Nexans SA (NEX) fell the most since February 2009 after saying it plans to raise 284 million euros ($385 million) from selling shares and cut its full-year earnings forecast as the world’s second-biggest cable maker battles overcapacity and increasing competition.
The company, based in Paris, also unveiled plans to cut 468 jobs in Europe, including 206 in France, and transfer another 462 positions as it seeks to reduce costs. The stock plunged as much as 22 percent to 33.15 euros.
Nexans’s full-year operating profit will be 130 million euros to 150 million euros compared with a July forecast of about 185 million euros, Chief Financial Officer Nicolas Badre said on a call with journalists. Nexans said it will probably post a net loss in the second half due to reorganization costs.
“Markets remain difficult in the cable industry, in construction and power distribution,” said Pierre Boucheny, an analyst at Kepler Cheuvreux. “Even if it’s not written in the statement, it also points to a strong cut in 2015 targets.”
Chief Executive Officer Frederic Vincent said in February that Nexans will seek to boost its operating profit to as much as 400 million euros in 2015 from 202 million euros in 2012. He’s seeking to fix production issues at its undersea cables business, open or upgrade plants in the U.S. and China as well as focus on key markets and cuts costs by 70 million euros by 2017 to regain competitiveness in European high-voltage and industrial cables.
The group is currently putting together strategic goals for 2015, to be announced when 2013 results are published, Nexans said today, adding that it “remains confident in its outlook for the medium term.”
Most of the restructuring costs will probably be in 2014 and 2015, the CFO said. Excluding the cost of the plan, the “financial return” from the savings programs should add 48 million euros to earnings in 2015, and 73 million euros in 2017, the company said today.
The company’s net debt of 734 million euros at the end of September “is expected to decrease” at the end of the year, Nexans said. It “could rise” in 2014 because of the company’s plan to invest 600 million euros over three years, it said. The estimate doesn’t include a possible antitrust fine by the European Commission, for which Nexans has provisioned 200 million euros in its accounts, it said.
The capital increase will give Nexans flexibility in the execution of these initiatives, and strengthen its financial structure, it said.
“Going into 2014, covenants would have been breached, hence the capital increase,” Kepler’s Boucheny said.
Chile’s Grupo Quinenco, which holds 22.5 percent of Nexans through holding company Invexans SA (INVEXANS), has committed to subscribe to the capital increase, allowing it to hold a minimum of 24.9 percent of the company, Nexans said. BpiFrance, a French government entity which owns about 5.5 percent of Nexans, plans to subscribe for the minimum allowed.
Invexans shares fell today 6.8 percent to 11.49 pesos in Chile, the biggest slump since September 2011.
Each shareholder of Nexans will receive one preferential subscription right for every share it holds as of the close of trading on Oct. 16, Nexans said. The subscription price is 22.5 euros per share on the basis of three new shares for seven existing shares, a 47 percent discount to yesterday’s closing price.
Nexans shares closed with a 15 percent fall to 36.10 euros in Paris, giving it a market value of 1.06 billion euros.
Some 12.6 million shares will be issued, and the total amount of the rights offering could be increased to about 293 million euros if all currently exercisable stock options by Nexans are exercised by Oct. 22, Nexans said.
BNP Paribas is sole global coordinator and joint bookrunner of the rights issue, Credit Agricole is joint bookrunner, and HSBC Bank Plc. is co-lead manager, Nexans said.
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