Prysmian – Q1 2023 Financial Highlights

Long-term drivers continue to fuel growth
Improved results and strong cash generation Thanks to a wide portfolio of businesses and geographies

MILAN, ITALY   –   05/11/2023 – 1:00 PM

• SALES AT €3,992M, ORGANIC GROWTH AT +9.0%
• ADJ EBITDA GREW BY 48,3% TO €427M. MARGINS AT 10.7% (7.8% IN Q1 2022)
• GROUP NET PROFIT IMPROVED BY 44.4% TO €182M (€126M IN Q1 2022)
• LTM FREE CASH FLOW AT €581M. DEBT REDUCED TO €2,074M (€2,380M AT 31 MARCH 2022)

POSITIVE BUSINESS PERFORMANCE DRIVEN BY THE ENERGY TRANSITION AND ELECTRIFICATION

• PROJECTS: +29.5% ORGANIC GROWTH AND IMPROVING MARGINS
• ENERGY: +6.6%. POWER DISTRIBUTION AND OVERHEAD LINES (+12.2%) SUPPORTED BY GRID HARDENING
• TELECOM: +5.7% ORGANIC GROWTH DRIVEN BY OPTICAL CABLES

The Board of Directors of Prysmian S.p.A. approved today the Group’s consolidated results for the first quarter of 2023.

“The first quarter of 2023 closed with better-than-expected results, further confirming the solid and long-term nature of the drivers that had fuelled our extraordinary growth in 2022,” stated CEO Valerio Battista. “All the businesses and geographical areas performed well, particularly the sectors that play a strategic role in the energy transition and electrification processes — from submarine cable systems for large interconnections and offshore wind farms to cable for grid hardening, and applications for wind and solar renewable energy generation. Worth of mention is our ability to translate business results into cash generation, thus contributing to improving our net financial debt. In short, after having reported our best ever results in 2022, this excellent start to the year confirms the competitiveness of our product range and our technology innovation capacity, the quality and reliability of our supply chain and customer service, as well as our execution capabilities for the important projects in the order book,” concluded Battista.

FINANCIAL HIGHLIGHTS

Group Sales amounted to €3,992 million, with a +9.0% organic growth and a better-than-expected performance in almost all businesses and geographical areas. The strong acceleration of the sales organic growth (+29.5%) reported by the Projects segment was mainly attributable to submarine cables and systems, which are used both for developing interconnections and for connecting offshore wind farms that are strategic to the energy transition. The Energy segment’s sales recorded a +6.6% organic growth, mainly driven by long-term drivers, such as electrification, grid hardening and wind and solar energy generation. Medium-voltage cables and overhead lines recorded a +12.2% organic growth. Sales of the renewables segment also improved. Telecom recorded a +5.7% organic growth, chiefly thanks to the demand for optical cables for the development of broadband networks.

Adjusted EBITDA (excluding net expenses for company reorganisations, net non-recurring expenses and other net non-operating expenses) jumped by 48.3% to €427 million (€288 million in Q1 2022), with a significant increase in margins confirmed by a 10.7% ratio of Adjusted EBITDA to Sales compared to 7.8% for the same period of 2022. Profitability also improved in the Projects segment (Adjusted EBITDA margin at 10.0% compared to 7.8% in Q1 2022), in Energy & Infrastructure (Adjusted EBITDA margin at 10.9% compared to 6.8% in Q1 2022) and in the industrial application cable business (wind and solar energy in particular) with Adjusted EBITDA margin improving to 9.8% from 6.8% in Q1 2022. In the Telecom business, the ratio of Adjusted EBITDA to sales was 14.6% (15.6% for the same period of 2022).

EBITDA grew to €398 million (€285 million in Q1 2022) including net expenses for company reorganisations, net non-recurring expenses and other net non-operating expenses totalling €29 million (€3 million in Q1 2022). Operating Income rose to €294 million (€209 million in Q1 2022).

Net Profit (attributable to owners of the parent) grew sharply by +44.4% to €182 million compared to €126 million for the same period of 2022.

Free Cash Flow generated in the past twelve months amounted to €581 million (excluding costs for acquisitions and disposals and anti-trust related flows), confirming the Group’s ability to translate positive business results into cash generation.

Cash generation allowed the Group to further improve its Net Financial Debt, which amounted to €2,074 million at the end of March 2023 (€2,380 million at 31 March 2022; €1,417 million at 31 December 2022). The main factors that led to the change in the Net Financial Debt in the past 12 months were:

• €1,549 million net operating cash flows (before changes in net working capital);
• €184 million cash flows absorbed by the increasing net working capital;
• €43 million antitrust-related outflows and €3 million net outflows for acquisitions and disposals;
• €473 million cash outflows in net capital investments;
• €88 million net finance expense
• €233 million in taxes paid;
• €10 million in dividends received;
• €148 million dividend payout.

PROJECTS 

• +29.5% ORGANIC GROWTH, DRIVEN BY THE SUBMARINE POWER CABLE AND SYSTEM BUSINESS
• ORDER BOOK AT €8.3 BILLION (€9.1 BILLION INCLUDING THE BISCAY GULF INTERCONNECTION OF ~ €800M)
• HIGH VISIBILITY WITH FULL UTILISATION OF PRODUCTION ASSETS; FOCUS ON PROJECTS EXECUTION

Projects revenues amounted to €563 million, with a +29.5% organic growth compared to Q1 2022. Adjusted EBITDA rose to €56 million (€32 million in Q1 2022), with a percentage of Sales that improved by 10.0% compared to 7.8% for Q1 2022.

The sales growth of the Projects segment was driven in particular by the High Voltage Submarine Power Cable and System business, which provides strategic technological solutions for the development of power interconnections and cabling of offshore wind farms for the energy transition. Prysmian confirmed its role as market and technological leader in an industry which went from an average of approximately €3 billion of projects assigned a year until 2019 to approximately €13 billion of projects expected for 2023 and the coming years.

Profitability improvement was attributable to both a thorough approach in the selection of the projects to be acquired, thanks to the full utilisation of the production assets, and the excellent execution of the projects in the order book. In particular, the execution of the major German Corridor continued in line with expectations.

The Group has recently been awarded a new contract worth €800 million for the Biscay Gulf project relating to a new submarine power interconnection between France and Spain on behalf of INELFE, a 50:50 joint venture between the Spanish grid operator Red Eléctrica and the French grid operator Réseau de Transport d’Électricité (RTE). The project falls within the European Commission’s Projects of Common Interest, as it increases power supply reliability, enables the further integration of renewable energy into electricity grids and contributes to creating a more efficient system.

This latter contract adds to two projects IJmuiden Ver Alpha and Nederwiek 1 of a total worth of approximately €1.8 billion, for the connection of offshore wind farms in the Netherlands, acquired in the first quarter of the year. IJmuiden Ver Alpha and Nederwiek 1 are the first projects in which the Prysmian Group uses the 525 kV HVDC submarine cable, an extremely innovative technology, developed to enable the construction of lines with capacity of 2 GW.

The order backlog at 31 March 2023 amounted at €8.3 billion (€9.1 billion including the Biscay Gulf contract finalized in May).

ENERGY 

• EXCELLENT SALES PERFORMANCE AND IMPROVED PROFITABILITY
• INVESTMENTS IN GRID HARDENING DRIVE ORGANIC GROWTH IN THE PD AND OHL SEGMENTS (+12.2%)
•  DOUBLE-DIGIT ORGANIC GROWTH IN THE RENEWABLES SEGMENT AND THE NEW PRYSOLAR CABLE

Sales of the Energy segment amounted to €2,969 million, with a +6.6% organic growth compared to Q1 2022. Profitability improved, with Adjusted EBITDA amounting to €304 million (€189 million in Q1 2022) and a ratio of Adjusted EBITDA to Sales of 10.2%, compared to 6.7% in Q1 2022. The rising prices due to inflation were mainly offset by the operating efficiency of the supply chain, the consistent service level, the appropriate price mix management, and increased volumes.

Energy & Infrastructure 

Sales of the Energy & Infrastructure business area totalled €2,031 million in the quarter, with a +7.5% organic growth compared to Q1 2022. Adjusted EBITDA rose to €221 million, (€132 million in Q1 2022) with a ratio to Sales at 10.9% compared to 6.8% for Q1 2022. Worthy of note is the excellent performance of the Power Distribution and Overhead Lines segments, which reported a 12.2% organic growth, confirming electrification and grid hardening as long-term drivers, with cable demand expected to constantly increase in the coming years. Prysmian signed an important agreement with the American Invenergy for the supply by 2029 of about 20.000 km of overhead conductor cable enhanced by the advanced proprietary E3X® technology enabling higher efficiency of transmission lines.

Industrial & Network Components 

Sales of the Industrial & Network Components business area amounted to €835 million, with a +5.2% organic growth compared to Q1 2022. Adjusted EBITDA rose to €82 million (€55 million in Q1 2022). The ratio of Adjusted EBITDA to Sales was 9.8% compared to 6.8% in Q1 2022. A double-digit growth was reported in the OEM & Renewables (+12.4%), with the launch of Prysmian PRYSOLAR to meet the growing market demand, and a solid uptrend in relation with all the other applications.

TELECOM

• ROBUST ORGANIC GROWTH OF SALES IN THE OPTICAL CABLE BUSINESS
• ADJUSTED EBITDA STABLE COMPARED TO Q1 2022

Telecom sales grew to €460 million in Q1, with a +5.7% organic growth compared to Q1 2022. Adjusted EBITDA stood at €67 million, in line with the first quarter of 2022, with a ratio to Sales at 14.6% compared to 15.6% for Q1 2022.

The solid performance of sales are attributable in particular to the optical cable business, driven by the demand in support of the development of high-capacity networks. In North America, the temporary destocking is negatively impacting the market.

PERFORMANCE BY GEOGRAPHICAL AREA (*) (*) Data by geographical area are stated excluding the Projects segment.

EMEA

Sales in the EMEA area amounted to €1,665 million in Q1 2023, with a +8.5% organic growth. Adjusted EBITDA was €106 million (compared to €71 million in Q1 2022). The ratio of Adjusted EBITDA to sales was 6.4% compared to 4.5% in Q1 2022. Growth was driven by the results of the Power Distribution and Renewables segments.

North America 

Sales in this area amounted to €1,214 million, with +7.5% organic growth compared to Q1 2022. Adjusted EBITDA was €216 million (€142 million in Q1 2022). The ratio of Adjusted EBITDA to sales was 17.8%, improving compared to 12.3% in Q1 2022. Grid hardening investments drove growth in Power Distribution and Overhead Lines.

LATAM

Sales of the LatAm area totalled €306 million, with a +2.4% organic growth. Adjusted EBITDA was €31 million (€24 million in Q1 2022). The ratio of Adjusted EBITDA to sales was 10.1% compared to 8.3% for the same period of the previous year. Results improved in nearly all business areas.

Asia Pacific 

Sales in Asia Pacific amounted to €244 million in Q1 2023, with a -5.3% organic growth. Adjusted EBITDA amounted to €18 million, stable excluding YOFC’s contribution. The ratio of Adjusted EBITDA to sales was 7.2% compared to 7.4% in Q1 2022.

OUTLOOK 

After the rebound that followed the Covid-19 pandemic, global economy is now facing a phase of volatility and great uncertainty. Inflation has reached its peak for several decades, mainly due to the hikes in energy and commodity prices, and supply chain bottlenecks. At the same time, the ongoing war in Ukraine and a slowerthan-expected improvement in supply chains continued to impact the world economic outlook. In addition, the default of two US regional banks and the rescue of Credit Suisse contributed to heightening market uncertainties. Global economic growth forecasts continued to remain positive, despite being revised downwards compared to year-start. After a 3.4% growth in 2022, the global economy is expected to grow by 2.8% in 2023 and by 3% in 2024, according to the most recent estimates by the International Monetary Fund in April.

Prysmian Group’s results for Q1 2023 further confirmed the benefits generated by a broad business portfolio, both in business and geographical terms, as well as the Group’s focus on proactively and seamlessly serving its customers, leveraging an efficient and widespread industrial footprint. This was confirmed by the Energy segment’s excellent results, also driven by the businesses exposed to grid hardening (power distribution and overhead lines), which is a medium/long-term growth driver. Worth of mention is also the ongoing improvement of the Projects business, with an order backlog above €9 billion, including the confirmation of the order for the new €800 million energy interconnection between France and Spain (Biscay Gulf). Also the Telecom business has long-term growth prospects and reported a solid performance.

As a result, for the full year 2023 Prysmian Group expects demand to remain substantially stable in the construction and industrial cables businesses, after last year’s excellent performance, with results that will depend on the capacity to implement pricing polices able to offset the impact of inflationary pressures on costs. In the high-voltage underground and submarine cables and systems business, the Group is committed to implementing a selective approach to confirm its leadership on a market that is expected to grow consistently, driven by the development of the offshore wind farms and interconnections in support of the energy transition. Thanks to the level achieved by its order book, the Group can fully exploit the potential of both its actual and new planned assets, such as the submarine cable plant in Brayton Point, Massachusetts, and the new cable-laying vessel that will join the Leonardo Da Vinci. For the Projects segment, the Group expects results to grow in 2023 compared to the previous year, thanks to the level of its order book, a solid execution and the full use of the submarine cable business’s capacity. In addition, demand in the Telecom segment is affected by the temporary destocking in the US market, with growth drivers that remain solid in the medium/long term thanks to digitalisation.

The long-term growth drivers are confirmed, mainly linked to the energy transition, digitalisation, and the electrification process. The Group can also leverage its broad business and geographical portfolio, solid capital structure, efficient and flexible supply chain and lean organisation, all of which is enabling it to effectively seize growth opportunities.

Given the above considerations, the Group confirms the guidance announced in March 2023. For the full year 2023, the Group expects to achieve an adjusted EBITDA in the range of €1,375-1,525 million, and to generate a cash flow in the range of €450-550 million (FCF before acquisitions and disposals).

These forecasts assume no material changes in both the geopolitical crisis relating to the military conflict in Ukraine and in the development of the health emergency, in addition to excluding extreme dynamics in the prices of factors of production or significant supply chain disruptions. The forecasts are based on the Company’s current business scope, assuming a EUR/USD exchange rate of 1.08, and do not include Antitrust-related impacts on cash flows.

ANNEX A 

Consolidated Statement of Financial Position

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Cash Flows

ANNEX B 

Reconciliation table between Net result, EBITDA and adjusted EBITDA of the Group

Statement of Cash Flows with reference to change in net financial position

Source
Prysmian