Consolidated Financial Statements >
Directors’ Report
EXTERNAL RISKS
MARKET RISKS
Risks associated with trends on the Group’s markets
Some of the markets for the Prysmian Group’s products,
mainly relating to the Trade & Installers business area, the
Power Distribution business line and certain applications in
the Industrial business area, are subject to cyclical fluctuations
in demand and are influenced by overall trends in GDP growth.
Although the diversified nature of the Group’s markets and
products reduces its exposure to cyclical trends in demand
on certain markets, it is not possible to guarantee that such
cyclical trends will not have a significant impact on the Group’s
activities, results of operations and statement of financial
position.
In addition, demand for products in the energy cables market
is also influenced by the spending plans of Utilities companies
and by overall energy consumption, and also in part by
construction sector trends, while demand for products in the
telecom cables industry is heavily influenced by the spending
plans of telecom operators.
Financial year 2012 reported general global stability in volumes
on the prior year, although several business segments more
exposed to cyclical trends recorded a slowdown in demand
in the course the year, partly due to growing concerns about
Eurozone and US debt sustainability. The general stability in
volumes did not permit a significant improvement in plant
utilisation, which remained well below pre-crisis levels, with
a consequent maintenance of competitive pressure on sales
prices and therefore on margins.
Despite these conditions, the Prysmian Group achieved
satisfying results both in terms of profits and cash flow;
however, if another significant downturn in demand should
recur in coming quarters in the Trade & Installers, Power
Distribution (partly linked to trends in the construction
market), Industrial and Telecom businesses, combined with
a slowdown in order intake in the High Voltage underground
cables business, the Group cannot exclude that the
consequent sharp downturn in business might have a material
impact on its activities, results of operations and statement of
financial position.
Risks associated with the competitive scenario
Primarily in the Trade & Installers business area and in the
Power Distribution business line, although less so, competitive
pressure due to a possible further reduction in demand could
translate into additional pressure on prices. Many of the
products offered by the Prysmian Group in this business are
made in compliance with specific industrial standards and
are largely interchangeable with those offered by its major
competitors; therefore, in such cases, price is a key factor in
customer choice of supplier. Although the competitive scenario
for this business may vary by country or region, one constant
is the ever larger number of competitors, ranging from those
capable of competing globally to smaller ones whose presence,
in an individual country or region or an individual business line,
may be comparable to that of the principal players.
Even though the Prysmian Group believes it will be able to
cut costs in the face of contracting sales volumes, it may not
be able to reduce them sufficiently to match the possible
contraction in sales prices, with a consequently adverse
impact on its activities, results of operations and statement of
financial position.
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| 2012 annual report prysmian group
