The strong growth in the high voltage underground and submarine cable businesses has allowed the Group to boost its sales to Euro 2,659 million. Net of metal price effects, currency translation effects and changes in the scope of consolidation, organic growth in the first half of 2008 was 5.3%. This marks a significant improvement on the first quarter of the year when organic sales growth was 3.4%. Rising performance by the utilities business accounted for a large part of this improvement, achieving an organic growth of 14.2% in the first half year and accelerating from the 11.3% organic growth recorded in the first quarter. In particular, Prysmian confirmed its leadership position in the high value added sector of underground and submarine systems for high and extra high voltage power transmission, securing new major contracts in the first half of 2008 such as the Kahramaa project in Qatar and Greater Gabbard, the world’s largest off-shore wind farm being built in the UK, which join other large projects currently in progress worldwide such as SA.PE.I in Italy, Transbay in the USA, GCCIA in Bahrain and Cometa in Spain.
“The first half of 2008 has confirmed the long-term trend by utilities to invest in projects to modernise and upgrade power transmission infrastructure” – explains Valerio Battista, the Chief Executive Officer –. “Prysmian was able to meet this demand globally and can now rely on a solid order book ensuring high visibility on future sales growth: the order book for submarine cables covers production capacity until the first half of 2010, while orders for high voltage underground cables already cover more than 50% of production capacity in 2009. Recently we have also taken a strategic step forward, signing an agreement with the oil company Petrobras, allowing us to expand our scope of operations into high-tech, high-margin businesses and entering with a full range of products into the industry of services for the off-shore oil drilling industry”.
Prysmian and Petrobras have signed a four-year Technical Cooperation Agreement involving the design, production and supply of flexible pipes for off-shore oil drilling with an initial value of USD 135 million. Prysmian will start up a new plant in Vila Velha (Brazil) by mid 2010 for this purpose. It will be located at the same site currently dedicated to the production of umbilical cables and will involve an overall investment of USD 110 million, most of which will be made in 2009. The new flexible pipes plant is expected to generate sales in excess of USD 600 million in the period 2010-2014. Prysmian intends to extend this business to other oil-drilling regions in the world and at the service of other customers.
In the Telecom cables business, demand for optic fibre cables and systems keeps growing in most of the regions; this led to a more than 10% increase in volumes and also to an improvement profitability despite the negative impact of the weak dollar.
Adjusted EBITDA amounted to Euro 291 million in the first half of 2008, up 8.2% on Euro 269 million in the corresponding period of 2007, with margin on sales rising to 10.9% from 10.4% in the first half of 2007. The increase in profitability was achieved thanks to strong growth in volumes in the higher added value businesses of high voltage and submarine cables. In the Trade & Installer business efforts focused on product mix and sales channel improvement, with the aim of safeguarding profitability and limiting exposure to the weakest markets, such as residential construction, and to the products most sensitive to rising raw material prices.
EBITDA reached Euro 280 million in the first half of 2008. EBITDA amounted to Euro 299 million in the corresponding period of 2007, having benefited from Euro 30 million in net non-recurring income compared with Euro 11 million in net non-recurring expenses in the first half of 2008.
Adjusted operating income climbed by 9.9% in the first half of 2008 to Euro 260 million, up from Euro 236 million in the corresponding period of 2007. The margin on sales also improved to 9.8%, up from 9.1% in the first half of 2007. Operating income amounted to Euro 248 million compared with Euro 266 million in the first half of 2007, which had benefited from Euro 30 million in net non-recurring income compared to Euro 12 million net non-recurring expenses in the corresponding period of 2008.
Net financial charges improved in the first half of 2008, reporting net costs of Euro 10 million compared with net costs of Euro 67 million in the corresponding period of 2007. This improvement was mainly due to the Euro 59 million bank fees write-off in the first half of 2007 and to the recognition in the income statement of positive valuation of derivatives (Euro 23 million before tax in 2008 compared with Euro 39 million in the first half of 2007).
Net income rose considerably in the first half of 2008, climbing from Euro 150 million to Euro 190 million (+26.5%). This result benefited from Euro 10 million in net positive extraordinary items, mainly attributable to the recognition in the income statement of the derivatives valuation.
The Prysmian Group kept delivering strong cash generation also in the first half of 2008, achieving a Cash flow from operations (before changes in net working capital) of Euro 290 million, compared with Euro 268 million in the corresponding period of 2007. Part of this positive cash flow was absorbed by the increase in net working capital due to the high seasonality of the business and to the significant growth of high voltage and submarine business, and lastly by Euro 42 million in net investments (including Euro 2 million related to the acquisition of Facab-Lynen). Free cash flow (before dividends) generated in the last twelve months (July 2007 – June 2008) amounted to Euro 249 million, reporting a major improvement on the corresponding amount at the end of March 2008 (Euro 194 million).
At the end of June 2008, net financial position amounted to Euro 780 million, improving from Euro 908 million at 30 June 2007.