2014 ANNUAL REPORT

Consolidated Financial Report |

EXPLANATORY NOTES

2014 Annual Report

Prysmian Group

172

SEGMENT INFORMATION

From 1 January 2014 the Group embarked on a process of orga-

nisational change, which has involved redefining its segment

information, in keeping with the new management model

adopted by the Group.

Following this change, the Group’s operating segments have

been redefined as follows:

• Energy Projects;

• Energy Products;

• Telecom.

Reporting systems in support of the new model were intro-

duced in 2014 and fully implemented prior to the preparation

of the current document. Accordingly the criteria used to

identify the reportable segments are consistent with the new

organisational model. The Board of Directors approved the

adoption of the new structure for segment reporting in its

meeting on 23 January 2015.

Segment information is currently structured in the same way

as the report periodically prepared in order to review business

performance. This report presents operating performance by

macro type of business (Energy Projects, Energy Products and

Telecom) and the results of operating segments primarily

on the basis of Adjusted EBITDA, defined as earnings (loss)

for the period before non-recurring items (e.g. restructuring

costs), the fair value change in metal price derivatives and

in other fair value items, amortisation, depreciation and

impairment, finance costs and income and taxes. This report

also provides information about the statement of financial

position for the Group as a whole and not by operating

segment.

In order to provide users of the financial statements with

clearer information, certain economic data is also reported for

the following sales channels and business areas within the

individual operating segments:

A) Energy Projects operating segment: covers high-tech and

high value-added businesses whose focus is on projects and

their execution, as well as on product customisation: High

Voltage underground, Submarine and SURF (umbilical cables,

flexible pipes and special DHT (Downhole Technology) cables

for the oil industry).

B) Energy Products operating segment: covers the busines-

ses offering a complete and innovative product portfolio

designed to meet the various and many demands of the

market, namely:

1. Energy & Infrastructure (E&I): which includes Trade and

Installers and Power Distribution;

2. Industrial & Network components: which comprises Spe-

cialties and OEM, Oil & Gas, Elevators, Automotive and

Network Components;

3. Other: occasional sales of residual products.

C) Telecom operating segment: produces cable systems and

connectivity products used in telecommunication networks.

The segment is organised in the following lines of business:

optical fibre, optical cables, connectivity components and

accessories, OPGW (Optical Ground Wire) and copper cables.

All Corporate fixed costs are allocated to the Energy Products,

Energy Projects and Telecom operating segments. Revenues

and costs are allocated to each operating segment by iden-

tifying all revenues and costs directly attributable to that

segment and by allocating indirect costs on the basis of

Corporate resources (personnel, space used, etc.) absorbed by

the operating segments.

Group operating activities are organised and managed sepa-

rately according to the nature of the products and services

provided: each segment offers different products and services

to different markets. Sales of goods and services are analysed

geographically on the basis of the location of the registered

office of the company that issues the invoices, regardless of

the geographic destination of the products sold. This type of

presentation does not produce significantly different results

from analysing sales of goods and services by destination of

the products sold.

All transfer prices are set using the same conditions applied

to other transactions between Group companies and are

generally determined by applying a mark-up to production

costs.

Assets and liabilities by operating segment are not included

in the data reviewed by management and so, as permitted by

IFRS 8, this information is not reported.

It should be noted that the comparative figures have been

restated compared with the previously published figures to

reflect the following:

• The redefinition of the operating segments after adopting

the new organisational structure;

• The adoption of IFRS 10 and IFRS 11, which has involved

restating the Group’s consolidated figures with effect

from 1 January 2013.

• The newmethod of classifying the share of the net profit/

(loss) of associates and joint ventures, which has involved

recognising this amount as a component of “Operating

income” when relating to companies that operate in the

same market as the Group.