© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to the Q3 2018 Financial Information Strategic Review. My name is Katrina, and I'm your event manager. [Operator Instructions] I would like to advise all parties the conference is being recorded for replay purposes. And now, I'd like to hand over to Mr. Guérin and Mr. Badré. Thank you.
Good morning, ladies and gentlemen. This is Christopher Guérin, the CEO of Nexans. Thank you to join us for the call. I'm here in London with 3 of our management board members, Nicolas Badré, our CFO; Juan Eyzaguirre, our Strategy and M&A head; and Vincent Dessale, our head of Subsea and Land High Voltage.Let me explain to you how we will proceed. We have 2 information to bring to the market this morning. One is about the Q3 results and the guidance for the year and the new equity story for Nexans. In order to have all the full picture, I will start by the new equity story, and we will hand over at the end before questions about Q3 comments.To follow my message on the new value delivery model of Nexans, I will make my speech around the presentation, which is available on the site, and I will describe the page each time I will do any comments. So let's start with the new equity story. Good morning, everyone. Thank you to listen to this story in regard to our developments and performance in 2018.As I mentioned last July, we have made the financial stress test of all our activities in terms of performance, in terms of market positioning, capability to grow in a profitable manner. In parallel, we have analyzed and benchmarked our cost base at a very granular level. The fact I'm part of the company since years is an advantage, and we're going to [ issue ] much faster than any newcomer. This was, in fact, is that we have to challenge the current Nexans world [indiscernible] sufficiently. That has been my focus over the last months.Clearly, the result of Nexans [ is branching from now ] on sure program of resilience. Since 2012, our return on capital employed and our EBITDA are moving up and down like a roller coaster. Our organic growth has been negative. We have spent an equivalent of EUR 1 billion CapEx with limited financial impact. We have not yet delivered the level of returns, that you, our investors, shareholders both experts and deserving. You have been patient with us over the years, and I want you to know that we don't take the patience for granted. And we know that is not [ adjustable ]. I consider Nexans as a performance [ debt ] tied with shareholders, so it's time to react and put the company in working order to deliver returns and become resilient to prepare ourselves for the new world.Let's move to the Slide #3 of the new equity story presentation. In 2014, we have introduced Nexans in Motion, our program for use in transformation. And we have to recognize that this program has been a success, a success only in 2 areas. Our company transformation is not only an ambition, neither a booster for a year. It's a deep reform of its way of operating to make it resilient and robust in the long run. We consider that only 50% of our activities have been transformed and today are resilient. I will come back to this in more detail so far in this presentation. Therefore, the good news is that 50% of group activities can still be transformed and can unlock rapidly a growth value creation potential. One of my main takeaway out of this financial stress test and disappointing results of 2018 is that most of our financial growth has been very misleading for our team. I have a sales and marketing DNA. I do value the group structure, but there is a gap. We can see right now more volume does not mean more profit. Our objective is to scale more than to grow. We need to grow value by positioning Nexans as a service provider. We need to grow value by conquering new white space. We need to move into the value chain to find new ways of operating rather than focusing on growth at all cost.To be honest, being part of the group since 20 years, I have to remember that Nexans -- the Nexans I loved was lost. I have sometimes the feeling that we collectively took choices that were too big for us, not in our image, too corporate, too love-struck, not very faithful to our DNA and spirit. The reality is, we are a group of agile, humble, entrepreneurial SMEs with a real differentiation DNA. We make our history on our past successes. We must reinvent ourselves without betraying ourselves, building our modernity on the strength of our tradition. Our challenge is not, therefore, only financial, you understand. It's as well a human project.Let's move to the Slide 4. The main question is how to unlock our potential. I have developed 6 years ago a transformation program named SHIFT, which is based on private equity blueprint for best practice. It is systemic, analytical and financially driven, supported by more than 30 operational levers. This awarded program has proved already efficiency, scalability, and it fits perfectly with all the market we do serve. In Europe, it took us only 3 years to multiply by 4 our return on capital employed at idle sales. I will come back to this point during the presentation. Point number 2. The DNA of Nexans is clearly around innovation and differentiation, but we have not been able so far to run everything in a scalable way and very impactful in terms of financial results.Now I would like to take a moment before going back to our new deal on Slide #5, take a moment to walk through sort of favorable long-term industry trend we are seeing in the marketplace. In 2017, we have done a deeper work on scaling the world mega trend in the energy and data centers. We have interviewed more than 80 customers, experts and economists, and we have all the data. This exercise confirmed 2 main things. Number one, the demand evolution in the coming 10 years is huge. The world population will increase by 20%. The urbanization will grow by 40%. The energy consumption, again, jump by 40%. The renewable energy will be multiplied by 2 as well as the mobility. Energy transition is inducing a huge need in infrastructures and networks. Cable and connectivity production will grow as well by 4% and system management by more than 9%. Based on our interview, that's our point number two, customers do not want a cable [indiscernible] offer but system. [indiscernible] offer because all of them -- all our customers are moving hard into the value chain, and they want us to follow them with new offering supporting their evolution. The old world of the cable production is crowded, commoditized but is evolving strongly into this new world, which is the world of services, which is less capital intensive but more ingenious and digitally driven. Nexans singularity perfectly fits with this new world, a world that will require us not to go alone, a world that will be eco-systemic and that will require us to build strong partnership like the one we signed with Total, for example, to scale faster last September. Let's now go straight to the point to the new deal. Let's move to Page 6.On Page 6, you will notice our new strategy scorecard, which is composed of 2 folds. First, the transformation of our operating model to pay our performance debt and to finance our future. For this green path, 3 main mottos: focus, simplify, adapt. Focus, simplify, adapt. Yes, we have to focus on the right market customers and products seeking with our transformation. We have to simplify and lean-up our organization both with the end to reduce the overall group complexity, but as well to adapt our footprint toward our business portfolio on market evolution. We build on the talent regarding the world evolution in coming years. The second fold is our very rapid and successful rotation to this new world. Our definition of the new world is very clear. It's all about characterization, system, innovation and services. We will support demand by developing new customer offerings with partners. This move will be supported by digital transformation to capture higher returns. I know very well the market. I know very well the customers. Believe me, Nexans is the best [ one ] on position to offer better value for money and greater experience for its customers.Moving on Page 7. I will not commit to a 5 years plan. I will not commit to a growth story only. My commitment is about 3 years. My commitment to generate an incremental EBITDA of EUR 175 million from now to 2021. My commitment to generate a return on capital employed that we gain 7 points over the period. My commitment to reach a cumulative free cash flow from '19 to '21 above EUR 200 million. Those objectives will be reached thanks to 4 main levers: Number one, transform rapidly our underperforming units towards greater profitability; number two, focus profitable units on growth for value via differentiation, new offerings and innovation; number three, restore competitiveness through ambitious cost reduction plan; and based on the result and experience of the last 5 years, enforce more discipline in CapEx management on return on investment monitoring. Those are our 2021 objectives.Let me now describe to you some of our models and how we will capture this value. Propose that we move on to Page #10. Let me drive you to our financial stress test exercise. In the last months, we have screened the [ end of '17 ] activities and P&Ls of the company using an approach similar with what a private equity firm could have done. We have valued their market playfield of all these units. We have checked the competition performance locally for all activities we are positioned, their market shares and their financial performance over the last 5 years. Obviously, I cannot share you an exhaustive view of this exercise, but at least let's have a look at their positioning in our financial metrics. So you can see on the matrix 2 axes, EBIT generation and percentage of sales on the sales by euro of operating working capital. 50% of our activities and 50% of our turnover are considered as profit drivers, meaning return on capital employed and free cash flow contributive. On the other hand, 50% is either improving on EBITDA but still considered as cash tank because of their working capital level, or dilutive on both axes. We call them the value burners.I know you have one question. The question will be the following: should we get rid of the value burners? I strongly believe it is not the right approach. Well, let's say that everything is a question of sequence. Should we restructure all the work on their competitiveness? Surely. But we need to check first that some of our value burners are just not well managed and are potential strong profit driver. It was exactly the conclusion of our success in Europe activities. Some activities have moved in less than 24 months from value burners to profit drivers, thanks to our SHIFT program. To reiterate our 2021 objective, we must strongly reduce the value burners' rate by converting them fast, while of course, growing our profit drivers, keeping the same good financial ratio. You can see that as well on the slide number -- second part that each market has its own profit drivers and value burners.I propose that now we move to Page 11 to give you a bit of granular view of our management of this portfolio on our objectives. Believe me or not, we have never been at this level of management granularity to transform the company, even if some of you consider that this is the obvious things of doing. My first fight is to avoid one single motto that could fit to every activities because one single motto will be absolutely irrelevant, pure dream. We have to be clear. We have 2 company tasks: the conservative one with exceptional financial ratio, and the agility one. Therefore, the profit driver will be managed through a value growth lens. We are looking for EUR 400 million CapEx in the period, including our new subsea vessel, and we'll target an EUR 50 million EBITDA improvement on those profit drivers by 2021. Please note that the new vessel full payback is expected only in 2022. To support that growth, we will deploy a series on innovation, a squad force, to support it. On the other side, we will be in the world of no CapEx, sales attrition to accelerate business selectivity and financial ratio improvement. Only 2 motto for those activities: a separation of the model and transformation. Their target, an incremental improvement of EUR 110 million EBITDA and a working capital improvement of EUR 190 million. To support it and to support our advocacy, we are now deploying the transformation squad team, but I will explain their duty on Page 12. As mentioned at the beginning of the presentation, SHIFT is based on our own practice coming from private equity world. SHIFT turnaround squad teams is a mix of group of high potential managers and external financial and industrial analysts and consultants to support data functions on action implementation. More than 30 transformation levers have been qualified and adapted to the deep cable industry covering sales, logistics and operation, in a very systemic way. The mission is organized in a project mode for the next 12 to 18 months with a weekly tempo under direct supervision on Nexans' top management. The SHIFT program leader is reporting to me directly, and the program deployment has just started, with a team hub in each region of the globe: South America, North America, Asia, Europe, Middle East, Africa and a specific team dedicated to high voltage activities. SHIFT aims is to generate EUR 100 million incremental EBITDA and EUR 190 million working capital improvement. And we will, this is my commitment, communicate regularly the progress of the program.Let's turn to Page 14. To enforce the change, we will adapt our management routines. We need a big change. We need to switch the future from understanding to acting. We need to foster a result-oriented mindset by creating repeatable processes that spur performance improvement again, again and again. We need to develop manager skills on turnaround practice, but as well growth practice. We need to strongly incentivize on return on capital employed and free cash flow generation. In fact, I simply want our manager to be obsessed at maximizing short and mid-term return on capital employed and free cash flow generation. I think you understand it. We will adapt as well the key performance indicators to the business clusters. Either you are a profit driver, either you are value burners; either you are in a growth mode, either you are in a turnaround mode. We agreed to centralize our control to lead and monitor weekly all these initiatives supported by digital business intelligence tools. And in a nutshell, we will put a very, very high focus on discipline in execution and capability to deliver financial commitment. Let's go to the financial part on Page 17. Our EBITDA trajectory is fueled by 3 main levers. Of course, we are not in a perfect world. We have to fully offset the anticipated price/cost squeeze through a strong cost reduction program. These results will reduce our exposure to labor and the higher cost inflation for the future. We will transform 50% of the group that still need to do so, duplicating program turnaround [ receipt ] in order to bring EUR 100 million EBITDA. So we have EUR 210 million EBITDA incremental improvement, thanks to cost reduction initiative, EUR 100 million coming from the transformation plan, working on business selectivity and complexity reduction. We have to keep some part of this for growth. We will support the value growth initiative for our profit drivers to deliver an incremental EUR 55 million EBITDA by 2021. In parallel, a strong focus on our baseline will be maintained to warrant a full delivery of our 2021 ambition. Next page, on Page 18. In order to commit to this delivery, I propose to show you a look on the timing of all these actions to better understand how they are articulated: transformation plan, organic growth, cost reduction initiative and, of course, price cost squeeze actions. Surely, the transformation initiative will have a limited impact in 2019, but we know, thanks to the European experience, that the EBITDA improvement run rate is reached after 18 months. Value growth initiative will have -- or so take some time to pay back. Even so, some of them have already been set. This lever, being the most uncertain because market related. We keep [ a present ] hypothesis -- solutions on its 2019 impact. Therefore, we have started to put a very strong focus on indirect spend and on the short performance initiative in order to offset now the 2019 price/cost squeeze. But by 2020, most of these actions triggered, we'll have reached a good level of maturity. Page 19. In addition to the expected EBITDA impact, our return on capital employed will be strongly influenced by 2 parameters. The transformation payback on working capital should arrive earlier than the EBITDA improvement, the associated levers being quicker to implement. Our CapEx in high voltage for our new growth would be mainly made on the coming 2 years, leading to an increasing successes. Part of this increase would be offset by a reduction of CapEx and value burners and be -- with a much more selective day-to-day CapEx policy with higher discipline. We expect to keep an average organic growth rate of 3% CAGR. The growth of value burners being delivered is very limited. Our profit driver, therefore, will achieve stronger values. I think you understand it. These indicators of growth will not be our main communication focus. Let me now jump to Page 23 to give time for our Q3 results explanations and time for question, and we're at the conclusion. Going forward, Nexans' results, I'm giving the long-term market perspective for energy and data. We actually are at the intersections of 2 worlds: the one of pure cable supplies and the one of subsistent, moderated innovation and service world. I will drive personally the company to reap the reward of both of these worlds. We will communicate clearly and regularly. We have a clear mission worldview on innovation abilities. To manage this value migration, we are transforming the group fast on driving future world change from top to bottom, making sure that we have the right management and the right team in place. We will focus our 3 years plans on return on capital employed and free cash flow generation. We are building strong partnership with market leaders to bring the innovations the world need to market cluster.We are preparing and will be ready for the next wave of innovation and demand as we see a shift towards modules and platform. But before the migration into this new world, we need to restore our economical performance to finance the change. My commitment to you is to bring to market the Nexans that is agile and profitable in the next 3 years. Thank you for your attention.
Thank you, Chris. I will comment quickly on the third quarter financial information that was provided to you earlier today for a couple of minutes. We delivered organic growth close to 2%. What is noticeable is actually the fact that our cable activities, excluding the project activities, have actually accelerated significantly, reaching overall growth of 6%. On the other hand, the High Voltage & Projects segment has been down 16%. We expected indeed based on the order intake, which we had for the second semester, to slow down. Actually, the slowdown has been much even than anticipated for the terrestrial high voltage part of it. And even if we have seen an acceleration of order intake in terrestrial, it will impact 2019 onwards. Regarding the subsea, the good news is actually execution has continued to be very robust over the last months, and also very noticeable, as you know that we announced that we expected an acceleration of order intake in this field to take place in the second half of '18 and beginning of '19. And we're happy to share that we are now quite confident based on the recent order intake of the group to exceed the backlog of EUR 1 billion for subsea alone at the end of 2018. Now going back to the organic growth in cables for non-project businesses. Actually, it was strong but it was uneven and the mix was not favorable. We have seen strong organic growth in the building markets in almost all our territories. We have also seen some significant growth in industrial cables also a little less than expected and with a less favorable mix as we have seen a little less sales in the most profitable areas, like aerospace, and more sales in less attractive, like mining, for instance. Regarding the data and telecom cables and medium-voltage cables, we have been pretty flattish versus 1 year back. Actually, in the data and telecom piece, we have a mixed picture with strong growth continuing in infrastructure telecom in Europe, a pickup starting in LAN copper in the U.S., and this is actually offset by the still declining demand for LAN fiber in the U.S. as well as lower sales in submarine telecom. Regarding medium-voltage cables, it has remained relatively soft, even if we have some variances from one area to the other. Globally, we are flattish. And when we look at this overall organic growth, we can see, echoing the comments of Chris earlier, that actually this kind of growth level does not necessarily mean a significant uptick in margins. This is all the more true that we have continued to see persistently high commodity prices, and this has led us to acknowledge the fact that probably we will end up the year around EUR 325 million EBITDA, corresponding roughly to EUR 187 million of operating margins, which would represent a significant uplift versus H1, but still not at the full expected level we thought about in June. I propose we stop here before we take your questions.
Thank you for your attention.
[Operator Instructions] You have 3 questions. First question is from the line of...
Dialing in on behalf of Daniela Costa, Goldman Sachs.
This is Daniela from Goldman here. Thanks for the presentation. And I have quite a few questions, but I'll ask a couple now and then leave the rest for the meeting later. So I'll ask 3 now if that's possible, and I'll go one by one. First, I sort of wanted to understand a little bit better how you're changing the incentive structures for the people at the various layers in the organization because there have been quite a few restructuring plans at Nexans. What exactly in terms of -- I know you touched upon briefly on the KPIs, but what is the structure at various layers and how you're changing it to make sure that this time around the plan gets implemented? And along the lines of that, would you consider buying any -- are you buying any shares yourself to sort of -- to reinforce that confidence? That's my first question, and I'll follow up with the others.
Thank you, Daniela, for these questions. So obviously, the questions of incentive is right now under discussion with the Board of Directors. Of course, we will -- depending on the activities, the one on profit drivers and the one on value burners, there will be certainly for -- not certainly, obviously for all the management a very strong focus on return on capital employed and free cash flow generation. The growth will be a mandate, but the growth has to make sure -- you have to make sure that for growth, this growth will never be dilutive for the group. So of course, that will be an incentive of that growth, but only if it's cash contributive. So on the KPIs, we'll evolve the fundings if you are managing activities in the profit drivers' length or value burners' length. So that's my first answer. And we are working on it in the coming 2 months to have a full-fledged incentive ready for January 1, 2019. My commitment, and because of my commitment and my trust in the company, I will put 20% of my revenue in the share in the coming months. It's already done at the beginning of September.
And then, I wanted to ask again on the value burners, sort of, I understand you don't want to sort of immediately give up on those and you want to try to improve them. But there are quite a few things, as you lay out in the plan, not just on the value burners, but also on the other assets that you will be busy with. You are still sort of doing the CapEx for the profit centers. And in terms of sort of focusing attention, why not just sort of simplify the task and get more focus on the good things? And why do you have to do it all at a time in terms of sort of management attention? Isn't it too complex of a task?
Yes. Just on the questions, it's very clear. Because first, you can get rid of your value burners, actually, at a very, very cheap price. But I have this experience 2 years ago with one of our important, critical activity in Europe that was generating a negative return on capital employed of 5%. I discovered, thanks to our SHIFT program, which is again, growing in this very high granularity of financial indicators, that I've discovered that I didn't have the right management. I discovered that we didn't have the right product offer. I discovered that our cost base was wrong. I discovered that my pricing strategy was wrong. So we have reset everything in 4 months. And this activity in 24 months moved from minus 5% return on capital to 35%. So I want to make sure that in my value burners, I don't have such jewel of project activity that's just extremely good but not well managed. So that's the reason that we will spend time on those ones.
Actually, sort of just quickly follow-upping that you're doing basically -- are you doing a review of all your divisional heads? And is that part of the plan that there are now among those internal organization of teams that the -- what's the practical way to implement this?
Of course, there will be the financial aspect but as well the human aspect of engagement of the people. But I will make sure that we have the right team in place. So we are reviewing as well all the competence of our managers. We will support them with trainings regarding turnaround practices. I will as well check that I have the right people in place. If I don't have the right people, they will be changed. I will communicate beginning of the year a new organization that will fit to this part -- to this task.
And my final question here would be -- it's for the meeting later, but you had -- you were part of the management team which last December showed us a plan, I think, which had EUR 260 million to EUR 275 million, if I remember correctly, of fixed and variable cost ambition for the next few -- next 5 years. You are talking about EUR 210 million of fixed and variable costs now. What was wrong with the prior plan? And related to the prior plan as well, I think one of the things you have said over the past was that the growth part was where the group was lagging, but you still have EUR 55 million of growth in the EBIT bridge. Why are you more confident on that now? You have lower fixed and variable cost savings there. You still have some growth. Can you explain maybe sort of what was wrong with the prior plan?
What was wrong with the prior plan is that it was -- the ambition was extremely market related. I love the economic terms, that from U.S., that side of the world is becoming VUCA, volatile, uncertain, complex and ambiguous. And I think it's right now dangerous for us since specifically given our 2019 result and our fragility to weigh our plan, which is entirely market related for growth. I prefer to have a shorter time frame of transformations but with self-measure, auto finance. Of course, we are talking about EUR 210 million cost reductions, but we are working on it right now. We have a lot of project running 5 years that we accept. We will communicate about it on the first half of 2019, but it will be done in a very short time frame with a very strong impact.
But if I -- I might be wrong, but I thought the prior plan had already EUR 260 million to EUR 270 million of fixed and variable costs, so there was a very important cost element on it. I'd take the growth point. And the cost element that we're talking about here is EUR 210 million, which is lower. Am I getting something wrong here?
Actually, Daniela, if I may. There is here, we actually continue to have the same kind of productivity targets in our plans and in our processes. And regarding the execution of fixed cost reduction, we intend to execute that faster. And to the point of Chris, the details will be communicated in the first part of next year, but we've laid it that most of the spend will be completed within the 2 years to come. And by the way in terms of comparison, just to make it clear, we are talking here about the reduction exercise that is 3 years to come not reflecting what -- are already taking place and excluding what will continue to take place moving forward. The key message here is productivity, being very focused on the areas at stake and accelerating the fixed cost part of it within the 2 years to come.
Okay. And I guess, within that, you've said during the speech that for '19, there is not much in terms of savings from this plan, but there will still be savings from the old plan then in '19. How much would you be factoring in from that in your EUR 350 million to EUR 390 million from the old plan?
You're right that the current plan actually -- we'd make it clear we have already a couple of cost-reduction initiatives underway that will bear fruit next year. I would assume basically that we talk about something like EUR 15 million to EUR 20 million for next year. But the new plan, that will be developed and explained more granularly and will have a significantly higher impact.
All in 2020 then if it's over 2 years?
Yes. I would read -- invite you to refer to Page 18, which gives you a sort of time line for the various deployments. And you see that the transformation plan of cost reduction initiatives within this starts relatively slow next year for, I would say, fundamentally details and the conversations with legal bodies. And I think reached a big chunk of the effect already in '20 and the full effect in '21.
Your next question is from the line of...
Max Yates. Just my first question is on the project pipeline. So you talked sort of quite positively about getting the subsea business to above EUR 1 billion backlog by the end of the year. Could you just give us a feeling of sort of what you've already got in terms of backlog and what you are assuming in terms of sort of future project wins to get there? That's my first question.
Thank you, Max. Let me hand over to Vincent Dessale, our head of High Voltage.
Max, why we are so confident to reach this EUR 1 billion backlog for the subsea is that we have indeed received over the last weeks a notice of award, but really I cannot disclose because, as you know, once you have received this notice of award, you have to go through a certain number of administrative steps, giving a certain number of documents in order to have finally the signature of the contract. But indeed, we have right now a notice of award of a major contract, and you will have the press release of this contract coming most likely before the end of November.
Okay. Could you just give us a sense of whether those are in offshore wind or more in the interconnection side?
For the subsea, as you know, our market is basically 50% interconnection and -- activity service is 50% interconnection and 50% offshore wind farm. And what you will have in this press release will reflect more or less the split of activity.
Okay. Perfect. And just my second question would be around, obviously, you talked about the detail that you've gone into around splits in the business and to sort of individual P&Ls. Could you just give us a sense of the sort of 50% of the business which you feel needs transforming? How much of that is actually loss-making today in EBITDA terms? And I don't know whether you've sort of given any thoughts if you were able to just purely get the loss-making businesses back to breakeven what that might do to your group EBITDA in terms of sort of incremental tailwind?
Okay. And maybe to answer that question, I would say, today, we have a handful of really loss-making businesses, the biggest one being currently the terrestrial high voltage, which by far is the hottest issue that we have to fix. And we have a handful of businesses that are making losses of EUR 3 million to EUR 5 million across various segments. And again, I think the message of Chris in the midterm is not all focused within that one area and that you can see on Page 10, there are a couple of bucket of losses in the various segments. But to make it simple, you have the big issue in HV and you have a handful of businesses that lose, let's say, EUR 3 million to EUR 5 million. That is the way because we communicated already on it. We have some losses in Brazil that we are addressing with very in-depth restructuring and transformation plan right now. We have some issues in the terrestrial high voltage part of China when we started the impairments in June. And on top of that, as I mentioned, we have a couple of areas that are at present suffering a lot. Like I mentioned, the land high voltage, for instance, is an issue for us in the U.S. So I believe it gives you a flavor of where those can happen. And actually Page 10, you can spot the red areas, of which part are in the loss-making rather than being breakeven-ish.
I mean, just, finally -- I mean, obviously, building and territories, looking at that slide, is the one with the sort of biggest transformation candidates and value burners. And I don't think that's sort of particularly surprising. But I guess, when you look at the problems within various regions in that business, is it just simply that this is a challenging business that it's a fragmented market? And in some of these markets volumes sort of decreased, so therefore you have some overcapacity? Or is there actually something more structural in the way that these businesses are being run that you can internally fix, whether it's sort of pricing strategies, cost structures around head office costs? So just a sense of why you're confident that this isn't just a market issue in the regions that you operate and some of the competitive challenges in this industry as oppose to perhaps it's something that you really can't change because to me building and territories is just a very difficult industry to operate in.
Thank you for the question, Max. I will answer it. It's Chris. I think it's very symbolic of our program. We are talking about the constructions and utilities market. They are all the main drivers in the world, whatever the region. We are also planning the same type of customers with the same type of products, and we do manufacture those products with the same machine. So of course, you can have some change on different dynamics in the market, but fundamentally, everyone has the same weapon, the same tool to address this market. And the question we raised to the value burners is why the hell some activities are able to deploy return on capital employed above 15% in some areas of the world and orders are just done in cash? So what we are doing right now is that we are qualifying the best practices because there is clearly good and great, best practices from the management from the profit drivers that we will deploy in the value burners. And for me, of course, there is some market dynamic in some areas and some market difficulties and some stiff competition somewhere, but there is no reason than the one being in the red, not be turning to the blue, with the right management and the right practices. So that's the aim of this program. And I'm -- it's not a wishful thinking for me. When I was running the European activities, 2/3 of our activities of our turnovers was in the red, and now they are in the blue. So there is a chance to change.
So maybe -- I mean, maybe just one final sort of figure. I mean, just to understand, in things like building and territories, when you looked at your market shares in places like Brazil and the market structure in places like China and you compare it to your European business that you've turned around, are you confident that actually the market structure and market shares are similar now? There's no reason that you won't be able to turn Chinese and Brazilian markets around in the same way that you did in Europe because I might pushback and suggest that the European structure and market shares for Nexans would be quite markedly different to some of those emerging markets.
Yes. You're right, Max. And we asked exactly the same question. We had the question to say, is the blue because we are the market leader? Are we profit driver because we are clearly dominant? The answer is no. In the profit drivers, you have both high market share activities, great positioning, but as well niche player. So the market share length was not the answer, which is a good news. I don't say that it's all Europe activities that are in the blue. There is order activities in other part of the world that are in the blue as well.
Your next question is from the line of Lucie Carrier.
I will have a couple. I mean, the first one is I was hoping you could come back on the free cash flow generation during the period. And I just wanted to, first of all, make sure about the range. Are you talking of a generation of over EUR 200 million between '19 to 2021 or '18 to 2021 because you have 2 different reference in the presentation? And then to that, this is before dividend and before M&A. So if I look at your dividend spend over the last few years, it's been about EUR 30 million to EUR 35 million per year. I mean, that EUR 200 million, is that really, what I would call, a conservative minimum? Or how should we think about capital allocation between M&A or dividend from here, if this is roughly what you're targeting?
Thank you, Lucie. That is -- thank you, Lucie. That's why there's a typo mistake. It's '19. The free cash flow committed is '19 to '21. Nicola?
So maybe if I go back to Slide 20, which is the one you referred to, well, fundamentally, as mentioned, we aim at reducing the CapEx overall, while despite the committed investments in the new vessel in Goose Creek. So actually, we talk about EUR 600 million of CapEx, of which 2/3 will be allocated to 1/2 of our businesses along the lines that we have of profit drivers, of value burners. You can identify the working cap revision that we have to reduce it substantially. Obviously, we recognize the fact that some areas of growth will consume marginally some additional working cap, but we deliver and we will focus very much on ensuring that we clean up the working capital of those businesses that are more in the value burners' position, which would help us drag down a level of working capital by 2%, 3%. Regarding this, it is described on Page 20 of the document. This is Page 20. And to your point, the cumulative cash flow that we see we say -- we consider EUR 200 million to be the low range of our cash flow generation indeed before dividend and M&A activities, and this reflects the fact that over the period we have -- we acknowledge the fact that we will some cost reduction one-offs. Here again, without a figure, the red around EUR 250 million makes a lot of sense, and that's fundamentally again the message that most of these transformation actions will have to become cash neutral after 2 years. So fundamentally, that in 2020, we will come back to cash generation. So I think we have a message, it's fundamentally that we position the group and the trajectory so that moving 2021 onwards, we get to significantly improve the ratios of cash conversion from EBITDA.
And if I can have a follow-up on that, please, on the CapEx. So I understand you're kind of provisioning about EUR 600 million for the period. I remember, I think it was EUR 254 million kind of the latest project on subsea. I'm just trying to understand because I thought some of that had already been done. So it seems that you still have quite a lot of CapEx expansion maybe in other areas. So just maybe if you could break down the CapEx in between Aurora maintenance and maybe any other initiatives you're having.
Okay. Just a quick reminder on Aurora plus Goose Creek because I think that's the core of the investments and you're right to say we mentioned around EUR 220 million to EUR 225 million, of which roughly EUR 55 million was -- will be paid in at the end of 2018, so letting EUR 170 million to be final over '19 and '20. And again, we think that for the rest of the CapEx, we will be falling down and focusing especially on limiting the CapEx of the value burners to a really bare minimum. So that's fundamentally the equation to take into consideration. But you're right, we already spent something like EUR 35 million for the vessel, and we will have probably spent something like EUR 20-plus million at year-end for Goose Creek.
Okay. My second question was around the step-up of EBITDA from 2019 to 2021 that you -- when we look at the setback that you are kind of taking on '18 and to some extent, I guess, on 2019 versus at least consensus expectation, it looks like the step-up in EBITDA from '19 to 2021 is quite accelerated compared to what we have seen historically in the business to reach the EUR 500 million. And so is it because you are thinking of also maybe an acceleration of your organic growth during this period? Or is that -- do you think you don't need the organic growth part and this is really only -- or cost reduction-driven?
Thank you, Lucie. It's not -- no. No. With the exception of subsea that where we show significant concise, but more in 2021. It's not really growth, it's more organic and more transformation plan. It's more management focus. It's what I say a bit at the beginning, the test for gross motor was a bit misleading for the team. And the clear message I give to the management and to all our employees that we cannot grow at all cost. And unfortunately, the very disappointing result of 2018 shows that we have a very strong raw material inflation that we are not able to pass over to the customers right now. So we have to refocus on the way we manage the company. We have to refocus on some things that have worked pretty well in Europe, which is complexity reduction, make sure that we address the right customers with the right portfolio and the right products. And this exercise, in most of the activities of the group, had never been done in the last 10 years. So I consider that our huge potential to unlock that with this competitive reduction and cost reduction improvement. And as well, we will put a very strong focus on discipline and pricing management. So on pricing, very, very fast. So that's the reason that this shift -- aggressive shift in 2019.
And just maybe my last one would be on land high voltage. I appreciate that you said you want to try to fix some of the businesses before considering sales. This one, if I remember well, has been on the process of being fixed or needed fixing for a long time was also, I guess, part of it was on the European kind of a scope of restructuring project. And when we think about this business, I mean, you've looked at it, I believe, Christopher, also quite personally when you were leading the European business. What is really the problem there? And is it realistic to saying that it's going to be fixed to a good enough level? I'm not saying, being breakeven, but good enough level within a reasonable time frame after all of the efforts you deployed already over the last few years.
So land high-voltage activities was not at all in European activities. So -- and part of the group is...
But part of it was in Europe, wasn't it?
Yes. But it was managed directly by Dirk Steinbrink, which was -- the head of high voltage. So it was not in my scope of responsibilities. So even if I'm 20 years on the company, I'm still learning a lot of things on high voltage. Land high voltage is a new word for me. I'm beginning to read this since the last months. We will come back to your question at the beginning of the year because right now, we're striking on every things, all industrial levels, all the pricing levers, all the cost as well the fixed cost situation of these activities. The main question we raised with Vincent, maybe Vincent can say a word about it, even if he was not in charge of land high voltage before, just since March. The main question is, can we restore this situation of land high voltage in the coming 3 years or not? If not, we have to take other decisions. So that's the main question we are raising right now, but we will not answer during the call. Vincent, you want to have a word?
No. I think you'll see maybe 2 additional point. I think -- I've mentioned, [ by case ] I'm now in charge of this business land on top of the subsea since few months. And what is important for us in order to get it back on the right track is, we have to work at 2 levels. We have to work on the short-term impact, I will say, a little bit in the shift approach because we have to tackle in a very active way the basics, I will say, of the business in terms of commercial, industrial performance, working capital and we are working on it already. And this one -- because it's a project business for part of this activity, we have to work on the fundamentals, because if we don't work on the fundamentals, the other impact that we have this year or beginning of next year to big victory gain in 2020 or 2021, would not be as the right develop expectation. So that's why these are specific activities on which we are working right now is to work at 2 level. And indeed, as mentioned by Chris, we are working on more people analysis as we will present early next year regarding this specific segment.
But I want to be focusing. I'm part of the group since 20 years, and I've been partly surprised about what I've seen in land high voltage in terms of management. I think we didn't took the right decision that fosters to have a very catastrophic financial situation right now. So we have made mistake in the past. Now we have to correct it very, very fast.
Your next question is from the line of...
[indiscernible] from [ Legacy ]. You said that the former plan Nexans in Motion was too market related. But in February, Nexans said that the mission was accomplished concerning this plan. So I wondered did your diagnostic changed regarding this plan? Or what happened between then and now so that you realized that the plan was not so completed? And I have a second question. I'm not sure I got the 2 areas, where you say that the Nexans in Motion was successful. But can you repeat those 2 areas, please?
Thank you, [ Antoine ]. That's the same question indeed. And yes, there was 2 ways to look at it. We say that Nexans in Motion were completed. It depends on what level you position when you say that. What I mean is that, of course, financially speaking, we say that we will move during the period of 2014 to '17 from an EBIT of USD 148 million -- EUR 148 million to EUR 270 million. So what has been done? So you could say, mission accomplished. Now when we go a bit more detail that has not been given to you at that level of granularity, the question is, where this incremental improvement of EBIT came from. Roughly, I will make it short. 60% of this incremental EBIT improvement came from European activities without high voltage, 10% to 13% of this improvement came from Middle East and Africa region with a very, very strong gross model that has been implemented by [indiscernible].
15%, sorry?
13%.
13%, okay.
10% to 13%. So 60% for Europe, 10% to 13% for MEA. And we say, the rest came from an exceptional year in high voltage in 2017. That help us to reach its EUR 270 million of EBIT. But when you take all the other area, mainly South America, Asia, North America, and of course, as well as low and high voltage because the exceptional year in high voltage was specifically driven by [ Turkey ]. All these activities are, of course, ups and down during the period. But in terms of incremental volume and resiliency in our business, they are not at all deliver Nexans in Motion. So that is the reason that -- sorry?
Did you just realize that afterwards? Or did you -- were you aware that those areas were not delivering the plan?
No. No. We knew about it, of course.
Actually, if I may, we have explained the difficulties, the ups and downs we had across the board. And it's true that the global [ distro ] was in line with the initial target, the components of which are related to a series of weaknesses and successes. So it was known and it was communicated. I believe the real thing that came very hardly on us in 2018 is relinquishing the resilience for those businesses that could have been a weapon down over the past 3 years, and where we have seen that such an impact land high voltage that actually the improvement as we saw last year in this specific area was not resilient and we still had a lot this year, a much stronger effect, volatility of performance. I would say the takeaway by businesses was actually shared over the 3 past years with you. But what is correct that we have really said the resilience issue much more in 2018 is not because in land high voltage we suffered indeed dramatically lower sense or because in the other activities at preferred we have seen a raising inflation that actually this time you mentioned [indiscernible] on our businesses.
To close the loop, [ Antoine ], is that subsea is project-related so important is to follow the backlog of our project. And what we can say, regarding 2018 performance is that European activities on Middle East, Africa are very close to budget. So they are resilient. So that's the reason I am extremely confident in our capacity to turn around because we will apply the same approach, the same methodology of those 2 areas to all the others.
I see. I have -- so is there a mix of internal causes and also macro causes, because you did not really mention any macro causes like whatever raw materials or commercial tensions, international tensions and so on? Are the reasons of today's problem more internal related or...
We have to fight every day on material inflation in all areas, in all market so that we are verified. But I would say we have basically the same issue with our key competitors, so we are all at the same page. When I go back to the Page 10 with the value burners aspect, our conclusion here is -- does not mean changing its financial analysis is that 85% of the closes of those activity being in value burners are purely internal. That means management practice, pricing practice, cost practice or heavy cost structure.
I have just, sorry, 2 other questions. You mentioned in July that you might sell assets still the pace or do you first want to restructure them before selling them? And the second question is about Arnaud Poupart-Lafarge. Is he still adviser to CEO or not? And will he take a role in the following years?
I will tell you approximately. I mean, regarding the potential divestiture of asset to meet the macro to -- one on regarding your question. I don't need anymore adviser, so Arnaud Poupart-Lafarge left the company on the 30th of September.
So [ Antoine ], I would say that 3 years in a row there was an exercise done regarding the portfolio and potential divestiture that had a focus mainly on taking through the low performing assets. In this case, the approach is completely different. The idea is to really deep dive in a very granular way to assist the potential of these assets rather than just divest in a fire sale process. So there's no formal assessment of the portfolio to divest some of our assets. However, of course, part of the exercise that we do has to do with the competitiveness and attractiveness of those assets in different consolidation happening in particular markets. However, in that logic, we don't have -- we don't foresee a strong process of divestitures with, let's say, minor exceptions that if we push them forward we will announce it to the market timely.
Your next question is from the line of...
Akash Gupta. It's Akash from JPMorgan. I have quick follow-up to start with, and then I have a question on EBITDA. So first of all, on your 3% sales figure, it's written in the presentation that is the sales figure used organic sales growth. So maybe if you can confirm whether it's organic or overall sales growth. That's question number one.
It's purely organic, yes.
Okay. And then on cash flow, I have a follow-up there in terms of what should we expect for each of the next 3 years. And maybe, if you can say that is it fair to estimate that there would be positive cash flow in each of the 3 years or is there maybe some negative in 2019 and more in 2020 and 2021?
Thank you, Akash, for the question. Let me give the microphone to Nicola.
Yes. Akash, I think the comment I made earlier is actually we believe the cash control for the growth years of '19 and '20 combined, the figure amounted between the 2 years will depend on the time of execution of some reorganization action. But globally, we believe it should not be neither a major uptick nor downtick in terms of debt, so there may be different variances, but we do not expect that to be significant. I mean, by that, we do not expect for instance that the debt of '19 will go up by EUR 150 million. It would probably be more minor variances year-on-year, meaning that we are obviously focusing on ensuring we keep with that number, which is very reasonable.
And my final question is on EBITDA guidance for next year. So maybe if you can talk about what are the drivers for high-end and lower-end, and how much visibility do you already have given the backlog in submarine and other businesses?
Okay. With us entering into the detailed cash decision we have at present, is that we should see improvements in most areas because typically in HV, we expect to see some benefits coming in the territory of it. It's too early to go into the detail of everything, but we've given details of indeed to raise the EBITDA generation in most businesses. Some being recovery to meet performance of '18. And in some other cases, reflecting some ongoing plans that should deliver. I would like to add to that, that what we discussed on Page 18 that we -- even if we believe that the maturity of the various transformation actions and efforts more and more fully from 2020 onwards, we would still have some positive impact, especially from the shift approach starting next year, as well as, I would say the benefits of the actions already taken.
Your next question is from the line of...
Sean McLoughlin, HSBC. A couple of questions from my side. Have I understood correctly that the lower 2018 EBITDA is down to a mix of weak high voltage and mixed pricing, or underestimating raw material price move? I just wanted to understand this in a little bit more detail. And again, is this a management issue, and how can this be changed? Or is this about fundamentally changing the way you think about strategy on commodity exposure?
Okay. Technically, maybe the first part of the answer is when we analyze by big blocks, what we see is actually something like 40% of the deployment coming from there is clearly high voltage related to the fact that at the end of June, that we saw limited orders coming. Still we were hoping that we would get more orders impacting us in Q4, which will not be the case. So we have, I would say, the first miss being there. And to the point I made earlier, we indeed have seen an increase of order intake including also [ high voltage ]. This will have fund and materialize on the next year onwards. So that's the first component of the disappointment. Then I highlighted when I explained the various growth path that we expected some growth globally for the cable activities, which materialized. However, not the ideal mix we had in mind in June. And in particular, the fact that we have less data telecom, for instance, coming in has played a role, as well as getting less set on quite profitable market like aerospace. With that component of mix, I would say that has also played a role. And the third component is indeed that we have continued to see strong inflationary pressure across the globe continues. So this combined was quite negative and compensated by, indeed, the fact that still we have some benefits, ongoing action in terms of pricing. We were able to pass through a little more supply pressure to our customers in the building segment, for instance. So all in all, the picture is there is fewer high voltage mix, especially around industry and data telecom. And this, of course, involve inflationary stuff.
On to -- to close the loop, Sean, regarding your questions, I think it's what I said in the introduction. I think the model base for growth was a bit misleading because clearly, we want to move into the value chain. The exercise we have done a very, very in-depth level in 2017 to pursue the vision of the group in 2030 on specifically the evolution of the energy and data markets shows that we have to move to grow into the evaluations, but not to grow specifically in volume at all cost. And I think this [ operator growth ] has been misleading for the team and data as well, a management issue -- management meaning competencies, practices that should -- growing at all cost, in fact, impacts strongly your working capital either in a receivable inflation and as well leading to acquisitions that you need to require the temporary workers too because of the high load of your factories. Maybe the price is not at all reflecting the increase that you have on raw materials. So when you make the equation of all this, at the end, you have the disappointing result of 2018. So that's the message we are giving to the management right now is that we will value only smart growth, the one which is profitable on the ability for the return on capital employed, so growth is more nondebt. That's an objective. That's the message for the value burners, for you, no growth at all. You have to rethink, reform your business model first, your business portfolio and then to grow, because all of our value burners are grow right now this year, and have generated extremely negative result. So that's, in a nutshell, what we can say in regards to your question, Sean.
And if I could just follow up on that. I think your ambition to move up the value chain, it sounds sensible, but I wonder how easy that's going to be to develop new capability internally and change the DNA internally. It feels like a very internally focused plan. So what -- can you elaborate on how you're thinking now and hear about external growth opportunities and to confirm that your targets exclude any M&A?
So I think, yes, there is no question regarding M&A right now. It's not on the agenda. Because you understand -- in fact, I recall the question of Lucie that we have a really high step in front of us to restore the situation. So we will focus on internal matters. But what we say, that's returning our stock cap. If we do not see specific action regarding the trend of this new world requiring platform, modules, systems, we may be extremely satisfied in 2021, if I project myself with you on the phone saying, yes, we did it. But potentially, we will need the next sequence from 2021 to '25. That's within that new world, so what will we do with that? We have 600 researchers in the group. So mainly focusing on internal matters, cost matters regarding cables. We would have to shift a big part of those brain towards applications, towards customers' problematics to really support that change. I will announce in the coming weeks a new innovation service growth catalyst to feed that new world. That will be part of the communication beginning in 2019.
Your next question is from...
Jean-Francois Granjon, ODDO BHF. I just have 3 questions, please. The first one concern the organic growth expected. You mentioned 3% for the CAGR until 2021 compared to 5% for the previous plan presented at the end of last year. So I understand that you were more selective for the growth. But nevertheless, I think it was [ overlooked ] for the previous spend, so why are you so pressured for the trend for the organic growth for the plan with only 3%? This is my first question. The second question concern the price/cost squeeze estimated at EUR 190 million. There's some risk to undervalue this level and to see an amount higher than that in the future, the consequence of pressure on the raw materials impact. And the last question concern the cost reduction oneoff estimated at EUR 250 million. Could we have a saving impact on the company during the next 2, 3 years?
Thank you, Jean-Francois, for your question. I will take the first one regarding growth. Yes, 3% CAGR could be a bit conservative indeed. But if you listen our story, I said that I don't want any value burners to grow. So when you take that effect of that into the equations, that mean that the profit drivers, the 50% of the group or the part of the group, which is extremely contributive would have to grow by 6% over the period. So that's the main answer for that question. Regarding the price squeeze, Nicola, you want to say a word?
So regarding the price squeeze, the action we've taken is actually quite in line with what we have experienced in the past. And to your point regarding the raw mat inflation, which has been a big issue this year, we might expect indeed that we continue to see some inflation of raw mat. I would say the difficulty in the sector is the pass through to customer. And to make it simple, I would say forever we have been in an industry that passes through the prices of copper and aluminum, but we are not necessarily being -- no domestic update of prices based on the changes of raw mat prices like resin, for instance. So here is a question of sequence and how fast we pass it through to customers. And something we commented before that I would like to reiterate is that in some businesses that we are, typical in building, you have a chance to pass through faster because you have the true prices on a regular basis. It's tougher, but it's finally apparent at a slower pace. When we talk about term agreements, typically for utilities of our industrial customers, obviously, the size that we have and the market has some inflation pressures can be also managed and mitigated over time. But it takes longer because you do not reopen the price of your term agreement every single month, every single quarter. So here again, we delivered -- we continued with inflationary pressure that we continue to be this for the couple of years to come. But there is also sort of mechanical effect that when systematically some raw mats are actually increasing their price on the market. You finally pass that through, but again, with some lag. So the assumption that we took here is actually yes, we will continue to be in a similar environment passing through with some lag some of the pressures, which led us indeed to consider that, all in all, the price/cost squeeze will be relatively similar to what we have experienced before. One other thing I would like to mention in a minor mode is obviously, we work and we will continue to work on addressing the portfolio, towards those areas where we are less dependent upon this raw mat inflationary pressure because indeed, we push for more additive value. That's also part of, in my opinion, the equation that we push for.Regarding the third one, the cost one-offs, here again -- you asked about the sequence. To the point made earlier, we expect, I would say, significant proposition around fixed cost reduction to materialize between the 2 years, which is in practice and probably a significant cash upside we expected in '19. In front of that, we also mentioned the fact that in the SHIFT approach, we expect to derive benefits in terms of working capital sooner than later. So in other words, the equation we have in mind currently that indeed the cash out for restructure/transformation will be higher next year than in 2020; vice versa that the working capital improvement would be better in '19 than 2020, which in the end closes the loop with a vision that over 2 years, we anticipate to be cash neutral.
Your next question is from the line of...
William Mackie, Kepler Cheuvreux. A question, if we can come back to your assumptions around the price/cost element of EUR 190 million. Can you actually share where your assumptions sit in terms of the split between inflationary pressures, whether that's materials or labor and pricing? And then perhaps more of a general question on pricing first, which would be how do you see the pricing environment developing across the main elements of your business over this year and your assumptions into next year?
Okay. A little loaded question, but we took into consideration for the price squeeze the labor inflation that will be around EUR 30 million, EUR 35 million per year. The rest being indeed the squeeze of price to raw mat.
On getting the price evolution, we are still extremely prudent on the evolution. Of course, that with the move of Prysmian, which you see we're on the way for market consolidation. And I'm sure that the market will keep consolidating in the coming 10 years. But we have as well some other new competitors in there, everywhere in the world like from -- the one from China. So we did extremely conservative on the price elements, which is the one that our markets are in. So that's the reason we put a very stronger focus on price analytics, customer portfolio, being able to deliver price through better services because that's really our DNA, but we are not very well orchestrated in the last year. So we will push the team in that direction.
Just a follow-up. Sorry. I understand your -- to understand your comment on labor inflation correctly. You're saying EUR 35 million a year, per year, so cumulative EUR 105 million. And of the EUR 190 million that you're describing as price/cost, the remainder would be EUR 85 million, which is your assumption for negative pricing headwinds. Is that how I should understand what you just said relating to price/cost?
Yes. That's technically correct.
Okay. And then on pricing specifically, I mean in high voltage, if we come to that and particularly in submarine high voltage, clearly, 2018 has been an unusual year, where there have been a number of delays, not of your making, in the marketplace to commissions on interconnections or offshore wind projects. And as a result, a number of competitors have expressed their view that they've been willing to accept lower prices to fill capacity. If you like, strategic decisions have been made to fill volumes on fixed assets in high voltage markets. When you're talking about being able to book EUR 1 billion backlog in submarine this year, how would you describe the pricing environment, when you've been winning or coming close to announcing these contracts that we should expect by the end of November?
So, Vincent, [ I know we didn't book ] EUR 400 million business with really low margin. Please.
I think you have to have your [indiscernible] in the sense that the number of project sanctioned by the different authorities has been lower than the previous year, which has put indeed certain pressure on the different factors on the market to lower their assets. That's why in this business projects, which is a 3- or 4-year cycle, you have to keep count. And I think you see what we have done in order to continue to work on our pipeline, in order to work, in order to find, let's say, the right equation between orders and assets. And to answer your question indeed, the order that we have just taken or, I say, receive notice of cooperation in line in terms of gross margin compared to what we have, pure unseen factors. So we have been able to maintain the level of performance. But as you know, in this business, the most important is to execute properly the projects.
There are no further questions in the queue.
Excuse me, maybe I would like to suggest that the issues we are reaching the end of the time slot that was allocated for this call. What I would suggest, if that is okay for you, there is a portion of the sales side population that will be participating in specific Q&A question today. So to these people, if they would like to refrain -- or retain their question until that is coming. And from the rest of the population, if we can take 1 or 2 more questions, we're happy to do that. But we will have to close the call at certain point in the next coming minutes.
[Operator Instructions]
Again, any of the people that will not be participating in the specific Q&A session, if you have a last question to raise, we're happy to take that. Otherwise, I leave the conclusion to you, Chris.
So thank you, everyone. Let me close now this morning call. Of course, I understand it's a mixed feeling here with our disappointing 2018 results, and we all feel very frustrated by this guidance. But we are fully right about what we have introduced to you for this new deal for Nexans, with this new roadmap, short-term 3 years only, not 5 years; self-finance, not really related with very, very strong actions. Once again, my experience is based on private equity blueprint patterns, so we will be extremely tough in the way we will manage and execute those fronts, because we need Nexans to become resilient and we need to bring back credibility. We thank you all for your attentions, and for your great questions. Thank you, and have a very nice day.
Thank you. That concludes your conference call for today. You may now disconnect. Thank you for joining. Have a very good day.