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Thank you for standing by, and welcome to the Prysmian Group First Quarter 2021 Financial Results Conference Call. [Operator Instructions] I must advise you that your conference is being recorded today Thursday, the 13th of May 2021. I would now like to hand over to your first speaker for today, Mr. Valerio Battista, CEO. Please go ahead, sir.
Thank you very much, and good morning or good evening to everyone. Welcome to the first quarter 2021 financial results of the business group. The year has started pretty well. We define it as solid start of the year with a very good acceleration for Telecom and Energy, in construction and renewable, most of all. The Telecom has surprised even us because the Telecom has increased the sales by 11%, more than 11% organic growth, thanks to demand with still pretty low prices, but consistent demand. We got the sole pillar that is still partly missing is the project. The project has been able to get the award of the Sofia project, fully completed the Crete-Peloponnese interconnection. And today, we announced to the market to have catched up with the EBITDA Formentera. So for the project, it is not so bad, is in line with our expectations, but it's not yet the level of activity that we expected to reach. And we expected to reach it mostly in the second half of the year. Financial numbers, Page 4. Sales reached EUR 2,810 million, with an organic growth of plus 4.6%. The adjusted -- the rated adjusted EBITDA, EUR 213 million, with an EBITDA margin of 7.6%, basically stable on the same level of the first quarter last year. Free cash flow, very good, EUR 553 million, with a net debt that increased a little bit because of seasonality to EUR 2,325 million. So Telecom grew 11.4%. That's a very good sign. It is a little bit overstated compared to our expectations. Whereas the Energy, and generally speaking, both E&I and Industrial grew 3.5%, not so bad, too. The adjusted EBITDA has been driven by the volumes at the end, reaching margins that were pre-COVID level. Obviously, we are seeing a significant increase of raw materials but -- and transportation. But we have been able, thanks also to the sound market, to pass it to the market, to the customers. You have to consider that the results is discounted by EUR 14 million ForEx negative impact. All in all, a good first quarter. Let's move to Page 5. Projects, the missing pillar for the time being of the business, of our business. Organic growth, minus 7.9%, with EUR 29 million first quarter result versus previous year at EUR 36 million We expect the German Corridors to start to give the daily contribution starting from July when we are going to start the production of the first of the 3 German Corridors awarded to us. And in the meantime, the backlog that we have that is huge for the German Corridors is expected to increase for the offshore wind farms, too. That's mostly in the second half. Energy. Energy is continuing to grow. Organic growth, 3.5%, reaching more or less 3.4% in reality, which is more or less the same level of activity of 2019. So a very good outcome both for E&I and Industrial & Network Components. The organic growth in T&I and overhead has been partially compensated by a negative organic growth of Power Distribution, more than negative stabilized business level for PD, especially in North America, where due to the very big jump we have seen in 2020 for the onshore wind farms, now is stabilized in terms of this level of the business, as expected, we were expecting it. For the Industrial, I have to say that we have been positively surprised by the growth, 3.5%, thanks mostly to renewable and network components as well as automotive and elevators. In the number of elevators, let me remember that is out of the organic growth. But in the numbers, obviously, EHC, because of the escalator business we took over January, is in demand right now. Telecom. Telecom, as usual, is very fast going up as well as is very fast going down. We have seen a terrible backlog in second half '19. And we are seeing today a very sound rebound of the demand. The problem is that once in an almost commodity business, the prices have been certainly at a lower level is very difficult and need of much more time to recover. In the first quarter, we have seen the demand very strong, but with the prices that have been [ saturated ] last year at the end of this [indiscernible].
We enjoyed a EUR 4 million carryover from YOFC from 2020 because as you know, YOFC closed the accounts before us and closed. That's it. Let's flip to Page 6. So Page 6, you can appreciate that the physical demand, so the quantity of cables that is a very good indicator, that's my opinion, is growing and is growing well compared to 2020, of course, but even higher than 2019. And that's a very good sign. Whereas Telecom, volume-wise, is still well below 2019, even if better than 2020. If you look by geography, there are a few remarks to be done. At the group level, it's clear, and I'm talking about Energy only. At group level, as I said, the business is growing more than 2020, but still below the level of 20 -- sorry, more than 2020 with a different trend. Because you see that APAC was very high in 2019, was very low because of the pandemic in 2020 and now is in the middle. Overall, the Energy business is recovering pretty well all over the world with different speeds. Let's go to the numbers, Page 8. Sales, first quarter 2021 at EUR 1,400 million, definitely higher than the first quarter '19 and the first quarter of 2020. We have to consider, by the way, that the customer and the methods, generally speaking, have been increasing the value of the sales. And that's the reason why the organic growth is high, but not so high. At the end, organically, the sales went back to the level of 2019 for E&I. For Network Components, we have seen a moderate reduction in 2020 compared to 2019. But the same good upside, 3.5%, the first quarter of 2021. From the profitability point of view, EBITDA level, the first quarter of 2021 closed at EUR 75 million compared to EUR 68 million the previous year and EUR 69 million in the first quarter of '19. Whereas in the Industrial & Network Components, we closed with EUR 49 million versus EUR 45 million in the first quarter 2020 and EUR 41 million in first quarter 2019. I have to say that the Industrial business has not collapsed last year, but has been able to recover more or less in line with the rest of Energy business, 3.5% organic growth this year, that underline a certain improvement of the business in the last month. Let's flip to the geographical situation. The geographical presence of our group is pretty wide. The sole difference that we see compared to the past quarter is that North America is the region that is not anymore able, for the time being, to run the show. And for the first time, we are seeing the North America an organic decline of 0.9%. That is minimal, but is there. Europe is growing 3.9%. Latin America and Asia Pacific, a very big percentage. But on the basis of limited numbers, you see Latin America, plus 28%, but starting from EUR 172 million and landing at EUR 226 million.
Asia Pac, obviously, last year was negligible because of the COVID and this year has started to reach again a level of business that is definitely better, significantly higher, 14%. But remember that 14% of 0 is 0, meaning that our participation to the business in Asia Pac is not differentiating the results of the group. Okay. Very quickly. Let's flip to Page 10. And the priorities. We have to keep protecting our profitability, especially because of the raw material cost increase, and we, one way or another, have to be able to pass to the market. Seems that the market, especially in certain markets, is well available to discuss about the raw material cost increase. The Telecom, we have to leverage the volume rebound and to be able to face with the growth of the demand even with prices that are related to the crisis time. Overall, we confirm our outlook, that we gave EUR 870 million , EUR 940 million [ with an I ] that is more oriented to EUR 940 million than to the EUR 870 million, just to tell you the truth. As usual, we are pretty prudent at the beginning. Once we see the business that is taking off, we have no problem at all, and we can confirm that we see the year-end more in the range of, let me say, over EUR 900 million possible. We have not yet increased the guidance for the simple reason that we want to wait the second quarter and considering the first half results. The free cash flow, EUR 300 million plus or minus 20%, is -- seems to be the right numbers. I leave the floor quickly to Francesco Facchini for the details of the financial statement. Thank you.
Thank you, Valerio, and good evening to everybody. Let me start from the usual [ net shot ] of our profit and loss statement on Page 12. As Valerio explained, organic growth reached 3%, including projects, which was a negative organic growth and 4.6% ex project business. As explained already, the very good part is that the volume of the Energy business recover significantly from last year, but even more importantly, are above the level of 2019. Let's keep in mind that 2019 was very partially the first quarter a COVID period because COVID affected the first quarter of 2020 only for the last part of the last few weeks of March. And also, the Telecom volumes are closing the gap and getting closer and closer to the level of 2019. Adjusted EBITDA, EUR 213 million, plus EUR 16 million growth with a stable EBITDA margin at 7.6%. Considering the massive impact of the copper price increase on revenues, which is in the region of almost EUR 300 million. This actually means an improvement of EBITDA margin because, of course, of the copper price is just inflating our top line and bringing not too much in terms of additional operating results. In terms of results of different business units. If you focus on the box on top right, you see that the first quarter EBITDA is overall affected by EUR 14 million negative currency translation effect, ForEx effect, which is particularly affecting the Energy and the Telecom business. As Valerio anticipated, projects are slightly negative, minus EUR 7 million EBITDA versus prior year. I have to say, totally in line with our expectations. And we expect that a strong sequential improvement starting from the second half, both in underground high voltage, of course, driven by the kick-in of the German Corridors execution. But also and even more, I would say, in terms of submarine energy results. Energy and Telecom improved significantly, plus EUR 13 million plus EUR 5 million. Again, I repeat this plus EUR 13 million and plus EUR 5 million are negatively affected by the ForEx effect. So cleaning the ForEx effect, the improvement will be even more material. And then we also enjoy an improvement in our share of net income for EUR 5 million, which is almost 100% resulting from so-called YOFC carryover, meaning that YOFC is closing the annual results, in this case 2020 annual results, after the publication of our annual results. So the deviations, in this case, positive are taken in the first quarter. Adjustments are not very material, EUR 14 million, in line, by the way, with the previous year. Also, the nonmonetary special items are very neutral to our profit and loss, EUR 2 million, where we have basically a compensation between the positive impact of the fair value change of metal derivatives due to the rise of the copper price and on the cost side, a portion of share-based compensation. You see a very low level of financial charges, only EUR 13 million versus EUR 27 million last year, whereas the net interest expenses are quite stable compared to the previous year. This total amount of financial charges enjoys the positive impact related to the issuance of a nonconvertible bond because for the period starting from January 1 until the formal approval of the capital increase of the AGM, we booked the -- according to international accounting standards, we booked the option value at fair value. And this, of course, fluctuated for this limited period of time according to the share price and having the share price slightly dropped from the time we issued the bond, we enjoyed the positive impact on our profit and loss statement because this meant a decrease of the value of the conversion option. Tax rate is at 29%. That's, as usual, the best estimate that we have for tax rate of a full year and nice to report a group net income at EUR 76 million for 1 quarter, which is more than tripling compared to the previous year. I move to Page 13, statement of financial position. You see a very material drop of net financial debt from the equivalent period of 2020 from EUR 2.6 billion to EUR 2.3 billion, so down by EUR 300 million. And this is very evidently driven by the drop of the operating net working capital that you see reported in the relevant year, down from almost EUR 1.2 billion to EUR 900 million, so down by almost EUR 300 million. The main drivers of this drop of operating net working capital, which, obviously, boosted our free cash flow in the last 12 months have been the project business because starting from a very high level, relatively, I like to say, working capital, in Q1 2020, there was a very significant drop of working capital, specifically starting from the second, third quarter last year. So a very nice output. But on top of this, I like also to mention improvements that we keep posting in terms of stock of days of inventory, for instance. And also days of receivable, continuously improving the level of overview. The -- on the negative side, the driver, which worsened our working capital level, was definitely the metal price. This was [ higher operated ], as you well know. And just to give you an estimation, the impact on our working capital, the metal price increase between March 2020 and March 2021 was in the region of EUR 170 million. And of course, the metal price kept increasing after March. So we think there is another EUR 50 million, EUR 60 million to come in the second -- in the second quarter. Let me close with Page 14, summarizing the cash flow. Here, as usual, we report the bridge of our net financial debt between -- over the last 12 months. The free cash flow amounted to -- over the last 12 months, of course, amounted to EUR 441 million, but this includes a EUR 112 million antitrust cash out. Most of them are related to the penalties that we paid in the middle of last year. So summing up this one-off, let me say, of EUR 112 million We come to the free cash flow of EUR 553 million, which was the one mentioned by Valerio. Of course, as I will say, these last 12 months of free cash flow is enjoying the drop of the working capital, very massive, EUR 255 million. Going -- progressing over the year, we will lose the most of this boost coming from drop of working capital, but we will gain on other drivers, such as, of course, the cash flow from operations before working capital change, driven by the growth of the EBITDA, the reduction of restructuring costs, which will decrease significantly on a last 12 months base, going -- progressing in the year. Whereas we will certainly see a certain increase of the CapEx level to the well-known level that we target of EUR 260 million, EUR 270 million.
And this will certainly let us land, I hope, in the high part of the guidance -- of free cash flow guidance we provided of the well-known EUR 300 million plus/minus 20%. So let's hopefully take out -- take the minus of the table. Let's focus on the EUR 300 million plus. And I hope that as usual, we can deliver on the very high part of this range, also considering how the year started. I think I'm over with my presentation, and we can move with the Q&A session.
[Operator Instructions] We have the first question coming from the line of Max Yates from Credit Suisse.
Just my first question is on the telecom margins. And If I strip out the contribution for YOFC, it still looks like the underlying margins are holding up relatively well. So what I wanted to understand is obviously, within your guidance, you're still talking quite cautiously about the full year margins. So is it because you see the negotiations with customers and you still expect sort of prices on those contracts that have been rolled over to come down further? Or I'm just trying to understand sort of what was different in Q1 that will get worse as per your guidance.
Well, Max, thank you for the questions. It's clear that we have 2 different trends. On one side, we have a number of contracts that have to be renewed or under negotiation that are probably going to decrease the margins. On the other side, the demand is very good and consequently maybe that at least the volumes will be higher. That's the 2 opposite trend we see. Overall, I believe that the margins we have seen in the first quarter are a little bit overstated, but not very much.
Okay. Maybe just a quick follow-up on that. How much of your business, if we look on an annual basis, is driven by these contracts?
I leave the floor to Philippe Vanhille, that is much better -- has a much better knowledge than me.
Max, I would say something like 20%. It -- in these contracts, there is also a fact that is usually our customers do not really have a clear -- completely clearer view on the volumes that we'll need during the year and during the next years. So it's an estimate what I'm giving you. It can be between 20% and 30%. The other element that is important, that I would add to Valerio's answer, is there is a mix of region effect as well. The business in North America is growing strongly globally. And in Europe, there is more uncertainty because, as always, it's fragmented and some countries grow. Some others are in a decreasing mode. And the mix of these countries will make our profitability of the year. So it's not an easy answer, but it's the best answer we can give today.
Okay. That's helpful. And maybe just a quick couple of follow-ups on projects. So Valerio, I just wanted to understand on the Eurasia project. We obviously talked about that last conference call. Is there any update on, now that the tendering is underway, when would be a realistic timing for the award to come through? Some of your peers, it feels like, are a bit more optimistic on that contract coming later this year. Is that a view you would agree with?
I'm reasonably optimistic in terms of projects coming. The timing is a different matter. But I believe that within this year, should we see the tender award. Hakan, would you like to add something?
Yes. As you know, the Eurasia tender has been changed due to the voltage level and has been retendered and has been announced also by [ Eurasia ] that 2 participants have given, let's say, complete offers and this is under the evaluation currently and is market knowledge. We are expecting that if there is no delay based on the current schedule, the decision -- the evaluation is going to be finished during June. If there's going to be any delay, then it may go beyond June. But the current schedule seems to be end of June.
And should we assume that if it's -- if the evaluation is finished by June, that the contract awards would come shortly after or...
As you know, in these projects, usually, what is happening after the evaluation, the contract details are hammered out. So after June, the terms and conditions discussion with the preferred bidder from the customer side is going to be processed. So we can expect that if everything goes right in the third quarter, it can be a potential that the award is going to come. But again, this is all based on everything going right. And according to the customers' feedback that we received, which is at the market note.
Okay. And maybe just one very quick final one because I think it's important. Just the contract awards that you've announced. So one today, the Sofia contract, which has now been booked. Does that change at all your production schedule for '20 -- for the second half of 2021? And do you think that you will start producing any of these projects in the second half of the year?
These projects that we announced that came into our portfolio, the Sofia project and also Ibiza-Formentera, was one of our projects that we were expecting to have in our order entry this year. So we had planned them already in our budget for this year. And the execution of the production is going to start within this year. So it was already in our capacity planning for the year. This is only confirming our, let's say, expectations are being realized so far.
We have the next question coming from the line of Monica Bosio from Intesa Sanpaolo.
The first one is on the energy project. Can you give us some flavor on the energy project business prospects in U.S.A.? Are there some important tender to which Prysmian is going to participate? And EPS, if you can give us some flavor, maybe some kind of tender like the German Corridors in Europe, just to be updated on this? And the second is on the raw material impact. I understood that it was very tough in the first quarter. It will increase by EUR 50 million in the second. Can you give us an impact on the working capital from raw material over the full year? And very last is on the efficiency measures in the Telecom business. Is there a way to quantify the amount of efficiency you achieved in the first quarter?
You're welcome, Monica. And thank you very much for the questions. First of all, the questions related to energy projects. Energy projects, I don't want to mention the name of the projects because every time I mention, I can find 1 month later, competitors coming to customers and looking at destroying our business. Consequently, I can tell you that there is 1 project, specifically in U.S.A., where we are not so far from making an agreement with the customer that is something like the German Corridor, smaller size, but very, very interesting. I hope that within the year-end, we are going to be able to announce this project.
Raw material, for the raw material, in fact...
Okay. So more or less like German. Sorry, Valerio, a little bit smaller than the German?
Monica, similar to the German projects, but on a smaller size. We are not talking about it today. Raw material impact. I would like to leave the floor to Massimo Battaini, who is here with us.
Thank you, Valerio. Monica, so raw material impact is certainly significant in 2021, but definitely much more in terms of EBITDA, P&L impact than in working capital. The real impact to working capital is definitely coming from metal. I will consider the raw material impact very minor net to working capital. Also consider that have also efficiency and savings in the raw materials space, which are offsetting some of the raw material increases impact on net working capital. So I would not consider this a real impactful number to our working capital, Monica.
Okay. So just is on the EBITDA, do you expect a stabilization of the raw materials over the second part of the year? Or do you believe that it could rise further?
Monica, it's difficult to predict. Every month, we think it is the last month and then months after, we still see another increase. So I think we will see a continuation of this increase in the coming months. I would expect -- I agree with you, to see some softening of this pricing increase in quarter 3 to quarter 4. All I'll say that this is not -- it's a bad news in the short term with a very good news for the business in midterm because we are -- we have proven to be very successful in passing on these cost increases to the market, especially because there is a strong demand -- volume demand in the market, both in Telecom and in Energy. So this is not really a desirable impact, this one.
Last question of your question, Monica. The efficiency measures for the Telecom business. Just for your knowledge, today, during the Board, we have approved 2 significant investments, not extremely huge, but significant for the cost road map reduction for the fibers and the capacity increase in the North American market. Consequently, we are continuously working on this market.
We have the next question coming from the line of Miguel Borrega from Exane BNP Paribas.
I've got 2 questions, please. The first one on the Projects business. Can you maybe talk about your overall capacity? And maybe comment on the industry as well? You said previously, there's still 20% to 30% spare capacity for this year. But after 2022, it seems that you're at full capacity. How should we think about growth in high voltage after 2022? And also in the context of EUR 7 billion of tenders over the next 10 years? Is the industry able to fulfill this capacity?
Okay. Thank you very much for the question. Capacity in the project. Our capacity in the projects, i.e., in the past, I said that was not totally saturated, only for the submarine extruded. 20%, 30% may make sense. That does not represent the total business capacity. The total business capacity is much more saturated. Now after 2022, it's clear that if the market will ramp up at EUR 7.2 billion, as expected, our capacity will not be enough. And that's the reason why we are looking at how and where we think is to increase the capacity. Most probably, I give you a little bit in anticipation. We have the capacity in Europe. Maybe that if we are going to reach the EUR 7 billion, we have even to revise the capacity in Europe, but most of all, if the U.S. market is taking off, as hopefully expected. We have, first of all, to develop our presence industrially in the U.S., and that's what we are doing.
That's great. And then my second question, just following up on Telecom. Can you give us a sense of the size and timing of the contracts that you are renewing? Is this going to be a one shot in 2021? Or is this going to be sequentially renewed? And then maybe if I can push you a little bit on the margin. If we exclude the associates, your margin was 13.6% sequentially down. How should we think about the trajectory from here? Is this going to converge to a certain level towards the end of the year or relatively stable?
I leave the floor to Philippe Vanhille.
Another difficult question. The contracts that we -- that are in negotiation at this moment are multiyear contracts. So we usually -- we are talking about contracts that will be valid for 3 years, typically. So what we are negotiating now and a strong price pressure is, of course, going to impact 3 years, by definition. It's part of our business and our life. What -- as I said earlier to the question of Max Yates, what is not easy to estimate is how much real volume will be concerned by these contracts because we saw in contracts that are not with a fixed volume. So it's not easy to answer. We are usually, in general, able to compensate the part of this price pressure, which is typically very much European at the moment by 2 things: by our actions to reduce our costs that are, as you know, a permanent item in Prysmian; and also by the mix of regions that we have. Fortunately, we are also strong in North America where the pressure is a bit different. I cannot give you a precise answer with numbers. It's too early to answer this question, given the fact in particular, that these negotiations are not over.
We have the next questions coming from the line of Daniela Costa from Goldman Sachs.
I have 2 questions, 1 on Projects and 1 on Telecoms. But on Projects, I was wondering if you could comment on the latest recent order intake throughout 2020 and 2021 in terms of how does the project backlog margin look. I guess next you're pretty fully utilized already. So this is going to be sort of a helpful thing to assess what should we be modeling for margins in Projects next year. And then the second question, which is on Telecoms. I was just interested in hearing your views on the latest news flow that we have had on the anti-dumping case in Telecoms, where it sounds like the commission is taking a slightly different approach than in precedent cases in not putting the preliminary tariffs now. Do you think that there's anything to read into that? Or what are your expectations on that going forward?
Thank you, Daniela. First of all, the margins we see on the Project business, it depends. If we look at overall, the margins are reasonably stable. We don't see a significant decline. It may depend on the mix. If we look at the medium little-sized projects for offshore wind farms, we see the margins a little bit under pressure, but I'm talking about 1%, 2%, not more. Whereas for the big interconnections, we don't see any problem. The aggressivity and the competitivity of our colleagues is not so high to drop further the price. Consequently, overall, it depends on the mix of the projects we are going to get, but I see the margins mostly stable. The second question is on the Telecom case, the anti-dumping case of Telecom. And I consider appropriate to leave the floor again to Philippe because he is one of the person directly following the anti-dumping case.
Yes. Thank you, Valerio. Daniela, it's the interpretation, I think the only possible interpretation is that is what the European Commission told us, which is they need 6 more months to investigate. It's a long process. I have to confess that to me, 6 more months without protection is not good for us for sure. But it doesn't change the date of a definitive decision, which is still due for -- legally due for end of October, early November.
So we will have a decision. We have no temporary decision. That's what they decided because they need more time to investigate. And by the way, I can confirm that the investigation is really ongoing because we still receive questions from the European Commission very regularly. Every week, we have questions. And I guess it's the case also for our competitors. So it's clear that they are seriously investigating. That's all I can say. Decision, early November.
If I may just follow up on the first part on Projects, on the answer from Valerio there. I take it you said margins are relatively stable. But those higher utilization next year into 2022, wouldn't that contribute to margins being up on an EBITDA basis? Why would they just be flat?
Daniela, theoretically, you are right. The problem is, in the meantime, all the players, especially some of our competitors, have already announced the increase of capacity. And they will look for filling this capacity at any cost. That's the reason why I'm not so optimistic for it.
We have the next questions coming from the line of David Barker from Bank of America.
I've got 2 pretty straightforward questions, a bit more strategy oriented. So the first one is on U.S. high-voltage capacity. What would the kind of lead time be to ramping up in the U.S.? And are you thinking about brownfield or greenfield? So that's kind of first question. And then secondly, on Telecom. We've spoken a lot about volume recovery in the short term. But are we seeing any impact from 5G investment yet? And when could we start to see kind of growth ticking up from 5G?
Okay. Thank you very much for the question. HV capacity in U.S. The HV capacity in U.S. exist, is frankly, it was unsaturated because we built 2 lines. Nexans had built, if I'm not wrong, 2 lines or 1 line, I don't remember. So the capacity exist. The problem is that the capacity in U.S. is that until now, was not existing [ over the summer in HV ], except the Nexans plant. But most probably is the capacity that is needed.
I hope, and we are looking for a proper solution, that within the next 1 or 2 years, we are going to be able to at least announce, not execute it because there's a time line of 3 years, the submarine plant in the U.S. today. For the time being, and that's the case of being, we are going to supply it from our existing plants in Europe. Did I answer to your first question?
Yes, that's a great answer.
Okay. The second question, the possible impact of 5G on the telecom demand. I give you my personal perception. 5G is requiring a much bigger quantities of data. And that will impact partly on the existing networks that will be much more saturated. Some of the companies, the utilities, have already started to reinforce this network in order to comply with the expected increase in demand. But for more details, I would like to give the floor to Philippe Vanhille.
Yes, David. 5G is a new standard that is forcing the operators to deliver much better signals. Essentially, it means more -- higher speed, but also a lower latency. And lower latency, which is the response time of the network, means that you need fiber. So there is a clear link between 5G and fiber. That's the first general question -- answer. Then there is a different timing to get there depending on the kind of investment you consider. Some operators, as Valerio rightly said, are going to leverage on their existing FTTH network to build the 5G, and it's a certain way. They still have to build a certain part of their network with fiber when it's not yet fiber. And some others, like maybe in China, to be confirmed, they will build completely new networks to connect all the antennas of the 5G. It's an option that is more bullish, more investment intensive. But it also can be a decision. I see the Western players more leveraging on their existing networks. I see talks that are only talks for the moment in China, saying that they would build a specific network for 5G. In that case, of course, the demand in China would restart quite strongly. The next stop for this discussion is going to be the next China mobile tender that everybody is expecting in June or July. And there, at this moment, we will have a clear idea of the Chinese trend, which might, as always, influence the rest of the world in terms of market volumes and prices. That's the next -- the clarification can come during summer this year. That's what I expect.
We have the next questions coming from the line of Sean McLoughlin from HSBC.
Just a couple. If I can come back to the comment you made on the guidance. I just wanted to understand why you didn't raise the guidance given your confidence at the high end. Or particularly, not tighten the lower end of that range. If you could just talk about what you see as the key risks that could keep you at the lower end of that guidance range. And the second question is around offshore wind, specifically, you talked about confidence for the second half. You've previously said that you're going to be the aggressive player in the market to get orders to fill your backlog. Just an update really on the current tendering environment that you're seeing? And are your competitors, in fact, being less aggressive?
Okay. First of all, the guidance. Obviously, I could have modified the guidance, removing the lowest part of the guidance. But that is not -- I don't see it as a serious upside. In order to give a reasonable upside to the guidance, I need to see the first half, how it's going to close. And most of all, if there are going to be other issues in the business, like the ones we faced with raw materials and the orders and the execution, just in case. The German Corridors, we are going to start the mass production July. Let me see that everything is running well as expected and as we are working to do it. We have run another number of lengths in order to be more confident with the process and the specs of the cable. Went well, but a few kilometers, on basis of our experience, is good, is a good result. But thousands of kilometers is another chapter. And we have to accomplish with thousands of kilometers. So that's the reason why I like to be a little bit more prudent on the guidance than to be too much bullish, getting the risk to disappoint you and the -- you, the shareholders, in the second part of May.
The other question, can you repeat, please, because I didn't take notes.
It was about the tendering environment for offshore wind, with your confidence to second half orders and a little bit about you being more aggressive than competitors.
Yes. I didn't say I'm going to be more aggressive than competitors. I said last quarter [ con call ] that we are going to be a little bit more aggressive than the past quarters because we have seen that our competitors have become very aggressive. And I don't like it. Now obviously, there is a balance. Reducing the margins by 1% or 2% is already aggressive for me because this is a business that we have not to destroy. We have not to commoditize too much because the risks are always there. You have seen even our customer has had some problems with their strategy to split everything. I'm talking about Ørsted, obviously. And that's -- those are the execution problems into which everyone can incur trying to be too much aggressive. I prefer to be a little bit more cautious and making a step after [ that, simply put ].
So we have been able to get a few mid-sized, little sized orders without dropping too much the prices. We don't -- we are not talking about serious percentage over price reduction.
We have the next question coming from the line of Lucie Carrier from Morgan Stanley.
The first question I have is related to the slides you have on Slide 20. I think maybe many people could be surprised you -- to see you're expecting a larger market in interconnection versus offshore wind in the current decade. And I just wanted to understand a little bit the split of the EUR 7.2 billion average that you were showing. How much are you expecting of that EUR 7.2 billion to be subsea? And how much should be land, in our view, on average? And also if the market is multiplied by 3x, I guess I'll ask this question again, but how do we think about capacity here? Offshore, we assumed that in the previous cycle, you were only operating at 35% capacity.
Lucie, I have to be honest. I didn't catch very well your question. Could you repeat it?
Yes. I'll start again. So I was referring to Slide 20, and you are showing an average market of EUR 7.2 billion, on average, for the current decade for Project. And I was curious to know how much is subsea, whether this is interconnection and offshore, and how much is land on average out of that EUR 7.2 billion. And obviously, what you're also showing is a market which is multiplied by 2.5x between the previous cycle and the current decade. So how do we think about capacity here? Because I don't necessarily think that the market was operating at, let's say, 40% capacity before and now would be operating at nearly 100%. So how do we think about that?
Lucie, the capacity, unfortunately, in the cable industry can rise pretty easily. That's an unfortunate case, but it is what it is. And everyone is able to rise the capacity within 2, 3 years that are usually -- is usually the time lag between the award and the execution of a project. Consequently, there is not a problem of capacity even if the market is [ going to price it ]. It will be maybe a time lag, but even the projects. Frequently, we talk about projects that are coming tomorrow morning. But at the end, if you look at the history, you see that projects have not come -- are coming a little bit later because of authorization problems, because of financing problems. We have to look at it and to be with the foot on the ground. I see that the market is growing. I don't know if we'll grow really to EUR 7 billion, but maybe that the market will at least double. I already told to all of you that we are looking to increase the capacity. But the problem is that our capacity in Europe is already, in fact, sufficient for our market share. What we need is to expand our capacity in other markets. And the market -- the target market is North America. To do that, we need to -- we are looking for a site, a proper site in the U.S. Having our plants, all of them, far from the sea, unfortunately. And we needed to find a proper location for the new submarine plant in U.S. That's what we are doing today.
Understood. And when you think about the total size of the market, appreciate the EUR 7.2 billion is a figure that you're giving today might vary a little bit from 1 year to the other. But how do you think about the mix between subsea and land? So I'm not talking about interconnection versus offshore wind, but all subsea, i.e., interconnection plus offshore wind. And then on the other side, land, out of that EUR 7.2 billion or EUR 7 billion.
Time by time, the offshore wind is growing. There will be the related interconnector to the dispatch this power to the utilization point. So I believe the interconnector will be a little bit more than the offshore wind farms, this market, simply because the customers need to move the power to the utilization. If you look at -- I used to say, look at the mother of your wife and you see your future. The same applies to husband. If you look at it, how much can TenneT and the others have invested for the offshore wind farms in the North Sea and how much, 5, 7 years later, are going to invest for the German Corridors? That's a good proportion you can try to apply to all the regions. Taking care the fact that in certain markets, the overhead lines trend can help.
If I can press a little bit. Can you make it a bit simpler for us to kind of give us the split? Are we talking 60% subsea, 40% land? Or are we talking 50-50 out of that EUR 7 billion you are providing?
I believe that this -- okay. Let me leave the floor to Hakan that seems to have a clear idea.
I mean if you look to the EUR 7 billion that we are foreseeing, majority is going to be definitely subsea, including offshore and interconnect of subsea. And then the remaining that we are foreseeing for the short term is going to be land. We can say about 70% subsea, 30% land. However, this -- of course, this mix is going to change according to, as Valerio was saying, the [ big bunch ] of the offshore and how much the land portion is going to be supportive. For example, if you look to the North American, let's say, structure, majority of the first investments are going to be in the offshore. But the backbone is not able to support that, and therefore, it will be subsequently supported either by overhead or by underground cables. But currently looking to the pipeline in the short period of time, I can say that 70% is going to be offshore, including the interconnect offshore.
That's very clear, very helpful. Secondly, on the cyclical businesses. I just wanted to get your view on the sequential trends rather than year-on-year trends because, obviously, the comp is very easy as we go into April. So how does the first quarter was looking sequentially versus the fourth quarter? And how does April is looking so far versus the first quarter on a sequential basis?
Okay, Lucie. Sequentially, the business is obviously improving, is definitely improving compared to the same quarter last year. But the same quarter last year was already -- has already started to get the impact of the pandemic. Now we see a sequential improvement that is with a peak in the second quarter because last year, the second quarter was the one that was most affected by the pandemic. The line has to be drawn by December. That's my opinion. I believe that 2021 will be overall, of course, better than 2020, even in the last quarter, if that's similar to your question.
That's very helpful.
Which is really, Lucie, that today, thanks to the reacceleration of the business, everyone is trying to boom and to increase the demand, creating a false demand that we have to be careful with. I wouldn't like that within 6 months or at least 1 year, we are going to have an excess of availability of products. I'm talking about the E&I.
Yes. Okay. And just lastly on the raw material situation. That was very clear, the impact on your working capital. I understand from the Slide 28 you have in the presentation that, overall, you cannot expect the impact to be fairly limited from raw material inflation. But just maybe at the risk of playing devil's advocate here. I noticed that the gross margin in the first quarter is down quite sharply. So I was just curious to know if it was due to the mix and maybe the fact that the Project business was down the most or maybe if it is a delay in passing prices. And also as a result, if you could remind us a little bit, when we think about your raw material exposure, how much does that represent in terms of percentage of sales and also the split between the different metals and plastics, please?
Okay. The raw materials in our business have to be passed to the customers. No way. Otherwise, you are going to lose money very quickly. And that's the driver -- the main driver of our business. If you consider that the metals is passive by definition, not really by definition, but is mostly passive, maybe with an [indiscernible]. The problem are the other raw materials. I mean the plastics, the oil derivatives that are not really automatically passive, unless there is a specific clause in the company that may be positive or negative, depends on the system. It's positive when the raw materials goes up. It's negative when the raw materials goes down. In the past year, so with the oil crisis and the drop of the oil price, we have been able to enjoy a certain advantage from the raw materials. Today, we, at the same time, the shortage of oil derivatives, PVC and polyethylene and the price that is pretty stable for the oil, generally speaking, we are facing more a problem of availability than a problem of price increase. The price increase we can pass. The problem is that there is not a lot of availability of the products. That is positive, in my opinion, in our commodity business. It's the season into which prices can be raised. Did I answer to your question, Lucie?
Yes. I guess, I'm just trying to kind of make the link of that in terms of the gross margin, whether that's all the impact or whether there's another impact and how we think about that kind of for the remainder of the year. Because the gross margin has come down roughly 400 basis points, if I'm not mistaken.
Francesco?
No, I don't think so. I don't have the gross margin loss in front of me, but I'm looking at the EBITDA margin sequentially and the fourth quarter is quite in line with the first quarter this year. So I exclude that the contribution margin has come down by 4%. As a total, you have a decrease of the margin in the Project business. But this is totally normal, in my opinion, because any Q1 you take is a much lower margin than the second half of the year because typically, the finalization of the projects and the installation phase of the project is in the third and fourth quarter of the year. So typically, in Project business, it is correct that the second half is very much higher. So this explains the drop between Q4 and Q1. But in the other businesses, actually, I'm seeing in the Energy business quite an increase of the margin in Q1 compared to Q4 from 4.7% in Q4 to 6% in Q1. Yes, I confirm that. And in the -- sorry, in the Telecom business, I would say, quite a stability from 16% to 15.2%. So it's not a -- maybe we should look better, Lucie, at the numbers that you are looking to mention a 400 basis point decrease of the GP.
We'll double check the number on the gross margin. Sorry about that.
No problem.
We have the next questions coming from the line of Akash Gupta from JPMorgan.
My first one is on copper price, and we have seen sharp increase in copper price year-to-date. And one of the factors behind that, which I have come across, was anticipated shortage against demand that we see for copper. And the question I have for you is that have you seen any bottlenecks in recurring copper for cables? And could this availability of copper could be a headwind on how much you can grow your Energy business in the next 12 to 18 months? So that's question #1.
Akash, copper price is going up to reach the $10,000, and it seems not to look for a reduction. I don't see at all a problem because the -- especially the copper, the metals, generally speaking, is really an automatic or almost automatic pass-through to the customers. Availability is not an issue. If there is a raw material that we are not missing at all, is the copper and aluminum.
I don't believe that will stay for a very long time, unless the demand of cables and the other copper components will continue to rise very, very much, but I have some doubt. What I see is vice versa with the copper at such a high level, the possibility of conversion from copper to aluminum, wherever is possible.
And my second question is on North America. I mean, in the quarter, you had flattish growth there, but the Telecom business being very strong, while Power Distribution was down because of wind. What are your expectation for the next couple of quarters, given this 100% PVC-related wind boom is behind us? So is it fair to say that this North American growth could remain little bit under pressure because of Power Distribution business? Or do you think that this growth in solar that you see could be able to offset this decline in wind that you see there in the U.S.?
More than a decline in wind in U.S., we are seeing a stabilization of the demand for wind. There is no business that can continue to grow every day for a century. And that's the case, it was expected. It's not worse than expected. But the point of power distribution is that customers are divesting part of their investments from the distribution network to the high-voltage network. For Telecom, vice versa, I see a very good, continuous demand. That's the reason for the investment we decided to authorize today. And I see the Telecom business in North America growing pretty well and not scaling down at all.
And my final question is on monthly trends. So on Slide #4, you have shown monthly volume trends for January, February and March. Can you comment on April, like how April trends have been? Like have you seen some slowdown in growth? Or have you seen the momentum continue to build up in April?
I'm sorry, [ I didn't get it ]. Why?
[indiscernible]
Yes. My opinion is that April, May is in the same trend of March. Obviously, we have seen that March has been very difficult last year; April, too. And this year, vice versa, the demand is sound. I cannot say that it is definitely higher than 2019, but it's very sound.
We have the next question coming from the line of Alessandro Tortora from Mediobanca.
Yes, I have 3 questions, if I may. The first one is on -- you mentioned before installation, okay, on the submarine project. And let's say, some noise in the past weeks due to some clients are mentioning some, let's say, some issues related to the long-term maintenance. Can you give us, let's say, your idea on what Prysmian can do? And if this can be, let's say, an additional or an incremental business for you going forward? This is the first question. The second question is on, let's say, portfolio of assets, the portfolio -- business portfolio of the company. You mentioned in the presentation that diversification is helping the company. Is it a possibility for the company, do you consider as not full core some businesses and therefore, thinking about, let's say, disposal in the short, medium term? And the last question is on cash flows, let's say, cash flow expectation -- sorry, my line was not fantastic, but I didn't get the forecast for copper -- the copper impact, okay, for -- at cash flow level.
Yes, Alessandro, thank you very much. First of all, let's touch the point of installation. What we were mentioning before was the problem related to our public. Consequently, I mention even the customer, to one of the big customer of big developer due to the problems in installation. This is public, all of you know. And in my opinion, that's due to the complex business that once we started to flip between different players supplying you each one, a different piece of the project, the risk to make a mess is relatively high. The problem was related to cable protection, and this is not something related to our business. But generally speaking, I suggest my customer not to do split too much the projects. Because that's, in my opinion, makes much, obviously, in the short term, may give some advantage in term of prices. But you have so many different actors in the same supply chain that the risk of delay and mismatch is growing very much. That's the point. Second question, dismissal of businesses. There are businesses that are not considered core for us. Frankly speaking, there are some years that I'm trying to sell, but had not been lucky. Maybe I'm not a good seller. I wish to my colleagues to be better than us. But it's not easy, unless you decide to sell for free. So I would like, but if you want, I also, in other conf calls, I already told the market which are the businesses that we do not consider strategic for the company. High-vol to repeat, but there is no way to sell at a [ proper place ].
Okay.
I can add, Valerio, one point to this, I think, which is very relevant, is, of course, as Valerio is saying, a matter of valuation. And it's a matter of valuation versus a clear fact that we have no business which is burning any cash. So of course, not having any [ burning house ], let me simplify this, all right, even some business with apparently low level of growth or low level of margins, we have analyzed very differently, and we have concluded that we don't have any cash distraction. But over the long term, I'm not commenting 1 or 2 years. So of course, it may be noncore, but we would need to get proper valuation for that. just to strengthen what Valerio was saying. Sorry, Valerio.
Okay. Okay. The last question is related to cash flow, and I leave the floor to Francesco.
Thank you. Alessandro, the -- I was mentioning an impact of the copper price increase going from March last year to March this year. So on a last 12-month base, which is EUR 170 million. So it's very huge. And we are managing, I believe, because we are managing thanks to a decrease of working capital in the last 12 months in the Project business, which was a very material one, and also by improving the stock level in terms of inventory base. Sorry, we hear some background noise. Now it's -- no. And also improving the receivable overdues and the receivable outstanding base. Well, no one knows, of course, where this copper price impact will end simply because we don't know what the level of copper will be from now to year-end. But if we reasonably assume that it may have reached the, let me say, maybe not the peak, but let's not expect a further huge increase, I think that also for the full year, the total impact will be very similar because we will have a piece of the impact of the fourth quarter, which will fall out of the picture and then the further increase of EUR 50 million, EUR 70 million, which will kick in, in the second quarter, specifically. So I think that the full year of EUR 170 million for full year 2021 will remain more or less unchanged, given the current level of copper price, of course. If the copper price goes to USD 13,000 a ton, it's a different picture.
Okay. Probably it will be a different picture for everyone. But -- so just to confirm that your -- let's say, your eye on the high end of the guidance, okay, on the free cash flow side, is based on this around EUR 170 million copper effect. Is it right?
Absolutely. That's our target, I think is a realistic target. I think it's based on the start of the year, which has been very positive. The -- of course, the order intake that we are confident to have in the Project business, mainly in second half will play a role because, as you know, down payments is a major driver of our cash flow. And this -- whereas we are confident on the order intake. Of course, we cannot always predict the fact that 1 project that may come in Q4 or Q1 of the following year. So that's a potential uncertainty. But overall, I'm pretty confident that we may deliver the high part of the guidance, which is still within the guidance.
We have the next questions coming from the line of Vivek Midha from Citi.
I had two, if I may, both sorts of follow-ups. So firstly, I just wanted to follow up on your comments around false demand and just generally around the improving trends in Q1 because we've heard a few different things. Did you see any significant restocking effect in the first quarter, which could have supported your price trend? And secondly, touching again on the high-voltage investments in the U.S. In the past, I guess there have been some issues around things such as permitting. How optimistic are you on the sustained pickup in U.S. grid spending?
Thank you very much to you for the question. First of all, let me address your first question, the risk of restocking. That's really a guess. A guess, why? Because we don't believe, but we have not the control of the stock of our customers and the installer of our customers. For sure, there is a raise now due to the raw material price increase, the general price increase, everyone is looking to get the materials as much in advance as possible. And that's a -- I don't believe that anyone is making stock.
And for restocking, I believe that you are thinking to the fiber cable. In the fiber cable, the stock can increase, but not as much as been in '19. In '19, we were coming from years of shortage, and that may have drive the overstocking we are seeing, and we faced the second half '19 and the full year '20. So I don't see a very big risk. For the energy cable, vice versa. Whereas the demand there is strong, there maybe a little bit of over purchase. That's because of the desire of everyone to restore the precedent level of activity that obviously needs of materials is restocking, that I don't know. I don't know, but we are -- we used to be pretty careful looking at the stock for what we can of our customers. Now there now is our -- is a race to look at everything is possible to restart even better than the past the business level. That's your first question. I don't know if I did answer.
That was very helpful.
You're welcome. The second question was on projects, if I remember correctly.
Yes, on [ U.S. market ].
Hakan, do you wanted to answer?
If I understood well about the investment timing you're talking about, am I correct? The HV investment in the U.S. based on the permit?
Yes. Yes, permits and also, I guess, in the context of the Biden infrastructure plan.
Sorry, the permit of the investments from the Biden perspective, not from the capacity perspective. Okay. I understand. Let me say so the first permits are coming out based on the big push of Biden. As you know, he promised about 30 giga to be installed on the offshore. And relative also the infrastructure, which is going to be the backbone supporting this investment. And we are hearing good news and there were good news also this week about one of the projects, as you know, that is the first project of [indiscernible] which is progressing very well. So we are thinking that the pipeline is going to be cleared from that perspective. We feel very confident that all these plans are going to be executed compared to the skeptical situation we had before. So if you are asking if the strength of the market is there regarding the permit, yes. Is there a route already defined to the market to get these permits, also yes. So I think we are more than, let's say, positive that all this is going to be influenced.
Okay. And just following up in terms of the transmission grid. I mean how confident are you on a multiyear view?
Okay. From the transmission grid perspective, it's -- there are studies done also with the request of the utilities. The transmission grid analysis or the request from some developers are also being chased. The first is security of the offshore wind. There are some projects to connect these offshore winds with some connections in through the sea and then to the land and further transmission overhead or underground that is going to be connected to the end users to the distribution network. So these plans are currently -- we are hearing and we are participating to some development projects already. But these are in the engineering phase. They are not in the tendering phase. But the engineering phase is -- has already started. So there is both ways, let's say, work that is being done currently, supporting the offshore wind. But it will take time, let's say, to realize all these projects.
If I may, once a number of offshore wind farms will be built on the East Coast, we will see some projects to transfer this capacity inside the U.S. That will be projects of high-voltage land probably [indiscernible].
We have the next questions coming from the line of Luigi De Bellis from Equita.
Two questions for me. The first one is on the Eurasia Tyrrhenian Link project. If you may, can you give us more visibility on the technology that should be used for this project? And if will be divided in 2 or will be 1 single award? And on Tyrrhenian Link, in particular, when do you expect the potential award? The second question on the German Corridors. What could go wrong to have delays from a project starting in July? What are missing still?
Okay. First question, Eurasia and Tyrrhenian Link, 2 completely different -- Tyrrhenian Link is in the hands of Terna and we are discussing already with Terna about this project. It's an extremely huge project, 2,000 kilometers of connection is going to fly. When it's going to fly, it depends, but within this year in term of award. Then who is going to get? We will see. But the most important question is the technology we need. The technology for Tyrrhenian Link is expected to be [ MRA ] rather than nothing new under the sky. In Eurasia, [ biosimilar ] studies are more complex project. That is very important, in my opinion, for the future development of the European network use Eurasia interconnector is a link that can bring power on the paper from North Africa to Europe in the short term from Cyprus or better, from [indiscernible] to Cyprus. Let's see.
The technology for Eurasia is not going to be [indiscernible]. I don't know. But we are not going to offer MI for the simple reason that the test we made with the pressure of 3,000 meter water depth is critical, is more than critical. Do not elect, in our opinion, to realize the link with MI. Because it's not only the problem to lay the cable, the problem is also to be able to pull up the cable in case of power outage and to repair. So our opinion is that MI is not viable, but maybe we are wrong. If someone else is confident to do with such kind of technology. We made some tests with our -- in our labs, and the MI cable we have is not able to resist to the 3,000 meter pressure. That's the reason why we are offering the [ XLPE ]. You made another question, Luigi?
Yes, [indiscernible].
On the German Corridors, yes. Why German Corridors may be in the way? Simple answer, the problem of the permits. It seems that customers are having some delays, as expected, in getting all the permits along the route of the project. And that may delay some months, maybe 1 year, the execution of the project. In the meantime, anyway, starting from July, we are going to start the production of the link.
If I may add, Hakan speaking. The German Corridor delay is actually a positive delay. Not -- we have to see it positively because the German TSOs have applied for the second, let's say, phase of the German Corridors to be within the permit applications. So instead of giving partial permits for the first phase, which we know, the first 3 projects, they added also the subsequent project that is going to be tendered soon. So in this way, the permit is going to cover the full extended German Corridor. Therefore, there is a delay, but we don't see that this is going to be, let's say, from our side, a significant change in, let's say, in our planning a pipe. This is going to be some shift, for sure.
We have last questions coming from the line of Gabriele Gambarova from Banca Akros.
Yes. Again, on the German Corridors. I mean do you envisage any kind of technical challenge in this case? Or I mean, the technology is absolutely bulletproof, and you don't see any problem there?
Okay. The technology, we cannot say that is bulletproof. The technology is a new technology, 525 DC is a new technology. There is not 1 meter of 525 DC underground, XLPE or excluded. Consequently, it's not without risk. And that's the reason for our careful approach to the marker that pushed us to test many times the production and the performance of the cable. Within 1 or 2 years, when the German Corridors will probably run, it will be [ fully-proofed ] technology. But till then, I cannot consider [ fully-proofed ] Technology.
But just to add to what Valerio is saying. We are saying -- we are telling this from the, let's say, preparations that we do to make sure that the project runs in perfect condition. But definitely, we trust into the technology. We trust what has been done so far. But we are overly cautious to make sure that the industrialization and the implementation phase goes flawless. Therefore, that I just wanted to add. It's just fully -- it's a new technology, and we are taking the precautions and we feel pretty good with the precautions that we are taking.
We have already produced [ dozen of kilometers ] in order to test the technology, the materials and process. That is what we did not properly do at the time of Western Link.
Okay. And can I ask you, I didn't get this aspect. If there is any, let's say, delay from the German authority side and the German client in getting the permits to start, let's say, the job, you will produce anyway the cable or you will delay the start of production? How does it work?
Hakan speaking again. I would like to say that we are very much working together with the customer to have a good, a sound, let's say, a continuation of the project. And from that perspective, the delay is there. There is no doubt. I mean it's obvious. But on the other hand, we are starting the production with agreed length for the project that will derisk the project in the future, having already prepared some lengths ready to be installed. And we are agreeing. As time goes by, we have agreed already for this year. And we have discussed also for the coming years how much to pre-produce and to stock. And this will be only for the benefit of the project's execution.
But Gabriele, you have to understand that it is -- how it is, the reason for the delay, the ability of our customers to get the permits for the second German corridor is welcome, is more than welcome in such [indiscernible]. Because means that in the meantime, we produce the first 100 kilometers. Customers are able to get the permits for tendering the second German Corridor run. Just corridor is not one shot. That's true.
There are no further questions at this time, sir. Please continue.
Okay. Thank you very much to all of you for the participation to the first quarter results release of the Prysmian Group and to the next quarter. Thank you, and goodbye.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.