Prysmian S.p.A. risultati FY 2014

Categorie: Corporate  Financial Press Release 

Sales: €6,840 million (organic growth + 1,8%); Net Financial Position better than expected; proposed dividend of €0.42 per share

Milan, Italy   -   25/02/2015 - 12:00 AM

PRYSMIAN S.P.A. FY 2014 RESULTS

TARGETS MET IN STILL WEAK MARKET CONTEXT FOR ENERGY CABLES
POSITIVE ORGANIC GROWTH, WITH EXCELLENT PERFORMANCE BY SUBMARINE CABLES AND SOLID RECOVERY BY TELECOM
NET FINANCIAL POSITION AHEAD OF EXPECTATIONS

FY 2014 RESULTS

  • SALES: €6,840 MILLION (ORGANIC GROWTH +1.8% VS 2013; +2.7% EXCLUDING WESTERN LINK)
  • ADJ EBITDA1 : €509 MILLION (-17.0% VS 2013); €603 MILLION EXCLUDING WESTERN LINK (-1.6% VS 2013)
  • ADJ OPERATING INCOME2 : €365 MILLION (-21.5% VS 2013); €459 MILLION EXCLUDING WEST. LINK (-1.3% VS 2013)
  • ADJ NET PROFIT3 : €186 MILLION (-32.0% VS 2013); €252 MILLION EXCLUDING WESTERN LINK (-6.3% VS 2013)
  • NET FINANCIAL POSITION: €802 MILLION (€805 MILLION AT 31/12/2013)

 

 

Milan, 25/2/2015. The Board of Directors of Prysmian S.p.A. has approved today the Company's consolidated financial statements and separate financial statements for 20144

 
"Our Group's performance in 2014 confirms signs of a slight recovery in sales volumes, accompanied by a generally stable level of profitability," commented CEO Valerio Battista. "The decisive contributions to this result were from the strategic Submarine Cables and Systems businesses, with strong growth, and from Optical Cables, with recovering volumes and profitability. This is a particularly significant result, having been achieved in a still difficult scenario, that has seen demand recover for some businesses, like Optical Cables and Renewables, but ongoing weakness in the more cyclical sectors, like Trade & Installers and Power Distribution, as well as a slowdown in the Oil & Gas market. In this context, the Group has relentlessly pursued its actions to contain costs and reorganise its manufacturing footprint. This commitment, combined with efficient financial management, has helped to ensure good cash flows and a decidedly better net financial position than initially expected. We are pleased to have achieved the profit targets announced to the market and we are able to reward our shareholders with a proposed dividend in line with 2013."
 
Financial results
 
Group Sales amounted to €6,840 million, posting organic growth of +1.8% assuming the same group perimeter and excluding metal price and exchange rate effects (excluding the adverse impact of the Western Link project, organic growth would have been +2.7%). The decisive contribution to this good sales performance came from submarine cables and systems, where the Group had double-digit growth, proving, through this demonstration of market confidence, to have more than overcome the impact of the problems arising with the Western Link project. Telecom Cables also posted a solid recovery, while Trade & Installers saw an upturn in volumes. Performance by High Voltage Cables and SURF was broadly in line with 2013, while there were no signs of recovery for Power Distribution. Performance by certain segments of the Industrial Cables OEM market was affected by increased competitive pressure, while Oil & Gas was affected by market sector weakness, nonetheless delivering a performance in line with 2013.  
 
Adjusted EBITDA amounted to €509 million (€613 million in 2013). Excluding the adverse impact of the Western Link project, Adjusted EBITDA would have been €603 million, basically in line with its level in 2013. The decisive contribution to this result came from high value-added businesses, in particular Submarine Cables and Systems, and from improved profitability by the Telecom business. However, pressure on prices continued to impact the profitability of the more cyclical businesses (Trade & Installers and Power Distribution), which nonetheless found a broad stabilisation point. Within the Industrial Cables business, the various segments had widely differing performances, with Renewables and Elevators making a good contribution while others were less positive, such as Oil & Gas, affected by the fall in oil prices, and some sub-segments of Specialties & OEMs.
 
The Group continued its strategy of focusing investments on high value-added businesses, of constantly reducing costs and continuously improving the efficiency of its organisational structure and manufacturing footprint. Synergies arising from the integration with Draka amounted to approximately €140 million, in line with target.
 
Adjusted Operating Income came to €365 million. Excluding the impact of Western Link, it would have been €459 million (in line with €465 million in 2013).
 
Net Finance Income and Costs reported a negative balance of €140 million, down from €150 million in 2013, thanks to the improvement in financial structure and in the cost of Group debt and also to early refinancing of the Term Loan originally due to mature on 31 December 2014.
 
Adjusted Net Profit amounted to €186 million. Excluding the adverse impact of the Western Link project (€66 million net of tax effects), Adjusted Net Profit would have been €252 million, compared with €269 million in 2013. Net profit amounted to €115 million compared with €153 million in 2013, and was heavily affected by the Western Link project and by €44 million in impairment losses recognised against property, plant and equipment and intangible assets, mainly in connection with those markets particularly hard in recent years, like Italy, Oceania and Brazil (for flexible pipes).
 
Net financial position at the end of December 2014 amounted to €802 million (€805 million in 2013), well ahead of expectations, also on account of the Group's ability to generate significant cash flows.
 
The principal factors affecting the year-end balance were:
·         generation of €400 million in cash from operating activities (before changes in net working capital);
·         substantial stability in net working capital (increase of €1 million);
·         payment of €72 million in taxes;
·         €36 million in dividends from investments in equity-accounted companies (including the extraordinary dividend of €21 million paid by Yangtze Optical Fibre and Cable Joint Stock Limited Company before its IPO);
·         net positive effect of €9 million from business combinations; 
·         net operating investments of €155 million;
·         payment of €110 million in net finance costs; 
·         payment of €90 million in dividends;
·         purchase of treasury shares for €20 million.
 
energy projects operating segment performance and results
  
  • Double-digit growth for submarine cables business (if Western Link impact excluded)
  • High voltage underground sales stable; profitability slightly down
  • SURF sales and profitability in line with 2013

 

Sales to third parties by the Energy Projects operating segment came to €1,355 million in 2014, posting organic growth of +1.7% (excluding the adverse impact of the Western Link project, Sales to third parties would have been €1,416 million, with organic growth of +6.1%). The Energy Projects segment’s profitability would have risen, excluding the adverse impact of the Western Link project, with Adjusted EBITDA coming in at €248 million, up from €231 million in 2013. Incorporating the effects of Western Link, Adjusted EBITDA came down to €154 million.

 
Sales performance by Submarine Cables and Systems for power transmission was highly buoyant, despite the delay in the Western Link project. The Group confirmed its market and technological leadership by winning several new projects for both energy interconnections (Cyclades in Greece, Dardanelles in Turkey, NGCP in the Philippines and Zakum in the United Arab Emirates) and for offshore wind farms (Borwin3 and 50Hertz). Profitability also improved considerably, excluding the Western Link impact, which was in line with the figure announced (€94 million) at the time of the half-year results and whose recovery plan is proceeding in the designated stages. 
 
High Voltage Underground power transmission cables had a generally stable sales performance compared with 2013, despite the impact of weak demand for new energy infrastructure in several major European markets. This weakness was partially offset by the Group's increased exposure to growing markets such as Asia and the Middle East, also thanks to use of the production capacity of its Asian plants. This change in geographical mix affected the level of profitability. Among the principal projects awarded to the Group, of particular note were Phase XI in Qatar and Ausgrid in Australia.
 
The order book for underground and submarine power transmission cables and systems stands at about €2.8 billion.Technological development programmes have continued with €40 million invested in the plants in Pikkala (Finland) and Arco Felice (Italy), and in the transformation of the "Cable Enterprise" cable-laying ship, now ready to start work.
 
The Group's results in the SURF business (offering products and services for offshore oil production) were in line with 2013. Downhole technology (DHT) cables performed well in North America, while Brazilian demand for flexible pipes (post-salt) remained weak. The umbilical cables market was stable with a growing order book. The programme to expand the SURF business into the world's principal offshore oil markets was pursued relentlessly under the direction of the Houston headquarters, engaged in ramping up tendering activities also thanks to new sales offices in the Middle East and Asia.    
 
energy products operating segment performance and results
 
  • Positive organic growth for Trade & Installers
  • Continued downturn for Power Distribution
  • Industrial: OEM and O&G weak; good results for Renewables and Elevators
Sales to third parties by the Energy Products operating segment amounted to €4,491 million, posting organic growth of +1.4%. Adjusted EBITDA came to €239 million versus €276 million in 2013 (-13.6%).   
 
Energy & Infrastructure
 
Sales to third parties by the Energy & Infrastructure business area amounted to €2,667 million, reflecting organic growth of +2.7%, achieved in a still uncertain market environment. Business in Europe and South America, in particular, was affected by the standstill in the construction market as well as by reduced energy consumption which continued to hold back utility company investment plans. North America, however, displayed signs of greater stability. Pressure on prices, partially stabilising in the second half of the year, affected  profitability, nonetheless mitigated by improved efficiency. Adjusted EBITDA amounted to 108 million compared with €127 million in 2013.
 
Trade & Installers reported a slight recovery in volumes and sales, with a return to positive organic growth. The market was generally very difficult, with the construction industry still in crisis in Central and Southern Europe as well as in South America. Growth in the North American market was held back by the delay in defining tax incentives for energy-efficient buildings; markets in Australia and Asia were also flat. Pressure on prices, lasting throughout the year, showed signs of stabilising in the second half of the year. In such a scenario, the Group continued its strategy of focusing on commercial relationships with key customers, and of offering a highly differentiated product mix designed to defend market share and limit impacts on profitability. The Group confirmed its leadership in projects requiring higher levels of technology and know-how, such as fire-resistant and LSOH cables increasingly deployed in strategic buildings and infrastructure, such as the EXPO 2015 in Milan and several high value-added projects in Britain.
 
Power Distribution continued to be affected by the ongoing weakness of demand arising from slowing investment by utilities, particularly in Europe and South America. North America, however, displayed signs of greater stability, as did some European countries from the second half of the year. Full-year profitability was affected by the first-half weakness, despite additional steps to contain costs.
 
 
Industrial & Network Components
 
Sales to third parties by the Industrial & Network Components business area amounted to €1,708 million, reporting negative organic growth of -0.3% and sharp differences in performance between markets and geographical areas. Performance in the Oil & Gas sector was basically in line with 2013 despite the investment slowdown by energy-producing nations in the Middle East and the adverse impact of weak oil prices on MRO (Maintenance, Repair & Operations) business. The OEM order book was affected by lower demand for cables in the mining industry, particularly in the German market, and by increased competition in cables for infrastructure and in the port sector. However, cable demand improved for renewables, particularly in Northern Europe, North America and China, and for Rolling Stock and Marine. The strategy of high technological specialisation allowed the Group to consolidate its Elevator market leadership in North America and to expand into the European and Asian markets. The Automotive business reported a decline in volumes due to the highly competitive nature of the market in Europe and North America. Lastly, the Network Components business had a positive performance after extending its range of products and services, particularly in Asia. However, there was weaker demand for high voltage components in North America, and for medium voltage ones in Europe.
In terms of profitability, Adjusted EBITDA came in at €126 million compared with €141 million in 2013.
 
telecom operating segment performance and results
 
  • Growth in demand for optical cables globally and strong increase in sales volumes
  • improved profitability
  • Continued recovery by MMS Multimedia Solutions business

 

Sales to third parties by the Telecom operating segment amounted to €994 million, recording solid organic growth (+4.0%) on 2013.
 
Optical Cables reported a strong recovery in demand in almost all the major markets, while price pressure  seems to have stabilised. In Europe, in particular, the Group was awarded work on major projects involving the construction of backbones and FTTH connections for leading operators, such as British Telecom in the United Kingdom, Telefonica and Jazztel in Spain, Orange in France, and Telecom Italia in Italy; North America witnessed a recovery in domestic demand on account of the development of 4G LTE infrastructure and new FTTx networks. In South America, the Brazilian government's investment incentives did not bring any significant improvements during 2014. Lastly, the Asia Pacific region saw a resumption of work on the NBN (National Broadband Network) project in Australia and a positive trend for demand in Singapore. The plan to improve the competitiveness of optical fibre production continued to move ahead.
 
The high value-added Connectivity business enjoyed a positive trend, thanks to the development of new FTTx networks (for last mile broadband access) in Europe and North America.
 
Multimedia Solutions reported an increase in profitability through better product mix and the implementation of cost efficiencies. The Group's focus is on developing higher value-added products, such as data centres in Europe, and on improving customer service (logistics, quality and factory performance).
 
Lastly, Copper Cables continued their steady decline due to the retirement of traditional networks in favour of next-generation ones and to geopolitical problems in countries like Iraq and Libya.
 
Adjusted EBITDA amounted to €116 million, posting an improvement of +10.1% on 2013, also thanks to the contribution of Yangtze Optical Fibre and Cable Joint Stock Limited Company in China.
 
business outlook
 
The macro environment in 2014 was marked by a gradual strengthening of the US economy but continued overall weakness in Europe, despite tentative signs of recovery, especially in the first part of the year. Growing geopolitical tensions emerging in the Middle East and Russia, combined with slowdown in some economies like China and Brazil, nevertheless raise further uncertainty over the short and medium-term outlook for the world economy.
In such an economic context, the Group's expectation for FY 2015 is that demand for medium voltage power distribution cables used by utilities will remain weak, while the building wires business is likely to see a continuation of the stabilising trend observed in the second half of 2014. In the Industrial Oil & Gas and SURF cables business, the sudden drop in oil prices could affect investments and thus the business's order book over the medium term. The Group confirms a generally stable trend for its high value-added power transmission businesses, with potential growth areas in the submarine business, although offset by weak demand in the high voltage underground market, also penalised by growing competition in several geographical areas. With reference to its submarine cables business, the Group expects that the impact of the Western HVDC Link project posted in 2014 (€94 million on Adjusted EBITDA) will be significantly lower in 2015. In the Telecom business, demand for optical fibre cables is expected to carry on recovering in the coming quarters, especially in Europe and the United States, albeit at a slower pace than in 2014.
During 2015 the Prysmian Group will continue to integrate and rationalise activities with the goal of achieving its projected cost synergies and of further strengthening its presence in all areas of the business. Lastly, it is conceivable that exchange rate effects, which had an adverse impact of about €14 million on Adjusted EBITDA in 2014, will have a positive impact on the 2015 results, assuming constancy of the rates at the start of the year, through the pure effect of translating profits expressed in other currencies into the Group’s reporting currency.
 
Other resolutions by the Board of Directors
 
The Board of Directors has given the Chairman of the Board of Directors and the Chief Executive Officer several authority to perform all the formalities to call the Shareholders' Meeting for Thursday, 16 April 2015, in single call.
Based on the results for 2014, the Board of Directors will recommend to the forthcoming Shareholders' Meeting that a dividend of €0.42 per share be declared, involving a total pay-out of approximately €90 million.
If approved, the dividend will be paid out from 22 April 2015, record date 21 April 2015 and ex-div date 20 April 2015.
Presentation of a candidate slate by the Board of Directors for board renewal
In view of the expiry of its three-year term in office and as permitted in the By-laws, the Board of Directors has voted to present its own slate of candidates for the office of director to be submitted to the Shareholders' Meeting being called to vote, among other things, on the appointment of the new Board of Directors. This slate will be made publicly available, together with any slates submitted by eligible shareholders, at the locations and within the deadlines required by applicable regulations.
Share buy-back programme
The Board of Directors has decided to request the forthcoming Shareholders' Meeting for authorisation to initiate a programme for the buy-back and disposal of treasury shares, after revoking the previous resolution adopted at the Shareholders' Meeting on 16 April 2014.
The programme will provide the opportunity to purchase, on one or more occasions, a number of shares whose total cannot exceed 10% of share capital, taking account of treasury shares already purchased in execution of previous shareholder resolutions and not yet disposed of. Purchases may not exceed the amount of available reserves reported in the most recently approved annual financial statements. The programme will last for a maximum of 18 months commencing from the date of approval by the Shareholders' Meeting.
The shareholders' approval is being requested:
·         to provide the Company with a portfolio of treasury shares, including those already held by the Company, that can be used for any extraordinary corporate actions (for example, mergers, demergers, purchases of equity investments);
·         in order to use the treasury shares purchased to service the exercise of rights arising from convertible debt instruments or instruments exchangeable with financial instruments issued by the Company, its subsidiaries or by third parties (for example, in takeovers bids and/or exchanges of shares);
·         to use treasury shares to satisfy incentive plans reserved for the directors and employees of the Prysmian Group;
·         to allow efficient management of the Company's capital, by creating an investment opportunity, also for its available liquidity
 
Treasury shares will be bought back and sold in accordance with applicable laws and regulations:
 
  i.            at a minimum price no more than 10% below the stock's official price reported in the trading session on the day before carrying out each individual transaction;
  ii.            at a maximum price no more than 10% above the stock's official price reported in the trading session on the day before carrying out each individual transaction.
 
As at the present date, the Company directly and indirectly holds 2,824,653treasury shares.
 
The legally required documentation will be made available to shareholders and the public at the locations and within the deadlines required by applicable regulations.
Appointment as the independent auditors for the period 2016-2024
The publication of the financial statements for the year ended 31 December 2015 will coincide with the end of the engagement of PricewaterhouseCoopers S.p.A., since 2007, to perform the statutory audit of the accounts; by law, this engagement cannot be renewed. The Board of Directors has resolved to submit to the attention of the Shareholders' Meeting the statutory audit engagement for financial years 2016 - 2024, a year in advance of the natural expiry of the current engagement. The shareholders will make their decision on the basis of a justified proposal to be presented by the Board of Statutory Auditors, regarding both the firm to engage for the statutory audit and the fees payable for this engagement.
The legally required documentation will be made available to shareholders and the public at the locations and within the deadlines required by applicable regulations.
Corporate bonds
The unrated bond, for a total nominal amount of €400 million, placed on 30 March 2010 with institutional investors on the Eurobond market, will mature in the six months following the end of 2014. The bond, with a 5-year term maturing on 9 April 2015, has been admitted to the Official List of the Luxembourg Stock Exchange.
Group employee incentive plan and amendment of by-laws
 
With the approval of the Compensation and Nominations Committee, the Board of Directors has adopted a resolution to submit to the forthcoming Shareholders' Meeting a new long-term incentive plan (the "Plan") for Prysmian Group Management with an upper limit of around 300 participants, including four executive Directors of Prysmian S.p.A. (the Chief Executive Officer & General Manager, the Chief Financial Officer, the Senior Vice President Energy Projects Business and the Chief Strategy Officer) and three key managers of the Group.
The Plan qualifies as "of particular relevance" within the meaning of art. 84-bis, par. 2 of the Issuer Regulations.
The Plan involves the grant of new ordinary shares obtained from a capitalisation issue through the allocation of profits or retained earnings pursuant to art. 2349 of the Italian Civil Code, or, at the discretion of the Board of Directors, the grant of the Company's ordinary shares to participants taken from its treasury shares.
A condition of access to the Plan, which is based only on shares, is that participants co-invest a portion of their annual bonus for 2015 and 2016, if achieved and payable, which will be conditional on achieving minimum financial performance targets in the period 2015-2017, namely the Group's aggregate Adjusted EBITDA in the period and the average ROCE (Return On Capital Employed) for the period.
 
The Plan has the following objectives:
·         to generate strong commitment by the Group's Management to achieving the targets for additional growth in profits and return on capital employed over the next three years;
·         to align the interests of Management with those of shareholders by using share-based incentives, and promoting stable share ownership of the Company;
·         to ensure the long-term sustainability of the Group's annual performance through the mechanism of co-investing part of the annual bonus.
 
The information memorandum relating to the incentive scheme and report on the amendments to the by-laws in connection with the proposed share capital increase serving the Plan, will be published within the legally required deadline.
 
 
The Prysmian Group's Annual Report at 31 December 2014, approved by the Board of Directors today, will be made available to the public by 26 March 2015 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 and in the mechanism for the central storage of regulated information known as "1Info" at www.1info.it. The present 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 future results may differ materially from what is expressed in forward-looking statements for a variety of factors.
The managers responsible for preparing corporate accounting documents (Carlo Soprano and Andreas Bott) 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.
 
The results at 31 December 2014 will be presented to the financial community during a conference call to be held today at 18:00 CET, a recording of which will be subsequently made available on the Group's website: www.prysmian.com.
The documentation used during the presentation will be available today in the Investor Relations section of the Prysmian website at www.prysmian.com, and can be viewed on the Borsa Italiana website www.borsaitaliana.it and in the central storage mechanism for regulated information at www.1info.it.
 
 
[1]Adj EBITDA is defined as EBITDA before non-recurring income/(expenses), as reported in the table in Annex B.
[2]Adj operating income is defined as operating income before non-recurring income/(expenses) and the fair value change in metal derivatives and in other fair value items.
[3]Adj net profit is defined as net profit before non-recurring income and expenses, the fair value change in metal derivatives and in other fair value items, the effect of currency and interest rate derivatives, exchange rate differences, non-monetary interest on the convertible bond and the related tax effects.
[4] The audit of the consolidated financial statements and separate financial statements had not yet been completed as at today's date.

 

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Maria Cristina Bifulco

Chief Investor Relations, Sustainability and Communication Officer