Prysmian S.p.A., first nine months 2009

First signs of market stabilisation in 3rd quarter
Improvement in organic sales change (-16% in 3rd quarter; -18.3% in previous six months)
margins stable: adj ebitda 10.7% of sales in 3rd quarter (10.5% in previous six months)

FY2009 Profit targets confirmed: Adj Ebitda expected IN THE RANGE OF euro 400 million (+/- 5%)

• sales: euro 2,777 million (euro 3,954 million in first nine months 2008)
• organic growth -17.5%
• Adj ebitda : euro 292 million (euro 428 million in first nine months 2008; -31.8%)
• Adj operating income : euro 242 million (euro 381 million in first nine months 2008; -34.9%) 
• net profit: euro 204 million (euro 233 million in first nine months 2008; -12.1%) 
• net financial position improved to euro 629 million from euro 746 million at 30 september 2008 

The Board of Directors of Prysmian S.p.A., a worldwide leading group in the industry of cables and systems for energy and telecommunications, has approved today the consolidated results for the first nine months of 2009 (which are not subject to audit).

The market scenario remained generally weak in the third quarter, although the signs of stabilisation and recovery already recorded in the second quarter were confirmed. In fact, the Prysmian Group's results reported an improvement in organic sales change: the third-quarter organic decrease was -16.0% on the third quarter of 2008 compared with -18.3% recorded in the first half of the year. Margins also remained stable, with adjusted EBITDA at 10.7% of third-quarter sales, confirming the 10.5% achieved at the end of June 2009. Nine-month organic decrease (net of changes in metal price, exchange rate and group perimeter) was -17.5%, with Sales of Euro 2,777 million.

In the strategic businesses of high voltage power transmission cables, the third quarter confirmed the recovery in the orders intake already seen in the second quarter, with Prysmian winning an interesting contract at the beginning of August to supply cable connections for the Ormonde offshore wind farm in the Irish Sea. At 30 September 2009 the Group’s orders backlog covered submarine cables production capacity for the whole of 2010 and most of the first half of 2010 for high voltage underground cables. After a steady reduction in sales from mid 2008, the Power Distribution segment confirmed the slight recovery already seen in the second quarter. The Trade & Installers business also showed signs of stabilization, with third-quarter volumes rising 1% on the second quarter despite unfavourable seasonality.

" Despite continued market weakness – explains CEO Valerio Battista - the Group's results in the third quarter confirmed our ability to maintain profit margins and generate strong cash flow and profits. Our focus on high-tech businesses and on efficient industrial and manufacturing processes are core elements of the strategy adopted against the crisis from the very start and will allow us to benefit from any signs of recovery thanks to our even stronger competitive positioning. At third-quarter end we are able to confirm our initial target for Adjusted EBITDA in the range of Euro 400 million for the full year 2009".

Adjusted EBITDA amounted to Euro 292 million in the first nine months of 2009, down 31.8% from Euro 428 million in the corresponding period of 2008. The margin on sales was basically stable at 10.5%, down from 10.8% in the first nine months of 2008. The third-quarter margin reported a slight improvement compared to the previous six months, achieving a 10.7% from the 10.5% in the first half.

EBITDA amounted to Euro 271 million in the first nine months of 2009, compared with Euro 414 million in the corresponding period of 2008, reporting a reduction of 34.4%. The margin on sales was 9.8%, compared with 10.5% in the first nine months of 2008.

Adjusted operating income was Euro 242 million, 34.9% lower than the figure of Euro 381 million reported in the corresponding period of 2008 and representing a margin on sales of 8.7%, down from 9.6%. Operating income amounted to Euro 309 million, compared with Euro 357 million in the first nine months of 2008, posting a decrease of 13.4%.

Net finance costs improved by Euro 35 million in the first nine months of 2009, decreasing to a negative Euro 31 million from a negative Euro 66 million in the corresponding period of 2008. The decrease in finance costs reflects lower borrowing costs, a reduction in average net debt over the period and net positive exchange rate differences.

Net profit amounted to Euro 204 million, reporting a 12.1% decrease from Euro 233 million in the first nine months of 2008 and a 7.4% margin on sales. Adjusted net profit, before Euro 59 million in non-recurring income (mainly attributable to changes in the fair value of metal derivatives), came to Euro 145 million, down 45.2% from Euro 265 million in the corresponding period of 2008.

Cash flow from operations (before changes in net working capital) amounted to Euro 252 million in the first nine months of 2009, confirming the Group's strong cash generation, and compares with the record result of Euro 417 million in the corresponding period of 2008. Free cash flow (before dividends) generated in the first nine months of 2009 was Euro 22 million compared with Euro 96 million in the corresponding period of 2008, discounting also an increase in operating investments on the first nine months of 2008 due to the construction of a new high voltage plant in the USA and a new plant in Brazil to produce flexible pipes for the oil extraction industry. Free cash flow generated over the past twelve months (October 2008 – September 2009) was Euro 246 million.

At the end of September 2009, Net financial position amounted to Euro 629 million, improving from Euro 746 million at 30 September 2008. In the period October 2008 - September 2009 the Group paid Euro 75 million in dividends (April 2009) and bought Euro 30 million of treasury shares (fourth quarter 2008).


BUSINESS PERFORMANCE AND RESULTS

Energy Cables and Systems
Sales to third parties amounted to Euro 2,465 million in the first nine months of 2009, posting an organic decrease of 17.0% and marking a slight improvement compared to the first-half organic decrease of 17.6%. Adjusted operating income was Euro 222 million, down from Euro 344 million in the first nine months of 2008, with the margin on sales at 8.9%, down from 9.7%.

Utilities
Sales to third parties amounted to Euro 1,191 million in the first nine months of 2009, reporting an organic decrease of 12.6%, with a slight improvement compared to the first-half organic decrease of 13.1%. The third quarter saw signs of improvement also in the Power Distribution segment, with volumes stabilising in Europe; in South America, Prysmian took part in grid modernisation projects by South American utilities such as Edenor and Cemig. The high value-added segment of high voltage cables and systems (Power Transmission) recorded the first signs of a recovery in projects commissioned by the major utilities after a sharp slowdown between the end of 2008 and start of 2009. Lastly, submarine cables sales displayed positive organic growth thanks to the work in progress on numerous projects like SAPEI in Italy, GCCIA in Bahrain, Greater Gabbard in Great Britain, Cometa in Spain and Doha Bay in Qatar. Profitability improved considerably, with adjusted operating margin on sales climbing to 16.2% from 14.4% in the corresponding period of 2008, partly thanks to better product mix and actions to reduce costs.

Trade & Installers
Sales to third parties amounted to Euro 754 million in the first nine months of 2009. Despite continued sector weakness, sales in the third-quarter recorded a slight improvement in organic change (-20.2%) compared to the first half of the year (-25.0%). Moreover, volumes in the third quarter slightly increased on the second quarter 2009 (+1%). Prysmian has sought to limit the decline in sales volumes as far as possible by selectively acting on the product portfolio, particularly through increased penetration of high value-added products: sales of LSOH/Afumex fire-resistant cables have risen to 14.0% (on total sales) from 12.0% in the first nine months of 2008. Adjusted operating margin on sales went down to 2.9% from 6.9% in the corresponding period of 2008; the erosion in volumes and margins partially stabilised in the third quarter with few countries reporting small increase in volume.

Industrial
Sales to third parties amounted to Euro 458 million in the first nine months of 2009, reporting an organic decrease of 15.3%. Third-quarter sales and volumes did not show significant signs of recovery, although margins confirmed a positive trend. The recovery in oil prices could be an important driver of an upturn in exploration investments by the major oil companies. Small but positive signs of improvement were also seen in the automotive and branchement segments. Adjusted operating margin on sales was 6.2% in the first nine months of 2009, down from 8.9% in the corresponding period of 2008 but reporting an improvement in the third quarter (6.5%) on the second quarter (4.2%).

Telecom Cables and Systems
Sales to third parties amounted to Euro 312 million. The organic change in sales reported a major improvement in the third quarter to -16.1% from -24.1% recorded in the previous six months. The organic change for the nine-month period is a negative 21.5%. Adjusted operating income came to Euro 20 million, 49.4% down from Euro 39 million in the corresponding period of 2008, with the margin decreasing from 8.9% to 6.4% of sales.

Prysmian further increased volumes of optical cables in the third quarter compared to the second quarter, mainly thanks to the rising demand in emerging markets. In particular, the Group increased its market share in China also entering new clients, including some of the main local operators. In Europe, the FTTx developed was largely attributable to investments by alternative operators.

The Group's sales in EMEA (Europe, Middle East and Africa) reported an organic decrease of 15.6% in the first nine months of 2009, mainly due to lower volumes in the Trade & Installers, Power Distribution and Telecom businesses. EMEA accounted for 70.2% of total sales in the period.
Sales in North America posted an organic decrease of 42.7%, representing 9.7% of the Group's total sales in the period.
Latin America posted an organic decline in sales of 8.7%, particularly because of lower volumes in the Trade & Installers business, while sales volumes were higher in the OG&P segment. The region accounted for around 9.7% of total sales in the first nine months of 2009.
Asia Pacific reported an organic decrease in sales of 8.3%. This contraction mainly concerned the Power Distribution segment in South-East Asia, particularly in Malaysia and Indonesia. Asia Pacific accounted for 10.4% of total sales in the first nine months of 2009.


BUSINESS OUTLOOK
As already evident in the second half of 2008, the first nine months of this year confirmed the current weakness in the world economy, which is expected to continue in the fourth quarter of 2009. Given this economic scenario, the Group expects to see continued weak demand in the last part of the year in the Trade & Installers and Power Distribution businesses and for certain products in the Industrial segment more exposed to cyclical trends, although stabilizing compared to the first two quarters of 2009, and a more resilient demand for power transmission cables and for certain applications in the industrial segment such as OGP and renewable energy.
Based on the results achieved in the first nine months, which were in line with internal forecasts, combined with the full order book in the higher value-added businesses and the actions already taken to restructure and reduce costs, FY 2009 adjusted EBITDA can be confirmed in the range of Euro 400 million with a fluctuation margin of plus/minus 5% (FY 2008: Euro 542 million). This fluctuation margin, which has been reduced to 5% from the previous guidance of 10%, is related to the development of the reference markets in the fourth-quarter of the year.
The Group also continues to rationalise and improve efficiency in its industrial footprint, while confirming its investment plans in higher value-added businesses to strengthen its presence in the most profitable, high-growth segments.


ANTITRUST
During the third quarter, the company has been made aware that the Australian antitrust authority commenced a legal proceeding aimed at assessing commercial practices in the submarine or underground high voltage cable market and that, at the beginning of November, the New Zealand antitrust authority commenced an investigation aimed as well at assessing commercial practices in the submarine or underground high voltage cable market.

Accordingly, there are to date five authorities (European, United States, Japanese, Australian and New Zealand) which are known to be investigating on the above mentioned subject. The company continues to cooperate with them and to provide also the information requested.

In the event of proven breach of the relevant legislation, the financial penalties imposed by the competent authorities could be significant in relation to the economical and financial situation of the Group. It is reminded that, among others, the sanction system under the European law provides financial penalties that could reach a maximum of 10% of the turnover.


The Third-Quarter Report 2009 will be filed at the Company's registered offices in Viale Sarca 222, Milan, and with Borsa Italiana S.p.A. in compliance with relevant regulations. It will also be available on the corporate website at www.prysmian.com.

This document may contain forward-looking statements relating to future events and operating, economic and financial results of the Prysmian Group. By their nature, forward-looking statements involve risk and uncertainty because they depend on the occurrence of future events and circumstances. Therefore, actual future results may differ materially from what is expressed in forward-looking statements as a result of a variety of factors.

Mr. Pier Francesco Facchini, manager responsible for preparing corporate accounting documents, hereby declares, pursuant to par. 2 art. 154-bis of Italy's Unified Financial Act, that the accounting information contained in this press release corresponds to the underlying documents, accounting books and records.