Prysmian S.p.A. (PRYMF) Q2 2026 Earnings Call Transcript

Good morning, everyone. Thank you for joining this call, Quarter 2 Results. We are super excited to highlight that this is the best quarter ever of Prismian, 730 million EBITDA, 15.4% EBITDA margin, 9.4% organic growth. So as you see, it's a great quarter from the numbers perspective. It's also great in terms of the achievement of the upscaleless and modest deals with a 10 billion incremental revenues in the optical space over the next 10 years. Also on the sustainability side, we exceed our expectation with that 46 percent of the current revenues lead to sustainable solution. When you read 46%, you need to read almost 10 billion reviews, where we provide customers with low-carbon footprint and solutions that help them achieve their own targets. 42% is the amazing reduction of scope 1 and 2 over the baseline of 2019, setting great confidence in achieving the net zero by 2035, well ahead of everybody else. Moving to this quarter two perspective, I think it's important to share this different perspective, which we are very proud of. You see, in quarter two, we delivered, we created the EBTDA higher than what has taken us more than 12 months in the past. In 19, 2018, sorry, we generated 700 million EBTDA over the full year. In 2022, it has taken us six months, one semester to deliver a similar EBTDA. Now we did this in one quarter. This is a strong sign of the effectiveness in the good execution of the strategy that we designed years ago. So the strategy is basically set on expanding the transmission business, growing leadership in North America thanks to the acquisition, and also shifting our focus from cable manufacturing, that was our past driver of growth, to solution product. Entering to the digital solution space with more detail, I think you read the press release. I'd like to give you more color around the deals. So these are test media revenues that applies to the optical space. Forgive us, there is a time lag in the slide change. You see on the bottom of the right that our digital solution business covers three sets of bits. One is optical, which accounts for 40% of the revenues in digital, connectivity, so components to connect cables, and MMS, which is copper cables. Both, the last two accounted for 30% of the total revenue. You see on the left chart, the green bars explain our involvement in data center activities. If the horizontal line sets the scene relative to the past situation, where we had in 25 green data center exposure, data center exposure in green and in gray, the fiber to the home business, you see that we're adding this 1.1 billion at run rate incremental revenue. At the same time, we are reallocating the best part of the original fiber-to-the-home business to data center to gain even more share. And when you look at the 2031 perspective, you see that 90% of our revenues, and even more in terms of BTDA, belongs to data center expansion. And we see ourselves as the company enabling the data center expansion better than anybody else, because alongside optical, we have the whole range of a broad range of power cable products. Lastly, to mention is the submarine telecom interconnection, long haul, thanks to the exterior acquisition. So this is definitely a transformative opportunity for the digital social space in Brisbane, from a very sarcastic business into a fast-growing business that is meant to achieve a sizable EBTDA by 2020-31. We'll give you more detail about this at the next Capital Market. Moving to the segment of business, transmission continues a strong journey in terms of ABTDA, margin at 22%, 21.2%. In terms of organic growth, extremely solid, 14.3% in quarter two, and in absolute value, 180 million in quarter two. So, when you compare this to, say, last year, you see almost 60 million EBITDA accretion. In Power Grid, we confirmed what we basically told you last quarter. You see a significant rebound in EBITDA margin from 12.4 to 13.8, sequentially, with 135 million supported by strong demand in US and also strong demand in Europe but I would say that there is a kind of solid demand across all the region because the strengthening of the grid is a very common and a landing driver of growth across all segment or market in our geographies. The organic growth was particularly satisfactory at 13% increase in this quarter. Moving to industrial construction, also here we put significantly 228 million EBITDA, 20 million sequentially over 2025 quarter two, with 5 million Edwin coming from Forex, so even better when we excluded the Forex effect. EBITDA margin rebounded from the 13% of quarter one. We had a very strong quarter two, especially in the United States, with a very strong month of June inside this quarter, too. Organic growth in the U.S. is higher than the group average, 13.4%, driven by data centers, but not only. Also driven by the non-residation market that has shown different signs, new signs of improvement vis-à-vis a kind of a flattish situation in 2025. Specialties is still suffering from weak demand in elevators, in oil and gas, and profitability under pressure in the automotive business that is remaining with us. But we maintain it stable. It's a solid driver over EBITDA in different regions. And it's a nice complement to the industrial construction business because those are sophisticated cables. that we coupled with industrial construction business to electrify equipment alongside building so it's important complement and a portion of our portfolio and digital digital is the the star of the quarter you'll see the the standing a bit of margin 24 coming from 20.6 in quarter one um 24 is not the end of the game it's not the end of the story the The 24% will go further up in the future. So this is said to be the most profitable business from the bidder margin perspective that is selling portfolio, beating the transmission business at 21% bidder margin in the quarter. You see how sizable is the increase over quarter to 25, 60 million, out of which 30 million are attributed to the perimeter of change. last year we had channel including the port only for one month this year is for the full period but the rest from 16 to 30 to 90 is channel from 90 to 122 is a disease original perimeter and you see the power of pricing uh efficiency scale and the shift from farmer to the home to that was set. Our sustainability and innovation KPIs are also extremely satisfactory. The 25% recycled content in quarter two is a sign of a lower reliance on the tight copper market in the United States. We recycle more waste than we used to do in the past, lowering our costs and shortening the and securing the supply chain and shortening it in time. 46% of revenue is augmented already before. This 32% of vitality KPI is also an important indicator of a crucial and key for this company is to continue innovation. This is telling that one-third of our revenue has been achieved through products that we launched the market in the last three years. And one third of our revenue accounts for $7 billion. So we have, in this year, $7 billion of revenues generated by new products. Why is this important? Because new product means a higher share of wallet. It means higher profitability. It means a different pricing power. It means a different value provided to our customer to strengthen our relationship. So key parameter for our growth in the future as well in the past. To example, the innovation idea, Holocorofibre is an innovative solution to convey data through air, so a lot faster, 30% faster than standard glass technology, allowing the data center to be further spaced out, evolving to create a congestion on existing energy grids, which is the real constraint to the data center storage. and also in the transmission business a very innovative solution to bury cable at a deeper depth greater depth than the standard methodology making the network more secure more resilient and providing customer an upside in terms of reliability of the connection let me innova to francesco for more details on the financial result of the quarter thank you very much massimo and good morning to everybody.

As usual, let me use the profit and loss to recap some of the messages that Massimo has already passed. The organic growth in the first half was in excess of 7% with a very good acceleration in the second quarter, reaching 9.4% in the second quarter. I have to say that all the segments of the company performed extremely well in terms of organic growth, with a growth of 14% in transmission, 13% in power grid, 9% in IRC, 18% in digital solution, with the only little exception of specialties, which was substantially flat, was likely negative in the quarter. The performance was very strong in terms of EBDA, as Massimo said, the best yet quarter at 730, with a sequential increasing EBDA margin at standard metal at 15.4 percent and with a very substantial growth from the second quarter of last year plus 125 million but also sequentially from Q1 plus 130 million as you see from the right box of this chart. The lion's share of this growth was taken by transmission and digital solution plus 54 million and plus 65 million respectively. Of course with the support also of the great performance of channel that massimo mentioned power grid improved the margin sequential which is very important and as as you have seen organic growth in power grid both in europe and north america was extremely positive electrification and particularly idnc performed the best quarter in the last, I would say, 18 months. So very positive, specifically in North America. Very good note also on the group net profit that reached 569 million in the first half, by far the highest ever. And this is other than the EBDA and the operating result supported by a very nice drop in financial charges that you see here, a slight improvement also of the tax rate. And this assess our group net profit estimate for the full year in excess of the 1.2 billion, which will mean a growth of earning per share, which is significantly beyond the original targets that we have set. Let me now turn to the cash generation, which was of solid, close to one billion in the last 12 months of June, a bit lower than the one that we had in Q1. The main reason, I would say the only reason, is the very high impact and adverse impact of the rising metal prices, which reached actually the peak in the Q2. and which will progressively decrease in terms of adverse effect in the second half. Massimo will show you the updated guidance on the free cash flow, but we plan an extremely strong second half on the back, of course, of the contract with Molex, which will bring in a very substantial down payment. But even more importantly, on the back of a very strong cash flow coming from the transmission business. This year, the transmission business cash flow is mainly concentrated in the second half. And we are also doing great in terms of improving our working capital performance and efficiencies. And all this will contribute to this quite, I would say, strong target that we have set for the year. Massimo will explain in a while. I think I'm over. Back to Massimo.

Francesco, thank you. So quickly, two main challenges for the PTDA. We raised these 2.7 billion of the original guidance to 2.850. So range of 2.8, 2.9 is worth saying that we have super high confidence to be the 2.850 and to end up in the top portion of the upper part of the range, 2.850, 2.9. You'll see that 2850 itself is already quite close to the target we set for 2028 and the Capital Market Day 2025, which means that we will certainly in the next quarter one, quarter two, 26, seven, sorry, we will go out for a new Capital Market Day, providing and disclosing the trajectory from 2027 through 2030, 3021, with organic growth. and the strong driver explanation of where we see this growth in the different geographies. And free cash flow is an amazing number. 1.7 billion is, of course, the high-save free cash flow, the company. It is true that there is 250 million coming from Molex as a down payment, but equally important to mention that there are significant increasing CAPEX, partly to support digital solution capacity expansion, But partly to start showing the growth that we had to underline that we will disclose next year, the capital market day, this is organic across many segments and many geographies, North America, but also Europe, but also other regions, and transmission. So the 1.7 is the effect of molex on the one hand, some additional capex in 26 that will continue stronger in 27 and beyond, with the efficiency and the additional BTD8 of setting the metal impact versus the original guidance. And the metal impact is around the 250 million euros. With this, I move to the closing remarks. So great performance, super satisfied about the change in pace of the company. The company showed this quarter. As I said before, we have this unique opportunity to be the only one serving the data center with the whole product range they need for this function. We are going to invest in growth in 26 and beyond 26. And the acceleration pays the way for a new capital market in the start of 27. I would like to end over to you for your question and more details about our success story.

As a reminder to ask the question now, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. A moment for our first question. We will now take our first question from the line of Danila Koster of Goldman Sachs. Please ask your question, Danila. Your line is open.

Hi, good morning. Thank you so much for taking my questions. I have two questions. I'll ask them one at a time. But first, just wanted to follow up on sort of the going forward. How should we think about fiber margins from here? Should we think about sort of having a linear step up? I think in the past, you have commented about the mid-20% EBITDA margin, given all that has happened in that segment and your new exposures. Is that still appropriate? And sort of how the path is more linear, more back-end loaded? If you could give some color on that, and then I'll ask the second one.

Yeah, the path is pretty linear through 2029 because the shortage of market will continue until then. And we have, I mean, accurate targets that will disclose the capital market day. We see as in the upper part of the range of 25% to 30%. So we will beat the 25% mid-20s. And consider that not only fiber will drive the growth, but also connectivity, especially the channel portion which is also partly exposed to the center will support the BTD emerging growth in the coming quarters Sorry, 25 to 30 that's kind of like for the 29 period that you've mentioned or that's sort of throughout the period and then you It's linear from 27 to 28 to go as high as between 25 and 2030, and starting 25% and 30% by then.

Okay, thank you. And then just a second question. I think in the past you had tied up doing an update on the medium-term targets with sort of your M&A ambitions. I wonder if should we read anything into the timing of the CMD and that, if you could update a little bit how you're progressing on sort of your ambitions there.

We are making progress. we analyzed a lot of companies in the last 12 months and uh it could well be the case that we cannot comment much but could well be the case that before then we'll have a perimeter change so that new ambition will improve both organic and mna uh perimeter benefit very conditional benefit from the payment got it thank you so much i'll go back into queue thank you daniela Thank you.

We will now take our next question from the line of Vivek Mehta of Citi. Please ask your question, Vivek. Your line is open.

Thank you very much, everyone. Good morning. Hope you can hear me well. My first question is around the Molex deal. You've highlighted the figure of over 10 billion of cumulative optical data center revenues of which Molex is five and a half billion. So within the other portion of that figure, could you maybe give us an indication of how much of that has already been signed as of today versus how much you're anticipating in the old to come? Thank you.

Thank you, Vivek. The F1 is the Molex, as you said. The balance is hyperscalers or players in the infrastructure deployment of the center expansion. And the balance is not as long in terms of duration as the Molex deal, which is a 10 years deal. But for the next five to six years, the rest is also covered by deals already signed. We are also thinking of making a second wave of capacity expansion because there's still a lot of demand unsatisfied in the market. We keep receiving requests for additional volume delivered to existing customer, new customer, and I'm sure pretty confident that over the next two quarters we will sign new deals in addition to the one that we agreed will end in the last two months.

Thank you. just to follow up to clarify so is that those that second wave of deals over and above the 10 billion or is this part of the 10 billion it's right it would be it would be over and above the 10 billion agreements okay understood thank you very much my second question is on the imc margin It's a very strong organic growth, particularly in the U.S. The margin is down year on year. The U.S. is typically margin accretive in that business, or it is margin accretive in this business. So why is the margin not stronger? And maybe could you elaborate on how the margin has developed in both Europe and the U.S.?

Yeah, thank you. Yeah, U.S. is a pretty, we also have another region that is highly critical, which is Latam. And so the margin Latam are not as high as U.S., but close to. And in Latam, we have, I mean, softening margin in a couple of countries. One is Colombia, one is Argentina. And this is the reason why Eurobaria, the margin is still slightly down. Also mentioned that the quarter two was a strong quarter in U.S., But June was the strongest month ever. April and May were not as strong as last year. And so when you compare the year over year, the margin of quarter to 26 to 25, bringing to account that also U.S. did very well in June, but not as well as quarter to last year in April and May. But mainly, the major effect is this weakening in the Valhalla region.

That's clear. Thank you very much.

Thank you.

We will now take our next question. And the next question comes from the line of Akesh Gupto of JPMorgan. Please ask your question, Akesh. Your line is open.

Yes. Hi. Good morning. And I got two as well. The first one is a follow-up on these framework agreements that you have signed in optical fiber cable business. So, Massimo, you previously said margins of channel are higher than your remaining digital solution business because they sell directly to hyperscalers while your products were going through some intermediary companies that buy your products and then sell it to hyperscalers. So the question is that when you find these optical fiber cable framework and you have Molex, you have directly with some hyperscalers, my question is that does the margin in framework agreement directly signed with hyperscalers differs than when you sign with companies like Molex, or are they same? So that's the first one to start with.

Yeah, thank you. Interesting perspective. You know, the margins today are even higher than what we have in the long term deals. The approach was that we wanted to trade a longer duration and security margin over a longer time than the best margin possible in the stock business. When it comes to comparison, comparing models to other scalers, the margin across these two different customers is pretty much the same. But, of course, new deals or recent deals have better margins than what we signed two months ago. And some of those agreements, Molex was signed three weeks ago, but some of the other hyperscale agreements were signed two or three months ago. So there is a close alignment in margin between the two of them. And there is a certainty today and in September, October, November, for sure, better opportunity to enhance margin with new yields because the capacity is still what it was one year ago and for the next two years will remain unchanged. And what matters is the ability to shift from old or traditional fabatory customers to a data center. But also bear in mind that the market is buoyant within favor to the whole customer because they are desperate for volume as well. So margins are similar across the whole customer base, but they will be progressively growing. So new deals will give us a stronger profitability. Channel margins are higher because it's not cable. It's components, it's plastic, metal, frame and all this stuff. and a bespoke solution partly for data center and partly for fiber today.

Thank you. And my follow-up question is on guidance. So today you are raising guidance by 150 million at the midpoint. And I'm curious if you can help us split how much of that is because of digital solutions versus the rest of the company. And when we look at the upgrade that is coming from digital solution, how much of that is already secured based on your renegotiation and higher prices from some contracts that are getting rolled over? And is there any scope for renegotiating some of the existing contracts in the second half that might bring upside to this $150 million? Thank you.

Thank you. Very pertinent question. The two drivers of growth behind this guidance is solidity in power grid and electrification, which is the baseline, but certainly transmission and digital solution are the two main contributors to this 150 million, or to whatever the number would be that result would be definitely higher than 2,850,000. Transmission this year will add 200 million ABTDA to last year. Last year we ended up with 580. You can imagine a number this year, 20 million, and this is embedded in this guidance, not fully embedded in this guidance. Digital solution is adding easily 50, 70, 80 million to the previous guidance due to the repricing of the whole business. We see margin improvement in digital solution every single week. Every single week, we continue renegotiating contracts, frame agreements more than contracts with existing fiber to their own customers. But every single week, we are telling, we are disappointing customers because we are not fiber to get there. So there will be additional chances to build extra profitability and digital solutions in the coming months. At a certain point, we reach a balance. Now, the market will be fully saturated by existing capacity. It's fully saturated by existing capacity. There will be no room for new deals. But new room for new deals will come from the additional capacity expansion that we are thinking of negotiating with other players, after scalers or other infrastructure players, in the second half of 2027. So, 150 million, basically, solid growth in power grid electrification on the one hand, a stronger contribution for transmission and digital solution to top up this number to 850 and beyond.

Thank you, Massimo.

You're welcome.

Thank you. We will now take our next question from the line of Max Yates of Morgan Stanley. Please ask your question, Max. Your line is open.

Thank you. Good morning. So I just want to start off on the hyperscaler agreement. So I think in that press release, you said that you expected your hyperscaler revenues to be around $1.1 billion by 2031. One, you know, I was just trying to get a feel for how much of your total digital solutions you were expecting the hyperscalers to be, because look, where I'm where I'm going with this is I was struggling to reckon numbers. You know, I think you previously said hyperscalers would be most of your optical business. Your optical business is typically, you know, 60 percent of your total business. So it just seems like quite a low number, given where consensus revenues are. So maybe just any kind of any color around that, you know, how how much of that number actually doesn't seem that high in the context of where consensus is.

Yeah, I like to reset the scene with, first of all, the breakdown of digital social revenue between the three segment, optical, connectivity and MMS. I think 25 revenues, digital solution amounted to $1.6 billion. After that $1.6, you should see $600 million more or less optical. The rest is more or less equally split between connectivity and MMS. When I say $1.1 million, $1.1 million data center is incremental. So the 600 million plus 1.1 will make 1.7 billion in the optical space. The data center piece inside the optical space of 1.7 billion revenue by 2030 will account for 85, 90 percent of the total revenue. Today, in the last year, in 2025, the 600 million revenues in optical, we have more or less 200 million of data center revenues. So from 200 million data center to 1.1 additional, by the same time, if I were to the own business, we are shifting to data center.

So overall, I cited 1.7 million revenue optical total for 2030, take 90% that would be better set so 1.5 yep that's very helpful and maybe just a sort of bigger picture sort of question on tariff so we've seen obviously you know a huge amount of moving headlines but I imagine it's very difficult for you to kind of keep on top of but you know maybe just sort of your latest on the ground perspectives of what all of these tariff headlines you know maybe split by copper and aluminium is actually meaning for your business in terms of kind of on the ground activity how it's driving competitive behavior whether you've

seen any noticeable change in that in the last three months and whether these kind of newer tariff headlines you expect any change maybe in the next three to six months as a result of any of the developments thank you i think we confirmed the what the trend that we noticed in the market the last two months when uh in as far as the cop the aluminum cables concerned when they shifted from 50 percent of applied to metal to 25 percent applied to the whole value of the keyboard we noticed changes in the market importance became less relevant because they had to be clear the whole value cable and pay on top of the 25 this brought them out of competition in terms of price that could not offer any longer a better price than the local player. And we noticed, aluminum building wire cables benefit from more pricing or margin in power in the last three months. As far as the rest is concerned, copper nothing changed. As far as the future targets are concerned, I don't have a clue. But I think all the targets will help, again, local players to strengthen their position in the market to become even more relevant than importers and hopefully to benefit from incremental margins.

That's helpful. Thank you very much. Thank you, Max.

Thank you. We will now take our next question from the line of Sean McLaughlin of HSBC. Please ask your question. Sean, your line is open.

Good morning. Thank you for taking my question. Can I start with Power Grid? I mean, impressive organic growth, and you talk about the positive trajectory continuing i'm just wondering where you are in terms of your current loading um capacity and and if if we look out over the next 12 months you know what is driving that positive trajectory is it more capacity coming online is it pricing if you could just maybe flash that out a little bit in more detail that's But the growth that we plan for our perimeter in power grid is coming from additional capacity.

We approved that one year ago, additional medium voltage capacity in the US and in Europe. And two months ago, we approved another wave of medium voltage capacity increase in the US. Partly of that capacity will serve the INC, the asset construction market, call it EPC or data center expansion. Part of that will be for utilities, because don't forget these poor grids that we have in the US, but also in Europe, needs continuous reshaping, restrengthening and hardening because of additional electricity demand increase across the globe. um we we are also positive about the famous cost increase pass through to the market you know that are these uh time time like effect due to the existing formula um and but since the market is buoyant level prices is increasing the market that we would be able we should be able to restore this famous 14.5 or 15 percent bit margin in the coming quarter maybe quarter four maybe quarter one this year, I would say. But the growth opportunity is amazing. We are currently flat out in terms of capacity in Europe and North America. If you had more, we would sell more at a good price.

Thank you. That's very clear. The second question is back to digital solutions, just on slide five. To understand, firstly, the cadence of the incremental revenues, which look to be peaking in 28 and then you have a kind of a further uh pickup in 2031 after the fade i mean i i guess 28 is related to higher capex in 26 and 27 just wondering what's happening um on the tail and also the substitution switch of current revenues um into optical is that again should we assume a kind of a linear progression 25 to 31 or is that switch out going to happen much more quickly thank you uh so the the the steady level of uh capacity

expansion run rate will be achieved by 2030 so in 2030 we'll have additional capacity equivalent to 1.1 billion incremental revenues in the data center space in the optimal segment of business until then we will have marginal improvement on capacity from 28 onwards but the full run rate is 2030 but we'll have an important benefit by shifting away from faba to the home and to the data center and so i don't know if i answer the question but imagine today we have or last year had 600 million in optical business in 2030 we'll have 1.7 billion in optical business today they will last year with 200 million in data center out of the 600 million revenues in 2030 we'll have 1.5 billion revenue in the center i hope that with this basics i answer the question uh seani thank you yeah and i suppose just to follow up on an earlier comment you made about 2029 you're talking about the fiber shortage you know continuing up up to them is do you already then assume that by 29 there is more of a supply demand balance or is there likely to be more let's say demand upside risk pushing that date further back unfortunately Sean I would be unfair to say if I'm able to read the market in 2029 the comments I would like to make is that it will take 3 years 27, 20, 29 for the players to build this capacity and bear in mind that the players I'm talking about is us and Corby because none of the others are in the US and we are talking about US fibre the fibre the origin of country The origin of production has to be less to avoid the unbearable tariff if you were producing fiber in China. And so the volume demand, I think, will continue. I don't think we'll reach the balance in 29. In fact, we have a new opportunity to expand capacity now beyond what we're really committed to doing for Molex and the others, because there is additional demand in the market there um what else to say in the end of the day for as far as our content is concerned what the volume would be in demand the market will be in 29 30 21 is not that relevant because we have security of the margins in absolute value over the next seven to ten years tend to the contents but personally i believe that this imbalance will continue beyond 2029 sorry thank you you're welcome sean thank you thank you we will now

take our next question from the line of chris leonard of ubs please ask your question chris your line is open hey guys thanks for taking the time and maybe a few from me as well one by one perhaps starting on um digital solutions and thinking about the connectivity piece obviously you've spoken about incremental revenue you see coming through but directly into data centers i wonder if there's anything you can give us looking out to 2030 on the connectivity portion uh the division and whether or not that will also benefit from similar tailwinds and how you kind of think the channel business will progress because obviously it's a very high margin um it is already

Chris, thank you very much. It's already a great uptake in the performance of connectivity in the current months, because as the market rebounded in the U.S. cross habit to the home and certain data center, also these components of connectivity, closures, boxes and vaults, all the stuff that China makes benefit from additional demand and better prices. So we have in quarter one and also quarter two, 26, outperformed the result of channeling quarter one and quarter two, 2025. Significant. And we expect this to continue. And at the same time, we are developing new products, large boxes that goes underground for data center application. So this will give us the opportunity to add additional similar revenue to the channel business that originally was only in Faber to the homeland, adding the data center opportunity to channel business. And the margins, you have e-connectivity channel is as high as 35% to be done, that's 37% to be done.

So very accretive to the whole division. Thank you.

And staying still on digital, can you maybe talk about the phasing of the Molex contract this year? Are we anticipating a more material step up in revenue here for Q3, Q4? And with that, obviously, the higher margins too on the basis of that pricing being captured from business into customers, Molex being one of them. And equally, the new contracts you just pointed to that could be signed and maybe already have been signed to take you to 10 billion or above, and those also contribute into the back half of this year?

Yes, I mean, the whole market is really demanding more already in 26, and the phasing of models and the other hyperscalers' volume growth is consistent with, on the one end, our speed in expanding capacity in the U.S. and not only in the U.S., but certainly the fiber space and with our speed in reallocating volume from existing customer. But I tell you, we are proceeding at a very high pace both on CAPEX and on shifting from fiber to the home to the data center. So quarter two is much higher than quarter one in terms of EBITDA and EBITDA margin. Quarter three would be higher, quarter four would be higher. And this good year a journey that we'll see our capacity increase immediately release to the market also our ability to renegotiate existing contact with Farber to the home adding profitability but also our speed in reallocating volume from Farber to the home to the center adding additional opportunities the run rate level so the run rate level as said before will be reached in 2030 when the full capacity will be coming from online so well and that's super helpful and as a follow-up to earlier comments of margin expansion being quite linear sort of 25 uh 30 percent and confident of the upper end of that range should we think 25 is is is achievable for for your uh 26 performance in digital solutions is that kind of what you're pointing to today as a as a rate of quarter four for sure uh because the full year is depends on you know in quarter one we are 20 percent because we're at the early stage of the pricing and in improvement so if you take a quarter first half we are probably at 22 and a half 23 yeah we will end up slightly higher than 25 percent in quarter four, four-year average would be probably 1,000 over 25%, but 27, the four-year would be at a high level of margins.

Of course, yeah, thank you. And finally, going back to electrification and on the low-voltage side and thinking about the margin progression here as we've seen some evidence the European market is picking up, is there any comments you can make in terms of what you see in terms of the pricing opportunity in Europe and if you think there's going to be any sort of tell wins uh in the next few years on what you can do there thank you and you know we can't much more on the rebound that we notice in the united states and what we've seen in europe europe is a stronger than last year in terms of demand and pricing that uh but i still talk it over uh low margins in europe and as well in a nice country with uh high margins so the real upside

But from what I say, it's going to come from stable or mild growth in Europe, volume and margins, significant growth in the United States.

That's it for me. Thanks so much. Thank you.

Welcome, Chris.

Thank you. We will now take our next question from the line of Lucas Verhani of Jefferies. Please ask your question, Lucas. Your line is open.

Back on that phasing of the revenues in digital solutions, when I look at 2027, I'm wondering, you know, where is the acceleration coming from versus 2026, just because at that point, my understanding was that the repricing would be mostly done and you don't have any new capacity yet coming online on 2027. so yeah just wondering why am i missing on the 2027 where it seems from the building blocks you can grow kind of more on deliver more incremental revenues versus what you're delivering in 26 where the bulk of the repricing is happening thank you yeah thank you look at that three

effects on 27 there will be some marginal default on the existing capacity that will come online in 27 which would bring additional volume there will be repricing across the border and so we It will probably be almost done in terms of repricing everything to the best possible level. And there will be more share of data center business inside our total optical business. Those are the three elements that will compose the EBITDA growth and EBITDA margin announcement in 2017.

Perfect. Thank you. And on the 1.1 billion incremental, is that assuming kind of 100% of capacity is used, or is that the visibility you already have from the frame agreement, and so they could be upside to that 1.1 billion if you kind of deliver on other contracts?

Lucas, it's basically the same. We took commitment and allowed to saturate our capacity. Well, we raised our capacity to the level of the commitment, so they are the same numbers. 1.1 billion is the additional revenues, 1.1 billion is the additional capacity.

Perfect. Thank you. And the last one was just on the free cash flow. It's quite a strong upgrade there as well for the year. Very strong also conversion of EBITDA versus what we usually see. Just can you help us a little bit on the building blocks here? It's just many big down payments coming in transmission, or are there other things to mention for the higher free cash flow?

I'd like to have Francesco giving you the main components of this bridge, 1.350, 1.7.

Yeah, thank you, Massimo. Actually, it's quite simple. We have the positive components coming from the additional EVGA, which is plus 150 million versus the prior guidance. Of course, you have to take out some TAS effect from that. Then, as I mentioned, we are increasingly improving our performance in terms of working capital, stock receivable, and this will contribute not a very different number compared to the EBDDA incremental effect. And substantially these two elements, these two positive elements, will offset the negative metal impact versus what we had already embedded in the guidance that we quantify in the 250 million euro. Then what is left are two elements, a parking lot of setting each other. One is the big down payment coming from Olex, 550, net of a strong acceleration on the CAPEX that we quantify in the year of approximately 200 million over the level of the CAPEX, which was embedded in the guidance. And this is leading to the midpoint of 1.7, the plus 350 million. I don't know if I've been clear on that.

Yeah, all clear.

Thank you. Thank you very much. Thank you very much.

Thank you, Lucas. Thank you.

We will now take our next question from the line of Monica Bossio of InterSalle, Sao Paulo. Please ask your question, Monica. Your line is open.

Yes. Good morning, everyone, and thanks for taking my question. The first is on Power Grid. Margins improved sequentially, but they are still a little bit far to, I think, your target. Can you give us an indication of what do you expect for power grid by year-end? Is it 15% margins already achievable? And my second question is still on the down payments and the structure of the framework agreements. So the company would receive $550 million of down payment. Should we expect further down payment from Moldex or the next down payment will come from the additional and not yet identified framework agreements? And should we model the same weight of the payments that you got from Moldex? And in addition to this, as they perform production activities, very energy intensive, I was curious about the structure of the cost within your framework agreement. Are you planning a complete pass-through to the final customer to the hyperscaler? Thank you very much.

Thank you, Monique. A very articulated question. Let me start with Power Grid. The only reason why the margins are slightly behind the record margin achieved one year ago is because we are in a cost-inflationary situation and we are allowed to pass all cost increases to the market with a time lag. And as long as the costs continue increasing, we will still suffer from this time lag. Should the cost inflation end one day, we will catch up with the 15% dividend margin immediately. The whole point is that the real placement is the market is stronger because even if you had a good cost price adjustment close, if the market wasn't stronger, prices would go backwards. So the market is super strong. There's no pressing pressure in the market. New tenders will be made at a better price. So this is, again, a temporary, and sorry for seeing this, or mentioning this as a temporary situation which lasted longer, but it's due to the inflation, and the Iran war has a play into this. Don't be concerned. The market is demanding more voltage, more cables, more capacity, and every price is pretty sustained. So we will catch up as soon as inflation will ease in the coming quarters. The down payment structure is such that we receive a down payment and that as we start delivering revenues after a certain number of years, we'll have to return the money that we had in advance. And so in 2030, 31, we'll give back, 32, 33, we'll give back the vast majority of this down payment. The structure of this deal is solid in the sense that, and trying to address your third question, not only do we have formula to pass on the cost, we have guaranteed volume, we take off pay and guaranteed margin because we pass the cost immediately without suffering on the contrary to what I said before in Algeria from this famous time lag. So, in the given quarter, at the end of the quarter, the price will be adjusted based on the cost increase up and occur in that quarter. So, the margins in terms of dollars per fiber sold will be guaranteed throughout the whole period.

Okay, thank you very much. Yes, well clarified. Thank you.

Thank you, Monica.

Thank you. And the next question comes from the line of Alexandro Cecchini of Equital. Please ask your question, Alexandro. Your line is open.

Thank you. Thank you very much for taking my questions. The first one actually is on electrification. So you said that margins were down or, I mean, slightly up quarter on quarter, but due to LATAM. Could you give us a sort of feeling what are you seeing in the market now from the first half to the end of the year? So if you are seeing some incremental business or just to give some flavor on this. My second question is secondly on...

We have lost the line of the questioner.

We will now move to the next question while waiting for him to reconnect. And our next question comes from the line of Nabil Najib of Georgia Bank. Please ask your question, Nabil. Your line is open.

Hi, good morning.

Thanks for taking my question. I just had one. Can you give us an update on the secondary listing in New York? It looks like the plan is back on with work being started on it, according to your comments to the press this morning. Do you have a timeline in mind for the listing?

It's a crucial point about a project for us, for value creation. Currently, we are very busy with a lot of stuff. So the deployment of this data center opportunity, the contracts, new waves of capacity increase, M&As. So it will be remaining in our priority, top one in the list. At the proper moment, we'll disclose the timing of this operation.

Got it. Thank you. Thank you, Anabi.

We will now take our next question from the line of Wuma Semlin of Bank of America. Please ask your question, Wuma. Your line is open.

Hi, good morning, everyone. Thank you very much for taking my question. Two for me, please. So first question is the M&A. I guess you mentioned in the interview this morning they're interested in the M&A opportunities in the U.S. Would you be able to give us a bit more insight on what are the ideal type of business you find most exciting? Does the deal with Molex change your thinking in terms of how interesting a connectivity business for you versus accessories? You know, maybe we can start from there. Thank you.

Thank you, Yuma. Our approach to M&A doesn't change. Molex is a way to organically expand the capacity. It's a fast-growing opportunity for us in terms of incremental libidat. We are still open to spaces, M&A in spaces adjacent to our cable piece because we want to reinforce the share of revenues in the company that has solutions rather than just pure cables. And so the U.S. remains the best geography for those opportunities given the high profitability in the market, both in power, electrification in digital social space but we're also looking at other regions and uh and i'm i'm confident that in the coming quarter we will be able to discuss more of course the proper timing and the signing of the projects that's super clear thank you very much um my second question is on uh your capacity ramp up for the fiber production so um if i'm looking at the slide five from the presentation.

It's very helpful, that slide. So it seems like you're already planning to have some significant capacity increase by 2028. Is that ahead of your schedule? And then how should we think about the phasing of your capacity expansion from there? And then I guess a follow-up also on the second, you were talking about the second wave of deals that could be above 10 billion. So how much more capacity would you be able to add on top of that 2x you have announced and what would be the timeline there. So if you do sign those contracts, would that be on top of the 1.1 billion revenue zone? Thank you.

Thank you, Yuma. Yes, we will have the around rate capacity achieved by 2029, end of 2029. So part of the capacity increase will happen in 27 in Europe. The rest will happen in the United States, where we are planning to more than doubling the fiber capacity located in us so by 29 there will be this more in doubling in 2022 2028 will be the first chunk of this more than doubling us capacity let's say one third 40 percent of the run rate capacity will be already implemented by 2028 if you went for new deals and this will require this is will require additional capacity We are not thinking to go too wide in terms of extra capacity, but the demand from different players and the usual at-scalas customers is still unsatisfied, and we will for sure sign other deals, and this will bring incremental revenues, incrementally over the 1.1 billion year revenue added by 2031 or 2030 of the existing deals.

Yeah, that's super helpful. Thank you very much.

Thank you. You're welcome.

Thank you. We will now take our next question from the line of Alexandro Totoro of Media Bank Club. Please ask your question. Your line is open.

Yes, thanks. Good morning to everybody. I have three questions, if I may. The third one, let's say, relates to the transmission business. If you can, let's say, give us an update on the second half outlook in terms of tender or award, if you expect any acceleration on this front. The second question is on, let's say, I understood your comment on free cash flow, if you can help us also to reconnect a little bit with the, let's say, outlook on the leverage, and the leverage considering also the incremental capex and all the on the factor you mentioned before on the upfront payment and the last one is let's say just a small curiosity you mentioned the yellow core no fiber with the let's say this innovative you know uh solution that um you you are basically you know under development from a commercial standpoint industrial standpoint um Can you give us an update on this? If you see, let's say, in a kind of short period of time, five years of time, if you see, let's say, any update and that this solution can be commercialized with the existing, let's say, data center clients.

Thank you, Cenk. The center, as far as transmission is concerned, the second half should be a bit more buoyant than first half. In first half, we won what was available from the market. Our background is still pretty high, 17 billion. The demand, the overall demand in 26, we estimate around 10 billion in new projects awarded to the market. And we expect to see this level be beaten in 27, 28, because there are projects in the pipelines that we in 27, 28. I'd like to defer to Francesco de Fricas for connection to the levels at the end of the year.

Thank you, Maximo. Based on this update of the free airflow guidance, we estimate that the year-end net debt will be in the region of 2.3 slash 2.4 billion, which means a quite outstanding improvement versus our original expectation. And actually in terms of leverage, if you take the updated EBDA guidance, means a leverage of around 0.8 times, so a very low leverage.

Thank you, Francesco. As far as the Holocaust fiber is concerned, we completed, let me say, the industrialization phase. Last week we were in the U.S. and we handed over this cable, not just the fiber. They found in cables to Amazon for an installation trial, an installation test that passed successfully. They tried to break this cable in all possible ways that could not do it, that could not achieve it. So we passed the test. We are now able to scale production to a different level. The demand is high. The level margin is extremely interesting. I think it's all about how fast we can scale this up to a more mass production level. It will never be a solution that accounts for more than 10% of the fiber market demand, but it would be pretty profitable from this perspective.

Understood. And just if I may follow up on this, I recall that you have, let's say, you know, this agreement or you invested into the Relativity Networks company. you're currently a shared order of this company assuming that you're going not to start commercializing the solution do you expect to do also a step up in terms of ownership into relativity networks a good question we are discussing this as we speak it's probably to every stage to make a decision we want to wait and see what's happening in the second half in terms of the ball is on us in our field we have to speed up the industrialization and the division of capacity and you know that currently

we are producing this in europe the ideal place for the rollouts of extra capacity would be claremont south north carolina united states where this demand is located and probably towards the end of this year we will evaluate additional ownership or additional opportunity with the a relativity network in terms of a stake in the company.

Okay, thanks. Thank you. Thank you, Alexander.

Thank you. I'd now like to invite Alessandro Cicchini of Equita for his question. Please ask your question, Alessandro, your line is open.

Hello, can you hear me? Yes, Alessandro. Okay, perfect. Thank you for this. I repeat maybe my question. The first question we got, so the first question we got we're going to move to the second and we answer the we answer both ah okay okay so um my my last one was uh um i i don't know because the line uh was down about the european opportunities uh in terms of margins uh electrification so if you can elaborate a little bit uh more on this if you have uh plans to to to restructure or to to improve margins in the region so i don't know if you answered this question yeah so the first one question was about so the the market development in other regions in latam we had we're going

through a normalization the time we had these uh spiking margins in the last two years in Argentina due to the country situation, and in Colombia, and now we suffer from normalization, normal things like this. So things like this happen, nothing extremely relevant. Of course, in a time, we waited a lot in terms of our profitability because their profitability is pretty close to the United States. Europe, partly to answer your second question, is mildly growing in terms of volume growth and in terms of profitability. We have plans to strengthen the growth through things that we cannot probably disclose too much. There will be some restructuring, some additional capacity relocation, so there will be some re-fulprinting in Europe. Mildly re-fulprinting but will help us strengthen our position in Europe and also become more efficient in serving customers in a way similar to what we do in us with anchor wire so this is more or less the the essence of what we have in mind for european uh margin uh announcement okay thank you very much thank you welcome sandra thank you we have no further questions and i'll turn the conference back to the room for closing comments so thank you very much everyone for your time i hope you enjoyed the call and hope you'll be also enjoying your holiday in the coming weeks thank you and see you soon