ANNUAL REPORT 2015

PRYSMIAN GROUP | DIRECTORS’ REPORT

ad hoc process was also initiated to identify and analyse the Group's sustainability risks, details of which can

be found in the annual Sustainability Report, available on the Company's corporate website at

in the section Corporate/Sustainability/Downloads/Sustainability Report.

The classification used in the above Risk Model will now be used to discuss the significant risk 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 C (Financial Risk Management).

As stated in the Explanatory Notes to the Consolidated Financial Statements (Section B.1 Basis of

preparation), the Directors have assessed that there are no financial, operating or other kind of indicators

that might provide evidence of the Group's inability 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 2015, the Directors believe that,

barring any unforeseeable extraordinary events, there are no significant uncertainties, such as to cast

significant doubts upon the business's ability to continue as a going concern.

STRATEGIC RISKS

Risks associated with the competitive environment

Many of the products offered by the Prysmian Group, primarily in the Trade & Installers and Power

Distribution business, are made in conformity with specific industrial standards and so are interchangeable

with those offered by major competitors. Price is therefore a key factor in customer choice of supplier. The

entry into mature markets (eg. Europe) of non-traditional competitors, meaning small to medium

manufacturing companies with low production costs and the need to saturate production capacity, together

with a possible contraction in market demand, translate into strong competitive pressure on prices with

possible consequences for the Group's expected margins.

In addition, high value-added segments - like High Voltage underground cables, Optical Cables and

Submarine cables - are seeing an escalation in competition from operators already on the market, with

potentially negative impacts on both sales volumes and sales prices. With particular reference to the

Submarine cables business, the high barriers to entry, linked to difficult-to-replicate ownership of technology,

know-how and track record, are driving large market players to compete not so much on the product as on

the related services.

The strategy of rationalising production facilities currently in progress, the consequent optimisation of cost

structure, the policy of geographical diversification and, last but not least, the ongoing pursuit of innovative

technological solutions, all help the Group to address the potential effects arising from the competitive

environment.

Risks associated with changes in the macroeconomic environment and in demand

Factors such as changes in GDP and interest rates, the ease of getting credit, the cost of raw materials, and

the overall level of energy consumption, significantly affect the energy demand of countries which, in the face

of persistent economic difficulties, then reduce investments that would otherwise develop the market.