Good morning, ladies and gentlemen, and thank you for participating to this Nexans conference call. I'm Chris Guérin, CEO of Nexans, and here with me, Jean-Christophe Juillard, CFO of the group, and Aurélia Baudey-Vignaud, Head of Investor Relations. I will turn over to Aurélia for 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 today's release, along with the audio replay and transcript 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 first half 2020 highlights.
Thank you, Aurélia, and first of all, I hope everyone is safe, and as well, all your families. Before to jump into the results, as we just closed one of the most difficult quarter of the world economy since ten years, I want to warmly thank all the women and men of Nexans for their courage, resilience, and dedication during those unique times. And express as well, in the name of the executive committee and the board of directors, all my pride, not only in what they have been able to achieve, but as well what they have contributed for the health of the communities and where we work and where we live. Thanks to all of you. Let me turn now to page five of our presentation document that you have been able to upload on our website for the key highlights.
All in all, we feel very proud of how we did manage, and we are managing this crisis. Despite the significant impact of the COVID-19 pandemic that we had on our business, we have been able to keep our factories running in all countries and support all our tier one customer while protecting our teams everywhere. As I told you, since February, facing the storm, we turn all the company into a crisis mode, and we put, since day one, a very strong focus on cash conversion and free cash flow generation. During the second quarter, we substantially increased our liquidity to record levels, and we further strengthen our capital position and capital ratio, much above past performance, as you have noticed, and JC will come back to that.
This robust capital and liquidity level will enable us to continue operating through this uncertain period from a position of strength and get prepared to a new chapter that we will introduce to you on the financial markets next November 2020. If we turn now to page 6, talking about our financial results. As you can see, we have been able to deliver resilient performance, exceeding free cash flow in this very challenging time. Our EBITDA, excluding estimated COVID-19 impact, lands at EUR 226 million, against EUR 195 million in the same period. But of course, after COVID impact, it lands at EUR 162 million of EBITDA.
Return on capital employed remains stable, thanks to a fantastic work on working capital reduction, generating as well a free cash flow generation for first semester of 2020 of EUR 231 million. As you know, because of seasonal effect, we explained you that before, H1 working capital is always much higher than H2, but as you can see in those results, all H1 free cash flow in the past year were big time negative, above EUR 100 million, and we did achieve it. We all reset all the objective in terms of cash conversion, unit by unit, everywhere in the world. We turn all the units under shift methodology and all business leaders, managers, focusing on converting resource to free cash flow much faster than before, and of course, in a very difficult environment.
This has been monitored, reported, followed every week by the executive management. Now, of course, we will put all our efforts to make this change sustainable, and no, there is no choice to stay at that equivalent level. We don't want to go to past performance, but we've done it with a strict methodology and strict control, and without putting our business medium term in danger. Turning to page seven, we have made several communications since March. As you know, since the beginning of the pandemic, Nexans' executive committee has put in place a stringent mitigation plan focused on four main pillars: workforce protection, supply chain and production continuity, customer engagement, liquidity preservation, and financial modeling.
So the group deployed, as you know, mitigation measures everywhere all-in in the world, in all units, with very strict internal control processes, preventive actions, by leveraging the experience that we had with our Chinese team and Julien Hueber, head of Industry Business Group, and just back from Shanghai a few weeks ago. He's there with us in the meeting room of Nexans. We need to thank as well all our employee engagements, like I said in the introduction, but as well, trade union support, because we didn't have any union obstruction in all the countries of the world. Production continuity was maintained, while sanitary measures were reinforced.
Our plants across all geography witnessed no major disruptions in terms of production, neither in terms of supply. At the end of June, this, last month, last month, 100% of our plant were operationally running at minimum 90% of their load, including automotive, but excluding our aerospace plant here in France. Through the period, supply of raw material was unsure. The group faced no shortages, as I mentioned, neither in copper, compounding or aluminum. Turning to page 8, you know that we have two significant strategic investment to really help us to grow in the long term. They are both on track. Our future Aurora, Aurora vessel arrived in Ulstein Verft in Norway on the fifteenth of June 2020, after having been built for the first phase in Gdynia, Poland.
So I remind that this vessel has a large 10,000-ton capacity split turntable, and it will be one of the world-leading vessels. It is ready for complex construction tasks in severe weather conditions anywhere in the world. At the same time, on the North American continent, in the U.S., we are upgrading our Charleston plant to build a unique manufacturing subsea cable plant that will exist in the U.S.A. As you know, this plant is dedicated to wind offshore business 100% and supported by the contract we signed with SSE for Seagreen, and moreover, the 7-year frame agreement contract that we signed on export cable for wind offshore with Ørsted.
You have noticed as well that we are start to prepare our reason number two in terms of equity story, so to pave the way for a stronger Nexans. So here's what you can see on the page 9. Now we sign an agreement with the group of Mutares to divest our metallurgy plants in Germany. Prior to COVID, we have as well started discussions at the end of 2019 with the company Leviton, with our partner in LAN systems, to sell our activities in USA called Berk-Tek. Berk-Tek is a leading US-based manufacturers for LAN cables. And so we have signed this agreement, a transaction that entails the enterprise value at more than $200 million, which will represent approximately 10x 2019 standalone adjusted EBITDA.
Berk-Tek has reported in sales $163 million in 2019. We have to notice as well that in July, we have decided to close our Chester, New York, manufacturing facility in Orange County, which produce low voltage power cables. This business site, cash flow performance were negative since more than eight years. We take the decision to close it. If I now move to the main achievement. A s you can see, we have seen from the reading of the IHS Markit PMI very strong rebound in June in many countries. The U.S. still remains, of course, fragile because of the COVID spread.
France have a big decline in the months of April, but a steep recovery in June, and China carry on its recovery. But still, everything looks still very fragile. Now, we have to be careful because a lot of rebound is because of a very strong confinement in many countries, and construction, for example, is back to normal times right now because they have to finish the project that has been stopped suddenly. We remain extremely prudent regarding Q4, specifically, because we believe Q3 will be strong, and Q4 because of the evolution of the demand, and as well, Q4, because of the risk of the continuity of the COVID-19 case spread continent by continent.
If we move now to page 12, we have updated the slide that many of you commented on last time during our quarterly review. As you can see in our press release this morning, we had a single-digit decline in demand across most of the business group, including high voltage project. So regarding if we go business by business, building on the territories, building on utilities, suffered a sales contraction of 8% in quarter two versus quarter one. But important to notice, our sales for June months, June only, has an organic growth of +10% versus June 2019. So I repeat, on the June 2020, just the month of June, has an organic growth for this sector of +10% versus June 2019.
Utilities being much more resilient than construction in crisis, remains more or less stable. On the dynamic of countries, of course, is changing month after month. For example, France and Canada are here, have a strong beat in June and July. Regarding industry sectors, of course, a variety of sectors, so variety of evolution. Let me start from automotive business. The automotive suffer from a very strong decline of 77% in April, and our automotive business represent 8% of our total group sales, but is back to a very good level in June and July. Aerospace represent EUR 100 million of our sale, is down 40% on the other hand. Renewable, which is on the right side on the chart, is at +22% for the quarter.
And as well as we have signed very long-term agreement with rolling stock tier one customer, we should benefit in the coming months of their very strong backlog. So of course, various evolutions, sector by sectors for the industry, but we remain extremely cautious on the future, but positive. Regarding telecom and data, so the driver remains good, specifically for the fiber optic installations on deployment in Europe and as well in other continent. But they are suffering from lack of resources, and they did suffer as well for confinement issue. The land business is connected to construction market indicators, so we should follow the construction evolutions. On our subsea telecom business is on budget due to very strong backlog and no disruption.
Regarding the high voltage, as I already commented earlier, we have not suffered from any delays, and neither any impact in that business. We had a smooth execution, and we are very happy to confirm that our land high voltage business is on track in terms of financial result and in terms of transformation completion. You have certainly seen as well that the high voltage business is up 20% year over year for H1, and +55% in terms of EBITDA, thanks to a great selectivity of the business on the project we follow, and as well, this turnaround of the land business division. Moving to next page, on page thirteen.
As I will not comment so much this, this slide, but as we already mentioned over the last months, the groups continue to be drastically selective on all commercial opportunities on turnkey project, because the market dynamics are very strong on medium and long term, so there is no reason to discount our capacity, available capacity. So we've put, since 18 months, a very strict, strict and solid evaluation process focused on risk on the technology side, but as well risk on the installation side, but as well, financial rewards on contractor terms. So that's the reason that we consider that our backlog, that which is EUR 1.5 billion, remains strongly profitable, has a limited exposure in terms of risk of execution on both technological aspect and installation aspect. Moving to page 14.
In half year 2020, we have reached now more than EUR 124 million of cost reductions on our total plan of EUR 210 million. So we are online in terms of implementations. As I say, our Hanover plant closure is down, so it's closed. So Halden high voltage business is on track. We have completed the resizing of the group in terms of organization and in terms of cost. On the rationalization of top management layers, it's done. We have, of course, reinforced our indirect spend reduction, certainly a bit much beyond what we planned to because of COVID.
We have reinforced the productivity, and, as I already mentioned at beginning of April, because of COVID, we have set up a new crisis management process around cash conversion cycle using our Shift methodology techniques, unit by unit, since the first week of March, and this is the result of the free cash flow that you can see for H1. Moving to page 15, I have always a lot of comments and questions and remarks regarding Shift methodology and mixed question. Let me remind one thing. First, Shift methodology objective is to reach EUR 100 million improvement in terms of EBITDA, but as well, more than EUR 150 million in working capital. We are using in-depth analytics, in-depth as well, I will say, problem-solving techniques, using as well, big data.
So it's a very innovative methodology that we have set up here in Nexans, supported by 20 levels of execution. But it's important to notice, and because I want to reinforce this message, Shift is not about fixed cost reduction. Shift teams, the transformation teams under Shift umbrella, are not allowed to touch the fixed cost, because this is a management issue. So they are working on 20 levers. The first five levers is to reshape the portfolio and increase financial value. We are going in very details in terms of analytics. The second macro lever is to select the right customers and the right business to value growth. The third macro lever is to recover competitiveness margin, and the last one is about cash conversion cycle.
This last item that we have decided to amplify everywhere in the group for all the units facing the COVID-19 crisis. We've shown you here on the graph 12 units that have been under since day one of 2019, under the shift methodology. You have two color lines here. You have the blue line, which is the turnover, the revenue of those units. So you can see that those units where we perform shift entirely, we're representing a turnover of EUR 1.3 billion in a 12 months running. What you can see on the first graph on the top right is their EBITDA levels over the years were around EUR 100 million.
Just in a year following this strict methodology, we have been able to deliver plus EUR 40 million EBITDA without any gross effect. On this, the same on working capital, you can see that it's exactly the same perimeter, and there is no trick in the numbers. We are talking about EUR 1.3 billion revenue. We are talking about 12 units. You can see that their working capital level with that were about EUR 400 million in the history is now below EUR 300 million. So this methodology is working extremely well. Whatever the business, either we are in construction market, utilities, industry, telecom, we are deploying and working on an equivalent methodology for project-based business.
Once again, our teams are only incentivized on free cash flow generation and working capital employed. So once again, SHIFT methodology demonstrates this very robust process and a great weapon for Nexans to make this transformation more robust. Talking about transformation, let me hand over now to JC for the details of our financials before we take your questions and before my conclusion.
Thank you very much, Chris. I'm now on slide 17. As you can see on the slide here, you'll find the half year key financial figures for the profit and loss statement that demonstrate Nexans' robust performance over the first six months of the year, despite the challenging environment. As illustrated on this slide, Nexans demonstrate its capacity to mitigate the crisis and come out stronger. If we look at first at the sales, the group posted standard sales at EUR 2,895 million, which is a negative organic growth of 9.8% versus same period of last year.
Considering the COVID-19 pandemic outbreak, the lockdowns in our plants, the closures and the reduced level of commercial activity, we believe that this level is quite sound. Also, it shows that Nexans' early shift to crisis management, focusing notably on customer engagement and supply chain, was a successful move. Second, our margin rate landed at 21.5%. Again, 21.8% at the same period of last year. So quite resilient, I would say, on margin. On the EBITDA side, end of June, the business generated an incremental EUR 70 million EBITDA. As you can see on the graph, all businesses contributed to this increase in EBITDA.
Without COVID-19 impact that we estimate at EUR 64 million, our EBITDA would have been for the first half of 2020 at EUR 226 million. EBITDA rate of 5.6% in 1H 2020, against 6% in 1H 2019. That demonstrate, again, the strong resilience of the portfolio as well as a significant cost reduction. We did a 10% cost reduction decrease versus same period of last year. If I move now to the next slide, and we look at the EBITDA bridge and how basically we achieved the performance. You know, you are quite familiar now with this slide. We have been presenting it now in all our communication, as it is the best illustration of our efforts to boost performance under the new Nexans transformation plan.
So this bridge here follows our equity story along the three levels: cost reduction, SHIFT program, and growth initiative. As Chris explained previously, the group accelerated and reinforced cost saving measures to mitigate the crisis, protect our profitability, and preserve our liquidity. Clearly, the fact that Nexans has been in reorganization mode for the last 18 months was a key enabler to higher agility and allowed us to swiftly adjust our production capacity. We have tightly managed raw material consumption in accordance with the change in demand and volume, while using partial employment when possible. Achieving additional cost savings also was facilitated by our in-depth knowledge of our cost base.
So all in all, as shown in the bridge, EBITDA improvement was supported by EUR 49 million of cost reduction, which is, as you know, above our, I would say, trajectory on our equity story, which is circa EUR 70 million-EUR 75 million per year. EUR 19 million coming from the continuous deployment of Shift mainly these six months in the Middle East and Africa, South and North America, and Asia Pacific. And then EUR 60 million coming from our value growth initiative, mainly focused on high voltage and project. For the half year, the conjunctural growth, which as explained before, we do not bet on, had a negative impact, mostly explained by specific political environments. Over the past six months of the year, EBITDA lands at EUR 162 million, of which, again, EUR 64 million estimated from COVID-19 impact.
Excluding this, again, EBITDA, EBITDA would have landed at EUR 226 million, which again, shows and imply a solid improvement of 16% against the same period of last year. If I move now to the next slide, on page 19, and we look at the net income, you'll see that the net income comes negative at EUR 54 million, which is due to EUR 18 million net asset impairment in Brazil and Germany Metallurgy, 14 for Brazil, EUR 3 million for the German Metallurgy. And secondly, to a negative, obviously, estimated COVID-19 impact of EUR 75 million. This EUR 75 million of COVID impact, we explain it by further loss of EBITDA after tax, as I mentioned before on the previous slide on EBITDA. A depreciation of deferred tax losses in Germany, reflecting the updated business plan of our harnesses business.
Finally, some sanitary expenses spent to protect our employee and main operation, but for a small number of EUR 2 million. So in line with our transformation plan and ongoing reorganization, we have incurred a related cost of -EUR 53 million, of which 32 is linked to a restructuring plan out of the 50 million we announced for this year. And EUR 21 million, mainly for new plans of restructuring to adapt our footprint to demand, which is part of our ongoing restructuring spending. If I move now to page number 20 and we look at our net debt, I think we are all at Nexans quite proud of the achievement of the net debt reduction over the six months of the year.
You see, that there is an outstanding improvement of our net debt. We moved from EUR 709 million of net debt at the end of June 2019, to EUR 276 million, at the end of June 2020. That was supported by a record high free cash flow generation of EUR 370 million over the last twelve months. Thanks to an early shift to a crisis managing mode, focused on cash conversion, as Chris explained, and the launch of immediate action on the operation to closely and strictly monitor working capital, we were able to reach this historical level of net debt, which represents 0.8 times EBITDA versus 1.9 times, at the same period of last year.
This performance is even more remarkable, that typically the seasonality of our business makes the first semester always quite cash negative by about EUR 200 million, through increase of working capital. The result of this action has been beyond our expectation, and despite a sharp drop of sales, as you know, and some adverse FX impacts, we were able to generate EUR 392 million from cash from operation, EUR 419 million change, positive change, I mean, improvement in working capital. That more than cover up the cash out from the reorganization plan, mainly coming from the plan announced in 2019, and also our continuous, I would say, higher than normal CapEx level of EUR 210 million, mainly driven by our Aurora building, as well as our plant in the US, Charleston.
If I move to the next slide on page 21, and we look a little bit about in detail on the working capital and the, and the return capital employed. So as said before, we have improved operating working capital by over EUR 500 million in the last 12 months, and by EUR 273 million since the beginning of 2020, strongly reducing our com-- strongly improving and reducing our conversion cycle time. DIO and DSO decreased respectively by 5 and 12 days. The improvement on working capital did not, as in the past, coming from mainly subsea, but really also coming from our commodity cable operation, where all businesses improved significantly their cash conversion cycle.
Overall, over operating working capital as a percentage of sales decreased from 12.4% in June 2019 to 6.5% in June 2020, which is the first time such a level is reached. Finally, in terms of return on capital employed, performance is also quite good, with an improvement of 2.3 points versus June 2019, coming from the improvement in operating working capital, mainly. Restated from COVID-19 impact estimated, return on capital employed would have been even higher at 13.2%. If I move now to the balance sheet on slide page 22, I will not repeat, but obviously, a very strong balance sheet, stronger than last year, June. Stronger than December 2019. Obviously, the improvement in working capital, as mentioned before, is noticeable.
The change in net debt, I already also commented, which is at a record low level. And as you can see here, all obviously, the room, the headroom on our covenant for our debt are now even increasing further at a low 25% on the gearing ratio and about 1x on the covenant for the leverage ratio, which is again probably the best performance on our covenants since a long time. If I move to the last slide of the financial presentation, and we look at our liquidity, consequently of the operating working capital improvement, liquidity is at record high level, thanks to all the action we have been taking again on our businesses.
Cash on balance sheet stands at above EUR 1 billion. Net debt, as I commented before, EUR 276 million. Total liquidity of the group at June 2020 is EUR 1.6 billion, considering the EUR 600 million of untapped revolving credit facility. And if we pro forma this number from the proceeds of the sale of our Berk-Tek business in the US, total liquidity reach EUR 1.8 billion at the end of June 2020, which is again a higher level ever achieved. That being said, I conclude the financial part and turn back to Chris for the conclusion.
Thank you, JC. So on page 25, I know that some companies do like not to bring any guidance, but because it's, of course, a very fragile environment. But we decided to do one, and specifically on the three indicators that reflects our performance. So the EBITDA for the guidance 2020 would be between EUR 310 million - EUR 370 million euro for the year. Return on capital employed between 7%-10% on, compared to our initial guidance pre-COVID. Our free cash flow year will be positive, taking into account as well the very strong dynamic and efforts that we have set in H1. As a word of conclusion, I think the team make a fantastic work.
Once again, Nexans is demonstrating its capacity to generate a strong free cash flow in a very difficult environment. So that's, I think, a great achievement. We are now pressing ahead on even accelerating the new Nexans plan, despite this exceptional situation. We have reinforced as well our strategy around the three Ps, profit, people, and planet. On specifically on these topics and as well, innovation, we have intensive discussion with our tier-one customer right now on how to reinforce services for them and to answer to all their demand. Nexans, Nexans will get stronger and ready to make as well some evolution of its business portfolio. We have give you as well a signal with two divestments in the last quarter.
We will have to choose the verticals, business vertical, where we want to scale up and where we want to build our future and divest some other sectors, where we consider that we are not the best owner anymore. Of course, I'm sure you will have a lot of question about this evolution of portfolio, but I will ask you to keep them for November, for our Investor Day. I will not answer those questions right now, but of course, open the lines for all the other questions, that you may have regarding this half year performance. Thank you for your attention. Now, we open for the line for the questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask questions on the phone, please press star one on your telephone and wait for your name to be announced. And if you wish to cancel your request, please press the hash key. Once again, star one should you wish to ask a question. So our first question is from the line, David Barker from Bank of America. Thank you. Please ask your question.
Thank you very much. Good morning, Chris, Jean-Christophe, from Aurélia. I hope you're well. Just a couple of quick ones from me. I think you touched a little bit on, on the kind of trends in the businesses in June, but I wondered if you had any more, color on how the U.S. behaved through the quarter? And, and did we see any kind of impact on demand as the second wave and cases started to rise again in the quarter? So that's, that's my first question. And then the second quick one is, are you able to quantify the impact of what short-term working schemes, particularly in Europe, had on EBITDA in H1? And can you explain how you think this might, might roll off in H2 and as we go forward? Thanks.
Hey, David. Hope you're well. Thank you for your questions. I will take the first one. JC will take the second one. So regarding the constraint of the demand, now we've seen right now, as I told you, if... I like to take construction as a great indicator of the worldwide economy. What we see is a very, very strong demand. We know as well that we have been able to take some market share because some of our tier one customers have given attributes to Nexans on the way we handle the crisis, because we know that some of the capital goods company have closed factories straight away in March and in April, where we keep our factories open.
So we know that in order to take Nexans' share during the peak of the crisis, we get back some market share. But dynamics for Q3 in those sectors worldwide will be extremely strong. We may as well keep our factories open for the months of July and August in all the area where we have a strong demand. The main concern, where we remain extremely vigilant, beyond the COVID-19 potential second wave, is mainly on the Q4, because Q3 still, we are still running the project that has been launched eight months ago. On Q4, we should see the new demand, the new project to start.
And this is where we are a bit cautious, and this is as well what our customers are claiming in the last week when we met them. Same for automotive. Automotive is we've seen sort of a very strong V curve right now, but once again, we remain prudent. We have to mention as well that for the automotive, we have a big jump of our electromobility demand for harnesses for electrical cars, that had a jump of 20% in the last weeks. So as well a sign of a change of the demand which is good for us, because we are very well positioned on that sectors.
If I stay as well, still in the automotive, we have seen that our competitors in Japan and some in Europe are facing very strong difficulties, both in terms of execution as well in terms of their balance sheet situation. So we may as well benefit from some market share shift in the coming months. So this is what I can tell you for the present time. Once again, high voltage business is a smooth execution. Everything is strictly on budget, so no deviation there. And the only sectors where we could be a bit surprised because of the evolution since more than three quarters is the telecom sectors. Because we all know that the drivers of the demand are extremely positive and strong.
But the supplies remain, I would say, weaker than expected in some countries, specifically in Europe. And we have seen as well, in the last weeks, very strong attack from Chinese suppliers for fibers and as well, cables in the European market, with very, very low price. So this is certainly a sector where I remain extremely prudent. JC, regarding the impact on the EBITDA for you?
Yes. So basically, David, as you rightly said, we, we've benefited from some government subsidies in the first half of the year, due to the pandemic situation. These amounted to EUR 14 million, included in our EBITDA. However, at the same time we did that, you might recall that we have decided to pay to our frontline workers a special, I would say, a one-time monthly bonus of EUR 750. So that totaled about EUR 5 million over the quarter, the second quarter of the year, negative impact. So the net of the two is about a little less than EUR 10 million.
For expectation in H2, right now, we have, we don't see any, I would say, subsidies coming in, nor us, we have stopped also paying the worker-
Premium.
-premium. And, and therefore, there is no expectation on H2 from that.
Is that-
Fantastic. Well, thanks for, thanks for the answers. That's very helpful. And, and have a good summer, guys. Thank you.
Thank you, David.
Okay, next question is from the line of Lucie Carrier from Morgan Stanley. Thank you. Please ask your question.
Gentlemen, thanks for taking my question. Actually, I wanted to follow up, maybe on the first question that was asked, if I can press a little bit. I appreciate your view on the construction side, but obviously, there's probably a lot more catch-up effect in this type of business than we might see in other businesses. And so I was hoping you could give us maybe overall for the group, kind of what was the trend in June and what you have seen in terms of group organic growth so far in July?
Yeah. Hello, Lucie. Hope you're well. Let me color a bit more the June figures, because of course, Q2 has a difficult read, because of the big stop of demand in April. So for Building and Territories, June to June to adjust the months view, we are at a +10.9% organic growth. June to June, so very, very strong demand in June and reconfirmation very strong in July as well. On August, certainly we'll be at a very, very strong demand, because for the first time in years, we keep our European factories open.
Regarding Industry and Solutions, you have seen from quarter-to-quarter, or if I have a look on 2019 versus 2020, Q2 2019 versus Q2 2020, we were at minus 27%. But when we look June to June, just on the monthly view, we are at minus 13% for the month of June, on roughly around a bit lower, closer to 10% in July. The biggest drop that we have in the Industry Solutions remains the aerospace business at 30%, but as well mining business in the U.S. Regarding Telecom and Data, if we look Q2 to Q2 year-over-year, we were at minus 21%.
On the June-to-June, we are at minus 13%, and in July, we are back to the level of last year. So it's a very strong improvement in the business. I'm still a bit disappointing on the fiber fiber evolutions year-over-year, because apparently a lot of European customers are taking the benefit of a very low price from China, but maybe it will change. Regarding high voltage, it's a smooth evolution year-over-year, but here it's we cannot really talk about organic growth because it links to project phases month per month. So now we told you that we had a very, very strong Q1 versus Q1 2019.
More or less Q2 versus Q2 last year is minus 2.8%, but, beyond this number, there is no specific information in terms of risk of disruptions or risk of execution. It's just, the evolution of the project phasing, which is like that. On Q3, we remain stable as well for high voltage. Does that help you a bit more, Lucie?
Yes. Thank you very much for the call. That's very, very helpful. My second question was, on, on the free cash flow. I mean, you, you rightly highlighted, obviously, you had a different seasonality, this first half compared to the, the previous years, I guess, you know, to some extent also linked to the disruption and the contraction in the business. When we look at the second half free cash flow evolution, how should we think, in terms of working capital? And here, I'm thinking about both the advanced payment on some of the project business, high voltage, but also, do we need maybe to increase the working capital to kind of restart some of the cyclical businesses?
Sure. I will take the question, Lucie. Thank you for asking. So, basically, all the improvement, we've made, I mean, definitely as I presented, there is a, there is a, a mechanical effect due to COVID on the free cash flow that, that explain part of the improvement. But the most significant part is really the initiative and, and work that has been done by the teams to improve, to improve the, the number. And the, and the true, I would say the, the perfect way to, to, to see that is a percentage on working capital on sale from, from again, 12%-6.5%. So I mean, this is obviously a major improvement, which is a one-off, one-time improvement in our working capital, that generated a lot of cash flow in, in, in this period.
In the second half, our objective, and we are confident in maintaining a 6.5%-7%, I would say, working capital on sales. We are expecting an increase in volume in the sales, and therefore a mechanical increase in the operating working capital due to the restart of the business. However, in terms of percentage, again, our objective is to maintain the low level of 6.5%-7% in terms of percentage of sales. At the end of the year, we are confident that we will, despite basically what we announced pre-COVID, generate a positive free cash flow for the year 2020.
With again a little bit more consumption of cash in the second half, but positive free cash flow. And then after that, to be included, there is a sale of the Berk-Tek business that will increase even further more. But even before the, I would say, proceeds of the sale, cash flow will be positive in 2020.
Thank you very much. If I may ask a last question, please, which is kind of more mechanical. You were just mentioning the Berk-Tek disposal. Are you considering you are selling this in the current quarter, are you able to tell us roughly what's the lack of EBITDA you will have in the fourth quarter from Berk-Tek and metallurgy? I mean, I seem to try to calculate it at about between EUR 5 million-EUR 10 million, but just wanted to have your confirmation.
Sure. It's, let's put it this way: it's a EUR 20 million EBITDA business. It will be off our financial in September, so you can calculate about three to four months of lack of EBITDA on a EUR 20 million average EBITDA, so it's about EUR 4 million, basically, we're missing.
Metallurgy was not very-
Zero, not contributed. In fact, a slightly negative EBITDA.
Okay. Thank you very much for the clarification.
Thank you, Lucie.
Thank you. Next question is from the line of Sean McLoughlin from HSBC. Thank you. Please ask your question.
Good morning. Thank you for taking my questions. Just wondering about CapEx related to Lucie's question around cash flow. I mean, any changes to previous communication, more caution or more confidence on your spending through the rest of the year and into 2021?
So, CapEx, again, there's two big part of the CapEx. Roughly, the CapEx before COVID was EUR 300 million. That was our plan for this year. About, I would say 160, 150 million of that, about half of that, was the strategic CapEx I mentioned. On those two CapEx, we are on track. We will, we will spend the cash... in the year as planned, so no change on that. On the remaining EUR 150 million, that's basically maintenance CapEx in our businesses. We have obviously, with COVID, looked very carefully at every, I would say, euros of those EUR 150 million, making sure that we were, spending wisely the money, and, and, and there was a necessity to do that.
And we have reduced that number quite significantly, about EUR 60 million. Again, not, not obviously endangering the business. Mechanically, the fact that some of our plants in the second quarter were running at a lower productivity, meant that there was lower need for maintenance CapEx due to lesser utilization of the machine. Between that and as well, the scrutiny and the careful decision on investment, we've reduced CapEx by about EUR 60 million versus the total target of the year.
Thank you. And just a question on electromobility. I think it's quite a supportive trend. If you could just discuss... I think you've said in the past that certainly, there might be lower cable content in an EV versus a traditional IC, but it's higher quality. Is that still the trend? Is it a higher margin switch for you? And, you know, is this a potential area where you see kind of more involvement also through M&A in future?
It's a good question. Thank you, Sean. I hope you're well. No, I will not say that the electromobility is still to the better margin. It's more the reverse, because we are not yet at the scale level of what we have on the combustion side. So there is still a lot of significant effort on investment, both on car manufacturers, on the harnesses makers, to make that business profitable on the long run. So we are more in the ramping up CapEx phase on this business. It is less wires, but more complex. Once again, we are not, Nexans is not supplying the ZOE of Renault, which is a small car.
We are supplying, and with all respect I have with Renault, which has a record in terms of electrical car production. But we are supporting only the German car manufacturers, so namely Daimler and BMW on those aspects. So it's pretty big on important sizable hybrid cars. So the demand is pretty strong. Do we have any plan of M&A on that sectors? Not right now. We want just to benefit the fact that we are a very strong balance sheet, and as well a very profitable business in this harnesses world, to take the opportunity of some competitors that are suffering a lot before COVID and even more during COVID.
We have a lot of customers calling us to support them in their model deployment. So for the moment, we remain open to discussions to get market share, but we are not on the M&A road for this business.
It is true to notice that one of the impact of the COVID situation accelerated the share of electrical mobility in the sales of our harnesses businesses, which is quite high today versus what it was before and versus our main competitor, which is, we believe, a good thing.
Thank you.
Thanks, Sean.
Okay, next question is from the line of Akash Gupta from J.P. Morgan. Thank you. Please ask your question.
Yeah. Hi, good morning, everybody, and thank you for your time. I have three questions, please. Maybe first one on the guidance. I mean, it's quite useful that you start, you came out with the guidance when some of the other companies are not. But I'm just confused a bit, because your range, EUR 310 million-EUR 370 million, is wider than what you gave originally before COVID-19. And then you also have four no's in terms of what is excluded from your guidance. So if you exclude these four no's in terms of change in macro, change in COVID-19 situation, market demand, second wave, then can you please help me explain or understand what, what, what needs to happen to—for you to reach on the lower end, and what needs to happen for you to reach the upper end? So that's question number one.
Hello, Akash. Thank you for your question. Hope you're fine. Yes. I mean, we purposely took a wide range because of the current situation. And the... I mean, as you know, a big part of our business is on the commodities and still very potentially impacted with low visibility and very short-term backlog. So this is why we have decided to increase the range. We usually communicate ranges about EUR 40 million wide, and we thought it was in this current time, we preferred to give a range than not give a range or not give any guidance. We prefer to give guidance than no guidance. But we purposely decided to increase the guidance, the guidance, the range of the guidance.
Obviously, our target is to be within the guidance and to be at the midpoint of the range. This is our objective. I would say the fact that we have also some disclosures just again reinforce the fact that, the market today and the environment is still extremely fragile with extremely low visibility. We're hearing very mixed signals about a very low Q4, a good Q3, a low Q4, and a potentially low Q1. Probably could be at the level of the Q2 we've had. So, I mean, it's again, it's very uncertain, and we felt that a wider range was making sense.
Thank you. My second one is on working capital. So you said you expect 6.5%-7% level to continue in second half of the year. Maybe if you look at on a 2-3-year view, then could you sustain these low level, low working capital levels into 2021 and 2022?
That's the objective, definitely. I mean, I think again, as Chris explained, we've done a very in-depth job with the businesses over the past semester, over the past six months, and mainly in the second quarter. Plant by plant, operation by operation, to both shift our portfolio and focus our priorities and resources to our top customers, not addressing, again, the 17,000 customers the same way we've been doing in the past, focusing on the top one. That's one thing. And then, obviously, the second thing, very strict target in terms of inventory management and cash conversion cycle. I mean, this is something we are reviewing with the executive committee of the company on a weekly basis.
And this is why we are confident that this level, whether it's 7.5%, 6.5% or 7%, I mean, to be seen. But definitely the objective is not to go back to the level prior to this year and above a two-digit percentage. So to answer your question, confident that next year we will be at the same kind of level in percentage of our OWC on sales.
If I may add, Akash, this is Chris speaking, that we took this crisis as an opportunity to show that the SHIFT methodology that we apply in some units could be a very huge benefit for all the groups. So, we took the working capital SHIFT methodology and applied it to 80 units, ex zero, at one go, during three months. All units received from their management cash conversion cycle objective. They are receiving as well cash conversion objective for September and for December, because the objective is not to make a window dressing of our account, but to sustainably improve the cash conversion of all the business.
We have as well reinforced strongly the training around cash management for all our top executive, taking the benefit that they were at home office and certainly have a bit more time, because not traveling, to keep learning and reinforce their financial acumen on that topic. It was, I think, a great time for this element.
I would like to add, Akash, on top of that, in the achievement of the working capital at the end of June, there are no artifice or any short-term one-off goals taken to reach a target. We have not extended payable, for instance, not paying suppliers, not trying to pay suppliers at the end of the month to improve our position. We have not done that. We have not increased furthermore vendor financing or factoring of receivables to again try to improve the picture at the end of June. So all of that really is all the improvement is really done again on the sustainable way, as Chris mentioned, on the business side and mainly managing cycle times and inventory.
Thank you. My final one is on 2021 targets. I see there is no mention of 2021 targets in today's release. Maybe if you can update on where do we stand on that? Thank you.
Akash, can you give me the name of a company that commit on its 2021 target right now?
I think, well, for me, JC, it's a difficult question. I'll leave it for you.
Thank you.
Yeah.
Thank you, Chris.
No, I mean, we said that we would communicate on 2021 when we do our investor day in November. We said that in July, we will communicate the guidance for 2020, and in November, we will talk about 2021 and the new equity story of the company. Just, not giving any numbers, but just to give you some information about where we stand today, we believe that basically 2020 is kind of a year on hold for the company in terms of the equity story. But as soon as 2021 confirms that it goes back to, I would say, a more normal track, we will be back to our EUR 500 million.
Might not be 2021, might be 2022, but it will be in excess of EUR 500 million anyway, for the simple reason that we have, again, done a lot of work in advance on the cost reduction that are sustainable improvement on our cost base. You see here, first six months, we've done, on the six months alone, EUR 49 million improvement on our cost base, which is, which is above, I would say, our normal improvement year after year on our equity story. So this is, this will be sustainable, and we'll continue to benefit from that. And, and at the same time, we are, we are now starting now, in fact, and it will have a full impact in 2021, have the positive impact also in the additional subsea capacity that we are building.
Thank you.
Thank you, Akash.
Okay, our next question is from the line of Artem Tokarenko from Credit Suisse. Thank you. Please ask your question.
Good morning. Thank you very much for taking my questions. I have two, please. My first one is around the EBITDA bridge. Could you help us with understanding better the EUR 64 million COVID related impact, whether how much of that is coming from volumes, how much from some cost and efficiencies, and also thinking about H2, how much more P&L cost savings you expect to deliver this year? And my second question is around the pipeline in high voltage business. Would you say that there are any changes to the pipeline because of COVID or because of the Green Deal, maybe on the opposite, more positive side? And also, are there any big projects you're working on for H2 this year? Thank you.
Yes, so I will take the first question. Artem, I hope you're fine. First question is regarding EUR 64 million. It's purely volume. It's really looking at what we achieved in 2019 in terms of sales and volume when the company was operating on a normal, I would say, circumstances, with plant running at 75%, 80%, 85% of capacity. We looked at obviously all the plants we shut down for weeks, one week, two weeks, 10 days, depending on the plant and the situation, as well as some of the plant where we reduced capacity from 80% and 85% to 50%. So this is really the EUR 64 million is purely a volume impact. It doesn't include anything else.
It's a mechanical calculation from, I would say, what we budgeted this year and what we achieved last year when the company is running on a normal path. In the co- for the second question, on the financials, on the cost reduction side, I will not give you a number of what we will do in H2. Definitely, we will continue to work very hard in improving our fixed cost base. We have definitely done, as you see, a big part of the job already in H1. We will continue to do that. But, what I can say is that, our total cost reduction will be higher than last year, and will definitely put us in a situation where we will exceed the number.
If you recall the number, the commitment on our equity story is EUR 210 million cost reduction in between 2019 to 2021. We are almost, I mean, way above at half, half point of the three years, we are way above that, half of the EUR 210 million, and we will overachieve this number at the end of the equity story.
Yeah, and regarding, Artem, regarding your question on the pipeline, so, of course, we, as you can see on the page 13, our load is pretty strong up to mid-2022. For our Halden plant in Norway, same for our plant in Charleroi, which is fully loaded up to 2021, the end of 2021.
Charleston, USA, is 80%, 80% loaded, between 70%-80% loaded, thanks to the deal that we have signed for 7 years with Ørsted. We are, of course, start to discuss some big interconnection project in NorthConnect, NorthConnect. There is as well growing, but there is as well a very, very strong demand on wind offshore. For the moment, we have not felt any delays in terms of execution, neither demands for wind offshore business. Neither yet an amplification but given what all the government are announcing everywhere in the world, we are very positive, maybe not in the short term, as some, but on medium terms, on the development on specifically wind offshore business.
So we make sure that we keep our capacity open for big moves on that direction.
Very clear. Thank you very much.
You're welcome. Next question?
Okay, yes, our next question is from the line of Benjamin Terdjman from Kepler. Thank you. Please ask your question.
Yes, good morning, everybody, and thank you for taking my question. I just have a quick one, kind of technical one. So, since you are selling the German metallurgy and Berk-Tek, should they be put under IFRS 5 after H1? And therefore, does your EBITDA guidance consider the disposals?
So the answer to the question is yes, they are under IFRS 5 in H1. You can see in the balance sheet, we have EUR 27 million in the line asset held for sale. So they are included in—they are treated as IFRS 5. In terms of guidance and EBITDA, it is included. It is included in the EBITDA and the ROCE guidance. It is not included in the free cash flow for the reason that we communicated our equity story before our M&A and equity transaction. So we wanted to be consistent with our equity story. This is why we say positive. Obviously, if you include that and you add that, the cash will be very positive.
Okay. Thank you very much.
Merci, Benjamin. Next question?
Next question is from the line of Jean Granjon from ODDO BHF. Thank you. Please ask your question.
Yes, good morning. Just a few questions, please. The first one concerns the trend for the H2. Could you give us some more color regarding what do you expect for the organic growth for the second half, after the -9.8% for the H1? Do you expect to reduce this decrease during the second half? My second question concerns the objective for the cost cutting and the SHIFT Plan. So you expect EUR 210 million for the cost cutting and EUR 1 million for the SHIFT Plan. Do you expect more than that due to the acceleration of the plan? And can you give some what do you expect until 2021? My third question concerns the cost or the exceptional costs.
So there was EUR 53 million exceptional costs on the PNL for during the first half. What do you expect for the second half? And my last question will concern the fiber optic market. Could you just remind us what is your exposure to this market? And you mentioned some more subdued or cautious comments regarding the market due to competitors. So what do you expect for this market, fiber optic market, sorry, trend for the next quarter? Thank you.
Okay, Jean-François. So thank you. We have four questions. JC, I propose that you take number one and number three, which is about organic growth for H2 and about cost reduction. I will take number two and number four-
Okay.
-which is about the shifts on cost reduction on fiber.
Sure. So about H2 and organic growth on H2, so definitely, I mean, the way we see the year is Q2 was the very low point, because Q2, by itself, we had a flat Q1, negative organic growth in Q2 of 19%, negative 19% in Q2. We foresee Q3 to be slightly better than Q2, but not obviously breakeven, I mean, flat organic growth. We're still in the range of -10%-11% for Q3. And then, slightly better, but still negative, single digit negative for Q4. Obviously, the trend for that, the main trend for that are the following, no impact on the high voltage, as we discussed, whether it's land or sea.
We see a slow recovery on the, despite a good month of June, as Christine described, we see a slow recovery on the harnesses business. It continues, I would say, impacting in the third and fourth quarter before it comes back to a more normalized level in 2021. We have also, in the industry group, some businesses that are quite heavily impacted. I name, for instance, the aerospace business, which, as you know, is not that significant in the total portfolio of Nexans. It's about EUR 100 million of sales, but quite contributive in terms of EBITDA.
And it's a profit driver in the company, and a lot of the volume goes to Airbus, and Airbus right now in a difficult situation, postponing orders and so on. So we see at the same time, a rebound in rolling stock in industry. Automation is in between. So there are pluses and minuses, but globally, and same thing with telecom and data. The recovery will not be immediate and not starting for the fiber installation, for instance. So it will take a little bit of time. So it's. I would say we see more, I would say, a progressive improvement, but continuous, I would say, negative organic growth versus a very good H2 we had in 2019, on most of our business except, except, high voltage.
Regarding the second question on cost reduction on SHIFT. Yes, we have indeed initial plan and objective of cost reduction of EUR 210 million. We will certainly reinforce these numbers in the months to come. We have already taken some actions on some unit to reduce the cost. There will be no announcement in terms of restructuring, because I think the restructuring we've done a year ago, which is still in motion, is a very strong help right now to face the crisis. But here and there, we will reinforce cost reduction in some areas and some businesses where we consider that medium-term demand will be weak.
Regarding SHIFT program, potential slight delays in terms of EBITDA generation, because in H2, but not yet confirmed, because we've put all the focus of the team on the working capital improvement. I think you have seen, once again, the noticeable change in terms of ratio of working capital. This is thanks to SHIFT team. So very, very strong focus on working capital more than EBITDA in Q2 and as well in Q3, Q4. But we are very confident to achieve the target in 2021, as planned for SHIFT program. Regarding the question on-
Okay, so the question on the bridge EBITDA, we have indeed a negative impact of EUR 15 million, which is not due to COVID. That is why, I mean, it's not excluded on the far right of the bridge. It's mainly due to political situation that we have experienced, mainly in Lebanon, which is started way before COVID and not COVID related. Lebanon is a country in crisis, political crisis right now. It's quite a strong contributor. It's not very large in terms of sales, but it's quite contributive in terms of profit making. Right now we see disruption in that country impacting the business. The other part was in the other part of the EUR 15 million impact was coming from the building and territories in North America.
We implemented, we implemented, SAP beginning of the year, end of last year, beginning of the year, and we had some disruptions due to SAP in H2 of 2019, and we explained a little bit of that, but the most part come from Lebanon. On regarding the last question for fiber optic, our exposure is about EUR 200 million. So, we know that we have a lot of question here, on there, on, on that sector. Sorry. But, we have, we are not a leader, because we, we are far away from the, the top leaders of the telecom, sectors that are namely Corning, CommScope, Prysmian, Sumitomo, Fujikura, Furukawa. We-- so but we are, a niche player with, a great profitability.
We have for the year to come, for the months to come, we are okay. We are positive because we have already signed contracts with our customers, so the price are fixed. Volume as well is market share, we'll say, is fixed. But we are wondering what will be the evolution midterm in that sector. The demand will be there, but once again, as I told you, each time, volume doesn't make profit systematically. And the big question is what will happen from all this capacity available in China, both in fiber and cable, where all these Chinese suppliers spreading their product everywhere in the world, sometime at very, very low price and very, very low quality.
So we are talking with our teams to get their vision of the future price evolution on these sectors. But once again, very limited exposure in the meantime.
Could you consider a possible disposal for this such a business?
As you've seen, we have decided to dispose half of our telecom business in the U.S., specifically because it was a LAN, a copper-type product, so very mature products on the customers one solution now. So there was only two solution. Either we acquire an equivalent of Leviton doing the connectics to move from components to solution. Either we are divesting our cable part, is what we have decided to do. For fiber optic, of course, we are a small player. So that's a question, strategically speaking, and we get back to that point in November.
But we, there is as well a positive things here, is that in fiber, we are doing both the connectivities, accessories, and as well the cables, so we are able to provide a full system offer for our customers. So that help us well to follow the demand of the customers, which was not the case of LAN copper.
Okay. Thank you very much.
Thank you, Jean-François. Stay safe. We still have a lot of questions, apparently. Next question?
Next question is from the line of Lucie Carrier. Oh, sorry. It's from Luigi De Bellis, from Equita. Thank you. Please ask your question.
Yes, good morning. Just one question for me on the high voltage. We have seen very strong margins in first half. How much do you think is sustainable in second half, and also look into next year, considering your production schedule, the activity, installation, and backlog? Thank you.
Hello, Luigi. Yes, hello, Luigi. So, indeed, we have seen a very good H1 in terms of margin in high voltage, mainly in subsea. There are 2 drivers that explain the good performance in EBITDA for high voltage over the 6 months. The first one is on subsea. The execution of the project went very well. Margin is in line with expectation, but we've had the good surprise, and one could say, that we had a lot of repairs in the first half of the year.
We did four repairs, and you know, repairs are basically damaged cables that you need to fix very quickly because there are significant losses for the user of the seller of the electricity and the user of the cable. So those are extremely profitable, I would say, work. We've done four. Usually we do a little less than that, probably one or two, I would say, per two per year, and we did much more. So that definitely help, I would say, H1 performance in subsea and boosted margin EBITDA on the first half. Difficult to say what will be H2 and next year in terms of repairs, because by definition, they are accident that you cannot foresee.
The second driver, which is explaining the total high voltage performance also, is compared to last year at least, and that will continue with the improvement and of the restructuring of, of the land part. We were, still, we were in 2019, we lost EUR 24 million in that business, EUR 12 million in the first half, EUR 12 million second half. We are as per our plan, breakeven, following our restructuring, efforts, on this business. So mechanically, there is, also a big improvement in the, performance, financial performance of the, of the total division due to, due to the restructuring of, of that business.
So to explain, I would say that H2 is likely going to be at a lower level of margin in Subsea than in H1, unless we get more repairs again, like we did in first half, and difficult also to say for 2021. But 2021 we have larger project also with good installation, so we should see a good level of margin in 2021 in Subsea.
Thank you very much. Very clear.
Thank you, Luigi. Next question?
Next question is from the line of Lucie Carrier from Morgan Stanley. Thank you. Please ask your question.
Actually, for taking my question, but Luigi just asked it, so I will go back in the line.
Okay, thank you, Lucie. We have another question? Maybe the last one.
Yes, it's from the line. Mm-hmm. Our last question is from the line of Akash Gupta from J.P. Morgan. Thank you. Please ask your question.
Yeah, thank you for the follow-up. It's on Charleston factory. So currently you are using for Seagreen project in the UK, and this factory is for subsea or offshore wind projects in the US. My question is that, maybe if you can talk to us about outlook for some of these offshore projects will come from, and how soon do you expect you will start producing cable for US offshore wind project? Thank you.
But we have decided to launch the first batch of production of Charleston with the Seagreen project. We like this project because it's a pretty big one. But we don't want to use Charleston to supply Europe, and of course, it will be a bit against our initial philosophy. So the objective is really to turn as much as we can, more than 80% of the capacity of this unit for North American-based project. That will be the case in 2022. The first production of offshore will start in the Q4 2021.
Thank you.
On their own time. Thank you very much. We thank you for your attention. We have a lot of question, but I think, now we spend more than an hour and 30. We want to manage your, your times. We take a lot of calls, after words in the next days. Thanks again. Stay safe. Have a great summer break. Thank you very much. Bye-bye. Thank you.
Thank you very much.