Back in January 2020, the CEO of our Chinese affiliate began to tell me about a health crisis likely to explode there, in Wuhan.
About one year on, the whole world has felt the dramatic effects of the Covid-19 pandemic. In introducing our 2020 Sustainability Report, it is therefore both my duty and an opportunity to focus immediate attention on how our business tackled this “black swan” event that, in all probability, has changed global economic and social priorities for ever.
Our priorities in tackling the Covid-19 pandemic have been, first and foremost, the health and safety of individuals, together with supply chain continuity and the creation of value for all stakeholders.
Reviewing the results of this past year, we can conclude with satisfaction that we have achieved our objectives. The pandemic has obviously had its effect but, thanks to the priorities assigned to our personnel, we managed to ensure a high level of business continuity, meet our profitability objectives with ease and, above all, generate record cash flows.
Giving priority to our people made it possible to protect our manufacturing organisation and, indeed, the entire supply chain. Activity levels at our 104 plants never fell below 80%, with intensified collaboration between countries as, inexorably, they were hit by Covid-19.
Consequently, we retained our ability to assure continuous customer service, regardless of the challenges.
Uncertainty still reigns, apparently, but the strong resilience of our organisation enables us to look ahead with confidence, in the knowledge that we have the resources needed to relaunch the growth challenge following the acquisition of General Cable.
Our ambition is to play a central role, as a technological enabler, in the energy transition and digitalisation processes. To achieve this, we will continue to invest in product innovation and the sustainability of our manufacturing footprint. The decision to set ourselves rigorous, challenging and, above all, science-based targets for the reduction of CO2 emissions reinforces the credibility and transparency of our commitment to be an ESG Company.
Group sales amounted to Euro 10,016 million, with an organic change of -10.3%; excluding the Projects business, the organic change was -8.3%, improving in Q4 to -4.8%. A good contribution to the Group’s resilience came from the Energy segment, which limited the organic reduction of revenues to -7.1% and recovered as of the third quarter also thanks to the positive performance of Power Distribution and Renewables in North America.
Adjusted EBITDA was Euro 840 million, confirming the Group’s resilience to the highly deteriorated market context, also thanks to the timely cost containment actions and the business mix improvement, which allowed the Group to preserve margins. The drop compared to Euro 1,007 million Adjusted EBITDA in 2019 also reflected the negative effects of exchange rates for approximately Euro 32 million. The ratio of Adjusted EBITDA to sales was 8.4% compared to 8.7% in 2019, confirming the Group’s ability to protect profitability.
The Energy segment benefited from the brilliant profitability performance of Power Distribution and Overhead Lines in North America.
In the Telecom segment, the impact on adjusted EBITDA of the volume reduction and price pressure in Europe was partly offset by the cost efficiency actions which also contributed to stabilising margins. Q4 saw signs of a recovery in the optical cable business, mainly in Nord America.
Margins were also maintained in the Projects segment, where profitability was hit by production and installation inefficiencies attributable to the pandemic, as well as by an unfavourable mix of projects. Signs of recovery were seen during the fourth quarter. The contribution from the integration of General Cable was significant.
Efforts to protect the cash generation capacity allowed the Group to achieve record-high Free Cash Flow at Euro 375 million in 2020 (Euro 487 million, excluding antitrust-related cash outs), higher than the guidance.
Based on the results for 2020, the Board of Directors will recommend to the forthcoming AGM that a dividend of Euro 0.50 per share be distributed, involving a total pay-out of approximately Euro 132 million.
A significant presence in China enabled the Group to understand the outbreak of the pandemic at an early stage. “People first” — people’s health and safety first —, technological innovation, lean manufacturing and protection of the business are the three guidelines adopted by the Group to tackle the pandemic. “People First” entailed increased investment in health and safety (+29% to Euro 17 million), in the massive supply of medical equipment and the carrying out of tests and analyses to detect contagions, in the redefinition of procedures for the safe use of workplaces, and in the extensive use of remote working, in the digitalisation of the Academy and initiatives in favour of the communities impacted by the virus (from donating cables to the Wuhan hospital, to citizenship initiatives also in other areas of the world). In a context that is redefining social and economic priorities, the Group has confirmed its ambition to be an energy and digitalisation transition enabler.
From the flagship 525 kV P-Laser cable to fibre and optical cable innovations like Sirocco, the world record cable in fibre density, and the submarine power cable for record-depth installation up to 3,000 m, the Group has strengthened its commitment to technological innovation. There was also an important focus on digitalising its manufacturing processes (Fast Forward Project). Putting health and safety first allowed the Group to ensure supply chain and business continuity. The operations at production sites never dropped below 80%, thus maintaining the ability to serve customers nearly unaltered (on time delivery exceeded 94%). The Group also promptly implemented a robust cost containment plan and measures to protect its cash generation capacity.
Prysmian Group confirms its ambition to be one of the leading technology players in the transition to the use of renewable energy sources and to a decarbonised economy. 48% of the Group’s sales are attributable to business segments and products that contribute to a low-carbon economy. With the goal of supporting the expected acceleration of the development of new submarine and underground power interconnections (chiefly links and interconnections of offshore wind farms), the Group has planned investments in the range of Euro 450 million by 2022 (over 50% of total investments), which are also intended to further improve the sustainability of its organisation and supply chain.
Prysmian Group has also announced a new ambitious climate strategy adopting science-based targets, in line with the requirements of the Paris Agreement, and endorsing the Business Ambition (1.5°C) with the “net zero” target expected to be achieved between 2035 and 2040 with regard to the emissions generated by its operations (Scope 1 and 2) and by 2050 for emissions generated by the value chain (Scope 3). Among the most important initiatives in this area is the Group’s Pikkala plant, chiefly dedicated to the production of cables for offshore wind farms, which will become the first net zero plant, where 100% of the energy used will be obtained from certified renewable sources.