08 Nov 2016
Prysmian S.P.A Nine-Month results 2016
Sales rise to €5,660 M ( Organic growth +1.8%, in line with 1H 2016)
Project execution capability drives growth by Energy Projects (+20.9%)
Positive trend for Telecom confirmed( +8.4%)
Improvement in profitability by all businesses, except Oil & Gas
ADJ EBITDA climbs to €527 M(+11.5%), with margin at 9.3% (8.5% at 30/9/2015)
Net profit attributable to owners of the parent €188 million (+33.3%)
Net financial position €1,017 M (€822 M excluding acquisitions; €955 M at 30/9/2015)
FY 2016 guidance confirmed; target at upper end of ADJ EBITDA range €670 M – €720 M
Milan, 8/11/2016. The Board of Directors of Prysmian S.p.A. has approved today the Group's consolidated results for the first nine months of 2016.
"Our capability to execute the major power transmission projects in our portfolio and confirmation of the solid growth trend by Telecom have driven the Group's 2016 nine-month results," explained CEO Valerio Battista. "Sales revenue has grown in line with the first half of the year, but above all we have seen another leap in profitability, with rising margins in almost all our businesses except for Oil & Gas, still affected by the very poor market conditions. Among the winning factors our insistent focus on reducing costs and our progress in rationalizing the manufacturing footprint. The market trend is confirmed as solid for the strategic businesses of power transmission, interconnections, offshore windfarms and optical cables for broadband telecom networks, while we expect the more cyclical businesses to gradually stabilise and Oil & Gas to experience continued difficulties. Based on these prospects, we are able to confirm the profitability targets for full year 2016, with ADJ EBITDA at the upper end of the range of €670-720 million."
Group Sales amounted to €5,660 million, posting organic growth of +1.8% (in line with the organic growth recorded in the first half of the year), assuming the same group perimeter and excluding metal price and exchange rate effects. The strong growth in sales for Energy Projects is attributable to favourable phasing and improved execution capabilities for submarine projects. High voltage underground also performed well. The Telecom business has confirmed a solid growth trend for optical cables, also thanks to the recovery in fibre manufacturing competitiveness. Energy & Infrastructure report signs of slowing for Trade & Installers, partially offset by Power Distribution, which has posted positive results for the first nine months albeit with a slowdown in the third quarter as expected. Industrial & Network Components present a mixed picture, with weaker sales for Specialties & OEM but positive performance by Elevators and Automotive. Lastly, difficult market conditions continue to afflict the Oil & Gas business, impacted by a sharp drop in volumes and prices especially in the Core Oil&Gas cables segment.
Adjusted EBITDA amounted to €527 million (of which €28 million from the additional contribution of fully consolidating Oman Cables Industry), up from €473 million in the first nine months of 2015 (+11.5%), despite the adverse impact of €18 million in exchange rate movements compared with the same period of 2015. Margins improved considerably with Adjusted EBITDA representing 9.3% of sales, up from 8.5%.
EBITDA amounted to €488 million, up 9.7% from €445 million in the first nine months of 2015, including a total of €39 million in net expenses for business reorganisation, net non-recurring expenses and other net non-operating expenses (€28 million in the first nine months of 2015).
Group Operating Income came to €333 million, improving by +17.2% from €284 million in the first nine months of 2015.
Net finance costs came to €58 million compared with €77 million in the first nine months of 2015, reporting a reduction of €19 million mainly attributable to lower finance costs associated with improved efficiency of the financial structure and a reduction in average financial exposure.
Net profit came to €198 million, marking a significant increase from €139 million in the first nine months of 2015 (+43.0%). Net profit attributable to owners of the parent amounted to €188 million compared with €141 million in the corresponding period of 2015 (+33.3%).
Net Financial Position reported a balance of €1,017 million at 30 September 2016 (€955 million at 30 September 2015). Excluding the impact of recent acquisitions (OCI and GCDT), net financial position would have been €822 million at 30 September 2016.
The principal factors over the previous 12 months that have influenced net financial position at 30 September 2016 are:
- €583 million in cash flow provided by operating activities before changes in net working capital
- €99 million in reductions in working capital
- €85 million in tax payments
- €138 million in net cash flow for acquisitions
- €235 million in net cash outflow for investing activities
- €69 million in net payments of finance costs
- €101 million in dividend payouts
- other effects, of which €83 million linked to the first-time consolidation of the net financial position of Oman Cables Industry and €42 million in currency translation differences affecting net financial position.
1 Adjusted EBITDA is defined as EBITDA, as described in the following note, before income and expense for business reorganisation, before non-recurring items, as presented in the consolidated income statement, and before other non-operating income and expense. The definition of this performance measure has been modified following CONSOB's implementation of the new ESMA guidelines (reference ESMA/2015/1415).
2 EBITDA is defined as earnings/(loss) for the period, before the fair value change in metal derivatives and in other fair value items, amortisation, depreciation, and impairment, finance costs and income, dividends from other companies and taxes.
- Project execution drives growth in Submarine cables
- Positive performance by High Voltage underground
- Offshore wind projects in Europe expected to accelerate
Energy Projects sales to third parties jumped to €1,172 million, posting organic growth of +20.9% on the first nine months of 2015. Profitability also improved, with Adjusted EBITDA at €172 million (+12.4%). The Adjusted EBITDA margin on sales was 14.6% versus 15.4% (13% excluding the €24 million write-up related to the Western Link project).
Sales of Submarine Cables and Systems have grown considerably, driven by progress in the execution of the important projects currently in the Group's order book. Margins are also much improved thanks to the focus on project management and to the enhancement of cable installation assets, making it possible to insource more of the installation operations. The outlook for 2016 is stable for power interconnections while we expect an acceleration in offshore wind projects.
Sales by the High Voltage underground business have performed particularly well, driven by the execution of the France-Italy interconnector and the execution of projects in North America and Asia Pacific. The medium-term outlook is positive for markets in the Middle East, APAC and Central Europe.
The underground and submarine power transmission order book stands at €2,600 million.
- Trade & Installers: weaker sales with better margins
- Power Distribution: 9M growth, 3Q slowdown as expected, improved profitability
- Industrial: Elevators and Automotive positive, slowdown for Specialties & OEM
Energy Products sales to third parties amounted to €3,398 million, posting negative year-on-year organic growth of -2.1%, with Oceania and certain Asian countries growing, Europe stable and a steep reduction in volumes in Brazil and Argentina. Adjusted EBITDA for the first nine months of 2016 was up +12.6% at €217 million. The Adjusted EBITDA margin improved to 6.4% on sales (5.7% in the corresponding period of 2015).
Energy & Infrastructure
Energy & Infrastructure sales to third parties amounted to €2,300 million (of which €403 million contributed by Oman Cables Industry), with year-on-year negative organic growth of -1.9%. Adjusted EBITDA climbed to €123 million (of which €28 million from the additional contribution of fully consolidating Oman Cables Industry), up +25.3% on €99 million in the corresponding period of 2015 (with the Adjusted EBITDA margin on sales improving to 5.4% from 4.5%).
The results for Trade & Installers show a slight organic decline in sales, partly attributable to the Group's decision to focus on a product and channel mix designed to protect its profitability, which has improved. Positive performances were recorded in Northern Europe, while the important South American market, like APAC and Central-Southern Europe, has continued to turn down.
Power Distribution has confirmed a positive sales trend, even if with weaker third-quarter sales as expected, and a general improvement in profitability. Most of the impetus has come from markets in Northern Europe, the Netherlands and APAC. On the downside, demand has slowed in Germany and exchange rates have had a negative impact in Argentina.
Industrial & Network Components
Industrial & Network Components sales to third parties amounted €1,021 million, posting negative organic growth of -2.5%, mainly due to the instability of investment demand in certain industrial sectors. Adjusted EBITDA improved to €95 million from €92 million in the same period of 2015, with the margin on sales rising to 9.3% from 8.1% in the first nine months of 2015.
Specialties & OEM had a negative underlying sales performance, mainly due to slowdown in the mining and nuclear power stations sectors and in renewable energy in China, as partially offset by good performance in the defence and marine sectors. The situation in South America is particularly difficult. The Elevator business has enjoyed a solid performance thanks to the Group's success in increasing its market share in North America with the sale of accessories and after-market services. The Automotive business has reported an underlying increase in sales and a slight improvement in profitability, with positive performances in APAC and Eastern Europe benefiting from the new manufacturing set-up. Sales of Network Components were slightly higher, with solid performance by High Voltage only partially affected by a Medium Voltage slowdown in Europe.
OIL & GAS
- Umbilicals sales reflecting the framework agreement in Brazil
- Project phasing impacts Core Cables business
- Focus on supply chain optimisation and effective use of manufacturing footprint
Oil & Gas sales to third parties came to €225 million, posting negative organic growth of -31.6% compared with the corresponding period of 2015. The performance of the Oil & Gas segment has been hit hard by the oil price trend, which is affecting investment decisions by the industry's players. Adjusted EBITDA for the first nine months of 2016 was €9 million compared with €21 million in the corresponding period of 2015 (-54.5%). The Adjusted EBITDA margin on sales was 4.1% (6.2% in the first nine months of 2015).
In particular, the phasing of both onshore and offshore projects in the Core Oil & Gas Cables business has resulted in a steep fall in volumes and drop in prices. Market conditions remain difficult and the Group confirms its focus on restructuring and optimizing the manufacturing footprint, continuing to rely on the greater competitiveness of its manufacturing facilities based in Asia.
In the SURF business (Subsea Umbilicals Risers and Flowlines), the performance of Umbilicals is evolving in line with expectations and reflects the renewed terms of the framework agreement in Brazil. The Group is continuing its efforts to optimise the supply chain and strengthen integration with key suppliers. The results for Downhole Technology products are in line with the corresponding period of 2015 and have benefited from full integration of Gulf Coast Downhole Technologies LLC, a company acquired in the second half of 2015.
- Higher sales and improved profitability
- growth for optical fibre and cables
- Positive performance by Multimedia Solutions
Telecom sales to third parties amounted to €865 million, with organic growth of +8.4% driven by healthy demand for optical fibre cables and by strong demand for copper cables in APAC. Adjusted EBITDA for the first nine months of 2016 came in at €129 million, posting a year-on-year increase of +20.9% and an improvement in margin to 14.9% from 12.6% in the first nine months of 2015.
The Telecom Solutions business has confirmed the positive performance of optical cables and fibre, with a solid trend in Australia, North America and France. The recovery of efficiency and competitiveness by fibre manufacturing has been reflected in a significant improvement in margins. This has been accompanied by robust demand for copper cables in APAC.
Multimedia Solutions have enjoyed a positive performance in Europe, also thanks to increased production capacity for copper data transmission cables.
The high value–added business of optical connectivity accessories has performed well, triggered by the development of new FTTx networks (providing last mile broadband) in Europe and particularly in France, Spain and the Netherlands.
The first nine months of 2016 have witnessed a macroeconomic environment with modest but mixed growth by Europe's major economies, partially eroded by the uncertainty generated by the outcome of the referendum held in the United Kingdom on 23 June 2016, with a vote to leave the European Union. In the United States growth has remained stable but less intense than in 2015. Among the main emerging economies, China and Russia are showing signs of stabilising after the considerable uncertainties seen at the start of the year, while the economic and political situation in Brazil remains challenging.
In such a context, the Group's expectation for FY 2016 is that demand in the cyclical businesses of building wires and medium voltage cables for utilities will be slightly lower than the previous year with a general stabilisation in prices. Given the positive market environment for the Energy Projects segment, the Group expects both the Submarine and High Voltage underground businesses to improve their performance. In the Oil & Gas segment, the low oil price and consequent reduction of investments in new projects are expected to adversely affect the Group's activities, especially in its Core Oil & Gas Cables business. In the Telecom segment, it is expected that the growth in demand for optical fibre cables recorded in the first part of the year, will continue through to the end of 2016.
In addition, assuming current exchange rates remain unchanged, these can be expected to have a negative impact on the FY 2016 results simply as a result of translating income statements expressed in other currencies into the Group's reporting currency.
The Group is forecasting Adjusted EBITDA for FY 2016 at upper end of the range €670-720 million, marking a considerable improvement from the €623 million reported in 2015. This forecast takes into account the current order book and the factors mentioned above, and reflects the expectations concerning full consolidation of Oman Cables Industry from 1 January 2016.
Lastly, the Prysmian Group is continuing in 2016 to rationalise its activities with the objective of achieving projected cost efficiencies and greater competitiveness in all areas of its business.
The Prysmian Group's Quarterly Financial Report at 30 September 2016, approved by the Board of Directors today, will be made available to the public 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.prysmiangroup.com and in the authorised central storage mechanism used by the company at www.emarketstorage.com. 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 nine-month results at 30 September 2016 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.prysmiangroup.com.
The documentation used during the presentation will be available today in the Investor Relations section of the Prysmian website at www.prysmiangroup.com.