Prysmian S.p.A., first-quarter 2009 consolidated results

Positive performance by high voltage and submarine cables business. 
Sales hold up in industrial cables segment.
Free cash flow euro 281 million in last 12 months.   

•  Sales: euro 926 million (euro 1,216 million in first quarter 2008)
• Organic change in sales: -11.5% 
•  Adj EBITDA : euro 90 million (euro 129 million in first quarter 2008; -29.6%)
•  Adj Operating Income : euro 74 million (euro 113 million in first quarter 2008; -33.6%)
• Net profit: euro 91 million (euro 103 million in first quarter 2008; -11.1%)
• Adj net profit : euro 45 million (euro 72 million in first quarter 2008; -37.5%)
• Net Financial position improved to euro 641 million from euro 758 million at 31 March 2008

The Board of Directors of Prysmian S.p.A., a worldwide leading group in the industry of cables and systems for energy and telecommunications, has approved today the consolidated results for the first quarter of 2009 (which are not subject to audit). 

The economic downturn, already evident in the fourth quarter of 2008, continued throughout this period. The Group has faced this market scenario by continuing to pursue its strategy of focusing on higher value-added and high-tech segments. Sales amounted to Euro 926 million in the first quarter of 2009. Net of metal price effects, currency translation effects and changes in the group perimeter, organic growth reported a negative variation of 11.5% on the first quarter of 2008, when the Group had benefited from a still very positive market trend. The growth of sales in the sectors of high voltage underground and submarine cables combined with the performance of industrial cables - particularly those for Oil & Gas, renewable energy and for infrastructure - has allowed the Group to retain a satisfactory level of profitability, posting a profit of Euro 91 million, representing 9.8% of sales (8.4% in the first quarter of 2008), partly due to the positive fair value of metal derivatives.

At the end of March 2009 the Group's order book for high voltage underground cables covered almost all sales expected for the full year, while the order book for submarine cables covers production capacity for 2009-2010.

Adjusted EBITDA amounted to Euro 90 million compared with Euro 129 million in the corresponding period of 2008 (-29.6%); this result includes negative exchange rate effects of Euro 4 million relative to the first quarter of 2008. The margin on sales came to 9.8% compared with 10.6% in the first quarter of 2008. The Group was able to limit the impact of lower sales on profitability thanks to its actions to reduce fixed costs and improve industrial efficiency. 

EBITDA  amounted to Euro 88 million compared with Euro 128 million in the first quarter of 2008 (-30.9%). The margin on sales was 9.5%, compared with 10.5% in the corresponding period of 2008.

Adjusted operating income was Euro 74 million compared with Euro 113 million in the first quarter of 2008 (-33.6%), with the margin on sales down to 7.9% from 9.3% in the corresponding period of 2008. Operating income amounted to Euro 72 million compared with Euro 112 million in the first quarter of 2008, with the margin on sales down to 7.8% from 9.2%.

Net finance costs and income were a positive Euro 54 million in the first quarter of 2009, up from a positive Euro 23 million in the corresponding period of 2008. This improvement mainly reflects lower finance costs of Euro 5 million, the impact on the income statement of positive fair value for metal derivatives (Euro 56 million in the first quarter of 2009 compared with Euro 35 million in 2008), and higher finance income from exchange differences and currency derivatives (Euro 12 million compared with Euro 7 million in the first quarter of 2008).

The Group generated a negative Euro 53 million in Free cash flow (before dividends) in the first quarter of 2009, compared with a negative Euro 14 million in the corresponding period of 2008. Free cash flow (before dividends) generated over the past twelve months (April 2008 - March 2009) came to Euro 281 million.

Net profit for the first quarter of 2009 came to Euro 91 million, 11.1% below Euro 103 million reported in 2008, which had almost doubled on the year before. Adjusted net profit was Euro 45 million, compared with Euro 72 million in the first quarter of 2008 (-37.5%).

At the end of March 2009, the Net financial position amounted to Euro 641 million, improving from Euro 758 million at 31 March 2008 (Euro 577 million at the end of 2008).
 
BUSINESS PERFORMANCE AND RESULTS

Energy Cables and Systems (in millions of Euro)

Sales to third parties by the Energy Cables and Systems business amounted to Euro 824 million, posting an organic decrease of 10.4% on the first quarter of 2008. Adjusted operating income was 29.6% lower at Euro 70 million, down from Euro 100 million in the first quarter of 2008, with the margin on sales slipping to 8.5% from 9.2%.   

Utilities
Sales to third parties in the Utilities business amounted to Euro 395 million, reporting an organic decrease of 4.4%. All of this reduction was in the Power Distribution segment (low and medium voltage cables), while the high value-added segment of high voltage underground and submarine cables posted a positive performance. Thanks to contracts relating to some of the sector's largest international projects (from the SA.PE.I submarine link in Italy, to GCCIA in Bahrain, to KAHRAMAA in Qatar and the offshore wind farms in North Europe), Prysmian has confirmed its leadership in the strategic high end of the market, which is characterised by higher margins and technological barriers. The performance of the more profitable businesses has translated into an improvement in the adjusted operating margin on sales, which climbed to 12.3% from 11.6% in the corresponding period of 2008.

Trade & Installers
Sales to third parties in the Trade & Installers business amounted to Euro 241 million. The organic decrease in sales (-21.3%) is attributable to a further slowdown in the construction sector and a tough comparable basis (Q1 2008). This scenario is expected to stabilise in the second half of the year. Prysmian has focused its strategy on cash generation and tight control of working capital, as well as on actions to ensure production capacity flexibility to face market demand evolution. The Company has continued to increase its position in high value-added products, such as LS0H/Afumex fire-resistant cables, and cables for non-residential applications. Adjusted operating margin on sales went down to 3.5% from 7.3% in the corresponding period of 2008.  

Industrial
Sales of Industrial cables to third parties amounted to Euro 170 million, remaining stable compared with the first quarter of 2008. Prysmian has focused on segments where demand has proved more resilient, such as the Oil & Gas, renewable energy and infrastructure sectors. Particularly, in the Oil & Gas segment Prysmian increased its volumes mainly thanks to the positive performance by umbilical cables, which offset the decline posted by automotive cables. The Company's diversification in the high value-added sector of flexible pipes for the oil extraction segment, is well on track with its initial plans. As confirmation of this, Prysmian recently presented its first prototypes at the Offshore Technology Conference 2009 in Houston, confirming its ability to develop new know-how and technology. Adjusted operating margin on sales went down from 9.4% to 7.7%.

Telecom Cables and Systems (in millions of Euro)

Sales to third parties by the Telecom Cables and Systems business amounted to Euro 102 million. The organic decrease in sales (-20.4%) is mainly attributable to the sharp downturn in demand for copper cables, while the contraction in sales of optical cables was less steep with a partial recovery expected over the course of the year. Adjusted operating income was down to Euro 4 million from Euro 13 million in the corresponding period of 2008, due to a particularly unfavourable geographical mix and the exchange rate effect. Adjusted operating margin decreased from 9.6% to 4.5%.

Within the optical cables sector, performance varied widely between the different geographical areas, with higher sales in China - where Prysmian has managed to strengthen its position in the market with local telecom operators - partly offsetting lower sales in North America and Australia. The reduction in sales of copper cables is particularly due to certain investment projects postponed by telecom operators to later in the year.

SALES AND RESULTS BY GEOGRAPHICAL AREA

The Group's sales in EMEA (Europe, Middle East and Africa) reported a 9.7% organic reduction, mainly due to lower volumes in the Trade & Installers, Power Distribution and Telecom segments. EMEA accounted for 69.7% of total sales in the period.
Sales in North America posted a 42.9% organic reduction, due to the widespread contraction in demand in all the Group's segments. Sales in North America accounted for 9.2% of total sales in the first three months of 2009. 
Sales in Latin America reported 5.4% organic growth, particularly thanks to the performance in the Industrial segment (especially by cables for the Oil & Gas sector) and to good results by Power Distribution. The region accounted for 10.5% of total sales in the first three months of 2009.   
Sales in APAC (Asia Pacific) were largely stable relative to the first quarter of 2008. Sales relating to certain major projects in Indonesia and Australia offset the reduction in volumes on the Chinese market. Asia Pacific accounted for 10.6% of total sales in the first three months of 2009.
(*) EMEA: Europe, Middle East and Africa

BUSINESS OUTLOOK

As already evident in the second half of 2008, the first quarter of this year confirmed the current weakness in the world economy, which is expected to continue throughout 2009. The decline in consumption and investment, generated by the banking crisis, first affected the United States and then Europe and the rest of the world.  Given this economic scenario, the Group expects to see continued weak demand in coming months in the Trade & Installers and Power Distribution businesses and for certain products in the Industrial segment more exposed to cyclical trends and a more resilient demand for power transmission and industrial applications such as OG&P and renewable energy.
Based on the results achieved in the first three months, in line with the internal forecasts, combined with the full order book in the higher value-added businesses, FY 2009 adjusted EBITDA is expected in the range of Euro 400 million with a margin of fluctuation of plus/minus 10%. This range reflects the uncertainty over the development of the reference markets in the second half of the year (FY2008: Euro 542 million).
The Group also intends to continue rationalising and improving efficiency in its industrial footprint, while confirming its investment plans in higher value-added businesses to strengthen its presence in the most profitable, high-growth segments.  

Lastly, based on the statements provided by the directors, the Board of Directors announced that it had verified, under the self-regulatory code for listed companies and par. 3, art. 148 of the Unified Financial Act, that the following directors qualified as independent: Wesley Clark, Giulio Del Ninno, Fabio Labruna, Francesco Paolo Mattioli and Udo Günter Werner Stark.

The Quarterly report at 31 March 2009 will be filed at the Company's registered offices at Viale Sarca 222, Milan and with Borsa Italiana S.p.A. in compliance with relevant regulations. It will also be available on the corporate website at www.prysmian.com.

This document may contain forward-looking statements relating to future events and 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 as a result of a variety of factors. Mr. Pier Francesco Facchini, manager responsible for preparing corporate accounting documents, hereby declares, pursuant to par. 2. art. 154-bis of Italy's Unified Financial Act, that the accounting information contained in this press release corresponds to the underlying documents, accounting books and records.