CONSOLIDATED FINANCIAL STATEMENTS >
DIRECTORS’ REPORT
4
| 2013 ANNUAL REPORT | PRYSMIAN GROUP
Further improvement in net financial position, strong cash
flow generation capability and commitment to cost control,
have all helped to confirm our Group once again in 2013 as a
benchmark in the cable industry for solidity, profitability and
creation of value for stakeholders.
Market scenario
The macro environment in 2013 was still generally difficult,
although trends diverged between the various markets and
geographical areas and signs of partial stabilisation were
seen in the second half of the year. In this context, also
beset by negative exchange rate effects, the Prysmian Group
has achieved its stated annual targets. Positive sales and
earnings performance by the higher value-added businesses of
power transmission and certain areas of the industrial cables
market, in line with the Group’s strategy, limited the negative
impact of falling demand in sectors like power distribution,
construction, renewables and telecommunications.
Business performance
Group Sales amounted to Euro 7,273 million, posting negative
organic growth of -3.1% on 2012, assuming the same group
perimeter and excluding metal price and exchange rate
effects. The negative trend showed signs of reversing in
the second half of the year, with organic growth at -0.9%
compared with -5.3% in the first half. In line with its growth
strategy, our Group performed well in high value-added
businesses, particularly underground and submarine power
transmission and certain business areas of the industrial
cables market. In contrast, the power distribution business
continued to experience difficulty, while the second half saw
the building wires sector return to basic stability. The sharp
decline in demand for telecom and renewable energy cables,
underway since the end of 2012, affected the overall sales
figure for 2013. The geographical distribution of Sales reflects
a recovery in North and South America, except for the Telecom
business, and persistent weakness in Central Europe and
the Mediterranean. Asia Pacific reported strong demand for
industrial cables but continuing weak demand for building
wires and power distribution cables. In terms of profitability,
the Group achieved its originally announced Adjusted EBITDA
target, set in the range Euro 600-650 million. In fact, Adjusted
EBITDA amounted to Euro 612 million, down 5.5% on 2012
mainly due to negative exchange rate effects of Euro 23
million as well as to the decline in the Telecom business. This
profitability measure also confirms the signs of improvement
LETTER TO STAKEHOLDERS
in the second half of 2013, with Adjusted EBITDA rising
to Euro 330 million from Euro 282 million in the first half.
Margins improved slightly, with Adjusted EBITDA representing
8.4% of sales, up from 8.2% in 2012 (9.0% in second half
2013). Of particularly positive significance was the continued
improvement in Net financial position, which stood at Euro
834 million at the end of December 2013, down from Euro 918
million at 31 December 2012.
Strategy development
The process of integration with Draka has continued
successfully in 2013. The target synergies have been exceeded,
reaching an aggregate of Euro 120 million at the end of
2013 compared with a target of Euro 100 million. Synergies
achievable in the procurement area are almost at a run-rate
level (approximately Euro 45 million); Euro 60 million in
savings have been obtained from fixed cost synergies and Euro
15 million from optimising the manufacturing footprint. Target
synergies by 2016 are confirmed at an aggregate Euro 175
million, particularly derived from further rationalisation of the
manufacturing footprint and from organisational rightsizing.
This target, originally set for 2015, will be pursued while paying
particular attention to the maintenance of customer service
levels.
Strategic investments for growth
In line with its growth strategy, the Group has focused its
investments on high-tech, high value-added businesses
and in geographical areas with the best growth prospects.
Approximately Euro 61 million was invested in 2013 to increase
production capacity and develop the product portfolio; the
major investments included the new optical cables plant in
Slatina (Romania) and the new high voltage cable factory in
Russia. Since its IPO in 2007, the Group has invested some
Euro 462 million in total to improve product mix and develop
the product portfolio, with a focus on: production capacity
increases for submarine cables and systems; geographical
diversification, cost reduction and development of high
voltage underground products; reduction of production costs
for telecom cables; and development of high value-added
products (SURF) in the industrial cables business.
Human Capital Development
With the goal of strengthening the engagement and
involvement of all its employees in the business and
achievement of its targets, the Group successfully launched
