Prysmian S.p.A.nine-month results 2012

HV & Submarine order book at €2.5 Billion (October 2012)

Significant improvement in profitability (Adj Ebitda +10%) with recovery in margins

Target FY 2012 Adj Ebitda confirmed at upper end of range €600-€650 Million

• Sales: €5,930 Million (€5,994 Million in 9M 2011**; organic growth -0.5%)
• Adj Ebitda : €468 Million (€426 Million in 9M 2011**; +9.8%)
• Adj operating income : €349 Million (€314 million in 9m 2011**; +11.2%)
• Adj net profit : €194 Million (€168 Million in 9M 2011*; +15.5%)
• Net financial position €1,446 Million (€1,389 Million at 30 Sept. 2011; €1,064 Million at 31 dec. 2011)

The Board of Directors of Prysmian S.p.A. has approved today the Group's consolidated results for the first nine months of 2012.
"The nine-month results show an overall stability in sales and above all a marked improvement in profitability, mainly thanks to synergies from the integration with Draka – explains CEO Valerio Battista -. For the third consecutive quarter in 2012, the Group has reported growth in its profitability indicators, consolidating the recovery started in 2011. On the commercial front, during the last few months we have been awarded some of the world's biggest contracts for power transmission systems, taking our order book to the record level of €2.5 billion at 31 October 2012".

FINANCIAL RESULTS
Group Sales amounted to €5,930 million. Assuming the same group perimeter and excluding metal price and exchange rate effects, the organic growth was -0.5%. The Group has generally succeeded in offsetting the effects of the persistent difficulties in some European markets thanks to the contribution of major projects for submarine power lines, where it is world leader, and to greater geographic diversification. The strong upturn in demand in North America (+10.9%) as well as positive signs in South America (+1.3%) have allowed the Group to minimise the impact of the downturns in EMEA, especially in Central and Southern Europe, which reported a -2.2% and in Asia Pacific (-3.3%).

Group Adjusted EBITDA climbed to €468 million, up 9.8% from the pro-forma figure of €426 million for the first nine months of 2011, also reporting an improvement in margin to 7.9% of sales (7.1% in first nine months 2011). The improvement in profitability is attributable to the good performance of the Submarine and Industrial businesses in Energy and of the entire Telecom segment. The contribution of overhead cost reductions achieved through synergies with Draka has also played a crucial role in improving profitability and the integration with Draka is generally proceeding faster than expected.

Group EBITDA amounted to €402 million, a clear improvement on the figure of €148 million in 2011 (consolidating Draka from 1 March 2011). EBITDA 2011 reflected the negative impact of €260 million in non-recurring expenses (of which €199 million in provisions for the antitrust investigations), compared with €66 million in the first nine months of 2012.

Group Adjusted operating income rose to €349 million, an increase of +11.2% from the pro-forma figure of €314 million for the first nine months of 2011. Amortisation and depreciation charges increased on the corresponding nine months last year due to the full impact on the first nine months of 2012 of higher amortisation and depreciation charges resulting from the increase in Draka's asset values (following the application of Purchase Price Accounting with effect from 1 March 2011).

Group Operating income was a profit of €295 million compared with a loss of €53 million in 2011 (consolidating Draka from 1 March 2011).

Net finance income and costs, including the share of income/(loss) from associates, reported a negative balance of €85 million, slightly down from the consolidated figure of €86 million for the first nine months of 2011.

Adjusted net profit increased by 15.5% to €194 million from €168 million in the first nine months of 2011 (consolidating Draka from 1 March 2011). The reported net result climbed to a positive €149 million from a negative €159 million in the first nine months of 2011 (consolidating Draka from 1 March 2011).

Net financial position at the end of September 2012 amounted to €1,446 million, compared with €1,064 million at 31 December 2011 (€1,389 million at 30 September 2011), having been particularly affected by the following factors:
- positive cash flows from operating activities (before changes in Net Working Capital) of €406 million;
- negative impact of €460 million from working capital increase;
- payment of €57 million in taxes;
- net operating investments of €89 million;
- receipt of €6 million in dividends;
- purchase of the remaining Draka shares under the squeeze-out procedure for €9 million;
- cash outlays of €26 million for acquisitions;
- payment of €97 million in net finance costs;
- distribution of €45 million in dividends.
 
Energy cables and systems performance and results
 •  order books for high voltage underground and submarine cables at record level of €2.5 billion
 •  weak demand in power distribution
 •  industrial: increase of profitability. Positive performance in O&G
 •  T&I: stable at low levels; slight recovery in margins
 
Sales to third parties by the Energy Cables and Systems segment amounted to €4,801 million, reporting a slight organic decrease (-0.3%). Adjusted EBITDA amounted to €348 million, posting an increase of +5.5% on the pro-forma figure for the first nine months of 2011.

Utilities
Sales to third parties by the Utilities business amounted to €1,678 million, with a 1.0% organic increase, thanks to a positive third-quarter performance which neutralised the decline experienced in the previous two quarters. Adjusted EBITDA amounted to €185 million compared with a pro-forma figure of €192 million for the first nine months of 2011 (ADJ EBITDA on sales is 11.0% versus 11.3%). The phasing of a number of important transmission projects points towards a significant recovery in profitability in the last quarter of the year.

Although the lower level of demand experienced by the high voltage underground business has generally reflected the uncertain macroeconomic conditions, particularly in Europe, the Group has seen signs of a recovery in sales in the third quarter, especially in North America and countries with growing demand for energy infrastructure, such as Russia, China and the Middle East. Other projects have been carried out for European Utilities (Terna, Edf and Tennet). The order book remains at a good level, providing sales visibility for about one year. Profitability is expected to increase significantly in the last quarter of the year, while the development of new power interconnections, particularly in Europe, should foster a steady recovery in this business in the medium term.

The Group’s submarine cables and systems business line reported a positive sales performance thanks to advancement of work on the numerous power lines and renewable energy development projects in its portfolio. A prestigious track record, combined with a policy of continuously investing in production capacity enhancements and technological innovation, allow the Group to consolidate its leadership position and be fully prepared to meet the expected increase in demand, especially for offshore wind farm connections. The value of the order book has reached record levels, assuring sales visibility for nearly three years.
 
During the third quarter the Group also strengthened its project implementation capability through the acquisition of Global Marine Energy, a British company specialised in installing submarine systems and also owner of a cable-laying ship that will complement the "Giulio Verne", the Group's main cable-laying vessel .

Demand in the power distribution business has continued to be generally weak due to lower investment by the Utilities. Countries in Central and Southern Europe have particularly suffered, with volumes in decline, while signs of a recovery in sales and profitability have been confirmed in North and South America. The Group is continuing its policy of investing in product innovation and customer service and over the last few months it has launched a new range for smart grid applications as well as niche technologies for monitoring electricity grid efficiency.

Trade & Installers
Sales to third parties by the Trade & Installers business amounted to €1,653 million, posting a small organic decrease (-1.8%) on the pro-forma figure for the first nine months of 2011. Demand showed further signs of contraction in Europe, particularly in Italy and Spain; instead, an upward trend was confirmed in North and South America, as well as in Asia. The Group generally defended its share in key European markets by pursuing a strategy focused on key international customers, while at the same time further concentrating its offer mix on more high-tech products. The decision, in some cases, to accept a slightly smaller presence in markets more exposed to pricing pressures and with low profitability, has allowed the Group to mitigate the decline in profitability. In South America, the Group maintained and in some cases increased its market share, also thanks to the breadth and quality of its product portfolio. The combination of the above factors and actions taken to improve industrial efficiency produced an increase of +8.8% in Adjusted EBITDA to €62 million and an improvement in margin to 3.7% of sales from 3.3% in 2011.
 
Industrial
Sales to third parties by the Industrial business amounted to €1,371 million, delivering organic growth of +2.7%. On the whole, markets were stable or growing, albeit with significant differences between the various geographical regions and industrial sectors. The Group had good sales and earnings in the oil sector, particularly in offshore drilling; SURF sales are expected to accelerate in the fourth quarter due to project phasing. Demand was slightly down in Europe's renewable energy sector, while investments in North America continued to depend on the renewal of stimulus measures. The infrastructure sector saw an upturn for Crane, Mining and Rolling Stock, while demand remained weak for Railway, Marine and Military. The Group's Elevator cables delivered positive sales and earnings in all regions. Lastly, the Automotive cable market was weak in Europe while volumes grew in Asia, in North America and in South America.

Adjusted EBITDA amounted to €101 million, reporting an increase of +26.3% on the pro-forma figure for the first nine months of 2011. Margins also improved with ADJ EBITDA on sales, climbing to 7.3% from 6.0%.

Telecom cables and systems performance and results
 •  9M demand holds up for optical cables; stabilisation in 3Q
 •  positive performance for OPGW and  MMS
 •  significant increase in profits
 
Sales to third parties by the Telecom Cables and Systems segment amounted to €1,129 million, delivering an organic decrease of -1.4% on the pro-forma figure for the first nine months of 2011. Although growing over the period as a whole, demand for optical cables showed a few signs of stabilisation and decline in the third quarter, especially in North America and Brazil due to the exhaustion of government incentives, while demand for copper cables confirmed its steady downward trend.

In Europe, sales growth was reported in several countries; in China, the positive trend was confirmed; in Australia, performance was in line with expectations, while the recovery in sales in North America and Brazil is tied to the renewal of government incentives.

The Group's Multimedia Solutions business confirmed a significant increase in profits, mainly thanks to cost reduction. The Group aims to further increase penetration in key European markets by relying on its extensive product portfolio.

Lastly, the OPGW business enjoyed significant growth in Spain, Brazil, the Middle East and Africa.

Adjusted EBITDA amounted to €120 million, an increase of 25.4% on the pro-forma figure for the first nine months of 2011. Margins also improved, with ADJ EBITDA on sales climbing to 10.6% from 8.7% in 2011.

BUSINESS OUTLOOK
The macroeconomic environment in the first half of 2011 had confirmed the initial signs of recovery already seen in 2010, albeit with very low growth rates at levels still well below those before the 2008 financial crisis. However, the second half of 2011 and first nine months of the current year were affected by growing concerns about Eurozone and US debt sustainability, leading to a sharp deterioration in business confidence and a gradual slowing of industrial output and demand. In such a context, the Group expects that 2012 will see a slight contraction in demand for medium voltage power distribution cables, for building wires and for those products in the Industrial sector most exposed to cyclical trends. Instead, positive developments in demand are confirmed for the high value-added businesses of submarine power transmission, offshore Oil&Gas and fibre optic cables for major telecom operators.
Despite the gradual deterioration in macroeconomic conditions, the results achieved in the first nine months, combined with the size of the current order book, allow the Group to confirm an increase in adjusted EBITDA for FY 2012 in the range of €600-€650 million (FY 2011: €568 million), with the upper end of the range thought likely to be achieved (€625-€650 million). This range is related to development of demand on the reference markets in the last quarter of the year and reflects the consolidation of Draka for the full year (in 2011 Draka was consolidated from 1 March). The expected increase in profitability is essentially due to synergies resulting from integration with Draka, as well as growth in higher value-added business areas.
In fact, during 2012 the Prysmian Group has continued to integrate Draka in order to optimise and rationalise the new Group's organisational and production structure with the goal of further strengthening its presence in all areas of business and of achieving the projected cost synergies.
 
The Prysmian Group's Quarterly Financial Report at 30 September 2012, approved by the Board of Directors today, will be available to the public from today at the Company's registered office in Viale Sarca 222, Milan and at Borsa Italiana S.p.A.. It will also be available on the corporate website at www.prysmian.com.

The present document may contain forward-looking statements relating to future events and operating, economic and financial results of the Prysmian Group. By their nature, forward-looking statements involve risk and uncertainty because they depend on the occurrence of future events and circumstances. Therefore, actual future results may differ materially from what is expressed in forward-looking statements as a result of a variety of factors.

The managers responsible for preparing corporate accounting documents (Carlo Soprano and Jordi Calvo), hereby declare, pursuant to art. 154-bis par. 2 of Italy's Unified Financial Act, that the accounting information contained in this press release corresponds to the underlying documents, accounting books and records.