Prysmian S.p.A., 2008 results

Sales at euro 5,144 million; organic growth +4.2% with strong performance in the utilities business (+12.1%) driven by HV and Submarine cables.

Operating results in line with 2008 targets.
free cash flow at record level of euro 320 million (+31.0%).
dividend at euro 0.417 per share, in line with prior year.

•  sales: euro 5,144 million (organic growth: +4.2%)
•  adj ebitda  (excl. "free stock" impact): euro 557 million
•  adj net income : euro 332 million (euro 299 million in 2007; +11.0%)
•  net financial position improved to euro 577 million from euro 716 million in 2007
 

The Board of Directors of Prysmian S.p.A., a worldwide leading Group in the industry of cables and systems for energy and telecommunications, has approved today its 2008 consolidated financial statements and the draft statutory financial statements .

The year 2008 witnessed a steady deterioration in the market, with the first part of the year generally stable, followed by evident signs of the crisis during the third and fourth quarters.  In such a context, Prysmian managed to improve its results, particularly in higher technology and value-added markets. Net of metal price effects, currency translation effects and changes in the group perimeter, overall organic growth was 4.2%, taking the Group's sales to Euro 5,144 million. Performance was particularly positive in the Utilities business, reporting organic growth of 12.1%, driven by the high voltage underground and submarine cables segment which grew by more than 30.0%. This is a very satisfactory result, achieved in the Group's more strategic business which significantly contributes to overall profitability.

This business will increase its strategic role thanks to its positive medium-term prospects even in a weaker market environment. In fact, the stimulus packages passed by the US and Chinese governments and by the European Union include investments in excess of USD 150 billion to upgrade power generation infrastructures and power transmission and distribution networks, particularly for renewable energy. Prysmian is world leader in this sector and also in 2008 secured new contracts such as the Doha Bay submarine connection and the Kahramaa VIII high voltage underground link in Qatar. In the renewable energy sector, Prysmian has been awarded major projects to build up power connections for Greater Gabbard and Thanet, the world's two largest off-shore wind farms currently under construction, confirming its leadership in a rapidly developing sector which is expected to benefit of EU incentives for Euro 500 million in 2009-2010.  
 
" Despite negative effects coming from the global economic slowdown in the second half of 2008 - explains Valerio Battista, Chief Executive Officer - the power transmission business confirmed its strength, with an orders backlog for underground cables providing strong visibility for the current year and orders for submarine cables covering all production capacity in 2009 and 2010. Our Group continues to improve industrial efficiency and keeps a strong focus on its strategy of growth, investing selectively in markets and businesses which also in a slowing environment provide interesting opportunities. Leveraging on a particularly solid balance sheet and financial position, Prysmian is well equipped to compete even in a persistent phase of market weakness."     

Adjusted EBITDA in 2008 amounted to Euro 542 million compared with Euro 529 million in 2007, with margin on sales rising from 10.3% to 10.5%. This result has been negatively impacted by the valuation of metal stocks not covered by sales orders (so-called "Free Stock"); this effect amounted to Euro 15 million and emerged entirely in the fourth quarter, as a consequence of the strong decline in the price of copper and aluminium. The Group's strategy - focussing on more profitable businesses with long-term investment cycles - has allowed to maintain high levels of profitability, even in sharply deteriorating macroeconomic conditions. The Utilities business, in particular, achieved an adjusted EBITDA of Euro 287 million from Euro 237 million in the previous year, with margin on sales rising to 14.2% from 12.5%. Within this business, the power transmission segment (high voltage underground and submarine cables) accounts for a significant part of the business total results, showing great resiliency in the general economic downturn.

EBITDA  amounted to Euro 518 million in 2008 compared with Euro 573 million in 2007, which benefited from Euro 44 million in net non-recurring income compared with Euro 24 million in net non-recurring expenses in 2008.  

Adjusted operating income  rose by 2.8% to Euro 477 million, up from Euro 464 million in 2007. The margin on sales also improved from 9.1% to 9.3%. Operating income amounted to Euro 448 million compared with Euro 508 million in 2007, which had benefited from Euro 44 million in net non-recurring income compared with Euro 29 million in net non-recurring expenses in 2008.

Net financial charges amounted to Euro 165 million in 2008, increasing from Euro 123 million in 2007, due to Euro 68 million of negative metals derivatives fair value effects and Euro 27 million of exchange rate and currency derivative losses. These effects mainly depend on the mark-to-market valuation of derivatives, which are nonetheless designed to hedge raw material price risk and currency risk arising in the ordinary course of business and which are substantially neutral in terms of operating profitability; net interest expense decreased, reflecting the lower average net debt in the period and the reduction in borrowing costs, resulting from the new financing agreement effective from April 2007.    

Adjusted net income amounted to Euro 332 million (Euro 299 million in 2007), excluding the negative impact of non-recurring items, derivatives and exchange rate differences. In more detail:
- net non-recurring expenses of Euro 29 million, of which Euro 16 million in costs for rationalising production capacity, including the writedown of fixed assets no longer used and held for sale;
- metal derivatives negative mark-to-market of Euro 68 million and exchange rate/currency derivative losses for Euro 27 million;    
- positive tax effects relating to the above charges of Euro 27 million.

After including the non-recurring items described above, net income amounted to Euro 235 million compared to Euro 302 million in 2007.
 
Cash generation in 2008 was extremely positive. Cash flow from operating activities (after changes in net working capital) amounted to Euro 502 million, reporting an increase of Euro 136 million (+37.2%) from the previous year.  Free cash flow (before dividends, shares buy-back and other changes in equity) reported robust growth in 2008, rising to Euro 320 million from Euro 245 million in 2007, thanks to efficient management of working capital and despite larger investments in higher margin businesses; this cash flow also benefited from the fall in metal prices in the last part of the year.  

At the end of 2008, the Net Financial Position amounted to Euro 577 million, representing a major improvement from Euro 716 million in 2007, with the ratio Net Financial Position/Adj EBITDA down to 1.1x (1.4x in 2007). In the current credit crunch, Prysmian's financial strength is even more an important asset. The Group's financial structure is based on two long-term financing agreements expiring in mid-2012; including the undrawn committed credit lines and the available cash, the Groups financial resources exceed Euro 1 billion at the end of 2008.

BUSINESS PERFORMANCE AND RESULTS

Energy Cables and Systems

Sales to third parties by the Energy Cables and Systems business rose to Euro 4,608 million in 2008, reporting 4.0% organic growth. Adjusted operating income increased by 3.1% to Euro 435 million from Euro 420 million in 2007, with margin on sales of 9.4% up from 9.1%.
 
(in millions of Euro)

Utilities
Sales to third parties in the Utilities business rose to Euro 2,028 million, reporting organic growth of 12.1%.   Growth is attributable to the positive performance of high voltage underground, submarine cables and accessories:, high-tech, high valued-added sectors in which Prysmian has confirmed its worldwide leadership. The Group has secured contracts to build some of the most important underground and submarine connections in the world, particularly in the Middle East with the Doha Bay and Kahramaa VIII projects. Important business opportunities have also been seized in the renewable energy sector, with the acquisition of contracts to build power connections for the world's two largest off-shore wind farms. In view of the increasingly tough market outlook, the Group has also focused its commitment to emerging geographical areas, with interesting opportunities taken up in Russia and the Persian Gulf, and on smaller projects, particularly network repair and maintenance.  The power transmission business offer attractive growth prospects in view of the economic support plans enacted by governments worldwide, involving expected investment in excess of USD 150 billion in energy infrastructure, of which a sizeable part will be devoted to transmission networks. Prysmian has moved to take up these opportunities, by increasing production capacity in the USA and China. The segment of low and medium voltage cables for power distribution experienced a slight contraction with sales performance extremely weak in North America, following the steep construction industry downturn starting back in 2007; in the last quarter of 2008, the worsening of the economic crisis produced a major contraction in volumes in Europe as well. 
In terms of profitability, adjusted operating income rose to Euro 256 million (12.6% of sales) compared with Euro 208 million (11.0% of sales) in the prior year.

Trade & Installers
Sales to third parties in the Trade & Installers business amounted to Euro 1,629 million. Given the progressive contraction in demand, caused by the construction industry crisis, Prysmian reported a 5.0% organic decrease in sales, with attention focused on efficient management of net working capital. Market conditions got significantly worse in the fourth quarter (particularly in Europe), when Prysmian reported an organic decrease in sales of 11.7%. Prysmian has further increased its exposure to high value-added products such as LS0H/Afumex fire-resistant cables and to the demand for cables related to non-residential applications. Thanks to its products range, Prysmian has developed interesting niche markets, as the fire-resistant cables for installation in public structures where safety is crucial; by way of example, the new tennis stadium in Wimbledon and the new motor racing circuit in Singapore, site of the first night-time F1 Gran Prix, have both been cabled by Prysmian. Adjusted operating income slipped to Euro 100 million (6.1% of sales) from Euro 137 million (7.6% of sales) in 2007. 

Industrial
Industrial cables sales to third parties amounted to Euro 850 million in 2008, reporting organic growth of 5.0%. In  an adverse trend affecting demand in the industrial reference sectors, Prysmian improved its performance thanks to the high quality of its product portfolio, particularly in the Oil&Gas and renewable energy sectors. Even in the last quarter of the year, sales confirmed a positive trend, with organic growth of 7.3%. The umbilical cables segment for the off-shore oil industry reported an increase of around 15.0% in volumes in 2008. In June 2008 Prysmian announced a technical cooperation agreement with the Brazilian oil company Petrobras, which will allow it to enter the flexible pipes high tech and high margin business. The agreement involves initial orders for USD 135 million and the start up of a new production plant in Brazil in the second half of 2010. Adjusted operating income for 2008 increased to Euro 80 million from Euro 71 million in 2007, with margin on sales climbing to 9.4%, from 9.0% in the prior year.

Telecom Cables and Systems

Sales to third parties by the Telecom Cables and Systems business amounted to Euro 536 million, remaining largely stable with respect to 2007. Excluding the effect of exchange rates and copper prices, organic growth was 5.2% due to the growth achieved in the optical cables segment with positive performance in Europe, Australia, where an important contract was signed with the operator Telstra, and above all in North America where Prysmian boasts customers like Qwest, Telus and Verizon. In the copper cables segment, Prysmian secured an important contract with the Libyan General Post and Telecommunications Company. Adjusted operating income increased by 5.7% to Euro 45 million from Euro 44 million in 2007. Adjusted operating margin on sales rose to 8.4% from 7.9%.

(in millions of Euro)

SALES AND RESULTS BY GEOGRAPHICAL AREA

The Group's sales in EMEA (Europe, Middle East and Africa) reported 3.8% organic growth in 2008, mainly thanks to the development of high voltage and submarine projects and despite the downturn in the Trade & Installer business.  EMEA accounted for 69.9% of total sales.
Sales in North America reported 2.8% organic growth, particularly thanks to development of the high voltage and telecom businesses which offset the contraction in demand in other business areas such as Power Distribution.  Sales in North America accounted for 11.8% of total sales in 2008.     
Sales in Latin America reported 7.6% organic growth, with almost all business areas performing well except for Power Distribution. The second half of the year saw significant organic growth in sales of cables for Oil&Gas applications.  The region accounted for 9.3% of total sales in 2008.  
Sales in APAC (Asia Pacific) reported 5.5% organic growth, having benefited from certain important projects in Indonesia and Australia, mainly in the Industrial cables sector. APAC accounted for 9.1% of total sales in 2008.

BUSINESS OUTLOOK
As already evident in the first nine months of 2008, the last quarter of the year confirmed a sharp slowdown in the world economy, with further contraction expected in 2009. The construction market crisis in the United States has generated great instability in the global banking system with clear signs of a decline in consumption and investments first in North America and then in Europe and the rest of the world. Given this economic scenario, the Group expects demand to further decrease in the Trade & Installers, Power Distribution and certain products in the Industrial segment more exposed to cyclical trends and a more resilient demand for power transmission and industrial applications such as OG&P and renewable energy. 
The Group also intends to continue rationalising and improving efficiency in its industrial footprint, while confirming investment plans in higher value-added businesses to strengthen its presence in the most profitable, high-growth segments.   

SHARE BUY-BACK
On 7 October 2008, the Board of Directors granted to the Chief Executive Officer and Chief Financial Officer, severally and not jointly, powers to purchase up to 4 million of the Company's shares by 31 December 2008.  The Company has bought back 3,028,500 of its shares since the start of this programme, at an average price of Euro 9.965 for a total of Euro 30 million. These treasury shares are currently being held by the Company.
Moreover, the Board resolved to submit to the next Shareholders' Meeting the renewal of the buy back project, and the revoke of the current authorisation for the purchase and disposal of treasury shares, granted to the Board on 15 April 2008. The new plan calls for the buy-back of up to 10% of the Company share capital, considering the treasury shares already owns by the Company. The term of the plan is 18 months effective from the date of the shareholders' meeting approval.

ONGOING ANTITRUST INVESTIGATION
At the end of January, the European Commission and the Antitrust Authorities of Japan and the United States started an investigation against Prysmian which aims at verifying the existence of alleged anti-competitive agreements in the High Voltage underground and Submarine cables sector. The investigation is at an initial stage of gathering the relevant documentation and Prysmian is collaborating with the Authorities. In the event of proven breach of the applicable laws, the sanction system under the European law (EC Regulation 1/2003) foresees financial penalties that could reach a maximum of 10% of the turnover.

DIRECTORS INDEPENDENCE
Based on statements made by the Directors, the Board of Directors announces that, as per the Self-Regulatory Code for listed companies, it has carried out the appropriate checks on independence requirements, observing that directors Wesley Clark, Giulio Del Ninno, Francesco Paolo Mattioli, and Udo Günter Werner Stark continue to satisfy these requirements.

RESIGNATION OF AN ALTERNATE STATUTORY AUDITOR
The Board of Directors of Prysmian S.p.A. has acknowledged the resignation of Mr. Alessandro Ceriani as a alternate statutory auditor, for own professional reasons, tendered today and with effect from the shareholder meeting which will resolve upon his replacement

SHAREHOLDERS MEETING CALL
The Board of Directors empowered the Chairman, Mr. Zannoni, and the CEO, Mr. Battista, severally, to perform all the formalities to call the next Shareholders Meeting on April 8th 2009 (first call) or eventually on April 9th 2009 (second call). 

The Annual Report at 31 December 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.  By their nature, forward-looking statements involve risk and uncertainty because they depend on the occurrence of future events and circumstances.  The actual results may differ significantly from those stated owing to a series of factors.

Mr. Pier Francesco Facchini, manager responsible for preparing corporate accounting documents, hereby declares, pursuant to paragraph 2 of article 154-bis of Italy's Financial Markets Consolidation Act, that the accounting information contained in this press release corresponds to the underlying documents, accounting books and records.