Group Businesses

The first seven months of 2021 saw a strong recovery in the global economy, after a 2020 heavily penalised by the Covid-19 pandemic with unprecedented negative effects on the global macroeconomic framework. This recovery was also sustained by national plans supporting the development of infrastructure and digitalisation projects. According to the most recent estimates by the International Monetary Fund, the global economy is expected to grow by 6.0% in 2021 after contracting by 3.2% in 2020. At the geographical level, the United States — with estimated growth of 7.0% — are expected to return to the levels of activity seen at the end of 2019 as early as this year, whereas in the Eurozone and the United Kingdom this recovery is expected to occur in the following year. The Chinese economy — the only major economy to close 2020 on a positive note (+2.3%) — is expected to pick up pace, with estimated growth of 8.1% in 2021. In 2020, the extraordinary impacts of the Covid-19 pandemic also affected Prysmian’s results, above all in businesses relating to the construction sector (Trade & Installers) and characterised by significant installation activities. The gradual recovery of business, accompanied by timely cost management, an extremely flexible supply chain and a highly-focused level of customer service, enabled management to protect the Company’s performance and limit the impact of the pandemic on the Company’s margins. These positive trends were consolidated in H1 2021, with the Energy business reaching pre-pandemic levels and recording improved margins (excluding the effect arising from the price increase of metals), and with Telecom volumes up considerably at the global level, although there remains a high level of uncertainty, heightened by the effects of the pandemic on the availability and prices of raw materials. In light of the H1 2021 results, and considering the current business context, Prysmian expects demand in the construction and industrial cable businesses to sharply recover in 2021, compared to the previous year. In the Submarine Cables and Systems business, the Company, as demonstrated by its strong order intake in H1, is committed to confirming its leadership in a market expected to grow, thanks to the development of the offshore wind farms and interconnections necessary to the development of renewable energy in support of the energy transition. For this segment, the Company expects results to grow compared to last year, with the second half of the year clearly improving compared to H1, thanks both to greater use of capacity in the submarine cable business and the start of the execution phase of the German Corridors projects. In the Telecom segment, the Company expects volumes to increase in the optical business and price pressure to continue, particularly in Europe. Prysmian continues to pursue long-term growth drivers mainly relating to the energy transition to renewable sources, the upgrade of telecommunications networks (digitalisation) and the electrification process. The Company may also rely on broad diversification by business and geographical area, a solid financial structure, an efficient, flexible supply chain and a lean organisation — all factors enabling the Company to face the emergency with confidence. In light of the above considerations and in addition to the Company’s solid performance in the first half of the year, the Company revised its guidance for the FY upwards compared to that announced in March. Adjusted EBITDA for FY 2021 is expected in the range of €920-970 million, up from the €870-940 million range previously announced. The cash generation target has remained unchanged, as according to which the Company expects to generate cash flows of approximately €300 million ± 20% (FCF before acquisitions and disposals) in 2021. These projections are based on the absence of significant changes in the evolution of the health emergency and of possible further discontinuities and slowdowns in the global economic activities. In addition, these forecasts are based on the Company’s current business scope and do not include antitrust-related impacts on cash flow. In 2021 as well, the translation effect resulting from the conversion of the subsidiaries’ results into the reporting currency used in the consolidated accounts is expected to generate a negative impact on the Company’s operating income for approximately €20-25 million. The (expected) cumulative amount of the negative impact of exchange rates in the two-year period 2020-2021 is estimated at around €55 million.