52 348
Consolidated Financial Report |
DIRECTORS’ REPORT
2014 Annual Report
Prysmian Group
52
Financial Performance
Sales to third parties by the Energy Projects segment
amounted to Euro 1,355 million in 2014, compared with
Euro 1,360 million in 2013, posting a negative change of
Euro 5 million (-0.3%). Excluding the negative impact of the
Western HVDC Link project, sales to third parties would have
been Euro 1,416 million.
The decrease in sales can be broken down into the following
main factors:
• positive organic growth of Euro 22 million (+1.7%);
excluding adjustments for the Western HVDC Link
project, organic growth would have been a positive Euro
83 million (+6.1%);
• reduction of Euro 22 million (-1.7%) for exchange rate
fluctuations;
• sales price reduction of Euro 5 million (-0.3%) for metal
price fluctuations.
Positive organic growth in 2014 reflects a combination
of opposing factors, such as the positive trends in the
Submarine and SURF businesses, as partially offset by
weakness in the High Voltage business.
The High Voltage business performed poorly in some of the
major Europeanmarkets (Italy and North European countries)
in the wake of lower demand for energy infrastructure. The
Group increased its exposure to markets in the Middle and
Far East, characterised by growing demand for energy infra-
structure but also by lower profitability. Demand in Russia
continued to be limited due to the uncertain local political
situation causing delays in the implementation of previously
planned major projects.
Sales by the Submarine business were up on 2013, despite
the delay in the Western HVDC Link (UK). The main projects
on which work was performed in the year were the Helwin 2,
Sylwin 1 and Borwin 2 and 3 offshore wind farms in Germany.
With regard to execution of the Western HVDC Link (UK)
project, initiated in the third quarter of 2012, some technical
problems were encountered with the cable manufacturing
process, resulting in a downward revision of Euro 61 million
to expected sales.
The value of the Group's Submarine order book was in
excess of Euro 2.3 billion at the end of 2014, providing
sales visibility for a period of about three years. The order
book mainly consists of the following contracts: the inter-
connector between Greece and the Cyclades islands, the
interconnectors in the Balearic Islands (Mallorca-Ibiza) and
over the Dardanelles Strait, the link between Montenegro
and Italy (Monita), the contracts for offshore wind platform
connections (DolWin3, Deutsche Bucht, 50Hertz), the link
between offshore wind farms in the North Sea and the
German mainland (BorWin3), the interconnection of the
Philippine islands of Panay and Negros, the Shannon River
crossing in Ireland, the interconnector between the UK and
Scotland (WesternLink) and the contract for the supply and
installation of submarine cables for part of the offshore
operations of ExxonMobil Corporation in the United States.
In order to satisfy these contracts, investments have been
made to upgrade production capacity at the Pikkala plant in
Finland, already operational since the end of 2011, and at the
Arco Felice plant in Italy.
The SURF business reported a good performance for DHT
cables in the North American market, in the face of a weak
result in the flexible pipes segment. Performance in the
umbilical cables segment was basically stable.
As a result of the events described in the Submarine
business, an impoverished geographical mix of projects in
the High Voltage underground business and stability in the
SURF business, Adjusted EBITDA for the Energy Projects
operating segment came to Euro 154 million (Euro 248
million without the negative impact of the Western HVDC
Link project). This is a decrease of Euro 77 million from Euro
231 million in 2013, of which Euro 94 million is the adverse
impact of the Western HVDC Link project; excluding this
effect, Adjusted EBITDA would have reported an increase of
Euro 17 million.