CONSOLIDATED FINANCIAL STATEMENTS >
DIRECTORS’ REPORT
54
| 2013 ANNUAL REPORT | PRYSMIAN GROUP
MARKET OVERVIEW
Both the power distribution and generation markets continued to report differences between
the various geographical areas and a tougher competitive environment, while the High
Voltage market saw slightly more activity than in the previous year.
During 2013, the markets in which the Prysmian Group’s
Utilities business area operates saw a consolidation of the
signs of uncertainty already emerging in the second half of
2012.
Both the power distribution and generation markets, in
which demand declined throughout 2012, further confirmed
the differences between the various geographical areas and
tougher competitive environment.
Activity levels in the High Voltage market - traditionally highly
international both in terms of demand and supply - were
slightly higher than in the previous year, particularly thanks to
the positive mix of investment projects realised in the period.
This was particularly positive in view of the generally
uncertain macroeconomic scenario regarding future energy
consumption and access to funding, in response to which the
largest utilities, particularly in Europe and North America,
adopted a selective approach to new investment projects.
The focus in Europe, and North and South America was on
rationalisation and/or maintenance projects to improve
efficiency and reduce energy generation costs, while the focus
in the Middle East and Southeast Asia was on extending and
completing major projects. There was continued competitive
pressure on prices for operators in growing economies,
like China and India, not only due to a large number of
competitors but also because of the need to limit financial
exposure in the face of uncertain investment returns.
With reference to the Submarine cables market, the upturn
in play since the second half of 2012 became even stronger in
2013 thanks to investments by utilities to build new offshore
wind farms and commence major new interconnection
projects.
Although this trend was particularly evident in parts of the
world, whose energy demands had grown over the past two
years, such as Northern Europe, North America, the Arab
Emirates and emerging countries in Southeast Asia, new
infrastructure upgrade projects also appeared in regions hard
hit by the financial crisis, like the Mediterranean.
In contrast, demand in the Power Distribution market slowed
even more in the period, confirming the downward trend
already seen in the first half of the year that had commenced
in the final quarter of the previous year.
Energy consumption trends in the principal European
countries were basically flat, adversely affecting demand
by the major utilities. The latter, operating in a recessionary
economic environment, either maintained an extremely
cautious approach given the difficulties in forecasting
future growth, or else they concentrated on restructuring to
improve efficiency and reduce costs of supply. As a result, the
competitive environment in terms of price and mix remained
extremely challenging almost everywhere.
In contrast, markets in North America confirmed the signs of
recovery seen during 2012 and the first half of 2013, after a
three-year period during which operators had reduced work on
grids to the bare minimum.
The Network Components market can be broadly divided
into products for high and extra high voltage networks and
products for medium and low voltage use.
As regards High Voltage components, demand followed the
downtrend trend in the number of projects in this sector,
mainly caused by delays by the major utilities in awarding
projects; volumes were also affected by the mix of the High
Voltage order book, reflecting a common trend of more
fragmented and erratic demand, concentrated on smaller
scale but technologically more complex projects than in the
past, accompanied by more exacting requirements regarding
quality and after-sales service.
Demand for submarine accessories was stable with an upward
trend as a direct consequence of projects currently in progress
around the world.
