58 348
Consolidated Financial Report |
DIRECTORS’ REPORT
2014 Annual Report
Prysmian Group
58
Market Overview
The reference markets have distinct geographical character-
istics (despite international product standards) both in terms
of customer and supplier fragmentation and the range of
items produced and sold.
Throughout the year persistent uncertainty about the
construction industry's future prospects prevailed over the
positive effects of lower metal and commodity prices; as a
result, the largest industry players continued to maintain low
stocks and constant pressure on sales prices.
As noted in the nine-month report, countries in Europe, such
as Spain and Italy, were particularly hard hit because of the
negative impact on the property market of severe restrictions
on bank credit. Even Germany and the Netherlands were
affected by a stationary trend in demand for new build; this
led to growing price pressure, also due to ever increasing
competition by small foreign operators from Southern Europe
and North Africa seeking outlets for their surplus capacity in
the richer markets of Central and Northern Europe.
The North American market, already affected by largely flat
demand for products serving infrastructure construction, was
partly affected in 2014 by the delay in defining tax incentives
for energy-efficient buildings. Nonetheless, Canada saw good
growth in demand in the renewables sector (for wind farms).
Markets in South America reversed the previous year’s
volume gains after reporting a downturn in demand caused
by slowdown in the industrial and residential construction
sectors.
Lastly, despite the Australian dollar's depreciation during
the year, demand continued to stagnate on the Australian
construction market, defined by strong competitive pressures
from Asian operators.
Demand for the Power Distribution business line slowed in
2014, confirming and reinforcing the downward trend already
seen in 2013.
This trend reflected generally stagnant energy consumption
in the principal European countries, which in turn adversely
affected demand by the major utilities. The latter, operating
in a recessionary economic environment, either maintained
an extremely cautious approach given the difficulties in fore-
casting future growth, or else they concentrated on restruc-
turing to improve efficiency and reduce supply-side costs. As
a result, the competitive environment in terms of price and
mix remained extremely challenging almost everywhere.
Markets in the Americas showed signs of general stability in
2014 compared with the previous year.
Uncertainty about the construction industry's future prospects prevailed over the positive
effects of lower metal and commodity prices. Demand for the Power Distribution business
line slowed, confirming and reinforcing the downward trend already seen in 2013.
Financial Performance
Sales to third parties by the E&I business area amounted to
Euro 2,677 million in 2014, compared with Euro 2,747 million
in 2013, posting a negative change of Euro 70 million (-2.6%)
due to the combined effect of the following main factors:
• positive organic growth of Euro 75 million (+2.7%);
• reduction of Euro 89 million (-3.3%) for exchange rate
fluctuations;
• sales price reduction of Euro 56 million (-2.0%) for metal
price fluctuations.
Prysmian Group continued its strategy in this business area
of focusing on commercial relationships with top internation-
al customers and its development of tactical actions to avoid
losing sales opportunities, by differentiating its offer in the
various markets and by increasing its market share in specific
geographical areas. This has led to a very complex commercial
strategy, not only focused where possible on improving the
sales mix, but also aimed at regaining market share while
seeking to minimise the impact on sales margins.
The general precariousness of demand for infrastructure,
combined with the state of energy consumption in most
European markets, certainly affected the performance of the
Group, which was nonetheless able to benefit from growth
opportunities in Asian and North American markets.
By contrast, Prysmian Group's sales suffered in South
America, where the trend in demand remained negative and
where pressure on prices started to be felt.
Given the factors described above, Adjusted EBITDA for 2014
came to Euro 108 million, down from Euro 127 million in the
previous year.