PRYSMIAN S.P.A. FY 2012 RESULTS

PRYSMIAN S.P.A. FY 2012 RESULTS

FURTHER GROWTH IN PROFITABILITY
POSITIVE CASH GENERATION AND IMPROVEMENT IN NET FINANCIAL POSITION
POWER TRANSMISSION SUPPORTS GROUP SALES

ALL TARGETS FULLY ACHIEVED DESPITE TOUGH MARKET

DRAKA INTEGRATION: 2012 SYNERGIES HIGHER THAN EXPECTED AT €65M
DIVIDEND DOUBLED TO €0.420 PER SHARE (€0.210 in 2011)

• SALES: €7,848 MILLION (€7,973 MILLION IN 2011**; ORGANIC CHANGE -1.8%)
• ADJ EBITDA1: €647 MILLION (€586 MILLION IN 2011**; +10.4%)
• ADJ OPERATING INCOME2: €483 MILLION (€435 MILLION IN 2011**; +11.1%)
• ADJ NET INCOME3: €282 MILLION (€231 MILLION IN 2011*; +22.1%)
• NET FINANCIAL POSITION €918 MILLION VS €1,064 MILLION AL 31 DECEMBER 2011

 The Board of Directors of Prysmian S.p.A. has approved today the Company's consolidated financial statements and separate financial statements for 20121.

"Improvement in profitability and positive cash generation. These are the principal drivers of our Group's 2012 financial statements," comments CEO Valerio Battista. "In a difficult market, particularly in Europe, Prysmian has achieved a positive performance in operating earnings mostly in its high value-added businesses. This result, combined with synergies from the integration with Draka achieved faster than expected, has allowed us to fully reach the targets announced to the market. To further strengthen our public company model, we are proposing to the Shareholders' Meeting the introduction of an Employee Stock Ownership Plan addressed to all our employees in order to increase their commitment to the Group and share future business success."

Financial results

Group Sales amounted to €7,848 million compared with the 2011 pro-forma figure of €7,973 million. Assuming the same group perimeter and excluding metal price and exchange rate effects, the organic change was -1.8%. The Group's higher geographic diversification and exposure to high-technology businesses, more resilient to economic cycles, allowed to limit the effects of the continued market difficulties, particularly in Europe, in the power distribution and building wires markets. The Group achieved double-digit growth for large submarine, interconnection and offshore wind farm projects. Some industrial cable applications, such as offshore Oil&Gas and elevator cables, also performed well. Optical telecom cables were affected by a slowdown in the fourth quarter, mainly due to the suspension of incentives in North and South America. Sales trend by geography showed a recovery in North America and a good performance in Northern Europe. On the whole, the South American market held up well while Asia Pacific reported mixed trends in different regions.

Group Adjusted EBITDA increased to €647 million, up 10.4% from the 2011 pro-forma figure of €586 million (with the margin also improving to 8.2% on sales versus 7.3% in 2011). Despite the still negative environment, particularly in the second semester, the Group has achieved the Adjusted EBITDA target initially announced to the market in the range €600-€650 million. In terms of profitability, Submarine Cables and Systems and Industrial Cables (within the Energy Sector) and the entire Telecom Business reported an overall positive performance.
The contribution from Draka integration was important, allowing to reduce overhead costs and to achieve higher-than-expected cumulated synergies for €65 million in the two-year period 2011-2012(versus a target of €45 million).

Group EBITDA1 amounted to €546 million, an improvement on the result of €269 million in 2011 (consolidating Draka from 1 March 2011). EBITDA includes €101 million in non-recurring net expenses, compared with €299 million in 2011.

Group Adjusted operating income rose to €483 million, +11.1% on the 2011 pro-forma figure of €435 million.

Group Operating income reached €362 million (€19 million in the prior year, consolidating Draka from 1 March 2011).

Net finance income and costs, including the share of income from associates, reported a negative balance of €118 million, slightly down from the 2011 consolidated figure of €120 million.

Adjusted net income increased by 22.1% to €282 million from €231 million in 2011 (consolidating Draka from 1 March 2011). Reported net income climbed to a positive €171 million from a loss of €145 million in 2011 (consolidating Draka from 1 March 2011).

Net financial position at the end of December 2012 dropped to €918 million, an improvement from €1,064 million at 31 December 2011, thanks to the positive impact of free cash flow, which - excluding the acquisitions effects - rose to €284 million (€209 million in 2011). The net financial position as a whole benefited from the following main factors:

• positive cash flow from operating activities (before changes in Net Working Capital) of €545 million;
• positive impact of €75 million from the reduction in working capital, mainly driven by a decrease in the inventory level and by a significant reduction of working capital in the Submarine business
• payment of €74 million in taxes;
• net operating investments of €141 million;
• purchase of the remaining Draka shares under the squeeze-out procedure for €9 million;
• Acquisitions for €77 million;
• payment of €129 million in net finance costs;
• distribution of €45 million in dividends.

 INTEGRATION WITH DRAKA AND STRATEGY DEVELOPMENT

• Higher-than-expected synergies
   

The process of integration with Draka has been carried out quickly, allowing to achieve higher than expected synergies (€65 million cumulative at the end of 2012 compared with a target of €45 million). These synergies have been realized mainly in fixed costs and overheads (approximately €30 million), in procurement (approximately €30 million), as well as thanks to the first benefits from the optimization of the industrial footprint. The target for 2013 is confirmed at €100 million in cumulative synergies, mainly due to the run-rate benefits of the first stage of manufacturing footprint rationalization and of the organizational rightsizing.

The new matrix structure (by business and geographical areas) has proved its worth. The clear mix of responsibilities and managerial skills, coupled with the successful integration of the business and product ranges, have improved the competitiveness of the Group's range of products and services and strengthened its position and growth in strategic markets, in particular power transmission, Oil&Gas, optical cables and connectivity for telecommunications.

With the aim of further developing the potential of its "human capital", in 2012 the Group embarked on some important projects in the area of organisation and human resources. These included the "Build the Future" project to recruit young high potential talents, the Corporate Academy for high-level technical and managerial training, and the new system of performance management.

• Investments for organic and external growth

In line with its growth strategy, the Group has invested in both organic and external growth. On April 1st, the Group acquired non-controlling interests in the Brazilian companies of Telcon and Draka Optical Fibre, thus gaining 100% control over these companies; in November, it completed the acquisition of Global Marine Energy in UK, with the intent of expanding its installation capabilities and services for submarine cables and systems.

Approximately €88 million has been spent on investments in new production capacity for strategic businesses. In particular, in the submarine cables business, the Group has expanded production capacity at its centre of excellence in Arco Felice (Naples), Italy, and it has started production in Finland to serve the growing market of links for offshore wind farms in Northern Europe. In the high voltage underground cable business, the Group has invested to expanded production capacity in China, Russia and France. Investments have also been made in the Oil&Gas sector, in Optical Telecom business and in the development of innovative cables and services for smart grids.