CONSOLIDATED FINANCIAL STATEMENTS >
DIRECTORS’ REPORT
82
| 2013 ANNUAL REPORT | PRYSMIAN GROUP
A special Internal Risk Management Committee (consisting of
the Group’s Senior Management) ensures, through the Chief
Risk Officer, that the ERM process is developed in a dynamic
way (i.e. taking account of changes in the business, of needs
and events that have an impact on the Group over time), and
that it is updated on a periodic basis, or as a result of new
situations or risk events that might occur or be envisaged over
time. The Head of Internal Audit is responsible in this context
for reporting to the Board of Directors on the adequacy of
existing processes.
The Internal Risk Management Committee also oversees
the implementation of risk management or mitigation
strategies and may, with the assistance of the Internal Audit
department, request an independent opinion on the adequacy
and efficiency of such implementation.
The classification used in the Risk Model just described will
now be used to discuss the significant risks factors for each
category and the strategies adopted to mitigate such risks.
Financial risks are discussed in detail in the Explanatory
Notes to the Consolidated Financial Statements in Section D
(Financial risk management).
As stated in the Explanatory Notes to the Consolidated
Financial Statements (Section B.1 Basis of preparation),
there are no financial, operating or other kind of indicators
that might cast doubt on Prysmian Group’s ability to meet
its obligations in the foreseeable future (and particularly
in the next 12 months). In particular, based on its financial
performance and cash generation in recent years, as well as
its available financial resources at 31 December 2013, the
Group believes that, barring any extraordinary events, there
are no significant uncertainties, such as to cast significant
doubts upon the business’s ability to continue as a going
concern.
Risks associated with market trends for the Group’s products
Some of the markets for the Prysmian Group’s products,
mainly relating to the Trade & Installers business area, the
Power Distribution business line and certain applications
in the Industrial business area, are subject to cyclical
fluctuations in demand and are influenced by overall trends
in GDP growth. Although the diversified nature of the Group’s
markets and products reduces its exposure to cyclical trends
in demand on certain markets, it is not possible to rule out
that such market cycles could have a significant impact on
the Group’s business, results of operations and financial
condition.
In addition, demand for products in the energy cables market
is also influenced by the spending plans of utilities companies
and by overall energy consumption, and also in part by
construction industry trends, while demand for products
in the telecom cables industry is heavily influenced by the
spending plans of telecom operators.
Financial year 2013 reported a slight reduction in the Prysmian
Group’s overall volumes on the previous year, reflecting
the slowing trend in demand underway since mid-2012
particularly affected by continued weakness in the Eurozone.
Despite ongoing work to rationalise the manufacturing
footprint, the renewed reduction in sales volumes did not
allow any significant improvements in plant utilisation, which
remained well below pre-crisis levels, with a consequent
maintenance of competitive pressure on selling prices and
therefore on margins.
Despite these conditions, the Prysmian Group achieved good
results both in terms of profits and cash flow; however, if
another significant downturn in demand should recur in
coming quarters in the Trade & Installers, Power Distribution
(partly linked to trends in the construction market), Industrial
and Telecom businesses, combined with a slowdown in order
intake in the High Voltage underground cables business, the
Group cannot rule out that the consequent sharp downturn
STRATEGIC RISKS
