Prysmian S.p.A., first quarter 2008 results

Profitability improvement. Net income doubled to €103 million.
Orders growing in high value added businesses (High voltage and submarine cables).

•  Sales: €1,216 million (€1,205 million in the first quarter 2007)
•  Organic Growth: +3.4% 
•  Adjusted Ebitda : €129 million (€116 million in the first quarter 2007; + 10.6%) 
•  Adjusted Ebit : €113 million (€99 million in the first quarter 2007; +13.9%) 
•  Net Income: €103 million (€52 million in the first quarter 2007; +97.6%) 
•  Net Financial position improved to €758 million from €899 million at 31 March 2007

Today the Board of Directors of Prysmian S.p.A., a worldwide leading group in the industry of cables and systems for energy and telecommunication, has approved the results for the first quarter of 2008.

The focus on high value added segments allowed the Group to record an increase in Sales also in the first quarter of 2008, totalling the amount of €1,216 million. Net of metals price effects and exchange rate translation effects, organic growth was 3.4%. The Energy cables division benefited from a strong organic growth of 11.3% recorded in the utilities business, due to a sharp volumes increase in the submarine cables segment, where Prysmian is realising strategic projects worldwide, such as SA.PE.I. in Italy, GCCIA in Bahrain, Transbay in the USA and Cometa in Spain, as well as in the high voltage segment, especially in China, Russia and the Middle East. In the Telecom business, positive sales performance was achieved by optical cables particularly in Europe.

Strong demand in the high voltage and submarine cables segments is expected to continue due to the growing energy consumption combined with high oil price and the need to make transmission networks increasingly efficient and eco-sustainable. Prysmian can count on a growing order book that ensures high visibility on future sales. In submarine cables, the order book covers production capacity up to the end of 2009-beginning of 2010, while in high voltage cables the 2009 production capacity is already 50% booked.

In the first quarter of 2008 adjusted EBITDA totalled €129 million, up by 10.6% compared to €116 million in the corresponding period of 2007. This also led to an improvement in the margin on sales which rose to 10.6%, up from 9.6% in the first quarter of 2007. This increase comes from volumes growth in higher profitability businesses, together with the ability to keep fixed costs unchanged compared to the previous year.

In the first quarter of 2008 EBITDA  amounted to €128 million. EBITDA in the corresponding period of 2007 was €152 million due to €36 million benefit of non-recurring items, mainly attributable to the price adjustment related to the acquisition of the cable business from Pirelli & C. S.p.A. in 2005. Margin on sales amounted to 10.5% compared to 12.6% in the corresponding period in 2007 which was positively affected by the non-recurring items above.

Adjusted EBIT reached €113 million in the first quarter of 2008, up by 13.9% compared to €99 million in the corresponding period in 2007, with a margin on sales rising to 9.3% from 8.2%. EBIT amounted to €112 million compared to €135 million in the first quarter of 2007 which benefited from €36 million of positive non-recurring items, mainly attributable to the price adjustment recognised by Pirelli & C. S.p.A.. The margin on sales was 9.2% from 11.2% in the first quarter of 2007.
Net financial income/costs were €23 million positive in the first quarter of 2008 compared to €64 million negative in the corresponding period of 2007. This change was mainly due to the write-off of bank fees for €59 million in the first quarter of 2007 and the recognition in the income statement of the positive effect from the fair value evaluation of derivatives (€50 million in 2008 before tax effects).

Net income was almost double compared to the corresponding period of 2007, rising to €103 million from €52 million (+ 97.6%). This result benefited from a positive extraordinary item of €31 million, due to the recognition in the income statement of the valuation of derivatives.

In the first quarter of 2008 the Prysmian Group generated Cash flow from operations (before net working capital changes) of €126 million, compared to €110 million in the corresponding period of 2007. This positive flow was offset by the increase in net working capital mainly linked to the execution of the high voltage and submarine cable projects. Free cash flow (before dividends) during the last twelve months (April 2007 - March 2008) was €194 million.
 
Net financial position at the end of March 2008 totalled €758 million, improving from €899 million at 31 March 2007.
 
PERFORMANCE AND RESULTS OF THE BUSINESS AREAS

Energy Cables & Systems (in millions of Euro)

Sales to third parties in the Energy Cables & Systems business rose to €1,074 million posting an organic growth of 3.6%. Adjusted EBIT rose by 14.2% to €100 million from €87 million in the first quarter of 2007, with margin on sales surging to 9.2% from 8.0%.

Utilities
Sales to third parties in the Utilities business rose to €444 million, recording a strong organic growth of 11.3%. Performance was particularly good in the higher added value segments of high voltage and submarine cables where Prysmian strengthened its leadership winning some major worldwide projects (e.g. EMAL in Dubai and Kaharamaa in Qatar). Thanks to the production capacity increase completed during the last two years at the plants of Arco Felice (Italy), Gron (France), Pikkala (Finland) and Delft (Holland), Prysmian is well-positioned to take advantage of the sustained investment trend for new projects launched by the main utilities worldwide. Profitability also improved, with adjusted EBIT margin on sales of 11.6% from 8.4% in the corresponding period of 2007.

Trade & Installers
Sales to third parties in the Trade & Installers business totalled €423 million. The slight organic sales growth of +0.4% becomes more significant considering the uncertainty in the market following the construction industry crisis. Thanks to the ability to react quickly to market changes and to re-direct demand also to higher added value products such as LS0H/Afumex fire-resistant cables, Prysmian managed to record an increase in sales, limiting the impact on profitability. Adjusted EBIT margin on sales amounted to 7.3% from 8.0% in the corresponding period of 2007.

Industrial
Industrial cables sales to third parties totalled €186 million. The organic sales decrease of 7.6% was mainly due to projects phasing in the Oil & Gas area. However, EBIT remained substantially stable. To be highlighted the strengthening of commercial relations with the strategic customer Petrobras which awarded Prysmian as supplier of hi-technology "umbilicals" for the Plangas project in Brazil. In the first quarter of 2008 adjusted EBIT margin on sales rose to 9.4% from 8.8% in the corresponding period of 2007.

Telecom Cables and Systems
Sales to third parties in the Telecom Cables and Systems business totalled €142 million, posting an organic growth of 2.3%, driven by strong increase in the optical cables business. Adjusted EBIT totalled €13 million, unchanged compared to the corresponding period of 2007, despite the negative effect of the devaluation of the US dollar and the British pound. The margin on sales rose to 9.6% from 8.3%.

Optical cables continued to benefit from growing demand in Europe; Australia also recorded a positive sales development thanks to the contract signed with the telecom operator Telstra. Recently Prysmian has introduced some important technological innovations such as the CasaLight optical fibre, specifically designed for applications in the growing FTTH (Fibre to the Home) market, and Verticasa, which is a new fibre-optic cabling system for high-rise buildings.

Copper cables recorded steady sales, with particularly high volumes in Turkey, Italy and Romania. Prysmian won an important contract for the supply of cables to the Libyan operator Libyan General Post and Telecommunications Company.  

SALES AND RESULTS BY GEOGRAPHIC AREA

(*) EMEA: Europe, Middle East and Africa

In EMEA (Europe, Middle East and Africa), in the first quarter of 2008, the Group achieved 4.3% organic growth, largely generated by the development of high voltage projects. EMEA accounted for 69% of total sales.

Sales in North America decreased by 7.7%, wholly due to the exchange rate translation effect. The growth in the high voltage cables business more than offset the slow down in demand in other business areas such as Power Distribution. Sales in North America in the first three months of 2008 represented 12% of the total.

In Central and South America sales were steady. The region represented 9% of total sales in the first three months of 2008.

In the first quarter of 2008 Asia and Oceania recorded the most significant growth in sales (+5% in absolute terms and + 8.1% net of metals price and exchange rate translation effects), thanks in particular to good results in Telecom and Trade & Installers businesses. Asia and Oceania represented 10% of total sales in the first three months of 2008.
 

OUTLOOK
Despite a slow down in the economic scenario which should continue throughout 2008, Prysmian expects to confirm the profitability drivers for the full year. In particular, Prysmian will continue to benefit from the growing demand of high voltage cables for power transmission and cables for industrial applications such as OGP and renewable energy, as well as the positive trend in demand for fibre-optic cables from telecom operators. 
Based on the positive results achieved in the first quarter, combined with the strong order book in the higher value added businesses, operating profitability is expected to improve in 2008 and, in particular, adjusted EBITDA is expected above 2007 level.

 
The Report on the First Quarter 2008 will be filed at the Company's registered offices at Viale Sarca 222, Milan, and with Borsa Italiana S.p.A. in compliance with relevant regulations. 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. These forecasts are, by their very nature, risky and uncertain since they depend on the occurrence of future events and developments. The actual results may differ significantly from those stated owing to a series of factors.

Mr. Pier Francesco Facchini, manager responsible for preparing the Company's financial reports, hereby declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.

Prysmian
The Prysmian group is a world leader in the energy and telecommunication cables industry, with a strong market position in higher-added value market segments. Organised into two business units, Energy Cables & Systems (submarine and terrestrial cables for electricity transmission and distribution) and Telecom Cables & Systems (optical fibres and cables for video, data and voice transmission, and copper telecom cables), the Prysmian Group has a global presence with subsidiaries in 36 countries, 54 plants in 21 countries, 7 Research & Development Centres in Europe, the United States and South America, and more than 12,000 employees. Specialising in the development of products and systems designed to meet clients' specific requirements, Prysmian's main competitive strengths include its focus on research and development, its innovative products and production processes, and the use of advanced proprietary technologies. Prysmian is listed on the Milan Stock Exchange Blue Chip index.