Work to consolidate the integration of General Cable within the Prysmian Group continued during 2019. The resulting generation of synergies worth Euro 140 million has exceeded all expectations. This integration has helped the Prysmian Group to build a position as the only global leader with a model balanced by business segment and optimal geographical diversification. The absorption of General Cable has also significantly consolidated our ability to innovate and develop new solutions that satisfy the highest expectations of our customers, generating value for the Group.
The Prysmian Group achieved satisfactory results in 2019, with strong cash generation, even more than expected, and an adjusted EBITDA in excess of one billion Euro (Euro 1.007 billion). The established profitability objectives were therefore achieved, with a 31.4% increase compared to Euro 767 million in 2018.
EBITDA rose to Euro 907 million (Euro 501 million in 2018, accounting for General Cable from 1 June 2018), including net expenses for corporate reorganisations, non-recurring net expenses and other non-operating net expenses, totalling Euro 100 million (Euro 192 million in 2018). Net profit improved significantly to Euro 296 million from Euro 58 million in 2018 (including General Cable since 1 June 2018). Group revenues totalled Euro 11.519 billion, in line with 2018.
The Energy division performed well, especially in terms of profitability, which increased by 35.9%; in particular, power distribution achieved a solid growth with an improving profitability.
A significant contribution was also made by the Projects business. The order backlog now exceeds Euro 2 billion once again, following the acquisition of major power interconnection work and projects for the cabling of offshore wind farms. These activities allow us to strengthen our position as an enabler of the transition to renewable sources of energy.
The performance of the Telecom business was also good. In this area we introduced a number of important innovations, such as a new cable with 6,912 fibres, the largest number in the industry, allowing ease of use and improved fibre management, and the first fibre in the world that can be bent at will - just 180 micron in diameter - with an unprecedented size reduction that allows for the miniaturisation of cables.
With 900 professionals and 25 research centres throughout the world, the Prysmian Group is constantly committed to providing customers with the best cable infrastructure solutions. Addressing ever more sophisticated technological requirements, these solutions facilitate the power and data transmission processes while, at the same time, lowering the overall cost of cabling solutions for the customer.
The Group is also striving to develop technological innovations that lower energy and water consumption and reduce the greenhouse gas emissions of our manufacturing facilities. The Design to Cost (DTC) programme is committed to use the best materials, adopting efficient processes and implementing innovative projects to achieve cost savings in excess of Euro 45 million, with over 1,300 projects completed at our manufacturing plants during 2019.
R&D investment of Euro 106 million in 2019 was mainly dedicated to the ever more advanced search for EHV electricity transmission systems that can be buried, for longer and more efficient cables that can be laid at ever greater depth and for optical fibre solutions with the largest number of cables in a miniaturised space for easy use in the field. In order to achieve this, the Prysmian Group collaborates with more than 50 research centres and universities and launched about 180 new product families during 2019, not least thanks to the acceleration driven by General Cable from the third quarter onwards. The Group’s new products generated Euro 800 million, compared to Euro 496 million in 2018, with a 12.3% ongoing growth - 10.1% in Q3 2018 - led by North America and the Telecom area. Today, the Prysmian Group holds around 5,900 patents.
We have achieved world leadership in the sector of cables and systems for power distribution and telecommunications, with over 80 new products in the context of innovation and more than 500 new solutions in the product development area.
Sustainability has always been in our DNA, enabling us to direct the strategies of the Prysmian Group towards the provision of concrete help in tackling the greatest global challenges, with a clear and determined action plan.
As a consequence of this, the Group also improved its ranking in the main sustainability indexes during 2019, and was included for the first time - as the only player in the sector - in the Dow Jones Sustainability World and STOXX Global ESG Indexes, reaching the Ecovadis Gold level and confirming the good performance achieved in other ESG indexes, such as CDP Climate Change, Standard Ethics and FTSE4Good.
In addition, a new set of medium-term sustainability goals has been defined and constant efforts are being made to improve the sustainability of production processes, with a view to lowering CO2 emissions by 2-3% by 2022.
In fact, our new ambitious goal is to generate 50% of Group revenues from low carbon-enabling products in 2022, in line with our effort to tightly integrate ESG topics within the growth strategy.
On the People front, the Group makes Diversity & Inclusion a central activity, with a view to raising the percentage of women executives to 14-18% (12% in 2019) and ensuring that 40% of white-collar new hires are women.
In order to further improve the commitment of the entire organisation to achieve the 2022 sustainability goals, the annual and long-term employee incentive plans have been linked to a significant selection of those objectives. We have also launched a share incentive plan for 800 key people within the Group, which includes ESG goals among the four key drivers of value creation. This Plan envisages granting new ordinary shares serviced by a bonus increase in share capital, in order to strengthen the commitment of the company and management to the creation of sustainable value over time for all stakeholders.
Signature of the new Green Plan by the European Commission in December 2019 seeks to make Europe carbon neutral by 2050, highlighting the priority need for an integrated energy market that is both digitalised and interconnected with renewable sources. That said, the development of renewable energy in Europe, North America and the Asian countries with the largest impact on CO2 emissions is still heavily restricted by the high cost of production and the need for substantial investment.
Accordingly, the Prysmian Group is deeply committed to promoting the development of smarter and more sustainable electricity grids. In order to achieve the ambitious decarbonisation objective set by Europe, the European Commission estimates that offshore wind energy needs will reach 450 GW by 2050. To deliver this, the offshore wind power sector will need an efficient, sustainable and reliable electricity transmission system, capable of supporting the transition to renewable energy at ever more competitive costs.
In practical terms, it will only be possible to achieve the objectives set recently by the European Commission and the UN SDGs for the coming decade if efforts are made to lower the production cost of renewables to the level enjoyed by fossil fuels.
The Prysmian Group seeks to be the go-to technology player in this scenario, facilitating the production and transmission of cleaner, more intelligent, more efficient and competitive energy, so that power can be transferred from the location of renewable production (offshore wind farms) to the place of consumption (communities and urban centres).
The Board of Directors of Prysmian S.p.A. met on 30 March 2020 to discuss the effects of the changed macroeconomic and market scenario resulting from the spread of the COVID-19 pandemic at the beginning of 2020.
The Group can count on a broad geographic distribution of its production sites and an extensive diversification of its end markets. Top priority has been given to protecting the health of employees by implementing strict health and safety measures for plants and offices and making extensive use of remote working. Given this situation, the Group’s management has made it a priority to ensure the greatest possible continuity of its supply chain and operations, to protect its business and its ability to generate cash flows, and to adopt all possible cost containment and cash flow protection measures.
The Board of Directors, convened on 30 March, confirmed the assessments made at its meeting of 5 March 2020 regarding the Group’s ability to generate cash flows and sustain a balanced long-term dividend policy and believes its financial structure, liquidity and available credit lines are entirely adequate to respond to the new economic and financial situation emerging from the ongoing health emergency. However, in light of the spread of the pandemic and its potential duration, and given the uncertainty surrounding the terms and geographical extent of the restrictions to production and logistics around the world, as well as the slowdown that it could cause on the demand and the economic cycle, the Board of Directors has deemed it prudent to modify the proposed allocation of 2019 profits to be submitted in the forthcoming Shareholders’ Meeting called for 28 April 2020, reducing the dividend to €0.25 per share from the originally proposed €0.50 per share. Once approved by the Shareholders’ Meeting, the dividend will be paid out from 20 May 2020, with record date 19 May 2020 and ex-dividend date 18 May 2020.
The Board of Directors has also resolved to withdraw - without amending the agenda of the General Shareholders’ Meeting called for 28 April 2020 - the proposal under item 3 of the agenda regarding the granting of authority to the Board of Directors to buy back and dispose of treasury shares pursuant to Articles 2357 and 2357-ter of the Italian Civil Code.
The Board of Directors has also reserved the right to call an interim Shareholders’ Meeting, in the course of the year, to propose the possible distribution of the remaining 50% (€0.25 per share) of the originally planned amount and the request for the authorisation to buy back and dispose of treasury shares pursuant to Article 2357 and 2357-ter of the Italian Civil Code, should the uncertainty related to the development of the pandemic and its effects on the economic cycle and business appear clearer, thus increasing visibility regarding the Group’s financial performance.
The Board of Directors therefore approved the 2019 Consolidated Financial Statements and Draft Financial Statements of Prysmian S.p.A., which replace the documents already approved on 5 March 2020 and reflect the decision to distribute approximately €66 million as dividends, while allocating the remainder of the 2019 profit of the parent company, Prysmian S.p.A., to reserves.