Market Outlook

Market Outlook

Business Outlook

The global macroeconomic cycle got stronger in 2017, with all the main geographical areas improving, primarily driven by recovery of the Eurozone economies and by resumption of growth in certain emerging countries, such as Brazil and Russia.

In the United States growth has become steadily stronger thanks to improvements in domestic consumption and external demand and to positive effects of the Trump administration's tax reform.

China's growth was solid throughout 2017, outperforming government forecasts and analyst expectations; such expansion was supported by sectors operating in new technologies and services, which helped make up for slowing investment in traditional industries and construction.

The Middle East and North Africa region was the main area of weakness in 2017, beset by its uncertain geopolitical situation and highly oil-dependent local economy.

In such a context, the Prysmian Group's expectation for FY 2018 is that demand in the cyclical businesses of building wires and industrial applications will be higher than in 2017, reflecting stronger European demand as partially tempered by weakness in the Middle East (Oman), while demand for medium voltage cables for utilities should be stable, reflecting a mixed performance between the different geographical areas.

With market expansion forecast, Prysmian Group's Energy Projects segment anticipates consolidating its leadership in Submarine cables and systems while boosting the business's profitability through the strategy of insourcing installation activities. The Group expects High Voltage underground cables and systems to make a moderate recovery from 2017, with a steady improvement in results anticipated in China thanks to the new manufacturing footprint.

In the Oil & Gas segment, the Group expects cable demand for Onshore projects (primarily in North America and the Middle East) to be stable thanks to the gradual rise in oil prices, while the SURF business is forecast to remain weak due to price pressures in the Brazilian market.

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The Telecom segment should see solid underlying sales growth in 2018, underpinned by strong growth in demand for optical cables in North America and Europe, while copper telecom cables can expect to flag further due to declining demand in Australia.

In addition, assuming exchange rates remain at the same level as at the date of the present document, the effect of translating Group company results into the reporting currency can be expected to have a negative impact on the Group's forecast operating income for 2018.

Lastly, the Prysmian Group will continue in 2018 to rationalise its activities with the objective of achieving projected cost efficiencies and greater competitiveness in all areas of its business.

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