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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Ladies and gentlemen, welcome to the Nexans conference call. I now hand over to Mr. Michel Gedeon, VP Corporate Financial Operations. Sir, please go ahead.
MICHEL GEDEON, VP CORPORATE FINANCIAL OPERATIONS, NEXANS: Ladies and gentlemen, good morning or good afternoon. Thank you to be with us on this conference call. We have today with us on the Nexans side Gerard Hauser, Chairman of the Company, Mr. Frederic Vincent, CEO. On the Madeco -- COO, sorry, Chief Operating Officer. On the Madeco side we have together with us Mr. Francisco Perez, Chief Executive Officer of Quinenco, and Mr. Montes, Chief Financial Officer of Madeco. And we also, of course, have Mr. Frederic Michelland, CFO of Nexans Group. So, I hand over the floor to Gerard Hauser. Thank you.
GERARD HAUSER, CHAIRMAN AND CEO, NEXANS: So, ladies and gentlemen, thank you to be with us today because we are joining forces with South America's leading cable producers. I would like to draw your attention to the following key aspects of the acquisition.
First, the structure comprises a cash and shares deal involving 2.5m of shares. We agreed to offer Nexans shares on the basis that it was the Madeco shareholders' decision to become shareholders of Nexans. B, this will provide Nexans with a certain amount of financial flexibility in a consolidating market. C, given the prime importance of these assets, the share issue shall not prevent the acquisition from strengthening equity capital by 2009.
Two, the Company is valued at US$822m, which is 9.5 times EBITDA in 2007. This factor will be around 8 times the EBITDA we expect the Group to achieve in 2008. The acquisition of Madeco will strengthen the Group's stable shareholders base and bring on board a high-quality partner who has almost our goals.
Slide number five, I would like to take the opportunity to reiterate what I see as the Nexans strengths.
First, Nexans is an undisputed worldwide leader in a consolidating market. Team Nexans offers unbeatable industrial know-how with a range of assets including unparalleled R&D capacity and a solid sales network. Three, Nexans has a proven track record in acquisitions. These strengths will be boosted with the acquisition of Madeco, giving us a unique occasion to expand our product range in a part of the world where we have yet to establish a significant footprint.
Slide number six, lastly, this acquisition slots, perfectly fits, into the strategy we are currently implementing and which we were applying in early 2006.
Profitable growth, by taking on board a key player boasting organic growth of more than 12% over the last two years, with EBITDA on sales of 11% at current copper price. Less cyclical investment, by redeploying in a region that offers sustainable growth with a stronger foothold in the longer cycle businesses, energy infrastructure. Maintaining its financial flexibility through a balanced cash and share structure, allowing us to leverage our balance sheet, be accretive as soon as 2009 and preserve our ability to seize other strategic opportunities.
Slide number seven, this winning combination makes Nexans both more diverse and more profitable. More diverse, the Company of the -- the compatibility of the two companies can clearly be seen at the bottom of the table. More profitable, with less than 7% of our sales, Madeco will represent more than 12% of our joint profitability in 2009. So that is a winning partnership in the cable industry.
We now hand over to Francisco Perez Mackenna, Chief Executive Officer of Quinenco.
FRANCISCO PEREZ MACKENNA, CEO, QUINENCO: Hello everybody and thank you for being at this conference call and giving us the opportunity to address you in this, such an important day for Madeco.
As you know, Madeco is a leading industrial company in Chile with main interest in the cable and wire business in South America. It's based in Santiago, Chile, but its industrial presence includes the most important markets in the region, which are basically our own country, Chile, but also Brazil, Peru, Argentina and Colombia, with six production plants. We also participate in two copper rod plants in Chile and Peru, and also we're participating in two aluminum wire plants in Brazil and one in Chile.
We have extensive commercial activities in our region and we currently employ with the cable division around 3,000 employees. During 2006 our sales reached an amount of $694m, with an EBITDA of roughly $82m and a volume of 79,000 plus tons of metal, including both copper and aluminum. The return on capital employed, ROCE, after tax resulted in a 16.1% level for the cable division in 2006.
Madeco, as you probably know, is listed in both the Santiago stock exchange and the New York stock exchange with a total market cap of $681m as of November 2. Of the total market of around $4b where we participate, 49% is represented by Brazil. Then the main markets where we do operate are Argentina, with a 12% share, Colombia with 9%, Chile with 8% and Peru with 5%.
Over the last four years, the wire and cable industry in South America has grown at a compounded annual growth rate of around 10.4%. Our own growth has slightly exceeded this number, to a level of around 12% per annum, which implies that we have been able to gain market share in the region in the last four years.
Our market shares are basically -- put us in a leadership position in most of the markets where we operate, being the number one player in Chile but also the number one player in Brazil. In Chile we hold a market share of 30% and in Brazil our market share is as high as 15%. In Peru we also are number one with a 64% share in the market. So we do have, as of today, a very strong presence in the main markets where we operate.
Regarding our -- the way our turnover splits in the region, I must say that Brazil represents 43% of our sales, with Chile accounting for 28%, Peru for 18%, Colombia 5%, Argentina 6%.
The EBITDA numbers during the first half of 2007 are split slightly differently. Brazil, in the case of Brazil, the 43% share in sales transforms into 44% in EBITDA. But in the case of Peru, where we have a very strong competitive position, the 18% share in sales transforms into a 28% share in EBITDA. Chile accounts for 15% of total EBITDA in the first half of this year, Colombia for 7% and Argentina for 6%.
If you want to know about our split regarding the different...
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