2nd quarter improving: organic change in sales +4.3% (-11.2% in 1st quarter)
Adj Ebitda euro 106 million in 2nd quarter vs euro 75 million in 1st quarter
Order book for high voltage and submarine cables climbs to euro 1.4 billion as of
july
Results at 30 June 2010
• Sales: Euro 2,148 million Vs Euro 1,848 million in 1st half 2009
(organic change -3.4%)
• Adj Ebitda : euro 181 million vs euro 193 million in 1st half 2009 (-6.5%)
• Adj operating income : euro 143 million vs euro 161 million in 1st half 2009
(-11.0%)
• Adj net profit : euro 77 million vs euro 94 million in 1st half 2009
(-18.1%)
• Net Financial position at euro 675 million from euro 660 million at 30 june 2009
FY 2010 Adj Ebitda target confirmed in the range of Euro 350 – 400 million
The Board of Directors of Prysmian S.p.A. has approved today the Company's consolidated
results for the first half of 2010 .
MARKET SCENARIO
After a still uncertain start of the year, the second quarter reported the first signs of
recovery in demand across all the Group's businesses, also driven by higher seasonal sales. To be
remarked that, after several negative quarters, organic growth has come back to a positive sign
(+4.3%) and profitability has improved, with second-quarter adjusted EBITDA up to Euro 106 million
from Euro 75 million in the first quarter and also higher than Euro 103 million reported in the
second quarter of 2009.
"Prysmian has been quick to take up the opportunities arising from the first signs of market
recovery – comments CEO Valerio Battista - with a major improvement in Group’s second-quarter
results. Volumes have started to grow again even in the businesses most affected by the crisis,
like those involved with the construction industry. Prysmian has confirmed its technological and
market leadership in higher value-added businesses, securing contracts for some of the major power
transmission and offshore wind farm projects. Not only we shall be producing the world's first 300
kV HVDC cables, but we have also secured a contract in Abu Dhabi for one of the longest EHV links
planned in the Middle East. Prysmian is also following with attention the development of strategic
renewable energy projects in Europe: we have formed together with some other major companies ’F
riends of the Supergrid’ to promote the creation of a supergrid in Northern Europe and we have
joined the ‘Transgreen’ project to carry solar energy generated in the Sahara to Europe. Also
thanks to new contracts secured, our order book for high voltage and submarine projects climbed to
some Euro 1,400 million as of July. Based on this scenario we can confirm our year-end profit
targets", concludes Battista.
FINANCIAL RESULTS
Sales amounted to Euro 2,148 million compared with Euro 1,848 million in the first half of
2009. Net of metal price and exchange rate effects and variation in the group perimeter, the
organic change in sales was a negative 3.4%, although with performance differing markedly between
the two quarters: the +4.3% in the second quarter helped mitigate the effect of the –11.2% in the
first three months.
Adjusted EBITDA amounted to Euro 181 million, with a significant improvement in
the second quarter which confined the decline on the Euro 193 million of the first half 2009 (the
margin on sales was 8.4% down from 10.5% in the corresponding period of 2009). The Group continues
to focus on high value-added businesses, which accounted for over 60% of total adjusted EBITDA.
EBITDA amounted to Euro 175 million, down 2.9% from Euro 180 million in the first half of 2009,
with a margin on sales of 8.2% versus 9.8% in the corresponding period of 2009.
Adjusted operating income was Euro 143 million, down 11.0% from Euro 161 million
in the first half of 2009 and representing a margin on sales of 6.7%, down from 8.7%. Operating
income, including the non recurring items and the negative impact of Euro 17 million from fair
value changes in metal derivatives compared with a positive impact of Euro 75 million in the first
half of 2009, was Euro 115 million (Euro 223 million in 2009; -48.3%).
Net finance income and costs reported a negative balance of Euro 52 million,
compared with a negative Euro 18 million in the first half of 2009. The change is primarily due to
the impact of the Euro's strong depreciation on the fair value of currency derivatives, as well as
the impact of issuing the unrated Eurobond and the entering into a new Forward Start Credit
Agreement. These two financial transactions significantly strengthen the Group's financial
structure and allowed to extend the debt's average maturity at a highly competitive cost.
Adjusted net profit came to Euro 77 million compared with Euro 94 million in the
first half of 2009 (-18.1%), reporting a margin on sales of 3.7% (5.1% in the corresponding period
of 2009). Net profit amounted to Euro 44 million. The decrease from Euro 150 million in the first
half of 2009 is mainly attributable to fair value changes in metal derivatives, which were a
positive Euro 75 million in the first half of 2009 compared with a negative Euro 17 million in the
first half of 2010.
Free cash flow (levered) was a negative Euro 82 million (negative Euro 16 million
in the first half of 2009). This cash flow was affected by the negative impact of higher metal
prices on working capital (around Euro 81 million), by the cash outlay for the Ravin Cables
acquisition (Euro 20 million), by bank fees and other expenses (Euro 16 million) relating to the
Forward Start Agreement and by the Eurobond issue. Free cash flow (levered) generated over the last
twelve months (July 2009 - June 2010) amounted to Euro 117 million.
At the end of June 2010,
Net financial position was Euro 675 million compared with Euro 660 million at the
end of June 2009 (Euro 474 million at the end of 2009). The net financial position at 30 June 2010
also includes some Euro 43 million for the impact of the two recent acquisitions in Russia and
India.
STRATEGY DEVELOPMENT
• Development of high-tech businesses
In the first half of 2010 the Group invested Euro 31 million in high-tech
businesses (Euro 51 million in the first half of 2009), mainly to complete the flexible pipes plant
in Brazil and to increase production capacity for high voltage cables in China and the USA and for
optical cables in Romania.
• Expansion in high growth countries
The Group has continued to integrate its new acquisitions in Russia (RybinskElektrokabel) and
India (Ravin Cables). New organisational structures have been defined for these companies, and
initial investments are being examined to increase penetration in high-tech businesses.
• Focus on fixed costs and industrial efficiencies
Despite the impact of intervening acquisitions, in the first half of 2010 the Group kept
fixed costs largely stable relative to the corresponding period of 2009, having already made
significant reductions in 2009 (Euro 206 million versus Euro 200 million, including the impact of
the recent acquisitions). The Group also kept a strong focus on industrial efficiencies:
efficiencies in materials, optimisation of logistics and production costs, and development of more
effective production processes.
ENERGY CABLES AND SYSTEMS PERFORMANCE AND RESULTS
• NEW SUBMARINE PROJECTS FOR OFFSHORE WIND FARMS
• HIGH VOLTAGE: GROWING ORDER BOOK LED BY CHINA AND MIDDLE EAST
• POWER DISTRIBUTION RECOVERING: + 8% IN Q2 2010 VOLUMES ON Q2 2009
• BACK TO A POSITIVE ORGANIC GROWTH IN T&I: + 10.3% IN Q2 2010 VS - 8.6% IN Q1 2010
• INDUSTRIAL: INCREASING ORDER BOOK IN OIL & GAS CABLES; GROWTH IN RENEWABLES
Sales to third parties by the Energy Cables and Systems segment amounted to Euro
1,925 million, compared with Euro 1,641 million in the first half of 2009. Net of metal price and
exchange rate effects and changes in the group perimeter, the
organic change in sales was a negative 3.6% in the first half, although reporting
a clear trend reversal in the second quarter (+ 4.7%) recovering from the - 11.7% of the first
three months. Adjusted EBITDA amounted to Euro 164 million (Euro 177 million in the first half of
2009), with a margin on sales down to 8.5% from 10.7% in the corresponding period of 2009. Adjusted
operating income came to Euro 130 million (Euro 148 million in the first half of 2009), with the
margin on sales down to 6.7% from 9.0% in the corresponding period of 2009.
Utilities
Sales to third parties by the Utilities business amounted to Euro 829 million,
reporting an organic decrease of 5.9%. After a stable start to the year at the lows reached in the
second half of 2009, demand started to recover in the second quarter, with improvements in both the
power distribution and power transmission markets. In terms of profitability, margins were slightly
lower, with adjusted EBITDA on sales at 14.4%, down from 15.8%, and adjusted operating income on
sales at 12.4% down from 13.9%.
Sales by the submarine cable business enjoyed an organic increase on the corresponding period
in 2009, confirming the recovery in investments by the utilities, particularly in offshore wind
farms. In recent weeks Prysmian has been awarded two of the most important projects currently under
development: HelWin1 and BorWin2, the world's first 300 kV HVDC link, confirming its market and
technological leadership in this sector.
Demand for high voltage underground cables showed steady signs of recovery during the first
six months of the year. In fact, in the second quarter larger utilities have resumed their
investment programmes in Europe, China and the Middle East. The Group recently won the Transco
project in Abu Dhabi, the largest contract for underground high voltage systems ever awarded to a
single supplier in the Middle East.
Starting from the second quarter, the power distribution business confirmed the first signs
of volume recovery, particularly in Europe. Second-quarter volumes were stable even in markets that
had suffered most, such as North America, Brazil and South-East Asia. The high price of raw
materials continued to put margins under pressure.
Trade & Installers
Sales to third parties by the Trade & Installers business amounted to Euro 699 million
(Euro 489 million in the first half of 2009), posting an organic growth of 1.0% on the first half
of 2009. The increase in volumes picked up significantly in the second quarter with + 10.3% organic
growth compared with – 8.6% in the first quarter, particularly thanks to the resumption of demand
in Europe, Brazil and Australia, and to the product mix with, for example, a growth in sales of
cables for solar systems. An important contract was also signed to supply cables for the new
underground railway in Istanbul. The growth in volumes reflected positively on second-quarter
profits, with adjusted EBITDA climbing to Euro 15 million from Euro 5 million in the first three
months of the year. Despite resumed growth in volumes, fluctuations in exchange rates and metal
prices have kept price competition alight. Volumes are expected to carry on growing in the next
quarters with a general stabilisation in prices. Adjusted operating margin on sales went down to
1.8% from 3.1% in the first half of 2009.
Industrial
Sales to third parties by the Industrial cables business amounted to Euro 344 million (Euro
314 million in the first half of 2009), reporting an organic decrease of 8.9%. Industrial cables
also showed signs of a trend reversal in the second quarter with an organic growth of + 1.0%
compared with - 17.3% in the first quarter. A number of important contracts were secured during the
period in the Oil & Gas sector in Libya and Asia Pacific, while business in the renewable
energy sector continued its positive trend. There was also strong growth in the order book for
umbilical cables for the Oil & Gas sector during the first half of the year, which has improved
sales visibility for the second half of the year. Volumes in the automotive industry carried on
recovering. Adjusted operating margin on sales was 5.0%, down from 6.1% in the first half of 2009.
TELECOM CABLES AND SYSTEMS PERFORMANCE AND RESULTS
• STABLE DEMAND FOR OPTICAL CABLES
• INCREASING VOLUMES AND MARKET SHARE IN OPTICAL CABLES
• STABLE MARGINS
Sales to third parties by the Telecom Cables and Systems segment amounted to
Euro 223 million (Euro 207 million in first half 2009), posting an organic decrease of 1.2% on the
corresponding period of 2009, reflecting a negative first-quarter trend (-6.5%) that was partially
reabsorbed by a second-quarter recovery (+3.4%). Although demand for optical cables was stable at
its level of 2009, Prysmian boosted its market share during the first half of 2010 in every
geographical area thanks to a 5% volume growth on the first half of 2009. The start of optical
cable production at the new plant in Romania will allow the Group to increase its presence in
markets in the Northern and Eastern European markets, where demand from alternative operators is
most lively. Adjusted EBITDA rose slightly at Euro 17 million from Euro 16 million in the first
half of 2009. Adjusted operating income was basically stable at Euro 13 million. In terms of
margins, adjusted EBITDA was 7.4% from 7.6% of sales, while adjusted operating income was 5.8% from
6.1% of sales.
The Group's sales in EMEA (Europe, Middle East and Africa) reported an organic
decrease of 1.3%. The second-quarter recovery in volumes for Trade & Installers and Power
Distribution resulted in organic sales growth of 4.2% for the quarter. EMEA accounted for 70.0% of
total sales in the period.
Sales in North America posted an organic decrease of 4.6% with a slight second-quarter
recovery thanks to the high voltage projects started. North America accounted for 9.0% of total
sales in the period.
Latin America posted an organic decrease in sales of 6.1%. There were signs of a
second-quarter recovery in sales in the Industrial business area, particularly for the Oil &
Gas industry, and in the Trade & Installers business area, which resulted in 9.7% organic
growth for the quarter. The region accounted for 10.0% of total sales in the period.
Asia Pacific reported an organic decrease in sales of 14.0%, almost entirely attributable to
lower volumes for the Power Distribution and Industrial businesses on the Australian market. Demand
showed signs of stabilising in the second quarter. Asia Pacific accounted for 11.0% of total sales
in the period.
BUSINESS OUTLOOK
After a first quarter that confirmed a stabilisation in demand and industrial output at the
low levels already reached in the last part of 2009, the second quarter started to show the first
signs of a moderate recovery in demand for all the Group's businesses. Although no major
improvement in the economic environment is forecast, the Group expects to see in the second half of
the year a continued recovery in volumes for the Trade & Installers and Power Distribution
businesses, and a confirmation of the positive trend in orders for power transmission projects, for
certain industrial applications such as renewable energy and offshore oil drilling, as well as for
optical fibre cables supplied to major Telecom incumbents.
Based on the results achieved in the first six months, combined with the size of the current
order book, the target for FY 2010 adjusted EBITDA can therefore be confirmed in the range of Euro
350-400 million announced at the end of the first quarter; this range is related to development of
the reference markets demand in the second half of the year (FY 2009: Euro 403 million).
The Group also continues to rationalise and improve efficiency in its industrial footprint
and to optimise its cost structure, while confirming its investment plans already started in the
high value-added businesses to further strengthen its presence in the most profitable, high-growth
segments.
KEY EVENTS OF THE FIRST HALF 2010
On March 30, 2010, with demand in excess of Euro 3,000 million, Prysmian SpA completed the
placement of a five-year bond issue, listed on the Luxembourg Exchange, for a total amount of Euro
400 million, sold exclusively to qualified investors. The bonds, which were offered at a 99.674
issue price with a minimum denomination of 50,000 euros, mature on April 9, 2015 and carry a gross
annual coupon of 5.25%. The Bonds are guaranteed by certain subsidiaries of Prysmian SpA.
Prysmian's Half-Year Financial Report at 30 June 2010, approved by the Board of Directors
today, will be available to the public, together with the report by the independent auditors, from
6 August 2010 from the Company's registered offices in Viale Sarca 222, Milan and from Borsa
Italiana S.p.A.. It will also be available on the corporate website at www.prysmian.com.
This document may contain forward-looking statements relating to future events and operating,
economic and financial results of the Prysmian Group. By their nature, forward-looking statements
involve risk and uncertainty because they depend on the occurrence of future events and
circumstances. Therefore, actual future results may differ materially from what is expressed in
forward-looking statements as a result of a variety of factors.
The managers responsible for preparing corporate accounting documents (Massimo Branda and
Jordi Calvo), hereby declare, pursuant to par. 2 art. 154-bis of Italy's Unified Financial Act,
that the accounting information contained in this press release corresponds to the underlying
documents, accounting books and records.
Prysmian
A leading player in the industry of high-tech cables and systems for energy and
telecommunications, the Prysmian Group is a truly global business with more than Euro 3.7 billion
in sales in 2009 and a strong position in higher value-added market segments. With its two
businesses, Energy Cables & Systems (submarine and underground cables for power transmission
and distribution, for industrial applications and for the distribution of electricity to
residential and commercial buildings) and Telecom Cables & Systems (optical cables and fibres
and copper cables for video, data and voice transmission), Prysmian boasts a global presence with
subsidiaries in 39 countries, 56 plants in 24 countries, 7 Research & Development Centres in
Europe, USA and South America, and around 12,000 employees.
Specialising in the development of products and systems even designed to customer
specification, Prysmian's key strengths include: a focus on Research & Development, the
capacity to innovate products and production processes, and the use of advanced proprietary
technologies. Prysmian is listed on the Milan Stock Exchange in the Blue Chip index.
Media Relations
Lorenzo Caruso
Marketing & Corporate Communications Director
lorenzo.caruso@prysmian.com
Investor Relations
Luca Caserta
Head of Investor Relations
luca.caserta@prysmian.com
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