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PRYSMIAN GROUP | DIRECTORS’ REPORT
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Government incentives for alternative energy sources also face reduction for the same reason. The
Prysmian Group's transmission business (high voltage submarine cables) and Power Distribution business,
both highly concentrated in the European market, are being affected by the contraction of demand in this
market caused by the region's prolonged economic downturn.
To counter this risk, the Group is pursuing, on the one hand, a policy of geographical diversification in non-
European countries (eg. Vietnam, Philippines, etc.) and, on the other, a strategy to reduce costs by
rationalising its production structure globally in order to mitigate possible negative effects on the Group's
performance from reduced sales and shrinking margins.
Risks associated with dependence on key customers
In the SURF business, the Prysmian Group has a significant business relationship with Petrobras, a Brazilian
oil company, for the supply of umbilical cables and flexible pipes, developed and manufactured at the factory
in Vila Velha, Brazil. A possible decline in demand for umbilical cables by Petrobras, in view of the country's
current economic difficulties, could in the short to medium term have an impact on the sustainability, even in
part, of the business in Brazil.
While committed to maintaining and strengthening its business relationship with this customer over time, the
Group has initiated a progressive diversification of its customer portfolio, including by opening up to the
export market.
Risk of instability in the Group's countries of operation
The Prysmian Group operates and has production facilities and/or companies in Asia, Latin America, the
Middle East and Eastern Europe. The Group's operations in these countries are exposed to different risks
linked to local regulatory and legal systems, the imposition of tariffs or taxes, exchange rate volatility, and
political and economic instability that affects the ability of business and financial partners to meet their
obligations.
Significant changes in the macroeconomic, political, tax or legislative environment of such countries could
have an adverse impact on the Group's business, results of operations and financial condition.