That concludes basically the financial part of the presentation.
Now we will open for questions. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Please ensure that your line is unmuted locally. You'll then be advised when to go ahead with your question. That's star one. The first question today comes from the line of Max Yates calling from Credit Suisse. Please go ahead.
Thank you very much. Good morning to everyone. Just the first question I had was around the comments you've made on the Charleston facility and the Halden facility being fully loaded for Q4. I guess this is sort of the one division where you have sort of the most visibility in terms of the backlog. Maybe if you could give us a feel of kind of how the loading was in Q3 to help us understand kind of what Q4 revenues could look like in that business and what the step-up could be based on those factories being fully loaded. That would be my first question.
Thanks, Max, for the question. Q3 was quite a particular quarter for the High Voltage business for the following reasons. First of all, we were not fully loaded yet in Charleston. We have the inauguration of the plant, as you know, on November 9th, next week. From that point, we are fully ramped up on Charleston. In Q3, I would say we generated less sales than expected on Charleston. We had a slight delay on our Seagreen project due to COVID. But Q4, we will be, I would say, Charleston delivering full speed. That's the first impact.
You will see much stronger sales in Q4 in Charleston than Q3. The second situation that was a little bit peculiar, I would say, in Q3 was we had the Skagerrak vessel, which was unused, basically in maintenance. For part of the quarter, it was in maintenance. The second impact on Skagerrak on the installation is that it did repair work in Southeast Asia. Basically, we account for the repair work not in sales. We have the full EBITDA contribution and the full margin contribution, but it's not reported in sales. Basically, we had an installation quarter very low, but doesn't mean, again, no margin and no work, but just not accounted in sales and plus the maintenance.
Whereas in Q4, Skagerrak will be fully used, and we'll also have Aurora on Crete-Attica, also ba sically doing full-time installation of the quarter. When you add up the two vessels together in Q4, plus Charleston full ramp-up, we will have a very strong Q4 quarter in terms of high voltage sales that will definitely make a difference with the low point of Q3.
Yeah, we continue to keep maintaining Skagerrak because we want the two vessel operating for the next three years. It's important to mention.
Altogether, I mean, I confirm what I said already in July. Altogether, the organic growth in terms of High Voltage versus last year will be nicely positive. But with a very strong Q4, but definitely positive.
Nice, nicely positive for the full year and High Voltage, that is. Just to confirm.
That's correct.
Yeah.
Thanks. Thanks to Q4.
Fantastic. Okay. Just the second question I had was on the sort of project pipeline, and you've kind of helpfully again shown your sort of factory load coverage, so 80% load for the next two years. I would imagine kind of when you look at the pipeline, are you kind of confident that kind of based on the pipeline that we see today, that actually kind of we understand the longer term pipeline is attractive, but actually for 2022 that we should be seeing a year of kind of full capacity in your Halden plant and also your Charleston plant. That's my second question.
Let me maybe color a bit the load utilization for 2022, 2023. First, in Charleston, we have this official opening next week, where we will be all in U.S. for this opening. Today, Charleston is operating the Seagreen project. In 2022, utilization will be devoted to Ørsted for all the contracts that we have in backlogs and are all confirmed. Charleston will have a very high utilization ratio. Regarding Halden, once again, you know, there are two technologies, XLPE and MI. Let me color a bit the load utilization. We are for 2022, 100% loaded in XLPE. 100%, so we cannot take any more orders. And significantly loaded as well for 2023.
The remaining capacity is in MI, which is as well linked to the award that should be announced on two major project that are the one of Tyrrhenian Link from Terna and the second one from EuroAsia.
Okay.
We are very confident to announce, for Q4 on a full year result, the full utilization rate ratio, capacity ratio, for Halden in the next two years.
Okay. That's very clear. That's helpful. Just my final question would be on the acquisition and disposal program. Obviously, we've seen the first acquisition. Maybe if I could ask about sort of the disposal process. Is this a case of kind of you're fielding offers for the different businesses that we've talked about, so sort of Telecom, Automotive? Do you more see that doing this kind of maybe in an orderly fashion, so you're thinking about sort of starting the process of maybe Telecom first and then Automotive? Maybe if you could just talk a bit about kind of what we should think about in terms of a timeline, and are you actually sort of fielding discussions at the moment for all of or any specific one of those businesses at this moment? Thank you.
Well, I cannot give you such granular details, Max, but that's for sure, you know, the execution of our M&A program is very important in terms of sequence because we don't want to divest first and to acquire after. We want to keep EUR 6 billion revenue constantly over the period. The first milestone was an M&A on acquisitions in South America. The second milestone of our M&A program will be divestment, and that's for sure, we are very active. Process is going on. We have a lot of discussions both for Automotive harnesses on Telecom, but I will not give you the orders of the sequence.
Okay. That's helpful. Thanks very much.
Thank you, Max. Next question.
Next question. Please be reminded, if you would like to ask a question, please press star one on your telephone keypads. The next question comes from the line of Lucie Carrier, calling from Morgan Stanley. Please go ahead.
Good morning, everyone. Thanks for taking my question. I have a few. I will go one at a time. The first question I had, please, was on the backlog and just wanted to understand a little bit the dynamics here, because you mentioning it is up 9% for the group, but then Building and Territories is up 26%, Industry 32%, Telecom up 9%. How do we actually get to the 9%? Is the backlog in project down, you know, compared to that? And then how does that backlog compare quarter on quarter? And excluding the project business, how many months or weeks visibility does that backlog give you in terms of the, again, the non-project businesses, please?
Yeah, sure. Lucie, thanks for the question. I'll take the question. You're right to mention it. When you look at the 9% and when you go on the division by division and you look at the percentage, it feels strange that when you have Building and Territories at 26%, the total makes 9%. The main reason is that Building and Territories backlog number is very small because it's a very short-term backlog.
It's only a few weeks, couple weeks, two weeks to three weeks .
For Building on the
For Building.
On one to two months for Utility.
In one to two months for Utility. The average length of the visibility of those backlog is very small. Therefore, in terms of value, it's much smaller than what it represents in terms of sales for the group, for instance. This is why you have this, I would say, strange view of the 9% for the group versus 26% for Building and Territories. But definitely the backlog on high voltage is growing versus last year. As Chris mentioned, it will continue to grow with what will be announced likely in the coming weeks.
Yeah. Let me color a bit more on this part, Lucie. Building, it's very strong demand. There is in all regions. No specific event. The question we have from customers is about raw material scarcity. There is more and more questions in regards to copper access. I can give you more information if you need to. Regarding Utilities, the backlog reading is always a bit complex because when we have orders shifting into backlogs, it's a few weeks visibility. Most of the contract is through from frame agreements on calls that are not injecting the backlog.
What I can tell you is that the end of the year utilities will remain stable, but we are entering in major negotiation for most of the utilities for the next two years. On the frame future frame agreement on volume demand is up 20%-30%. Why this demand is so important, it's because of the electrification, like we said during our Capital Market Day. Countries, regions, nations have underinvested massively in the medium voltage part in the distribution part in the last 20 years. So now they need to catch up. They need to catch up to make sure that there is no power outages in cities or blackout. So the demand will be extremely important for the next two years in the utility sectors.
Regarding the backlog of High Voltage, we don't want to have the biggest backlog. That's not the goal. We want to have, once again, a very healthy backlog in terms of limitation of execution risk with acceptable contractual terms. That's very important. Once again, we want to run for High Voltage a backlog depth of two to three years max. Why two to three years max? Because we see a bottleneck issue, an important bottleneck issue in the cable supplies starting 2024, because of a huge demand supported by mega project in offshore wind on interconnection. We want to make sure that we are not discounting our capacity with offering price potentially too low today, and that could be at a different level in three years' time because of a huge demand.
We try to balance our backlog to make sure that we have no risk in the coming two years, but we don't want to lock our capacity for the next four or five years with today's margin, because I think it could be different in two years' time.
Thank you very much for the color on High V oltage. Just maybe coming back to my question around the visibility on the backlog. I understand the one to two months ballpark for B&T overall. How should we think about Industry and Telecom in that context?
Oh, Industry and Telecom. Industry is the backlog today is much higher than 2019. Visibility is very, very strong. We are refusing orders not because of capacity utilization, but potential risk of scarcity of raw material, specifically in automation. It's automation links to robotics. Automation is extremely dynamic. Just for Automation, the backlog is up to 45%, and that's only the beginning. Very, very great visibility in the Industry business. On top of it, Aerospace is back. Not big time, but it's coming back. That means that 2022 will be an excellent year for the industry.
Telecom, it's a bit disappointing, but the signal that we receive from the market is pretty positive. That will be a strong demand in China that should, I will say, feed Chinese competitors. We hope to have a great news regarding a dumping case in Europe in the coming weeks that will support as well the European demand. Telecom, a bit disappointing certainly so far, but not in terms of margin evolution at all. Very good. I'm pretty positive for next year to come.
Thank you very much. My second question was around the supply chain. Thank you for the slide you included in the document. I just had a couple of questions on some of the factors for that. On the metal side, you mentioned in-kind hedging contracts. Is there any risk around, you know, those hedging contracts when they effectively roll over and they have to be kind of renewed or renegotiated in terms of, you know, which price level will be put in place?
Can you maybe help us understand, as a percentage of sales, the share of your energy cost and transportation cost and the nature of contracts you have in these two areas, please?
Well, I let you take the hedging, JC. Regarding energy, it's about 2% of the cost of goods sold, so it's about 2%. We have a long-term contract for the next two years at a pretty good price. Regarding transportation, so what we call direct marketing expense, of course, it can vary strongly depending on the sectors. Average is about 3%. But what we are pushing on this is part of our E3 strategy. E3, remind you, it's economics, environment and engagement. We will show you for the full year result what we are doing on connecting the profitability of each customers with as well the distance of supply.
We engage strongly our unit to increase their business with customers that are around 500 km, maximum 800 km, and try to avoid all customers beyond 800 km because we see that transport cost will be a big issue in the future. As well, we want to make all our unit manager aware regarding the footprint impact, carbon footprint impact. That's the reason that we are setting up some systems and tools to reduce the transport impact both on the cost and as well on the environmental aspect. Regarding the hedging, JC. Yeah.
It's a good question on the hedging because I would say that typically we have extremely limited or no impact when we hold our hedges on a monthly basis. However, it is true that last month, in October, there was a unique situation on the market on the copper, where the market moved into a situation that is called backwardation, where, I would say, the three month rate was lower than the spot rate. When we hold our hedge on the volume of copper at that time, we had a negative impact. I would say that this situation did not happen since, I recall, five or six years ago.
It lasted only that day, the third Thursday of the month of October, where most companies on the LME were holding their position. Since then, the situation of the market is back to a much more normal situation, I would say, with the two, the spread being close to zero. We had a unique situation. It is true in October that basically impacted us slightly but not significantly, to answer your question. It's a kind of a unique situation, but it's possible. Yes.
Thank you very much. I'll go back in the queue.
Next question.
The next question comes from the line of Sean McLoughlin calling from HSBC. Please go ahead.
Good morning. Thank you for taking my question. It was just one follow-up. I just wanted to understand your previous comments about your forward visibility on contracts and how that sits with the current framework that you have with Ørsted in the U.S. I mean, if I've understood correctly, you want to lock in for up to two years, but then you want to leave, let's say everything open in terms of price negotiations beyond that. I mean, does that apply to Ørsted or is Ørsted a special case? Then I had a follow-on.
Yeah, Sean. No, Ørsted is a special case because we have signed contractual terms for the next six years to come, seven years in total. We have a very strong visibility for Charleston both in terms of load, but as well in terms of margin. Are we able to yield what I was mentioning our price for Charleston? It will be limited because what has been signed for Ørsted is fixed. Of course, links to indexation to raw material. Of course, we will not lose anything. No margin impact.
Where we want to yield as maximum our margin is in Halden, where we want to make sure that Halden is not fully locked beyond 2024, because I'm sure that we can, given the contracts to be awarded and tendered in 2023 and 2024, it's significant, and I want to take this opportunity of course to improve our financial ratio.
Thank you. One question specifically then on the U.S. situation. I mean, obviously your main competitor is building a factory there. We saw as well Ørsted is going with another competitor to build capacity specifically for array cables. Just wondering how do you see the U.S. competitive environment changing? In other words, is the capacity already being built, or you think that this simply won't be enough to match demand?
No. I have to be honest, Sean. First, to build a high-voltage factories in the U.S. in normal times take four to five years. Of course, I understand the intention of our competitors, but nothing before four to five years, specifically if it's a greenfield. Secondly, no, there will be still under capacity, well, issue. Because of the very strong demand on both subsea and land links to offshore wind, but as well the land.
I remind you that the Build Back Better plan of President Biden is supposed as well to require an equivalent of 20,000 miles, 25,000 km of HVDC land cables. That can significantly positively impact the load of today's factories available in U.S. In the meantime, you have the huge growth of offshore wind. I was in New York talking with Doreen Harris, the chairwoman of NYSERDA in New York State. They will announce in the coming weeks the even more projects to come in the next four years. No, I think there will be an issue in terms of cable capacities to face all this demand coming up in U.S.
That's very clear. Thank you.
The next question comes from the line of Jean-François Granjon calling from Oddo BHF. Please go ahead.
Yes, good morning. Three questions, please. The first one concerns the future contract. Could you make an update about the future contract? I would just mention on EuroAsia, some project in Italy, etc., do you expect some new contract in the coming months? The second question concerns the other activities. We see a decline during the Q3 due to less external sales for copper. This is a strategic decision. What do you expect for the next quarter and for the coming months? Do you expect a new decrease for this business?
The last question, could you give us some more color on what do you expect for next year, 2022, taking into account the inflation costs, the shortage situation. Are you comfortable with new improvement for the margin next year? Thank you.
Thank you, Jean-François Granjon. A lot of questions regarding future contracts on Empire Wind, as you mentioned. We have preferred suppliers, but there is a significant project to come from Equinor as well in U.S. The full award of all this project should come at the end of H1 or beginning H2. Regarding the other contracts in High Voltage, both Nexans and Prysmian have been qualified in two significant project, which are EuroAsia and Ionian Link from Terna.
This is huge interconnection project where we are all waiting the feedback from the customers both in terms of, I will say, share of award of the share, and as well, the choice of the technologies. That's important. We are very confident on that part. Nothing to say regarding High Voltage. Very positive outlook. I will let JC comment on the metallurgy. Regarding the color of expectation of 2022, yes, I believe that inflation on the cost is not finished and will not be finished in the coming years.
We know that we are entering in a huge electrical revolution for the next 10 to 20 years because of the implementation of decarbonated energy for the generation of electricity. In parallel, the renewal of the power grid on the transmission, on the distribution, and at the end part of the ecosystem is the electrification of the usage. All of this will require significant amount of raw materials, significant amount of copper and aluminum. Our ability to pass through this inflation it doesn't need to be demonstrated again, and you will see the results in the full year for 2021 in terms of EBITDA. We have no risk on that side.
The main hot topic for starting in 2023 more than 2022 will be access to copper. Because we have modeled the copper production supported by the copper demand, and there is a high risk of shortage in 2023 and 2024. I'm sure we will have more time to discuss about it in the coming months. JC, regarding metallurgy?
Yes, on metallurgy, Jean-François Granjon, you're right to mention. I mean, definitely we are on the trend now to reduce the amount of sales coming from metallurgy. Definitely, because again, this is what we explained during our equity story in February. You know, it's a big business. It amounts to about EUR 1 billion of the sales of the company. The margins are extremely low, 1.4%. On average, EBT margin. So it's dilutive for the group, and we have the objective to reduce it by half by 2024. So we'll do that by step. But what we started to do at the end of this year is definitely going in the direction.
It will be progressive, they will not be, I mean, a massive reduction in one year or in a quarter of metallurgy. I would say, surely but slowly, we will reduce the sales. We move to a tooling business more than, I would say manufacturing, owning the copper business. And the size will decrease. In Q4 of this year, it will slightly reduce a little bit, again, not significantly because again, small step by small step, but it will definitely be lower than last year Q4.
Okay. Thank you very much.
Sure. Margin for next year. Want to
Next questions.
The next question comes from the line of Christian Schindler, calling from DWS. Please go ahead.
Good morning. It's Christian. I have two questions, if I may. First, just looking at the two-year stack organic growth. I mean, this quarter, pretty flat versus -10% last year. When comparing to six months, you have been on par, if one looks at two years. Is there an easier explanation why this quarter was relatively weak-ish comparing to previous year? That's question one. Question two, you are very confident on most of the divisions for Q4. Any idea how organic growth in Q4 on total group could look like? Thanks.
Yes. Christian, I will take your two questions. Again, why Q3? I gave a little bit of color why Q3 was this year was a little bit strange or I would say awkward in terms of sales. A big part of that is coming from high voltage and the fact that if you compare to last year, we had significant repairs still in the third quarter, about EUR 10 million of repairs that we didn't have this year. Then the vessel installation were again not account. Whether in maintenance in the quarter or whether it was not accounting for sales during the repair in the project in Philippines.
That makes already the high voltage sales, I would say, artificially, I would say lower. The rebound in Q4 for us is I would say we are very confident it will happen. We are already in Q4, and we already are on a different trend in sales of that business. The second element I think is important. We were surprised last year in Q3 by the rebound of the harnesses business. I don't know if you recall, but we had a second quarter of last year in the middle of COVID, where basically we had minus 40 or 50% sales on the business in harnesses. During the summer of last year, in the third quarter, we had double-digit, almost 30-35% growth.
Almost recovering, I would say, what was lost in Q2. Very strong Q3 harnesses sale. That is definitely not the same situation this quarter. We've had a strong H1 in harnesses, + 30% to 40% growth versus last year, but we had a weaker Q3. We had some consolidation of volume in harnesses business due to the shortage of semiconductors. Therefore, when you compare the two quarters of last year and this year on this segment, it's quite significant, the variance.
Those two elements explain why, I mean, you see, basically, I would say a flatish comparison Q3 to Q3, but we are extremely positive again with the high backlog we explained and what's the bumper for Charleston in Q4 and the vessel that will have a very strong Q4 in terms of sales.
Thank you. Good.
We have no further questions coming through on the phone lines. I'd like to hand the call back over to your host for any final remarks.
Thank you, Christian, for this last question. Once again, very positive outlook for the next months to come. No bad surprise in Nexans. Everything goes in line with what we have guided. I remind you that we don't guide organic growth. How can we miss what we don't guide? We guide EBITDA, we guide return on capital employed on free cash flow. Once again, selectivity of our projects and customers is the heart of our system. We have to make sure as well that any business which can be dilutive like metallurgy is really focused on our all internal needs and not external needs.
That impacted as well, slightly the organic growth. Once again, very confident for what's to come and as well, the future award that will be announced in the coming weeks. Thank you a lot for your attention. Next call will be on the 16th of February for the full year result. You will see that will be excellent. Thank you very much.
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