Competitive Trends in the Wire and Cable Industry by Gordon Thursfield Nexans … · 2016. 12....

September 10, 2003 Presentation to ICC 0

Competitive Trends

in the

Wire and Cable Industry

by

Gordon Thursfield

Nexans North America


Agenda

l Technological Developments

l Industry Rationalization

l Economic Environment

l The Future


Example: Energy networks

Electricalpowerplant

Submarine energy cables

Equipment & special cables

LV insulated overhead

cablesMV/LV

HV/MVUnderground

MV Cables

LV underground cables

OverheadHV cables

OPGW

ADSS

OverheadHV cables

Underground HV Cables

Laying vessel

Underground MV Cables

Overhead HV cables


Example: Telecom networks

ROW* Rivers and waterways

Interconnect hardware

Metropolitan cables

Long haul cables

Cellular antennas and systems

Submarinenetworks ROW* Gas linesFresh water

ROW* Power lines OPGW/ADSS cables

Long haul cables

Local area networks:

cabling solutions

and component

s

Fiber in the loop

ROW* Highways

ROW* Railways Underground and aerial cables

ROW*: Right of ways


Example: a car

Special cablesfor heated seats,windows,…

Special cablesfor ABS systems

POF cablesfor multimediaapplications

Winding wiresfor small motors Precision cables

for sensors used forairbags, brake pads,…

Winding wires forelectronic coils used inmany instruments such asdials for speed and fuel

Coaxial cables forcommunication & navigationsystems Magnebond wires used in

various motor components

Automotive harnessesthat link information andPower supply systems


Example: Smart Buildings

Copper & Fiber LAN

Multimedia

IndustrialLAN

Elevatorcables

High Voltage cables for

power distribution

Ballasts for lamps

Low Voltage Wires for HVAC

AV surveillance cables Cables for

Fire security MVcabinet Rubber

cablesProcesscontrol

MV power cables

Alarm wires for burglar alarm

Heatingcables


Example: shipbuilding

Optical Fiberto connect antennas todistribution networks

High and Low Voltage energy cables for propulsion and power distribution

Thin-wall LV cables to provide energy to equipment, conveniences, cabins,…

Coaxial cables & Cat7 solutions for entertainment and internet services

Instrumentation & Control cables to carry technical information

Winding wires for motors, generators, compressors,…

Telephone cables

LV energycables for lighting

Hybrid energy & data cables forsurveillance cameras and informationtransmission

Maritime LAN cablesfor telecommunicationand passenger videoservice and entertainment

Sensor measurement and fieldbuscables for hydraulic systems, motors and rudder control


Wire and Cable IndustryTechnological Developments

Power Cables - Medium Voltage

Paper Lead

Thermoplastic High Molecular Weight Polyethylene

Crosslinked Polyethylene (XLPE)/Ethylene Propylene Rubber (EPR)

High Performance Crosslinked Polyethylenev Tree Retardant Compoundsv High Performance Shieldsv Water Blocked Cablesv High Performance Jacketing Materials

w Cable life well in excess of 40 years even in arduous conditions.w Paper insulated cables totally out of the picture.

The industry is now totally comfortable with MV TRXLPE/EPR cables in almost all environments.



Power Cables - High Voltage

Oil Filled/Oil Impregnated Cables

Crosslinked Polyethylene(EPR to 230 kV)

Super Conductors

l Crosslinked polyethylene now the standard for almost all voltages and particularly >230 kV.

l Crosslinked XLPE performs well even at extra high voltage.E.g. several 500 kV installations performing well.

l Super conductors could be the norm for inner-city installations 10 years from now.



Industrial Application Cables

Trends include:l Fire Retardantl Low Smoke Zero Halogenl Crosslinked Jackets - Water Curable Compoundsl High Flexibility Cablesl Umbilical Cables for Off-Shore Installationsl Ultra High Temperature Resistant

Technology has advanced to the extent that cables can be designed to perform in almost any environment.



Telecommunications and Data

l In a little over 10 years, fiber optic cables have become a commodity - contributing to massive reliance on industry and society on high performance communications on a world wide scale.

l Also high performance data cables have emerged to satisfy needs for high speed and universal internet access.


Wire and Cable IndustryIndustry Rationalization

Profitability of Industry

Despite massive technological advancements this is not a profitable industry.

l Margins are very thin.l Costs of maintaining a presence in industry while continually advancing

technology are high.l The market does not reward excellence.

As a result -l Significant rationalization - but still no where near enough.l A number of high profile bankruptcies.l Difficult to continue to attract talent to facilitate continued advancement.


Wire and Cable IndustryEconomic Environment

The World Picture

Commodity application cables have migrated to low cost countries (primarily ASIA).

e.g. CordsCord SetsMagnet WireLighting CablesAutomobile Harness WiringLow Category Data CablesHook-Up Wires

and others could follow:e.g. Overhead Transmission

Building WiresElectronic Application Cables

The North American manufacturing base for wire and cable will continue to shrink!


Wire and Cable IndustryEconomic Environment

The European Picture

l Many “famous” companies have disappeared and/or been absorbed through rationalization and closures.

l Creation of the single European market has eliminated “country specialists and leaders.”

l Market rationalized to 3 major players in Europe -u Nexansu Pirelliu Drakaand a few product specialists focussing on specific market niches.

l The North American, and indeed, the World market could follow.


Sales 2001 (by geography)

Sumitomo

Nexans

Pirelli C&S

Corning OF & Cable

Draka

Superior Telecom

General Cable

Avaya C.S.

Belden

CDT

Europe North America Rest of World


Leading cablemakers have faceddeclining markets over the last two years

Sales Evolution (Leading Publicly Quoted Companies $M)

518 813

1 113

1 454

3 460

4 302

A B

1 499

D

1 512

C E F G H

200020012002

2000/2002 -10 % -25 % -26 % -17 % -18 % +13 % -28 % -39 %

Average sales decline(2000-2002)

-18 %

Company


Over this period, OP has gone downby 76 % on average

Operating Profit ($M)

70

23393939

5256

-26

-30

20

70

120

170

220

270

F A E C G D H B

200020012002

2000-2002OP: -900 M (-5pp)

OP 2002 6.0 % 1.3 % 3.5 % 2.6 % 4.8 % 2.6 % 4.5 % -0.8 %

Company


About 80% of the OP declineis related to the “Telecom crisis”

OP Telecom ($M)

23

4

-14

-35

2939

-81

-100

-50

0

50

100

150

G C H E D A B

200020012002

9 → 5 % 14 6 % 13 5 % 9 1 % 15 -5 % 5 -6 % 11 -18 %-28 % -38 % -39 % -31 % -50 % -34 % -67 %

2000-2002

OP margin:Sales:

→ → → → → →

2000/2002

Company

Telecom contributes $700M to the profit decline.


OP from “non-Telecom businesses” has become vital to many cablemakers

"Non Telecom" OP ($M)

83

68 70

5548

33

0

20

40

60

80

100

120

140

A D F B E C

200020012002

OP margin2002

2.6 % 5.5 % 6.0 % 1.8 % 4.7 % 3.3 %


In summary

l The environment has changed dramatically over the past two years - Most players have been injured and a few are barely alive

l All have been actively restructuring their operations to cope with current market conditions:u Significant headcount reductions at all major players.u Industrial rationalization with elimination of excess capacity and reduction of floor spaceu Reduction of SG&A in line with sales decline

l Looking forward, there is not any sign of a market recovery yet and the cable business is more challenging than ever:u Cost/price competitiveness will remain key to achieve decent marginsu Fight among large and small players to secure/gain market share is likely to intensify

l Impact of Asian, East European, South American competition will also intensify.


Demand for Electrical Equipment Products hasDeclined 25% in the Last 5 Years

2200

2400

2600

2800

3000

3200

3400

1998 1999 2000 2001 2002 2003

(Millions of 1996 Dollars, SAAR)

Source NEMA - July 2003


Employment in our Industry has Declined 30%in the Same Period

160

170

180

190

200

210

220

230

1998 1999 2000 2001 2002 2003

(Number of Employees, in Thousands)



80

90

100

110

120

130

140

150

160

170

1998 1999 2000 2001 2002 2003

(Seasonally adjusted index, average quarter 1987=100)

Decline in US Demand for Wire and Cableis Even Greater



Wire and Cable IndustryThe Future

Future Challenges

l North America is an increasingly expensive manufacturing base.u High Labour and Benefit Costs.u Environmental, health and safety, taxation and other costs much higher than

in developing countries.

Employment in US manufacturing has declined 20% since 2000.

l To succeed, North American manufacturers must continue to differentiate themselves.

u Cannot compete on manufacturing cost alone on commodity items.u Must compete on service, quality and technical leadership and higher value

added products.u Must continue to develop system solutions to create value-added to the

customer.


Wire and Cable IndustryThe Future

Future Challenges

l Perhaps the biggest challenge of all is to advance cable and cable system design to facilitate high levels of manufacturing efficiency.

l The potential for significant infrastructure investment in the North American power grid, presents a real challenge for our wire and cable engineers.

u Propose System Solutionsu Propose Latest Technologiesu Propose Underground Solutions Wherever and Whenever Possible.

Pro-active leadership from the wire and cable industry on this issue could improve the viability of our industry during the next decade.

Competitive Trends in the Wire and Cable Industry by Gordon Thursfield Nexans … · 2016. 12....

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Transcript of Competitive Trends in the Wire and Cable Industry by Gordon Thursfield Nexans … · 2016. 12....