Business outlook

Global economic growth remained positive in the first six months of 2018, with a sharp acceleration in the United States in the second quarter thanks to higher domestic consumption and investments, whereas China continued the positive trend seen at the beginning of the year, despite the introduction of tariffs on imports of Chinese goods by the current U.S. administration. Growth in Europe, while positive, remains slower than in the world’s two largest economies, affected by the increasing uncertainty triggered by the trade war between the U.S. and China and the imminent conclusion of the quantitative easing plan previously announced by the European Central Bank. In Brazil, there were signs of slowing following the recovery that began back in the second half of 2017, chiefly due to rising inflation and pressure on exchange rates.

Within this macroeconomic scenario, for 2018 Prysmian Group expects an increase in demand in the cyclical construction and industrial cable businesses compared to 2017, driven by the recovery of European demand, partially offset by the weakness in the Middle East (Oman), whereas the medium voltage utilities cable business is expected to remain essentially stable, with uneven performances across the various geographical areas. In the Submarine cables and systems business, despite the slowdown in the award of contracts in the first half of the year, the Group aims to retain its leadership, maintaining its share in a market that is expected to recover, with an increase in the volume of projects awarded in the second half of the year. The Group expects the High Voltage Underground cables and systems to recover compared to 2017, with a gradual improvement in performance expected in China and South East Asia due to the new manufacturing set-up. Finally, the Group foresees that growth will remain solid in the Telecom segment in 2018, supported by growing demand for optical cables in Europe and North America, whereas the copper cable segment is expected to slow due to the reduction in volumes on the Australian market.

It may also be expected that if exchange rates remain stable at the levels seen at the time of this press release the translation effect of converting subsidiaries’ results into the consolidated reporting currency will yield a negative impact on the Groups operating performance.

In the light of these considerations, the Group forecasts an adjusted EBITDA within a range of €860-920 million in all of 2018, an increase on the €733 million reported in 2017.

This forecast also includes the results of the recently acquired General Cable business for all of 2018, in addition to the provision (recognised in the first half of the year) of €70 million for the Western Link project.

Prysmian (excluding the effects of the acquisition of General Cable) is expected to record an adjusted EBITDA for all of 2018 of between €680 million and €720 million, compared to the €733 million recorded in 2017.  In keeping with the performance for the first half of the year, this forecast assumes an increase in volumes and margins in the Telecom operating segment and an improvement in sales volumes in the E&I and Industrial & Network Components segments. This forecast also reflects the adverse impact of exchange rate performance of approximately €30 million and the provision of €70 million already recognised in the first half of 2018 due to the additional costs associated with delays in the Western Link project.

The forecasts for the General Cable operations for 2018 have been prepared by the management on the basis of the most up-to-date projections and assumptions regarding the price of strategic metals, exchange rates and the expected macroeconomic scenario. Accordingly, the adjusted EBITDA forecast for all of 2018 (i.e., for 12 months) ranges between €175 and €190 million, based on a euro/USD exchange rate of 1.20. This estimate incorporates the expected negative impact of approximately €10 million due to the performance of the USD/euro exchange rate compared to the previous year. The General Cable operations have been included in Prysmian Group’s consolidated financial statements with effect from 1 June 2018 and thus will be included in the 2018 income statement for a period of seven months.

In addition to the above-mentioned effects, the Group forecasts synergies deriving from the integration of the General Cable business of €5 to €10 million relating to the period from the closing date of the GCC acquisition (6 June 2018) to the end of 2018.

This forecast is based on the company’s current scope of operations and reflects the current order book.

Other Board of Directors’ Resolutions

The Board of Directors appointed Claudio De Conto Chairman of the Board of Directors.

Prysmian’s Board of Directors also acknowledged the resignation tendered by Massimo Tononi on 25 July 2018 (see the press release issued on the same date) with effect as of today’s meeting of the Board of Directors, from his positions as Chairman, member of the Board of Directors and member of the Remuneration, Nomination and Sustainability Committee of the Company.

The Board of Directors wholeheartedly thanked Massimo Tononi for the important work he has carried out since July 2010, first as member of the Board and then, as of April 2012, as Chairman, in a period marked by strong development and changes for Prysmian Group.

Following the above-mentioned resignation of Massimo Tononi, the Board of Directors passed the following resolutions:

• it appointed as Chairman of the Board of Directors Claudio De Conto, non-executive and independent Director pursuant to Legislative Decree No. 58/98 (“TUF”);

• upon proposal of the Remuneration, Nomination and Sustainability Committee, it appointed by co-option as new member of the Board of Directors, as allowed by Article 14 of the By-laws and Article 2386 of the Italian Civil Code, Francesco Gori, who has already accepted his appointment and will remain in office until the Company’s next General Shareholders’ Meeting;

• it acknowledged Francesco Gori’s compliance with the independence requirements pursuant to TUF and the Corporate Governance Code;

• it reviewed the composition of its internal Committees which are currently made up as follows:

Control and Risks Committee:

• Francesco Gori (Chairman), non-executive and independent Director, pursuant to TUF and the Corporate Governance Code;

• Maria Letizia Mariani, non-executive and independent Director pursuant to TUF and the Corporate Governance Code;

• Joyce Victoria Bigio, non-executive and independent Director pursuant to TUF and the Corporate Governance Code.

Remuneration, Nomination and Sustainability Committee:

• Monica De Virgiliis (Chairwoman), non-executive and independent Director pursuant to TUF and the Corporate Governance Code;

• Paolo Amato, non-executive and independent Director pursuant to TUF and the Corporate Governance Code;

• Claudio De Conto, non-executive and independent Director pursuant to TUF.

The resume of the newly appointed Director Francesco Gori is available on the website www.prysmian.com in the section Investors/Corporate governance/Corporate Boards.

Change to the 2018 Corporate Events Calendar

The meeting to be held to analyse the quarterly financial report at 30 September 2018, originally scheduled for 8 November 2018, has been postponed to 14 November 2018. The change was deemed appropriate in light of the expansion of the consolidation area of Prysmian S.p.A., following the acquisition of General Cable Corporation.  

Prysmian Group’s Financial Report at 30 June 2018, approved by the Board of Directors today, will be made available to the public at the Company’s registered office in Via Chiese 6, Milan, and at Borsa Italiana S.p.A. It will also be available on the corporate website at www.prysmian.com and in the authorised central storage mechanism used by the Company at www.emarketstorage.com. This document may contain forward-looking statements relating to future events and future 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 results may differ materially from those reflected in forward-looking statements due to a variety of factors.

The managers responsible for preparing corporate accounting documents (Carlo Soprano and Alessandro Brunetti) 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.