Italy: Prysmian Publishes 2011 Anual Report

The Board of Directors of Prysmian S.p.A. has approved today the Company’s consolidated financial statements and separate financial statements for 2011 .

 ” Technological innovation and production flexibility have enabled the Group to achieve more than satisfactory results even in a market where signs of recovery are still weak – comments CEO Valerio Battista. Financial year 2011 has closed with a marked organic growth in sales. Profitability has also continued to improve, with Adjusted EBITDA coming in at the top end of the target range announced to the market. The strong cash generation and the clear improvement in our key indicators – for example, net debt just above €1 billion which is less than two times Adjusted Ebitda – allowed us to enter the current year with a solid balance sheet. Lastly, the integration with Draka has been conducted quickly and efficiently, letting us realise significant synergies in the year just ended”.

Sales amounted to €7,583 million compared with €4,571 million in 2010. Assuming the same group perimeter (excluding the Draka contribution of €2,220 million for the period March-December 2011, net of €59 million in intragroup transactions) and excluding metal price and exchange rate effects, the organic change was +11.2%. Draka’s sales for full year 2011 came to €2,669 million, reporting organic growth of +4.2%. Full year organic growth for the new Prysmian Group (including Draka for the entire period) would have been 8.8%.

Adjusted EBITDA amounted to €568 million, up 46.8% from €387 million in 2010, coming in at the top end of the target range announced to the market in May 2011. This increase is attributable to €32 million from organic sales growth by all businesses within the Prysmian perimeter and €149 million from the consolidation of Draka since March 2011.

EBITDA amounted to €269 million. The decrease from €365 million in 2010 is fully attributable to net non-recurring charges of €299 million, of which €205 million in provisions for risks arising from ongoing antitrust investigations and €56 million in restructuring costs mostly related to the start of integration with Draka.

Adjusted operating income was €426 million, up 37.8% from €309 million in 2010. This increase is attributable to €33 million in higher profits generated by organic growth in the Prysmian perimeter and €84 million from the consolidation of Draka since March 2011 (net of consolidation adjustments).

Operating income, including the effects of non-recurring items, fair value changes in metal derivatives and in other fair value items and asset impairment, was a positive €19 million (positive €307 million in 2010). The decrease is entirely attributable to the negative impact of non-recurring charges and negative fair value changes in metal derivatives.

Net finance income and costs reported a negative balance of €129 million (negative €96 million in 2010). The negative change of €33 million is primarily due to the growth in net debt following the Draka acquisition (€501 million cash outlay plus €357 million for the consolidation of Draka’s net financial position at 28 February 2011), but also reflects changes in the composition of financial structure, which has been strengthened after entering a Forward Start Credit Agreement for €1,070 million in January 2010, issuing a bond for €400 million in April 2010 and finalising a credit agreement for €800 million in March 2011. These new agreements have significantly extended average debt maturity to now about 3 years.

Adjusted net profit was 33.5% higher at €231 million (€173 million in 2010); the increase reflects the growth in adjusted operating income and the first-time consolidation of Draka.

The Net result was a loss of Euro 145 million, compared with a profit of Euro 150 million the previous year, reflecting the negative impact of Euro 376 million in non-recurring and extraordinary charges (of which Euro 205 million to provide against risks related to ongoing antitrust investigations).

Net financial position at the end of December 2011 was €1,064 million. The increase from €459 million at 31 December 2010 is attributable to the following factors:

– cash outlay of €501 million for the acquisition of Draka;

– consolidation of the Draka net financial position of €357 million as at 28 February 2011;

– net positive cash flows from operations of €481 million, before changes in net working capital;

– reduction of €183 million in net working capital due to actions taken in the period to improve efficiency;

– net operating investments of €145 million;

– payment of €37 million in dividends;

– net negative cash flows of €229 million primarily due to taxes and finance costs.

 ENERGY CABLES AND SYSTEMS PERFORMANCE AND RESULTS

• POWER TRANSMISSION ORDER BOOK CLIMBS TO €2.3 BILLION

• POSITIVE DEMAND FOR HIGH VOLTAGE UNDERGROUND CABLES THANKS TO RENEWABLES

• GROWTH IN POWER DISTRIBUTION VOLUMES

• T&I VOLUMES STABLE

• INDUSTRIAL: HIGHER SALES AND PROFITS. EXCELLENT PERFORMANCE IN OFFSHORE OGP

Sales to third parties by the Energy Cables and Systems segment amounted to €6,268 million (including the Draka contribution of €1,439 million for the period March-December 2011, net of €45 million in intragroup transactions). Net of metal price and exchange rate effects and changes in the group perimeter, organic growth was +10.5%, with a particularly positive performance by the Utilities business. Adjusted EBITDA amounted to €447 million, up 27.4% from €351 million in 2010. The increase reflects the contribution of €74 million by Draka (consolidated since March 2011) and an improvement of €22 million by the pre-acquisition perimeter.

Draka’s Energy business reported €1,758 million in sales to third parties for the entire period (January-December 2011), with organic growth of 1.9%. The Energy segment’s overall twelve-month organic growth (consolidating the Draka perimeter for the entire period) would have been +8.1%.

The market trends and results of the Energy segment’s different business areas are presented below but only with reference to the pre-acquisition perimeter (accompanied by a few brief comments about the Draka perimeter).

 Utilities

Sales to third parties by the pre-acquisition Utilities business amounted to €2,160 million, delivering organic growth of +17.0% thanks to volume recovery by nearly all business lines even if with differences in timing and between geographical areas. Organic sales growth was positively reflected in profitability, with Adjusted EBITDA increasing by 2.5% to €250 million, despite the rising cost of raw materials and the competitive pressure particularly in emerging markets.

The Draka Utilities business reported €116 million in sales in 2011 (of which €101 million consolidated by Prysmian as from March 2011). The overall twelve-month organic growth of the Utilities business (consolidating the Draka perimeter for the entire period) would have been +17.8%.

Sales by the submarine business line increased thanks not only to progress on the major power interconnection projects acquired by the Group (particularly, Romulo in the Iberian Peninsula/Balearic Islands, Messina II in Italy, Doha Bay in Qatar and Hudson in the USA) but also to the contribution of smaller jobs carried out in Europe particularly in the fourth quarter. A significant number of contracts for offshore wind farm connections were won during the year. This is a market presenting significant opportunities for additional growth and in which the Group has further strengthened its product and technology offering thanks to integration with Draka, which specialises in interarray connections between wind farm turbines. Including the Western Link project for a submarine connection between England and Scotland acquired at the start of 2012, the order book provides sales visibility for over three years. With the objective of continuing to benefit from steady projected growth in this sector, the Group has carried on investing in new manufacturing capacity by starting up submarine cable production at the Pikkala plant in Finland and by planning about a 25% increase in capacity at the Arco Felice plant in Italy.

Sales performance by high voltage underground cables benefited from the recovery in demand, particularly coming from renewable energy projects and/or energy saving projects involving existing European grids (Italy, Great Britain and France) and from projects to develop new infrastructure in emerging markets like Russia, Turkey, the Middle East, Brazil and India. With the goal of boosting market share in Asia Pacific and the Middle East, the Group has invested in new manufacturing capacity for extra-high voltage cables in China. The order book provides sales visibility for about one year.

The Power Distribution business enjoyed strong growth throughout the year, particularly in Asia Pacific and South America. Demand in Europe was primarily driven by Nordic countries, Eastern Europe and Italy, while remaining stable in the rest of Southern Europe. Of particular note is the market success of the new P-Laser technology introduced in Holland after Italy. Brazil and Australia led the recovery outside Europe, while despite weak demand, the USA showed signs of improving profitability. On the whole, margins remained low despite the upswing in volumes.

BUSINESS OUTLOOK

The macroeconomic environment in the first half of 2011 confirmed the initial signs of recovery already seen in 2010, albeit with very low growth rates and still at levels well below those before the 2008 financial crisis. However, the second half of the year began to be affected by growing concerns about Eurozone and US debt sustainability, leading to a sharp deterioration in consumer confidence and a gradual slowing of industrial output and demand.

In such an economic context, the Group expects that 2012 will see generally stable demand for medium voltage cables for Utilities, for building wires and for those products in the Industrial sector most exposed to cyclical trends. Instead, positive developments in demand are confirmed for the high value-added businesses of power transmission, renewable energy, offshore Oil&Gas and fibre optic cables for major telecom operators. Lastly, the Prysmian Group will carry on during 2012 to integrate the activities of Draka in order to optimise and rationalise the new Group’s organisational and production structure with the goal of further strengthening its presence in all areas of business and of achieving the projected cost synergies.

[mappress]

Offshore WIND staff, March 08, 2012; Image: prysmian