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The Prysmian Group's manufacturing activities are carried
out through a highly decentralised model, involving 89
plants in 33 different countries. The widespread distribution
of plants is a strategic factor in allowing the Group to react
quickly to different market needs worldwide. Over the course
of 2014 the Prysmian Group continued to implement an in-
dustrial strategy based on the following rationale: (i) focus
on higher value-added high-tech products, by concentrating
their production in a limited number of plants that become
centres of excellence with high levels of technological
expertise, where it is possible to benefit from economies of
scale, by improving manufacturing efficiency and reducing
capital employed; (ii) ongoing pursuit of greater manufac-
turing efficiency in the commodities area by maintaining a
wide geographical presence to minimise distribution costs.
Capital expenditure totalled Euro 163 million in 2014, up
from Euro 138 million the previous year, mainly reflecting
the Group's ever increasing commitment to developing its
activities in the Submarine cables business. Investments to
increase production capacity and change its mix accounted
for 30% of the total: these investments were mainly in
the Energy Projects and Telecom operating segments, as
described in due course. In addition, the process of ratio-
nalising production capacity proceeded throughout the year:
in fact, the plants in St. Petersburg (Russia) and Aubevoye
(France) were both closed, resulting in the transfer of
machinery to other factories within the Group. The purpose
of concentrating production sites was to optimise cost
structure within individual countries and to rationalise the
Group's industrial footprint in order to restore a sufficient
level of capacity utilisation within the various countries.
Energy Projects
Work was completed during the year to increase capacity
at the Arco Felice Submarine cables plant in Italy to allow
it to fulfil the contract for the Western HVDC Link between
England and Scotland. Also in the Submarine business, in-
vestments were completed at the Drammen plant in Norway
to get production lines ready for the manufacture of cables
to connect some of ExxonMobil's offshore platforms off the
west coast of the United States to the mainland. A major
new investment was started at the plants in Arco Felice and
Pikkala (Finland) to increase capability for the "50 Hertz"
contract, worth more than Euro 700 million and awarded
to the Group during the year; this contract involves the
design, supply and installation of high voltage submarine
systems between offshore wind farms in German territorial
waters. Within the High Voltage business, two of the main
investments were: i) at the Abbeville plant (United States)
for the construction of a second vertical insulation line for
Extra High Voltage extruded cables, in order to intercept the
volume growth in this continuously expanding market; ii) at
the Slatina plant (Romania), to satisfy growing demand in
the markets of South-East Europe.
Energy Products
In theOil &Gas sector, investment projectswere completed at
the Sorocaba and Santo André and Sorocaba plants in Brazil,
allowing them to produce cables for the Jurong and Keppel
Fels Shipyards. At the same time, the Group continued to
invest in countries with the best growth potential: in Russia,
the plant in Rybinsk expanded its capability for the produc-
tion of low voltage cables; in China, the plants in Suzhou
and Tianjin increased their cable production capacity for the
Trade & Installers and Rolling Stock markets; in Hungary, the
plant in Kistelek started a project to construct a production
line for rubber cables serving the Central European market.
Telecom
The Telecom operating segment's main investment was in
the Sorocaba plant in Brazil for the verticalisation of the
optical fibre production process, aimed at serving the South
American market and particularly the Brazilian one; there
was also continued investment to increase optical cable
production capacity at the new factory in Slatina (Romania),
confirmed as one of Europe's centres of excellence for
optical telecom cables.
Efficiency
Capital expenditure on achieving efficiencies to reduce
fixed and variable costs, particularly in relation to materials
usage and product design, accounted for approximately
20% of the total. In particular, the Energy Products segment
made significant investments in efficiency, particularly
in the metallurgical area, following the Group's decision
to complete the process of vertical production at some of
its plants (Schuylkill Haven in North America, Durango in
Mexico, and Schwerin in Germany). In the Telecom segment,
its European optical fibre manufacturing facilities in Bat-
tipaglia (Italy) and Douvrin (France) continued to invest in
efficiency with a view to achieving a significant reduction in
fibre manufacturing cost. In particular, the Italian plant is
about to complete the construction of a trigeneration plant
that will reduce its energy costs; at the same time, work has
INDUSTRIAL ACTIVITIES
During the year Prysmian continued to invest in the higher value-added business of
submarine cables, confirming once again its world leadership in this segment.