Prysmian S.p.A., first-quarter 2010 results

Still weak market demand in Q1; growing trend expected from Q2
Margins decrease due to high raw material prices; profitability to improve in coming quarters

• Sales: euro 969 million (organic change -11.2%) 
• Adj EBITDA: euro 75 million (euro 90 million in Q1 2009; -17.0%) 
• Adj operating income: euro 57 million (euro 74 million in Q1 2009; -23.8%) 
• Adj net profit: Euro 31 million (Euro 45 million in Q1 2009; -31.1%) 
• NFP improved to euro 596 million from euro 641 million at 31 March 2009

FY 2010 Adj EBITDA expected in the range of euro 350-400 million euro

Milan, 13/5/2010. The Board of Directors of Prysmian S.p.A. has approved today the Company's consolidated results for the first quarter of 2010 (which are not subject to audit).

MARKET SCENARIO
The market scenario in the first quarter of the year still presented signs of uncertainty. The level of activity in Prysmian's sectors of operation has remained generally stable since the last quarter of 2009, although there are signs of a recovery in demand, the strength of which varies by sector. Based on the existing order book, volumes and profit margins are expected to gradually recover starting from the next quarter, both for higher value-added businesses (Submarine and Industrial) and the more cyclical ones (Power Distribution and Trade & Installers). In the underground High Voltage sector, sales and margins are expected to be generally stable, with the portfolio showing signs of improvement.

FINANCIAL RESULTS
Sales amounted to Euro 969 million compared with Euro 926 million in the corresponding period of 2009. Net of metal price and exchange rate effects and variation in the group perimeter, the organic change in sales was a negative 11.2%.

Adjusted EBITDA amounted to Euro 75 million (-17.0% on first quarter 2009), with the margin on sales down to 7.7% from 9.8% in the corresponding period of 2009. This reduction was largely due to pressure on margin in the T&I business area, arising from a combination of still weak demand and the high price of raw materials, and from a weak start of the year in the Industrial cables business area, particularly for OG&P and umbilical cables. The Group continues to focus on high value-added businesses, which account for more than 60% of total Adjusted EBITDA.

EBITDA amounted to Euro 72 million, down 17.9% from Euro 88 million in the first quarter of 2009, with a margin on sales of 7.5% versus 9.5% in the corresponding period of 2009.

Adjusted operating income was Euro 57 million, down 23.8% from Euro 74 million in the first quarter of 2009 and representing a margin on sales of 5.8%, down from 7.9%. Operating income - including the negative impact of Euro 4 million from fair value changes in metal derivatives compared with a positive impact of Euro 56 million in the first quarter of 2009 - was Euro 50 million compared with Euro 128 million in 2009 (-60.8%).

Net finance income and costs reported a negative balance of Euro 16 million, compared with a negative Euro 2 million in the first quarter of 2009. The change is primarily attributable to the positive impact of derivatives and exchange rate differences in the prior year.

Adjusted net profit came to Euro 31 million compared with Euro 45 million in the first quarter of 2009 (- 31.1%), reporting a 3.2% margin on sales (4.9% in the corresponding period of 2009). Net profit amounted to Euro 23 million compared with Euro 91 million in the first quarter of 2009, reporting a 2.4% margin on sales (9.8% in the corresponding period of 2009). The decrease is mainly attributable to fair value changes in metal derivatives.

Free cash flow (levered) was a negative Euro 89 million (negative Euro 53 million in first quarter 2009). This cash flow was particularly affected by the negative impact of higher metal prices on working capital (around Euro 42 million), by the cash out for the Ravin acquisition (Euro 20 million) and by bank fees and other expenses (Euro 12 million) relating to the Forward Start Agreement. Free cash flow (levered) generated over the last twelve months (April 2009 - March 2010) amounted to Euro 147 million.

At the end of March 2010, Net financial position improved to Euro 596 million from Euro 641 million at the end of March 2009 (Euro 474 million at the end of 2009). The net financial position at 31 March 2010 includes Euro 38 million impact related to the two recent acquisitions in Russia and India. The Group has significantly strengthened its financial structure thanks to the new Forward Start Agreement entered on 21 January 2010 with a syndicate of leading national and international banks; under this agreement the financing banks have made available Euro 1,070 million to refinance until end of 2014 the current Term Loan and Revolving Credit Facility at their natural maturity on 3 May 2012.

STRATEGY DEVELOPMENT
The Group has carried on its strategy of focusing on higher-tech businesses and markets with higher growth potential. In addition, to defend profitability margins, actions have been stepped up to improve industrial efficiencies, to optimise raw materials procurement and to further develop customer service. 

• Investments in high-tech businesses
In the first quarter of 2010 the Group continued with its investment plans to develop high-tech businesses, mainly to complete the new plant in Brazil for the production of flexible pipes for the off-shore oil exploitation activities. A total of Euro 11 million was invested in the quarter (Euro 21 million in the corresponding period of 2009). 

• Expansion in high growth countries
Prysmian has started to integrate RybinskElektrokabel in Russia (acquired at the end of 2009), and completed in January 2010 the acquisition of Ravin Cables with operations in India and the Middle East, with both companies now included in the Group's consolidation perimeter. New organisational structures have been defined for these companies, as well as new commercial strategies, which will focus on expanding the value-added product range. The goal is to more than double the current turnover in these countries in the next three years. 

• Focus on fixed costs and industrial efficiencies
The Group kept first-quarter fixed costs stable (Euro 101 million), having already made significant reductions in 2009. The Group kept a strong focus also on industrial efficiencies: efficiencies in materials, optimisation of logistics and production costs, and development of innovative production processes.

ENERGY CABLES AND SYSTEMS PERFORMANCE AND RESULTS 

• POSITIVE OUTLOOK FOR SUBMARINE CABLES: NEW PROJECTS EXPECTED IN NEXT QUARTERS 
• HIGH VOLTAGE UNDERGROUND CABLES: GROWTH IN ORDER BOOK IN Q1 (VS END 2009) 
• SIGNS OF RECOVERY IN POWER DISTRIBUTION; STEADY RECOVERY FROM Q2 
• SLIGHT RECOVERY IN T&I VOLUMES (+3% ON Q4 2009) STRONGER RECOVERY EXPECTED FROM Q2 
• OGP EXPECTED TO RESTART IN NEXT QUARTERS; STRONG ORDER BOOK IN RENEWABLE ENERGY

Sales to third parties by the Energy Cables and Systems segment amounted to Euro 866 million, compared with Euro 824 million in the first quarter of 2009. Net of metal price and exchange rate effects and changes in the group perimeter, the organic change in sales was a negative 11.7%. Adjusted EBITDA amounted to Euro 68 million (Euro 85 million in the first quarter of 2009), with a margin on sales of 7.8% (10.3% in the corresponding period of 2009). Adjusted operating income came to Euro 52 million (Euro 70 million in first quarter 2009), with the margin on sales down to 5.9% from 8.5% in the corresponding period of 2009.

Utilities
Sales to third parties by the Utilities business area amounted to Euro 370 million, reporting an organic decrease of 13.1%. On the whole, despite differences between the different business sectors and geographical areas, demand generally stabilised at the low levels already reached in the last part of 2009, with minor signs of improvement in both the power distribution and power transmission markets. In terms of profitability, margins were largely stable, with adjusted EBITDA staying at 14.0% of sales and adjusted operating income at 11.7%, down from 12.3% of sales.

Sales by the submarine energy cables and systems business line reported an organic increase on the corresponding period in 2009, confirming the recovery in investments by the utilities, particularly in new off-shore wind farms projects. Based on the existing order book, which covers production capacity for the next 18-24 months, sales in the next quarters are expected to report stronger growth.

Demand for high voltage underground cables confirmed the signs of stabilisation already seen in the second half of 2009, while the larger utilities restarted their investment programmes. The Group is involved in bids for various projects, which could further strengthen the order book currently covering production capacity for the next 6 months. Demand is strong in China, where the Group can exploit all market opportunities thanks to production capacity increases still in progress.

The power distribution business line reported the same level of demand as in the last few months of 2009, with a slow down in volumes in January due to adverse weather conditions in certain areas, followed by a recovery in February. Based on its current order book, the Group expects a stronger recovery in volumes from the second quarter of 2010.

Trade & Installers
Sales to third parties by the Trade & Installers business area amounted to Euro 312 million (Euro 241 million in the first quarter of 2009), posting an organic decrease of 8.6%. Despite continued uncertainty in demand, the Group is showing signs of a recovery in volumes, which grew by 3% in the first quarter of 2010 on the fourth quarter of 2009 (excluding acquisitions). This trend is expected to continue in the next quarters with a general stabilisation in prices. Adjusted operating margin on sales went down to 0.5% from 3.5% in the first quarter of 2009.

Industrial
Sales to third parties by the Industrial cables business area amounted to Euro 159 million (Euro 170 million in the first quarter of 2009), reporting an organic decrease of 17.3% mainly due to the low contribution from the oil&gas activities, which is expected to increase in the second half of the year. The renewable energy order book continued to be strong, while volumes in the automotive and branchement segments carried on recovering. Adjusted operating margin on sales was 4.1%, down from 7.7% in the first quarter of 2009.

TELECOM CABLES AND SYSTEMS PERFORMANCE AND RESULTS 

• STABLE DEMAND FOR OPTICAL CABLES WITH VOLUME GROWTH IN USA AND CHINA 
• INCREASED COMMERCIAL PENETRATION WITH LARGE TELECOM OPERATORS 
• SLIGHT IMPROVEMENT IN MARGINS (ADJ EBITDA/SALES)

Sales to third parties by the Telecom Cables and Systems segment amounted to Euro 103 million (Euro 102 million in first quarter 2009), posting an organic decrease of 6.5% on the corresponding period of 2009. The reduction primarily reflected the geographical mix of optical cable sales and continued weak demand for copper cables. In the optical cables business line, the Group's commercial strategy has allowed it to strengthen its commercial position with large telecom incumbents, primarily in the USA and China. The start of optical cable production at the new plant in Romania will allow the Group to increase its presence in continental European markets. Adjusted operating income came to Euro 5 million (Euro 4 million in first quarter 2009). In terms of margins, adjusted EBITDA improved from 5.5% to 6.2% of sales, while adjusted operating income was stable at 4.5% of sales.

The FTTx segment continued to be fairly lively in the first quarter of 2010. In January Prysmian reached the important milestone of having installed 150,000 km of Optical Ground Wire cable worldwide.

PERFORMANCE AND RESULTS BY GEOGRAPHICAL AREA

The Group's sales in EMEA (Europe, Middle East and Africa) reported an organic decrease of 6.9%, mainly due to negative changes in terms of price and product mix in the Trade & Installers, Power Distribution and Telecom businesses. EMEA accounted for 71.3% of total sales in the quarter.
Sales in North America posted an organic decrease of 18.3%, due to the widespread contraction in demand in all the Group's activities and the closure of the St. Jean sur Richelieu plant in Canada. North America accounted for 8.0% of total sales in the quarter.
Latin America posted an organic decrease in sales of 20.2%, particularly attributable to the low contribution from Oil&Gas sales, which are expected to improve in coming quarters. The region accounted for 10.4% of total sales in the quarter.
Asia Pacific reported an organic decrease in sales of 24.1%, almost entirely attributable to lower volumes in the Power Distribution and Industrial businesses on the Australian market. Asia Pacific accounted for 10.3% of total sales in the quarter.

BUSINESS OUTLOOK
The first three months of the year have confirmed stabilisation in demand and industrial output at the low levels already reached in the last part of 2009; furthermore, the weakness in demand, combined with the high price of raw materials, has negatively affected the Group's profit margins. Given this economic scenario, in 2010 the Group expects to see demand stabilise, at the minimum levels reached in the first quarter, for the Trade & Installers and Power Distribution businesses, with a possible gradual recovery during the year. On the other hand, orders are expected to recover for power transmission projects, for certain industrial applications such as renewable energy and off-shore oil drilling as well as for optical fibre cables supplied to major Telecom operators.
Based on the results achieved in the first three months, combined with the size of the current order book, FY 2010 adjusted EBITDA is expected in the range of Euro 350-400 million; this range is related to development of the reference markets demand in the second half of the year (FY 2009: Euro 403 million).
The Group also continues to rationalise and improve efficiency in its industrial footprint and to optimise its cost structure, while confirming its investment plans already started in the high value-added businesses to further strengthen its presence in the most profitable, high-growth segments.

SUBSEQUENT EVENTS
Further to the resolution adopted by the Board of Directors on 3 March 2010, Prysmian S.p.A. completed the placement of an unrated bond with institutional investors on the Eurobond market on 30 March for a total nominal amount of Euro 400 million.
Strong investor interest resulted in the receipt of applications for in excess of Euro 3 billion, meaning that the offer was more than 7.5 times oversubscribed. The bond, whose issue price was Euro 99.674, has a 5-year term and will pay a fixed annual coupon of 5.25%. The bonds were settled on 9 April 2010.
The bond has been admitted to the Luxembourg Stock Exchange's official list and trades on the related regulated market. Prysmian S.p.A. will use the bond proceeds to finance the Group's activities, including to refinance its existing debt. On 16 April 2010, Prysmian therefore made an early repayment of Euro 200 million against the Term Loan received on 4 May 2007; this repayment corresponds to the amounts that were due in 2010 and 2011 and means that the Term Loan now stands at Euro 770 million.

FURTHER RESOLUTIONS BY THE BOARD OF DIRECTORS
The Board of Directors has voted to appoint Mr. Massimo Branda (Head of Administration, Tax, Financial Accounting and Financial Reporting Compliance) and Mr. Jordi Calvo (Head of Planning, Control and Reporting) as "managers responsible for preparing corporate accounting documents" under art. 154-bis of Legislative Decree 58/1998. This appointment has been made with the favourable opinion of the Board of Statutory Auditors and in compliance with the integrity and competence requirements established by applicable legislation and the Company's By-laws and will be effective from 14 May 2010.

The First-Quarter Report 2010 will be filed at the Company's registered offices in 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.