Consolidated Financial Statements >
Directors’ Report
122
| 2012 annual report prysmian group
INDUSTRIAL ACTIVITIES
The Group’s manufacturing operations are carried out
through a highly decentralised model, involving 91 plants in
33 different countries. The wide geographical distribution
of plants is a strategic asset, allowing the Group to react
relatively fast to different market requirements. Over the
course of 2012 the Prysmian Group continued to implement an
industrial strategy based on: (i) focus on higher value-added
products, while maintaining a well-diversified geographical
presence to minimise distribution costs; (ii) concentration of
high-tech product manufacture in a limited number of plants
to benefit from economies of scale, to increase manufacturing
efficiency and to reduce net capital employed.
The acquisition of Draka in 2011 has allowed Prysmian to
become a recognised world leader and to increase not only
the diversification of its product/customer portfolio, mainly
in the Telecom, Industrial and T&I businesses, but also its
overall production capacity. The process of integrating Draka’s
industrial activities, started in 2011, continued during the
year with the gradual extension of the Prysmian Group’s
organisational models and systems of control to the acquired
production facilities; at the same time, major strategic
investments continued in submarine cables, high voltage
cables, optical cables and fibre.
During the year, industrial plants were finally closed in Derby
in the UK, in Hickory in the USA, in Eschweiler in Germany,
in Livorno Ferraris in Italy, in Sant Vicenç dels Horts in Spain
and in Singapore, with their machinery transferred to other
Group factories. The purpose of concentrating production
sites in this way has been to optimise cost structure within
individual countries and to rationalise production activities, in
line with the forecast synergies communicated to the financial
community in 2011.
Gross investments amounted to Euro 152 million in 2012, a
slight decrease from Euro 159 million the previous year, as
a result of optimising capital employed after the transition
period following the merger with Draka.
Investments to increase production capacity accounted
for 58% of the total. Production capacity increases mostly
referred to the Utilities and Industrial business areas and
to the Optical Cables business line. In particular, work was
started in the year to increase capacity at the Arco Felice plant
in Naples to allow it to fulfil the contract for the Western
Link HVDC connection, and so ensure greater flexibility
in supporting the bigger order book. Other significant
investments related to the plants in Sorocaba (Brazil),
Durango (Mexico) and Liverpool (Australia), to meet the
growing local demand in power distribution, automotive and
mining segments. At the same time, investments continued
in the production of high voltage cables in Rybinsk (Russia),
direct current submarine cables in Pikkala (Finland) and high
voltage direct current underground cables in Gron (France).
In the Telecom business, projects continued to increase fibre
and optical cable production capacity at the Sorocaba facilities
in Brazil in order to meet growing demand for optical cables in
the South American market. In view of the massive broadband
development programme throughout the country, additional
investments were made in Australia to produce cables
locally using ribbon technology. Lastly, work continued at the
European optical fibre plants in Battipaglia (Italy) and Douvrin
(France) to reduce fibre manufacturing costs.
Capex for structural maintenance work or for worker safety
accounted for about 14% of the total.
A significant share of the investments (about 12% of the
total) was devoted to research and development and to the
continuous improvement of information systems. In particular,
there was continued expenditure on implementing the SAP
Consolidation project, aimed at standardising the information
system in all the Group’s operations over the next few years; in
2012, the new ERP system was rolled out to Estonia, Finland,
Germany and Slovakia. Lastly, 16% of total investment
expenditure went on achieving efficiencies to reduce fixed and
variable costs, particularly in relation to materials usage and
product design.
The Group focuses on higher value-added products for a geographically wide market,
concentrating high-tech product manufacture in a limited number of plants to increase
efficiency and reduce capital employed.
