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General Cable (NYSE:BGC)

Q1 2013 Earnings Call

May 01, 2013 8:30 am ET

Executives

Len Texter - Director of Investor Relations

Brian J. Robinson - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Gregory B. Kenny - Chief Executive Officer, President and Director

Analysts

Richard Wesolowski - Sidoti & Company, LLC

Shawn M. Harrison - Longbow Research LLC

Matthew Schon McCall - BB&T Capital Markets, Research Division

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Brent Thielman - D.A. Davidson & Co., Research Division

Operator

Good morning. My name is Kyle and I'll be your conference facilitator. I would like to welcome everyone to General Cable Corporation's First Quarter 2013 Earnings Conference Call. This conference call is being recorded at the request of General Cable. Should you have any objections, you may disconnect at this time. [Operator Instructions] Thank you. General Cable, you may begin your conference.

Len Texter

Good morning, everyone, and welcome to General Cable's First Quarter 2013 Earnings Conference Call. I'm Len Texter, Director, Investor Relations at General Cable. Joining me this morning are Greg Kenny, our President and Chief Executive Officer; Brian Robinson, our Chief Financial Officer; Greg Lampert, our President and Chief Executive Officer of the Americas; and Bob Siverd, our General Counsel.

Many of you have already seen a copy of our press release issued last night. For those of you who have not, it is available on First Call and on our website at generalcable.com. Today's call will be accompanied by a slide presentation also available on our website. If you have not downloaded a copy, we recommend that you do so, as we will refer to the presentation throughout our prepared remarks today.

The format of today's call will first be an overview by Brian Robinson of our first quarter results, followed by comments on the company's outlook for the second quarter. Secondly, Greg Kenny will provide additional comments on our 2013 full year outlook and business trends, followed by a question-and-answer period.

Before we get started, I wanted to call your attention to our Safe Harbor provisions regarding forward-looking statements and company-defined non-GAAP financial measures, as defined on Slide #2, as we may refer to adjusted operating income and adjusted EBITDA in today's call. To begin, please turn to Slide #5, where we have included a reconciliation of our previously communicated outlook.

With that, I will now turn the call over to Brian Robinson. Brian?

Brian J. Robinson

Thank you, Len. Good morning. We are pleased to report that all 3 of our segments performed about as expected during the first quarter. Consistent with seasonal demand expectations, net sales and global unit volume declined 4% sequentially, as weather-related limitations on construction and project activity and typical holidays throughout many Latin American countries curbed demand in the first quarter. Adjusted operating income of $46.2 million was above the midpoint of our range of expectations, principally due to strong contributions from acquisitions and solid results in our base businesses in North America. The momentum of our recent acquisitions continued in the first quarter as these businesses again exceeded our expectations for a second consecutive quarter. Adjusted EPS near the low end of our communicated range of $0.23 per share reflects the additional impact of foreign currency transaction losses and a higher-than-expected effective tax rate.

Due to the mechanics of the quarterly computation under applicable tax accounting rules, a tax benefit was recognized in the first quarter on a GAAP basis. We have removed this tax benefit so as to present the first quarter at an adjusted effective tax rate of approximately 36.5%. For 2013, the company now expects its full year adjusted effective tax rate to be in the range of 40%, excluding the impact of the currency devaluation in Venezuela. The company's effective tax rate for the full year has increased from prior expectations due to the relative greater mix of forecasted full year earnings and higher tax jurisdictions and forecasted full year tax losses in certain countries including Germany, Spain and India. On a full year basis, our cash tax rate is estimated to be in the range of 25% for 2013.

Next on Slide 6, we provided a reconciliation of the items excluded from adjusted operating income for the first quarter. The company recorded $3.5 million of expenses related to its submarine cable business, which includes $2 million for damaged cables on 2 separate power cable projects and $1.5 million related to the legal settlement of a warranty dispute in its offshore cable supply business. The company also incurred restatement and forensic investigation costs in Brazil of $5.4 million and further severance-related charges in Europe of $2.7 million during the first quarter.

Lastly, the company closed a small manufacturing facility in its electronics business in North America and moved the production to other facilities within the region. This facility closure is expected to result in annual savings in the range of $500,000 to $1 million.

Moving to Slide 7. Net sales decreased 5% on a metal adjusted basis principally due to typical seasonal declines in global unit volume, which declined 4% sequentially. Adjusted operating income for the first quarter of 2013 was also down 4% or $2 million compared to $48.2 million in the fourth quarter of 2012. Other expense reflects the $40.9 million impact of the currency devaluation in Venezuela as the company remeasured its global balance sheet in the first quarter. Also reflected in other expense are the movements of mark-to-market economic hedges of $9.2 million and foreign currency transaction losses of $2.6 million. On the next 3 slides, we've outlined some of the key metrics for each of our reportable segments.

First, in North America on Slide 8. Adjusted operating income in the base businesses in North America improved 18% sequentially, driven principally by results in the company's specialty networking and Electric Utility businesses. Results in the base businesses year-over-year were stable despite declining metal prices toward the end of the first quarter of 2013, which was in sharp contrast to the rising metal price environment experienced in the first quarter of 2012. Contributions from Alcan Cable and Prestolite were strong, as results again exceeded our expectations for the first quarter of 2013.

On Slide 9, adjusted operating income in ROW decreased in the first quarter of 2013 principally due to typical seasonal declines and the political and economic uncertainty coupled with extended statutory leave requirements in Venezuela where results declined $9 million as compared to the fourth quarter of 2012. Year-over-year results were down in the first quarter of 2013, primarily due to the strength of aerial transmission product shipments in Brazil and stronger results in Venezuela in the first quarter of 2012. Demand remained stable in Asia Pacific principally driven by construction activity in Thailand and the Philippines. Overall, contributions from the acquisitions of Procables and Alcan Cable China were in line with our expectations for the first quarter.

On Slide 10, conditions in Europe and Mediterranean remain difficult. The lack of construction and installation activity due to weather-related limitation on submarine and land-based turnkey projects had a negative impact on our first quarter results as expected. The benefit of cost reduction efforts over the past several years and stronger electric utility cable shipments in the Mediterranean helped to partially offset the impact of the ongoing weak pricing environment throughout much of Europe. Year-over-year, the first quarter of 2012 benefited from the supply of offshore specialty cables out of Germany, stronger demand for electric utility cables in France and the production of submarine power cables. The company's project backlog was about $630 million at the end of the first quarter and represents broadly an even split between submarine and land-based turnkey cable projects.

Moving to Slide 11. Net debt was $1,048,000,000 at the end of the first quarter of 2013, an increase of $236 million from the end of the fourth quarter of 2012. The increase in net debt is principally the result of higher working capital requirements due to normal seasonal trends, as well as the impact of funding approximately $37 million of copper purchases made in Venezuela under the company's previously issued authorization to import copper. The impact of the Venezuelan currency devaluation also contributed to the increase in net debt, as the value of the company's cash held in bolivars in Venezuela was reduced by $45 million in the first quarter of 2013.

The company intends to use a portion of the proceeds of its 2012 issuance of $600 million in senior notes to repay the 2013 convertible notes at maturity later this year. In the interim, part of the proceeds from the issuance have been used to reduce the ABL borrowings to 0. The company continues to maintain adequate liquidity to fund operations, internal growth and continuing product and geographic expansion opportunities, as well as its stock repurchase program. The company made no common share repurchases during the first quarter under its $125 million share repurchase program authorization, which expires at the end of October 2013. The company will utilize its buyback authority in the context of economic conditions, as well as the then prevailing market price of the common stock of the company, regulatory requirements, alternative capital investment opportunities and overall global liquidity.

Before turning the call over to Greg to provide some comments on the company's 2013 full year outlook and business trends, I wanted to briefly touch base on Slide 13 where you'll see our expectations for the second quarter of 2013. Global unit volume is expected to improve in the second quarter due to seasonal demand patterns driven by construction, electricity grid reliability and reinforcement work, submarine and land turnkey project installation and transmission projects in North America, along with the next phase of Brazilian transmission projects, which are expected to begin shipping in the second quarter of 2013. However, given recent declines in metal prices, the company now expects adjusted operating income in the range of $70 million to $80 million at current metals as of April 29. The company estimates the impact of a lower metal price environment on operating results in the second quarter to be in the range of $15 million to $20 million.

Adjusted earnings per share are expected to be in the range of $0.50 to $0.60 per share based on an effective tax rate of approximately 41% for the second quarter, which reflects the impact of the company's revised full year forecasted earnings mix and full year forecasted tax losses previously discussed.

With those comments, I'll turn the call over to Greg. Greg?

Gregory B. Kenny

Thank you, Brian, and good morning, everyone. As you can see on Slide 14, we have provided a roadmap outlining our revised 2013 full year outlook. Overall, we have lowered the midpoint of our full year outlook for adjusted operating income to approximately $300 million. This reduction is principally due to the impact of the lower metal price environment, which is expected to burden our operating results primarily in the second quarter by $15 million to $20 million. We have also lowered our expectations for global unit volume, primarily due to the company's start-up specialty cable business in Brazil, which is coming online more slowly than we anticipated and general demand weakness in sub-Saharan Africa. We expect stronger contributions from acquisitions to help offset this reduction in volume estimates.

Overall, based on the midpoint for 2013, global unit volume and adjusted operating income are expected to improve year-over-year by 25% and 18%, respectively. We are expecting volume improvement in North America and ROW driven in large part by volume attributable to acquisitions, which collectively are expected to contribute in the range of 340 million to 380 million pounds shipped in 2013.

While the seasonal earning step-up in the second quarter is expected to be muted by metal price headwinds, we expect a sharp improvement in the third quarter of the year as these metal price headwinds subside. At the midpoint of our guidance, volume in our base business is expected to improve year-over-year in the low-single digits, as demand in North America and ROW more than offsets weaknesses in the company's European and Mediterranean businesses. We continue to expect the Europe and Mediterranean region to contribute 3% to 6% of consolidated adjusted operating income in 2013. Global volume is expected to be somewhat skewed toward the second half, as construction activity ramps up and greater quantities of metal-intensive aerial transmission projects in Brazil begin to ship.

We are pleased with the positive momentum of our recent acquisitions. We are making excellent progress on integrating these businesses, which will remain a key focus for us throughout 2013 as we work to capture manufacturing, logistics and purchasing synergies.

Alcan Cable China was purchased late last year and is operating profitably. In addition to a state-of-the-art manufacturing facility, they have a very strong sales and distribution network. We're now looking at ways to build on this extensive network access with other products produced locally or globally.

Overall, we're well positioned to benefit from global growth trends, energy infrastructure-related investments and improving construction activity. The operating leverage in our business remains intact and has been further enhanced through our continuous cost reduction efforts, as well as the acquisition of Alcan Cable North America, which shares a similar historical earnings profile to that of General Cable's construction-driven businesses.

That concludes our prepared remarks. I'll now turn the call back to the operator, who'll assist us in taking your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Rich Wesolowski from Sidoti & Company.

Richard Wesolowski - Sidoti & Company, LLC

Even recognizing the transmission comps of a year ago, it appears to me that Brazil was the weak link in ROW. And I am wondering if the performance there reflects a lack of punch in the economy or in government infrastructure spending or rather a General Cable-related business development issue that could be improved upon by the new management.

Gregory B. Kenny

Yes. Rich, clearly the -- so as we said, sub-Saharan Africa is a bit off. It's not a big number. Venezuela was significantly off but is picking up now. And Brazil, we had a series of new products around the industrial communication space. They are complicated things to do. It was a pretty big business that we're building. I think with the -- we already had technical resources from around the world down there. Greg Lampert and the team are accelerating that to make sure we have a smooth launch and get the lines profitably filled. We're making nice progress in the communications line. But I think we'll continue to press on that. It's behind, but I think the Brazilian -- the biggest part of Brazil was just the transmission product side of things, which are lumpy. But Brazil, obviously, is underperforming, Rich, and we're focused there. We're making progress in Mexico. Thailand, Philippines are doing quite well. As I said, the China asset and ROW is performing. Oceania is making money but not what we'd like to see but overall, I would say it was Brazil and Venezuela that were the big swingers in the first quarter.

Richard Wesolowski - Sidoti & Company, LLC

And then secondly, maybe you would probably give us an overview of the Brazilian transmission project area. It was noted in the presentation that shipments will recommence in the June quarter. How long would that strength last? And what visibility do you have beyond this round of shipments?

Gregory B. Kenny

Yes, the -- we see 2013 as ramping up through the second half, so there was almost no transmission shipments in the first quarter, and it comes up nicely in the second quarter but well below prior year, so about 1/3 of prior year. And then we see the second half of '13 up materially from prior years. So what happened is 2012 ran out of projects. There was pause. So we had a very big first half of 2012 of transmission shipments. We're talking 25 million kind of pounds, very little shipment in the second half. That continued through the first quarter as there was a pause. And right now it looks like we will sort of have, in the second half of '13, the kind of volumes we expect to have, the kind of volumes we had in the first half of '12. So there was a 4-quarter pause, but I would say the second quarter is a bit better than the first quarter but still well off from where it was. But we continue to believe it will step up in the second half of the year materially, and that's in our forecast.

Richard Wesolowski - Sidoti & Company, LLC

Is there a visible end to the shipments following the second half of '13? Or does it continue on from there?

Brian J. Robinson

Yes, Richard, it's Brian. I would say our viewpoint is it continues on from there. I think the -- in -- for us, the Brazilian market, the long-term trends are -- we remain very optimistic about. Clearly, there are some short-term headwinds around GDP, so we're one of the leaders on the transmission cable side. Those projects continue to move ahead. Now the one caveat is just, in calling them exactly by quarter, it gets a little difficult, as you know, because of the siting and when the cables get pooled. We're big in -- we're a meaningful player in the construction cable market in Brazil, but we're one of many. And that -- again, that one's very GDP sensitive. And lastly, as we said in the comments and as Greg said, we're really focused on getting these specialties, some of these other cables that we've been successful in elsewhere, manufacture into the marketplace.

Operator

Your next question comes from the line of Shawn Harrison from Longbow Research.

Shawn M. Harrison - Longbow Research LLC

Just had a quick question here. Your free cash flow forecast is unchanged. Kind of curious how that's unchanged based on the lower operating income forecast. And then do you have any thoughts as far as actions for the buyback? Are you anticipating anything for the second quarter?

Brian J. Robinson

Yes, Shawn, the -- holding the cash forecast again that we're providing, we've provided a range. The way that we're -- and so the reason I would say that we're holding it despite the reduction in the income forecast would be -- which is probably caused by the metals. The corollary to the metals decline is, from a cash flow perspective, we benefit, so actually is a help from that regard. In addition, we continue to focus on working capital management, and that's also -- goes into the equation. So we held the range because there are those moving pieces, but headline wise, the reduction in metals caused the headwind P&L wise, actually can help us and do help us on the cash flow side. On the buyback side, we have the $125 million program. We did not use that in the first quarter. Clearly, depending on the model and investment in our own stock, is a very compelling investment from a return perspective and I -- and we -- the math from accretion perspective, clearly, is important as well. I think an argument that really is very strong and carries the day right now for us is around the -- our leverage and the liquidity in the business, in the global business. So as you know, we have this seasonal build in inventories. Our -- and so our gross leverage is just over 4 and our net just under 3. So we're cognizant of that. So we will continue to have the buyback as an option. We want to see how sort of the year continues to play out from a metals and an earnings perspective, but it's clearly still part of our arsenal and while the program expires in October, management's viewpoint at this point is that we would want to extend it, but ultimately, that will be a board discussion and decision later in the year.

Shawn M. Harrison - Longbow Research LLC

And then, I guess, the EBIT contribution you guys have for EMEA, could you give us any more color around that? Are you still expecting that to hold up with what you were previously expecting?

Gregory B. Kenny

I think you said the -- you're talking about Europe and the Middle East or North Africa and do we expect that EBIT to hold up around what we were -- have been expecting, which is a 3% to 6% of total adjusted operating income. Is that what you asked?

Shawn M. Harrison - Longbow Research LLC

Correct.

Gregory B. Kenny

Yes. No, I do. The swinger always is the complex projects offshore, but we -- I'm seeing perhaps a bottoming in Spain. And again, we're in the selling season, but it's around operating breakeven. Portugal is a bit above. We're continuing to see contribution from North Africa despite the investment that's fallen off because of the aftershocks of the Arab Spring. France has weakened a bit. You've seen some of the headlines on that and -- but we -- that has -- that stood taller last year. It's a bit weaker. But Spain, I think, with all the work we've done and some of the consolidation that invariably happens as people despair over pricing and volumes, we're maybe seeing that reach a floor. I say that hesitantly, but right now we're looking at -- in April at just around the breakeven or slightly positive, which is a first time in a long time. And again, a lot of the product we make in Spain goes outside of that market all throughout Europe and even internationally. But I think right now we do see a significant improvement primarily on the strength of NSW getting into its -- the warmer weather, and we continue to work through the projects. We're seeing pretty decent activity for oil and gas, submarine fiber optics and medium-voltage array cables. We're working through the current large project. So I think Europe, maybe a softening in France, a slight firming off bottom or bottoming in Spain or Iberia, and then we continue to work our communications business in Europe and oil and gas and some of the niche businesses, as well as improving our one Europe system. So I feel it's sort of is what it is and -- but it's not -- I'm not seeing it materially change other than France, as I said, weakening a bit.

Operator

Your next question comes from the line of Matt McCall from BB&T Capital Markets.

Matthew Schon McCall - BB&T Capital Markets, Research Division

So Brian, maybe for you, just wanted to understand the commentary about the expected pressure from copper. The closest I can find to a comparable period was kind of the Q3, Q4 of '11 time frame. And at that time, we had copper down about 15%. Again, there was about $20 million hit to earnings. This time, we've got copper and aluminum down an average of about 8%, but we're talking about pressure in the same range. I'm just trying to make those 2 make sense. Is there something I'm forgetting about an adjustment? Or just help me understand those 2 numbers.

Brian J. Robinson

Sure. The impact back in 2011 when we had that very significant drop in -- near the end of the third quarter of '11, which then came through in the fourth quarter, I think that was worth, Matt, more in the sort of $25 million area that we talked about. Again, this is not -- this is all our best estimate. But I -- and remember, too, when we originally went -- when that occurred, we also thought that the number would be slightly larger and that we'd actually see some into the first quarter of '12. But then we saw some nice volumes, and we saw metals start to recover in the first quarter, so the impact was really isolated, I'll call it, to the fourth quarter of '11. So turning to today, I think the -- while the fall has not been as dramatic as what we saw in that third quarter of '11, it's still been quite sizable though. So my percentage is a little bit higher than what you quoted there, but it is -- but I do recognize they're smaller than what they were in '11 but also in a fairly short time frame. In that the copper average in the month, as you know, we build our -- we typically are buying on the average occasionally for projects that are out materially. We'll go ahead and hedge if we have something out more than 3 months but $3.66 in January, $3.66 February, and then it drops to $3.46. I think the April average is $3.26, and this morning it hit $3.12 or something. So it's been coming down pretty hard. Also, we've seen aluminum track down as well, Matt, so I -- this is sort of an inexact science. It's been complicated because we're not running hard and we're -- we have activity, but we're not full, so some of the -- some of it really is people wait out, as you know, they wait out the copper to fall, some distributors, not all, some. And then they'll buy when it starts to look like it's firming. So there's a lot of aberration when these kinds of movements occur, but that's our best look as of through, I think -- we look at this through, I think through the $3.22 or $3.23 level then when we -- which was $3.23, which was closed a day or 2 ago. I think Monday night closed. So we'll have to see, Matt, but that's our sense. We'll have to plow through that average cost tail.

Matthew Schon McCall - BB&T Capital Markets, Research Division

And then you mentioned reference utilization. Can you give us an update on utilization, I guess, Greg, broadly maybe with specific focus on areas of the business that are getting to that 85-plus percent range. And then in the guidance, I'm specifically curious about construction and transmission in the U.S. given that it's such a big part of the business now. What's the assumed utilization as we kind of approach the end of this year?

Gregory B. Kenny

Matt, we don't -- no one independently tracks utilization, and we've looked at it from time to time, so we try to give it a sense of approximation. But in the -- broadly, in most of our businesses, they were approximately moving sideways from last year in the base businesses, and I think you probably saw that in some of the announcements by competitors, by channel partners. The utilization, again, is sort of the same. We have done well with our acquisitions. In the transmission area, that continues to be relatively strong. It was up dramatically from the trough periods as an industry, and our own business has been up. It's -- our first quarter in 2013 was materially better than 2012. Again, this moves around, but we, Matt, we see the utility sort of moving sideways. Housing will help a bit. The transmission continues to look like it will be strong in '13. And again, it always gets a little fuzzier as you go out, but '13 looks like nearly double demand from where it was in 2006. And then in '14 and '15 sort of at 2012 levels, so it looks pretty good, and of course, we have a -- we've got a larger profile on that because of the Alcan position as well. Wind is off but starting to rebuild, Matt, and then the core utility business is -- has come up, but it's still well off the former peak. So we're working through that. But we're down versus the peak on the distribution low voltage and distribution business, low-voltage and medium-voltage distribution. We're still 33% below the 2004, '05 kind of peak, but we're up 21% from the trough in 2009. So it's coming back, but I would say it's coming back gently, but it's -- still we have enormous amount of travel from where that was in the '04, '05, '06 time frame. But we expect transmission to hold together. Again, that can get a little bit time. Projects come and go, and we can see that move from quarter-to-quarter, but broadly, we think we're in a peak time.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. And then one more, then, on the construction side, Greg. At the Analyst Day, you had some pretty constructive things to say about construction in general, and really, it was a global comment with some emphasis on the strength in the U.S. and Canada. Can you just provide an update there? Has anything changed? Are you still as optimistic as you appeared at the Analyst Day?

Gregory B. Kenny

The first quarter, I would say there's been a lot of talk and results from companies where the first quarter was generally a bit weaker than people thought it might be and I still feel strongly about the construction impact on our business, maybe -- I think overall GNP was -- came in a bit lower than analysts had hoped in the U.S. and -- but I'm encouraged because housing pulls a lot alone, and the non-resi, as we said at the Analyst Day, was sort of moving sideways, but at least, it was relatively stable. We also obviously are watching major projects around infrastructure and things like that, which tie to mining, oil and gas, that kind of thing. But other than, I would say a weaker, a choppier first quarter just broadly as reported in the results by many companies including our channel partners. I think our -- my feeling is still the same.

Operator

Your next question comes from the line of Noelle Dilts from Stifel.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

I first have just a few questions on Venezuela. The color you gave on your expectations for Brazil by quarter were helpful. Could you talk about how you're seeing Venezuela kind of play out by quarter this year?

Gregory B. Kenny

Well, we're sort of not in the -- we'll be more general in the second half of the year, but broadly, we expect it to pick up nicely in the second quarter, perhaps triple the first quarter performance, which, as you know, had a new law and which caused a lot of the country to be shut down for the first half or the first quarter, as people were compelled to take vacation rather than get paid to work through it. This is broadly in the economy, and we had the close election and all of the stuff that went before, as well as Chavez' death. So we would anticipate that we'll have a good second quarter, and again, that should carry through -- sort of that trend line through the bulk of the year. And as you know, Venezuela has made in the 20%-ish of our overall operating income over time. But Venezuela is performing through April, and we anticipate it to be approximately 3x higher operating income in the second quarter than the first.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So have you -- it's been, I guess, a couple of weeks now since the elections. Have you seen a meaningful acceleration in terms of just demand and orders following the -- that election?

Gregory B. Kenny

We expected it to go back to normal, and I would say it's, based on what I saw in April, it looks like it's okay.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. On the NSW business or actually, on the turnkey business in general, you still have a nice backlog in that business. Can you speak to your confidence to replace that work as you start to work through that backlog?

Gregory B. Kenny

Yes, there'll be -- Noelle, we're still seeing -- I think there's an article in The Wall Street Journal on people going into the North Sea and trying to recover more oil because of some fields that were skipped. That was in the last week I think. There's still wind projects. There's also a lot of communications projects as well. So I would say the projects will be somewhat smaller, but they're out there. Our bid activity is good, and I feel relatively comfortable that we have a line of sight. Again, you have to go win them and then go deliver them. But the business is still out there, Noelle. Some of the mega contracts that were released 1.5 years ago and then stalled as the market was still finding itself in terms of supply chain and how people get paid, et cetera, that -- I think now there's a lot of just smaller projects but a number of them, and that's okay.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And one last question if I may. Just looking at the impact of copper and the squeeze you're seeing in the second quarter, given that copper has kind of continued to decline into today, and I think your lag is about -- tends to be around 3 months. Do you think you could see a bit of a headwind in terms of that copper squeeze going in the early third quarter? Do you think it'll be largely isolated to the second?

Gregory B. Kenny

Well, we sort of cut off this for today. Preparing for today, we cut off with copper in the low $3.20 range. Obviously it's moved down a bit. It's been $0.04 a day volatile, but there's a tail. Yes, there's possibility that we could see a little bit of headwind into the third quarter. We already probably -- again, copper has broken $0.10 in the last 1.5 days so from where we're talking, we'll have to see where she goes. But sure, Noelle, it's possible.

Operator

Your next question comes from the line of Brent Thielman from D.A. Davidson.

Brent Thielman - D.A. Davidson & Co., Research Division

Brian, I had another question, just around the variables of that $15 million to $20 million impact from metals on Q2. Does that become a conservative forecast if we were to see some pickup in metals prices during the quarter and presuming selling prices follow?

Brian J. Robinson

Yes, Brent, yes, broadly, but I think what we found typically -- particularly in an environment that we're talking about today it's, to be fair, I think you -- we see it accelerate a little harder on the downside than to get it back quickly in the market. I think, again, given some of the trends we talked about from a demand perspective, but sure, if metals ran up, but -- and I go back to Noelle's question as well, which is when we take a -- when we look at this from a long-term perspective, obviously, this is a -- this short-term volatility is noise for us. The long-term, our fundamental view remains the same around the business. I think to Noelle's point around the third quarter impact, I think it's a little too early to call. There are so many variables around our volumes and end-market pricing. Again, to Greg's point, if we continue to see copper drop, that obviously will become a bigger risk. But again, we saw it drop a lot in April for a number of days, and then it climbed back by $0.20 in a couple of days. So we're watching it very closely, and it's a little early to exactly call.

Brent Thielman - D.A. Davidson & Co., Research Division

Understood. And most of my other question's been answered but just a broader question on -- in terms of transmission cable demand, obviously, the U.S. has been good. Brazil is ramping. Greg or Brian, what do you think the next sort of major opportunity is for you in terms of major investment in transmission?

Gregory B. Kenny

Well, it's -- clearly, Europe is strongly moving into a need to interconnect these grids, so they can wield power, and we have an important facility in Bilbao, Spain called ECN that is benefiting by the know-how that came with -- that we have as a company but also came specifically with Alcan so -- and they operate a rod mill so where we have best practice teams working there. So I see Europe as an opportunity. We're touching transmission in many markets, but I would say those are the -- there's really nothing of size and scale to compare to Brazil, Europe and North America.

Operator

Your next question comes from the line of Shawn Harrison from Longbow Research.

Shawn M. Harrison - Longbow Research LLC

One quick follow-up, your old volume assumption was about 5% at the midpoint, now it's low-single digit. I guess, could you break out what the volume contribution from North America, ROW and EMEA would be organically now for 2013?

Gregory B. Kenny

This is on the base business, Shawn?

Shawn M. Harrison - Longbow Research LLC

Yes.

Brian J. Robinson

Yes, I would say North America would be in that low-single-digit sort of range. Europe, probably down slightly, probably low kind of 0 to 5% and then ROW would be the balance, so mid-single-digit base business improvement volume-wise, on the base, again putting aside Alcan, Prestolite, Procables, Alcan China. One other comment on the transmission, the -- Procables acquisition brings a lot of transmission capability regionally, so I would say that's not as big as any of the markets we've talked about, but is something we're were working on presently to really use Procables to service the Andean pact and possibly over some parts of Central America. That's all overhead transmission.

Operator

Your next question comes from the line of the Noelle Dilts from Stifel.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Sticking with the volume, I just -- look, I just want to make sure I understand this. It looks like your -- you brought down the middle pencil assumption for your acquisitions. What does that reflect?

Brian J. Robinson

I would say, I guess, somewhat in line with the overall trends. To be fair, probably also somewhat of an aggressive goal that we had. So we brought the volume, but you noticed we actually brought the contribution up. So there's nothing major to report in terms of the outlook on the acquisitions. I would say maybe just a little optimistic, but we're happy to say that the profitability is actually better than we thought.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

So say, is it across the board that you're seeing better profitability? Or is it more in Alcan or Procables?

Brian J. Robinson

Yes, I would describe it as -- probably across the board is how I would say it.

Gregory B. Kenny

So the question was on the acquisitions. Yes.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Yes.

Brian J. Robinson

We're, again, thrilled with all of the acquisition, and they're all contributing in a meaningful way.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And one other question, can you speak to the order trends that you saw through the quarter and how they progressed in April?

Brian J. Robinson

It's -- I would say they were fairly -- I'm not sure I would call it any sort of month as a special item. Meaning that in different countries, we had different trends, and as we said, we had talked about Venezuela a little bit, we saw a return. I think the first quarter, I would describe as an anomaly because of all the reasons that we mentioned and so a sort of return to normal, let's call it, in April. I would say the -- I don't know that we can say much more about the order patterns in the other businesses by month. It's been like it has been for -- it's -- as we said, we saw nice stability in the core North American businesses, but I wouldn't highlight any sort of specific months or trends.

Gregory B. Kenny

And Noelle, part of the problem is reading off in April is we've got copper at the high end of the month, it looks like a $3.43 and then closing on 29th of April at $3.23 where we did our work on this conference call and releases. The -- so you get those kinds of things where copper comes back up. Then, the orders come dribbling in but -- or maybe come in a little harder but you've got that effect that we've had with -- in the past with real quick movements at a drop, where people -- you may not get a true sense of what the underlying demand is because distributors could be waiting on a copper fall and living off inventory. And We really, other than a few places, we really can't see into the distributor inventory with great accuracy. But the -- I would say the market has been seasonally as we expect stronger, but it's somewhat choppy.

Brian J. Robinson

Noelle, it's Brian. just with all those comments within the seasonal nature of our business, remember, as well, as we've talked a lot about.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

And I'm assuming it's too early to try and estimate how -- the extent to which you think orders may be deferred or delayed at this point, the amount of orders that may be [indiscernible].

Gregory B. Kenny

Yes. We'll never know. If we could see into all our distributors' inventory, we -- and their incoming order rate, but we don't really -- our biggest class of customers on one side is utility who do releases, we do some joint planning, and then you've got distributors who are approximately as big. But other than a few integrated supply chains in some regions, we really don't have the data live to tell you what their -- we have to tell you what they're seeing. So we can see our incoming from the distributors. We know what we might be joint bidding in terms of projects, but we really won't have their overall flow. So yes, we read the -- our distributor channel partner releases, and we treasure the collaborative planning we do, do with them. But it's not a live feed.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And just finally, how are you feeling about your inventory levels going in into the second quarter?

Brian J. Robinson

We feel very good. We took inventory out in the fourth quarter, particularly in the rest of the world region. We added inventory back in the first quarter in ROW and some in North America. As we referenced, we had this raw material buy in Venezuela, so we feel very good about our inventory position headed in the second quarter for the rest of the year.

Operator

There are no further questions at this time.

Len Texter

Thanks for joining us this morning. That concludes our conference call. A replay of this call will be available on our website later today. We appreciate your continued interest in General Cable. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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