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Prysmian presents its financial targets at Capital Markets Day

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Prysmian presents its financial targets at Capital Markets Day

During the Capital Markets Day, organized by Prysmian at the beginning of October, the Group unveiled to its stakeholders the new segmentation of its organization, that now grows from three to four segments. The new segmentation will be effective from 2024 and will consist of the following four parts: Renewable Transmission, Power Grid, Electrification and Digital Solutions.

During his speech, CFO Pier Francesco Facchini explained how this new segmentation is a key element of the Group’s strategy, as it will allow a better explanation of the business granularity and the way it connects to the different market drivers and, secondly, it will mean that the Group adopts an internal structure and an organization which better mirrors the market drivers, thus sharpening the Company’s focus on capturing the opportunities offered by these market trends.

After explaining the advantages of the new segmentation, Pier Francesco Facchini showed how it translates into financial results, i.e. how it looks in terms of EBITDA.

How does the new segmentation look in terms of EBITDA?

As stated by Facchini during his speech, the new segmentation allows Prysmian Group to achieve much more homogeneous clusters in terms of EBITDA margins.

In numbers, taking 2022 sales as a baseline:

  • Renewable Transmission has an adjusted EBITDA of €220 million, with a 13.5% margin;
  • Power Grid has an adjusted EBITDA of €200 million, with a 5.6% margin;
  • Electrification has an adjusted EBITDA of €797 million, with a margin of 8.9%;
  • Digital Solutions has an adjusted EBITDA of €271 million, with a margin of 14.5%.

Prysmian Group's new financial targets for 2027

In terms of adjusted EBITDA ambition, the Group is targeting around €2 billion in 2027, with an intermediate target of around €1.775 billion in 2025. This is compared to €1.49 billion in 2022, which means the EBITDA is expected to grow from 2022 by over half a billion euro. Moreover, the Company is expecting an EBITDA compound annual growth rate (CAGR) of 5-7% between 2022 and 2027.

It is important to stress that these EBITDA targets are purely organic with no acquisitions planned and are also based on a substantially stable assumption in terms of US dollars to EUR exchange rate at 1.08.

 

EBITDA targets differentiation among the new segments

Overall, organic growth is expected to be very much differentiated by segment, with total sales in 2027 at over 19 billion (compared to about €16 billion in 2022). In particular:

  • Renewable Transmission is – together with Power Grid – the main growth pillar, almost tripling EBITDA by 2027 to €600 million. The segment will, in fact, experience a high double-digit organic growth in sales, driven by the execution of €20 billion order portfolio and by an effective and timely execution of the capacity expansion (both manufacturing and installation), especially in the EU.
  • Power Grid is the second main growth pillar, as it will see a mid-single digit organic growth in sales. The EBITDA is in fact expected to double by 2027 reaching €410 million. The growth of the segment will be mainly driven by grid enhancement in Europe and by volume growth in North America.
  • Electrification is the segment in which the Group expects a drop in EBITDA of €100 million by 2027. The decrease derives from the assumption of a -€225 million price effect in Industrial & Construction North America in 2023-2025 compared to the 2022 baseline.
  • The Digital Solutions segment will go through a decline in sales in 2023 followed by a recovery from 2024 through to 2027, reaching an expected €290 million EBITDA.

Prysmian Group – as CFO Pier Francesco Facchini reassures – is confident that the €2 billion EBITDA target is in its reach. This growth is also expected to result in a new scale of free cash flow, seen at €900 million to €1 billion in 2027, and of Return on Capital Employed (ROCE), which is seen at 25-28% in 2027.

So where is this expected strong cash generation going to be allocated?

The allocation of the strong cash generation expected

Cumulated free cash flow for 2023-2027 is seen at about €3.2 billion. Over the five-year timeline, the Group is thinking of allocating this capital with a focus on the following activities:

  • Bolt-on acquisitions, to better capture the main market drivers, both in terms of business and geography. It is because of this that the business priorities are set on Power Grid, Specialties, Optical Cables and Connectivity, while the geographic priorities are North America, the Middle East and the consolidation of specific markets with a good profit pool;
  • A share buy-back program, which the Group is planning to initiate in 2024. In total, capital allocated to bolt-on acquisitions and the share buy-back is expected to be within 55-60% of the €3.2 billion of cash flow generation;
  • Dividends, with an expected annual growth of ca. 10% compared to 2023 as a baseline. Total dividends for 2023-2027 are expected to be about €1.050 billion;
  • A further deleverage and a decrease of about €300 million in the Net Debt compared to 2022.

“I’m very proud of the incredible journey of the last decade, a journey that deeply changed our Company, not only multiplying our sales by almost four, but even more importantly deeply impacting our geographical footprint. And these new targets are our commitment to you: ambitious, but realistic.”

Pier Francesco Facchini

Chief Financial Officer – Prysmian Group