Italy: Prysmian Group Releases First Quarter 2012 Results
The Board of Directors of Prysmian S.p.A. has approved the Group’s consolidated results for the first quarter of 2012 (which are not subject to audit).
” The integration with Draka has led to a significant growth in size – comments CEO Valerio Battista -, allowing sales to be better distributed geographically and the range of products and services offered to be enlarged. The increased share of Northern Europe, North America and Asia and strengthening of the Telecom and Industrial businesses have neutralised the reduction in demand in Southern Europe in more cyclical businesses like Trade & Installers and Power Distribution. Despite continued uncertainty in the macroeconomic environment, namely in Europe, the Group expects to see a positive trend in demand for submarine cables in 2012 as well as for renewable energy, oil & gas and optical cables. Based on these expectations, also supported by a robust order book, we expect full-year Adjusted EBITDA to be in the range of €600-650 million, up from €568 million in 2011″.
Group Sales amounted to €1,874 million compared with €1,881 million in the prior period (pro-forma figure that consolidates Draka for the entire period January-March 2011). Assuming the same group perimeter and excluding metal price and exchange rate effects, the organic change was +2.5%.
Group Adjusted EBITDA amounted to €130 million, up 9.1% from the first quarter 2011 pro-forma figure of €119 million (€101 million consolidating Draka for just the month of March 2011). The increase is particularly attributable to the improved results in the Industrial and Telecom business areas.
Group EBITDA amounted to €115 million, up +24.2% from the figure of €92 million (consolidating Draka just for the month of March 2011). Non-recurring expenses amounted to €15 million, and refer to restructuring costs arising from integration of the two groups; they particularly include restructuring costs in connection with the closure of the Livorno Ferraris site in Italy and the Fercable site in Spain, where agreement has already been reached with the trade unions.
Group Adjusted operating income was €91 million, up 8.8% from the first quarter 2011 pro-forma figure of €84 million (€76 million consolidating Draka for just the month of March 2011). Amortisation and depreciation charges increased on the corresponding quarter last year due to the full impact on the first quarter 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 €89 million, significantly higher (+87.9%) than the figure of €47 million (consolidating Draka just for the month of March 2011). This increase is due to the growth in EBITDA and the positive change in the fair value of metal derivatives.
Net finance income and costs, including the share of income/(loss) from associates and dividends from other companies, reported a negative balance of €28 million, unchanged from the prior year figure (consolidating Draka for just the month of March 2011). Although interest expense increased, due to the full impact on the quarter of the growth in debt following the Draka acquisition, there was an improvement in the net result from derivatives and exchange rate differences.
Adjusted net profit increased by 25.0% to €45 million from €36 million in the first quarter of 2011 (reflecting Draka’s consolidation for just the month of March 2011). Net profit also improved significantly to €42 million from €13 million in the first quarter of 2011 (reflecting Draka’s consolidation for just the month of March 2011).
Net financial position at the end of March 2012 amounted to €1,273 million, compared with €1,064 million at 31 December 2011 (improving from the €1.460 million at March 2011), having been particularly affected by the following factors:
– positive cash flows from current operations of €103 million;
– increase of €243 million in working capital due to the seasonality of sales and to metal prices, particularly reflecting growth in the value of inventories of raw materials, semi-finished products and finished goods;
– payment of €15 million in taxes;
– net operating investments of €25 million;
– purchase of the remaining Draka shares under the squeeze-out procedure for approximately €9 million;
– payment of €17 million in net finance costs;
– Free cash flow (before dividends and the outlay to acquire Draka), although negative because of the typical seasonal nature of the first quarter, reported an improvement of about €45 million, (excluding the outlay to acquire the total control of the Draka joint ventures in Brazil), reflecting the growth in operating profitability, the slight improvement in working capital on the first quarter of last year and lower outlays for finance costs.
ENERGY CABLES AND SYSTEMS PERFORMANCE AND RESULTS
• Submarine cables order book grows thanks to record Westernlink Contract
• Industrial: increase in sales and profits
• High voltage underground cables: stable demand; growing contribution to results expected from sesecond half
• Slight decrease in power distribution volumes
• Revenues basically stable for T&I
Sales to third parties by the Energy Cables and Systems segment amounted to €1,528 million compared with the first quarter 2011 pro-forma figure of €1,559 million (€1,284 million consolidating Draka for just the month of March 2011), delivering a positive organic change of +1.8%. Adjusted EBITDA amounted to €95 million, reporting an increase of +1.1% on the first quarter 2011 pro-forma figure of €94 million (€84 million consolidating Draka for just the month of March 2011).
Sales to third parties by the Utilities business amounted to €489 million, compared with the first quarter 2011 pro-forma figure of €514 million, with a 3.8% negative organic change particularly coming from the power distribution and high voltage sectors and concentrated in European markets. The organic reduction in sales affected the profitability of the Utilities business with Adjusted EBITDA amounting to €46 million compared with a first quarter 2011 pro-forma figure of €57 million. This contraction in profitability is mainly attributable to the impact of the execution of projects acquired in 2009/2010 with lower margins as well as the reduction in power distribution volumes and the phasing of submarine projects.
Demand for high voltage underground cables was stable, reporting a decrease in sales on European domestic markets, while more positive results were achieved in countries with growing demand for energy infrastructure such as Russia, Brazil, China, India and the Middle East. A recovery in sales and profits, particularly in Europe, is expected from the second half, thanks to the phasing of certain projects and to the positive investment trends in renewable energy and new interconnections; organic growth for the full year is expected to be positive. The order book provides sales visibility for about one year.
Sales by the submarine cables and systems business increased thanks to the execution of large interconnections projects and development of renewable energy. In February 2012, the Group achieved a new historic milestone by winning the Westernlink project worth approximately €800 million for the construction of the Scotland-England submarine link. Also of note is the Butendiek offshore wind farm project to which, thanks to synergies and its larger product and technology range, the Group will supply both the cable link with the mainland and the interarray connections between turbines (manufactured at the Norwegian factory in Drammen acquired with Draka).
The order book has additionally increased providing sales visibility for nearly three years and reflects continued robust growth in demand from the development of renewables (offshore wind farms in particular) and the need for new interconnections.
Demand in the power distribution business line showed signs of a contraction compared to last year. This decline particularly occurred in central and south European markets (except for Scandinavian countries where volumes were positive), while better sales performance was seen in North and South America. The Group is focusing ever more attention on innovation and its ability to anticipate customer demand and over the last few months it has launched a new range of products and services for smart grid applications as well as niche technologies such as the new Pry Pad tool for monitoring the efficiency of electricity grids.
Trade & Installers
Sales to third parties by the Trade & Installers business amounted to €541 million, posting a small organic increase (+2.5%), compared with the first quarter 2011 pro-forma figure of €567 million. The volume recovery has been particularly concentrated in North and South America, and has also benefited profitability. In Europe, improvements, albeit minor, have been reported in the Nordic countries, Eastern Europe and Great Britain, while the situation has proved tougher in Central and Southern Europe. The Group has nevertheless been able to maintain its share in major European markets focusing on business relationships with the key customers. Even in South America the Group has maintained and in some cases increased its market share in a competitive but growing construction market. Adjusted EBITDA amounted to €18 million, remaining stable compared with the first quarter last year.
Sales to third parties by the Industrial cables business amounted to €464 million, delivering substantial 15.2% organic growth, compared with the first quarter 2011 pro-forma figure of €413 million. On the whole markets were stable or growing, with significant differences between the various geographical regions and industry segments. Growth was particularly driven by the oil sector, with an increasingly important contribution from products and technologies for offshore oil drilling. Sales of flexible pipes made a positive contribution (more than €10 million in the first quarter), with the order book expected to grow in the second half thanks to qualification of 6.0″ diameter flexible pipes. Umbilicals are expected to see a short-term decrease in volumes due to installation delays for some of the Petrobras projects, while the drivers of growth are expected to remain unchanged in the medium term; the Umbilicals business also secured its first orders in the interesting East African market. DHT cables posted a growth in volumes in the USA and the North Sea. Positive performances were also reported in renewables, particularly in China, Australia and India, as well as in specialties and OEM which experienced growth in Asia, Australia and North America, in contrast with a certain weakness in demand in Europe. The Group confirmed itself as world leader in Elevator cables after acquiring the important project to supply cables for installations in the new World Trade Center in New York. Lastly, the Automotive cable market has proven stable in Europe and growing in Asia, and North and South America.
Adjusted EBITDA amounted to €31 million, reporting an increase of €13 million on the first quarter 2011 pro-forma figure.
Prysmian Group is a world leader in the energy and telecom cables and systems industry. With sales of some €8 billion in 2011, 22,000 employees across 50 countries and 97 plants, the Group is strongly positioned in high-tech markets and provides the widest range of products, services, technologies and know-how. In the Energy sector, Prysmian Group operates in the business of underground and submarine power transmission cables and systems, special cables for applications in many different industrial sectors and medium and low voltage cables for the construction and infrastructure industry. In the Telecom sector, the Group manufactures cables and accessories for the voice, video and data transmission industry, offering a complete range of optical fibres, optical and copper cables and connectivity systems.
Subsea World News Staff, May 11, 2012