Prysmian S.p.A., 2009 results

Profitability target achieved: ADJ EBITDA euro 403 Million
Sales trend stabilisation in second half
Margins stable: ADJ EBITDA 10.8% of sales (10.5% in 2008)
High cash generation confirmed

• Sales: euro 3,731 million (organic change -17.4%) 
• ADJ EBITDA : euro 403 million (euro 542 million in 2008; -25.6%) 
• ADJ OPERATING INCOME : euro 334 million (euro 477 million in 2008; - 30.1%) 
• NET PROFIT: euro 252 million (euro 235 million in 2008; +7.5%) 
• ADJ NET PROFIT : euro 206 million (euro 332 million in 2008; -37.9%) 
• FREE CASH FLOW : euro 183 million. 
• Net Financial Position improved to euro 474 million from euro 577 million in 2008

Dividend confirmed at euro 0.417 per share for a total pay-out of euro 74 million

The Board of Directors of Prysmian S.p.A. has approved today the Company's consolidated financial statements and separate financial statements for 2009 .

"During 2009 Prysmian kept a prudent management approach while continuing to develop effective growth strategies at the same time," explains CEO Valerio Battista. “We are particularly proud of having achieved the initial Group profitability target even in a still weak market environment. Furthermore, thanks to the strategy developed - continues Battista - we have been able to strengthen the Group's financial solidity, with a significant improvement in our net financial position. Looking ahead, we believe that the investments in high-tech businesses, combined with the acquisitions made in high-growth markets like India, Russia and the Middle East, will allow us to fully benefit from future market recovery."


FINANCIAL RESULTS

Sales amounted to Euro 3,731 million with a negative organic change of 17.4%, net of metal price and exchange rate effects and changes in the group perimeter.

Adjusted EBITDA amounted to Euro 403 million (-25.6% on 2008), achieving the target originally announced to the market, with the margin on sales rising to 10.8% from 10.5% at the end of 2008. This improvement in margin is attributable to the greater weight of high value-added businesses, which accounted for approximately 65% of adjusted EBITDA (approximately 50% in 2008), and to the reduction in fixed costs.

EBITDA amounted to Euro 366 million, down 29.3% from Euro 518 million in 2008, with a margin on sales of 9.8% versus 10.1% in the previous year.

Operating income , including the positive impact of Euro 91 million from the change in the fair value of metal derivatives compared with a negative impact of Euro 68 million in the prior year, was Euro 386 million compared with Euro 380 million in 2008 (+1.6%). Adjusted operating income was Euro 334 million, down 30.1% from Euro 477 million in 2008 and representing a margin on sales of 9.0%, down from 9.3%.

Net finance costs improved by Euro 45 million, going to a negative Euro 52 million from a negative Euro 97 million in 2008. The decrease in finance costs reflects lower borrowing costs, a reduction in net debt and a decline in net negative exchange differences to Euro 1 million from negative Euro 32 million in 2008.

Net profit amounted to Euro 252 million, reporting a 7.5% increase from Euro 235 million in 2008 and a 6.8% margin on sales (4.6% in 2008). Adjusted net profit came to Euro 206 million compared with Euro 332 million in 2008 (-37.9%), with a 5.5% margin on sales (6.5% in 2008).

Free cash flow (levered) came to Euro 183 million (Euro 320 million in 2008) after Euro 106 million in operating investments, confirming the Group's strong cash generation even in a difficult year like 2009.

At the end of 2009, Net financial position improved to Euro 474 million from Euro 577 million at the end of 2008, with a NFP/Adjusted EBITDA ratio of 1.2x.


FOCUS ON COST REDUCTION AND INDUSTRIAL/ORGANISATIONAL EFFICIENCIES

• Reduction of Euro 39 million in fixed costs (-9% vs 2008)
The Prysmian Group reported Euro 388 million in fixed costs at the end of 2009, a reduction of Euro 39 million on 2008. Cost reduction was mainly achieved through improvement of plant productivity, rationalization of organisational structure and reduction of operational costs.

• Continuous generation of industrial efficiencies
The Group recorded around Euro 21 million in industrial efficiencies in 2009, achieved by paying constant attention to the efficiency of materials, by optimising logistics and production costs and by developing innovative production processes. Average annual industrial efficiencies amounted to Euro 24 million in the period 2004-2008.

FOCUS ON INVESTMENTS IN STRATEGIC BUSINESSES AND M&A

• Investments for Euro 63 million in high-tech businesses
The Group invested Euro 63 million (Euro 57 million in 2008) in developing its high-tech businesses. In the high voltage business, a new manufacturing facility was opened in the USA while in China the project to modernise and expand the Baojing plant was launched. Investments were also made in cables for renewable energy, particularly those used by offshore wind farms. Lastly, activities continued to build up the new flexible pipes plant in Brazil for offshore oil drilling industry.

• Acquisitions in Russia, India and the Middle East
In December 2009 the Group completed the acquisition of Rybinsk Elektrokabel in Russia, while in January 2010 it completed the acquisition of a majority stake in Ravin Cables with operations in India and the Middle East. These acquisitions are in line with the Group’s strategy to expand activities in high-growth countries and lay a base to upgrade and complete the product range in these countries.

PERFORMANCE AND RESULTS ENERGY CABLES AND SYSTEMS

• SIGNIFICANT GROWTH FOR SUBMARINE CABLES; RECOVERY IN NEW HIGH VOLTAGE CABLE PROJECTS
• DEMAND STILL WEAK FOR POWER DISTRIBUTION AND TRADE & INSTALLERS, WITH SALES TREND STABILISATION IN SECOND-HALF
• SIGNS OF UPTURN IN OGP DEMAND; STEADY GROWTH IN RENEWABLES
• TOUGH MARKET FOR SHIPPING AND CRANE CABLES

Sales to third parties by the Energy Cables and Systems business amounted to Euro 3,328 million, posting an organic decrease of 17.0%. Profitability improved. Adjusted EBITDA amounted to Euro 372 million (Euro 493 million in 2008), with margin on sales rising to 11.1% from 10.6% in 2008. Adjusted operating income came to Euro 309 million (Euro 435 million in 2008), with margin on sales basically stable at 9.3% from 9.4% in 2008.

Utilities
Sales to third parties by the Utilities business amounted to Euro 1,598 million, reporting an organic decrease of 13.9%. The higher value-added segment of power transmission accounted for 55% of total sales, with an order book of approximately Euro 900 million at the end of 2009 (approximately one year sales). In terms of profitability, adjusted operating margin on sales reported a significant improvement, rising to 14.7% from 12.6% in 2008, with a sharp acceleration in the fourth quarter (16.2%) thanks to strong submarine cable performance.

Prysmian confirmed its worldwide leadership in the submarine energy cables and systems segment, achieving a positive organic growth of around 10%. The Group is developing several major projects like SAPEI in Italy, GCCIA in Bahrain, Transbay in the USA, Cometa in Spain and Doha Bay in Qatar, and at the end of 2009 was awarded a new contract of Euro 300 million to develop the new Sicily-Italian mainland submarine transmission system, one of the world's biggest projects of this kind. New projects were also acquired in the fast expanding sector of renewable energy: in 2009 new contracts to supply cables to the Ormonde and Walney offshore wind farms were secured, in addition to projects currently under execution like Greater Gabbard and Thanet, among the largest in the world. At the end of 2009 the order book for submarine cables covered production capacity for the two subsequent years.

Demand for high voltage underground cables showed signs of recovery in the second half of the year and the larger utilities restarted work on new projects that had been suspended during the crisis. The order book provides sales visibility for the first part of the year. The acquisitions in Russia and India will allow the Group to further consolidate its world leadership in this sector.

Volumes in the power distribution segment reported a general stabilisation in the second half of the year. Prysmian faced the persistent weakness in demand by continuing to focus on innovation, with its revolutionary, high performance P-Laser cable which reached the final stage of industrialisation and marketing: contracts were signed with major utilities and the first 1,000 km of cable were delivered.

Trade & Installers
Sales to third parties by the Trade & Installers business amounted to Euro 1,020 million, posting an organic decrease of 21.5%. Despite continued sector weakness, the second-half organic change in sales, although still negative relative to the prior year, was considerably better than in the first half of the year. Volumes also showed signs of recovery in the second half, particularly in countries like Turkey, South America and Germany, while countries like Spain and Great Britain continued to be depressed. Prysmian sought to limit the decline in sales volumes as far as possible by selectively acting on the product portfolio, particularly through increased penetration of higher value-added products: sales of LSOH/Afumex fire-resistant cables rose to around 14% of the total. Adjusted operating margin on sales went to 2.5% from 6.1% in 2008.

Industrial
Sales to third parties by the Industrial cables business amounted to Euro 628 million, reporting an organic decrease of 16.1% although with an improving trend in the fourth quarter. Orders in the Oil & Gas segment recovered in the second half after a weak first part of the year, while the renewable energy sector confirmed a steady upward trend. Small but positive signs of improvement were also seen in the second half of the year in the automotive segment. Adjusted operating margin on sales was 7.3% from 9.4% in 2008.

PERFORMANCE AND RESULTS TELECOM CABLES AND SYSTEMS

• DEMAND RECOVERY IN SECOND-HALF FOR OPTICAL CABLES
• INCREASED PRESENCE WITH LARGE INCUMBENT IN CHINA AND USA
• GROWTH OF THE BROADBAND AND FIBRE TO THE HOME APPLICATIONS

Sales to third parties by the Telecom Cables and Systems business amounted to Euro 403 million, reporting an organic decrease of 20.7% on 2008. The reduction was primarily attributable to the copper cables segment, while the optical cables showed signs of volumes recovery in the second-half, particularly in the growing Chinese market, where Prysmian signed important contracts with the largest local telecom operators, and in the USA, where Prysmian increased its presence with large incumbents. Adjusted operating income came to Euro 25 million compared with Euro 45 million in 2008, with the margin on sales decreasing to 6.1% from 8.4% of sales.

The FTTx segment proved fairly lively in 2009, particularly thanks to investments by alternative operators. Prysmian has entered an important agreement with Cabelte Cabos Electricos e Telefonicos S.A., a Portuguese company, to develop and sell FTTx solutions in Portugal, Angola and Mozambique.

Telecom
PERFORMANCE AND RESULTS BY GEOGRAPHICAL AREA

The Group's sales in EMEA (Europe, Middle East and Africa) reported an organic decrease of 15.0%, mainly due to lower volumes in the Trade & Installers, Power Distribution and Telecom businesses. The downward trend in sales showed signs of stabilization in the last quarter, even if not strong enough to mark a real trend of recovery. EMEA accounted for 70.6% of total sales in the year.
Sales in North America posted an organic decrease of 40.3%, principally due to the drop in Power Distribution sales, and accounted for 9.4% of the Group's total sales in the year.
Latin America posted an organic decrease in sales of 13.4%, primarily attributable to the Trade & Installers segment, while sales volumes in the OGP cables segment showed signs of improvement in the second half of the year. The region accounted for 9.8% of total sales in 2009.
Asia Pacific reported an organic decrease in sales of 9.7%. This contraction mainly concerned the Power Distribution segment in the Southeast Asia markets (Malaysia and Indonesia). High voltage sales increased in China. Asia Pacific accounted for 10.2% of total sales in 2009.

BUSINESS OUTLOOK

The economic context in 2009 confirmed the weakness already experienced during the previous year and which became considerably worse from September 2008 due to the crisis affecting certain international financial institutions. Following intervention by national governments and central banks, the fall in demand and in industrial output stabilised in the second part of 2009 at record lows for recent years.
Given this economic scenario, in 2010 the Group expects demand stabilization, at the minimum levels reached in 2009, for the Trade & Installers and Power Distribution businesses and for certain products in the Industrial segment more exposed to cyclical trends, with a possible gradual recovery towards the end of the year. While orders for power transmission projects and for optical fibre cables are expected to recover during the year.
The Group also continues to rationalise and improve efficiency in its industrial footprint and to optimise its cost structure, while confirming its investment plans already started in the high value-added businesses to further strengthen its presence in the most profitable, high-growth segments.

FURTHER RESOLUTIONS BY THE BOARD OF DIRECTORS

The Board of Directors gave management the authority to be able to go ahead, depending on market conditions - with the issue in 2010 and in several individual stages if necessary - of a bond reserved for institutional investors. The bond issue has the purpose of diversifying the Company's sources of financing and lengthening the average maturity of its debt. The Board of Directors has approved the issue for up to a maximum nominal amount of Euro 400 million, and set the maximum term for individual issues at 7 years. The bonds will be quoted on the Luxembourg Stock Exchange and/or another regulated or unregulated market other than Luxembourg. The final terms and pricing of the individual issues will be set according to existing market conditions and published accordingly.

Directors independence
Based on statements made by the directors, the Board of Directors reports that it has reviewed their independence requirements, in accordance with the Self-Regulatory Code for listed companies, and confirms that the directors Wesley Clark, Fabio Labruna, Giulio Del Ninno and Udo Günter Werner Stark continue to satisfy these requirements.

Calling of shareholders' meeting
The Board of Directors has given the Chairman and the CEO several authority to perform all the formalities required to call the Shareholders' Meeting on 13 April 2010 (first call in ordinary session and extraordinary session) or 14 April 2010 (second call in extraordinary session) or 15 April 2010 (third call in extraordinary session and second call in ordinary session).
Based on the results for 2009, the Board of Directors will recommend to the forthcoming Shareholders’ Meeting that a dividend of Euro 0.417 per share be declared, with a total pay-out of Euro 74 million.
If approved, the dividend will be paid out from 22 April 2010 to those shares outstanding on the ex-div date of 19 April 2010.

Amendment of the stock option incentive plan and amendment of the by-laws
Having heard the favourable opinion of the Compensation and Nominations Committee, the Board of Directors has resolved to adopt an amendment to the incentive plan approved by the Shareholders' Meeting on 30 November 2006. This amendment - which will be submitted for the approval of the forthcoming Shareholders’ Meeting in accordance with art. 114-bis of Legislative Decree 58/98 - will introduce new four option exercise periods, solely for beneficiaries still in the Group's employment. If approved by the shareholders, this amendment will make vested but unexercised options and options that will vest in future, exercisable until the thirtieth day after publicly announcing the approval of the Company's separate financial statements for the year ended 31 December 2012. All the other terms of the plan remain the same.
The proposed amendment of the incentive plan will be accompanied by a proposal to extend the term of the capital increase by Prysmian S.p.A. relating to this plan, involving a consequent revision of article 6 of the Company's by-laws.
The information memorandum relating to the plan and report on the amendments to the by-laws will be published within the required deadline.

Change in financial calendar for 2010
By way of partial amendment to the financial calendar published on 20 January 2010, the meeting of the Board of Directors to approve the interim management statement at 31 March 2010 has been moved from 6 May 2010 to 13 May 2010. The dates of all the other corporate events in 2010 remain the same.

The Annual Report at 31 December 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.
This Press Release is not an offer for the purchase of bonds in the United States. The bonds have not, and will not, be registered as per the United States Securities Act of 1933, as modified ("Securities Act"), or in the terms of any financial regulation in any of the states of the United States, or on behalf or to the benefit of a "U.S. person", as per the definition given by Regulation S of the Securities Act, unless within the limits of applicable exceptions, i.e., an operation not subject to registration requirements under the Securities Act.
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