Prysmian : S.P.A. First-quarter results 2017

PRESS RELEASE

PRYSMIAN S.P.A. FIRST-QUARTER RESULTS 2017

Milan, 10/5/2017. The Board of Directors of Prysmian S.p.A. has approved today the Group's consolidated results for the first quarter of 20171 (which are not subject to audit).

"The first quarter of 2017 underlines the competitiveness of the Group's offering in high-tech, high value-added markets" commented Valerio Battista, CEO of Prysmian Group. "This is witnessed by the award of projects like the IFA2 subsea interconnector between France and Britain and the system commissioned by RTE to connect three wind farms in France to the mainland grid, as well as the partnership agreement signed a few days ago with Verizon to realise the "One Fiber" project in the USA. In terms of results, the Telecom business has delivered another excellent performance, in a market scenario not showing any signs of slowing. Organic sales growth was slightly weaker essentially due to the timing of project execution; however, this is a temporary trend that we expect will be re-absorbed in coming quarters. Profitability was slightly up, driven by Telecom growth and a largely stable Energy Projects segment, whose drop in sales was offset by growth in margins thanks to a more profitable mix. The expansion, rationalisation and technological enhancement of the Group's industrial and manufacturing footprint has continued as has the focus on product innovation. The outlook for 2017 as a whole is positive, albeit with some caution due to uncertainties in various markets and geographical areas, and allow us to set higher profitability targets with Adjusted EBITDA in the range of €710-€750 million."

SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION

(in millions of Euro)

(in millions of Euro)

(*)The figures in the consolidated statement of financial position and consolidated income statement have been restated compared with those previously published in the Quarterly Financial Report at 31 March 2016. This restatement is due to the purchase price allocation of Oman Cables Industry (SAOG).

1 Notwithstanding the fact that the law has abolished the obligation to publish interim management statements, the Company has elected to provide the market with quarterly voluntary reporting on a consolidated basis, in continuity with the past.

Group Sales amounted to €1,849 million, posting an organic change of -3.7% assuming the same group perimeter and excluding metal price and exchange rate effects. This result is largely due to the phasing of project execution, as well as the mix of projects in the submarine portfolio, which had recorded strong volume growth in the same period of 2016. Energy Projects therefore saw its organic sales retreat by -15.2%. However, Telecom continued to perform strongly, with an organic sales increase of +12.3%. A slight contraction in Energy Products volumes in Europe, partly offset by good performance in the Nordics and growth in some Asian countries, caused organic sales to weaken by -2.7%. Lastly, the situation for Oil & Gas remained negative: despite a slight recovery by Core Oil & Gas cables with the growth in onshore projects, the segment posted a -21.2% change in underlying sales (versus -33.9% in the first quarter of 2016) essentially due to weakness in the SURF business, which has longer recovery times.

€50 million to buy back the Company's shares.

The principal factors that influenced this change during the 12 months ended 31 March 2017 were:

• €617 million in net cash flow provided by operating activities before changes in net working capital;

• €122 million in cash flow used by the increase in net working capital, mainly due to project phasing and the increased copper price;

• €72 million in tax payments and €11 million in dividend receipts;

• €245 million in net operating capital expenditure in the past 12 months, of which €44 million to acquire the assets of Shen Huan;

• €31 million in net positive cash flow provided by acquisitions and disposals of investments;

• €64 million in finance costs paid, down thanks to the lower cost of borrowing and a reduction in average net financial debt;

• €91 million to pay dividends paid and €49 million for the buyback of the Company's shares and other changes;

• €48 million in net cash inflow as a result of accounting for the equity component of the convertible bond issued in January 2017.

  ENERGY PROJECTS OPERATING SEGMENT PERFORMANCE AND RESULTS
  • €700 MILLION IN NEW TRANSMISSION PROJECTS AWARDED IN THE FIRST FOUR MONTHS OF 2017
  • IMPROVEMENT IN MARGINS AND ADJUSTED EBITDA STABLE; PROJECT EXECUTION PHASING IMPACTS REVENUE RECOGNITION
  • BETTER MARGINS ALSO IN HV UNDERGROUND, DESPITE NEGATIVE IMPACT OF PERIMETER CHANGE IN CHINA

Energy Projects sales to third parties were affected by the phasing of project execution and the different mix of submarine projects, coming in at €275 million (organic change of -15.2%). Profitability improved slightly, with Adjusted EBITDA climbing to €40 million from €39 million in the same period of 2016 accompanied by a significant improvement in margins to 14.4% from 11.2%.

The decline in sales for Submarine cables and systems due to project phasing and differences in mix compared with the same period in 2016 did not impact profitability. Margins improved considerably thanks to the favourable mix of projects, the growing importance of maintenance and repair activities and the full deployment of the new installation capabilities and technologies, such as Ulisse, the Group's third cable-laying vessel, and special equipment for cable burial, allowing the Group to bring back in-house high-margin activities previously handled by third parties.

With order intake close to €700 million since the start of the year, the Group has consolidated its leading position in a still growing and high-potential market. Among the most important projects secured, the IFA2 submarine electrical interconnector between France and Britain awarded to the Prysmian Group by IFA2 Ltd, a joint venture between RTE and National Grid, worth €350 million, and the project to connect three offshore wind farms in France to the mainland grid, awarded to Prysmian by RTE France and worth €300 million. The total value of the Group's submarine cables and systems order book stands at around €2.2 billion, ensuring sales visibility for a period of about two years.

Demand for High Voltage Underground Cables reported a slight weakening in the French, Dutch and North American markets, which, together with the change in the scope of consolidation in China, was reflected in an organic decline in sales. However, the favourable mix and growth in services generated an improvement in margins. The order book for High Voltage Underground cables stands at around €400 million.

(in millions of Euro)

• WEAK START TO THE YEAR FOR T&I IN SOME MARKETS
• STABLE VOLUMES FOR POWER DISTRIBUTION, WITH IMPROVEMENT IN PROFITABILITY
• INDUSTRIAL AND NWC: GROWTH IN SALES AND MARGINS FOR AUTOMOTIVE BUSINESS; STABLE PERFORMANCE FOR

Energy Products sales to third parties amounted to €1,180 million, posting an organic change of -2.7%, primarily attributable to contraction in volumes in Central and Eastern Europe, as partially offset by positive performance in the Nordic region and growth in some Asian markets. Adjusted EBITDA amounted to €61 million (€66 million in the first quarter of 2016), with a slight fall in margins (Adjusted EBITDA 5.2% on sales versus 6.0% in Q1 2016).

(in millions of Euro)

(*) The previously published figures of energy products have been restated for the Purchase Price Allocation of Oman Cables Industry (SAOG).

Energy & Infrastructure sales to third parties amounted to €806 million, with a negative underlying change of - 2.3%. Adjusted EBITDA was €35 million compared with €38 million in the first quarter of 2016.

Trade & Installers were penalised in the first part of the year by weak performance in Central and Eastern Europe, Turkey and Argentina, as partially offset by positive trends in the Nordic region and Oceania. The rise in copper prices temporarily affected profitability. It should be noted that the European Construction Products Regulation (CPR) will come into force from 1 July 2017, imposing higher standards of quality and safety and representing an important opportunity for the Group, which already boasts a competitive range of products at the top end of the market.

Power Distribution reported stable volumes and higher profits despite the challenging basis of comparison with the corresponding period of 2016. The Nordics and APAC performed well, while Central/Eastern Europe and Argentina were weak.

Industrial & Network Components sales to third parties amounted to €340 million, posting an organic change of

-3.7%. Three-month Adjusted EBITDA was €27 million compared with €29 million in the first quarter of 2016. Order book started to recover after two consecutive quarters of decline. Specialties OEM & Renewables reported weak organic sales. Growth in APAC was not sufficient to offset the slowdown in Europe and North America. Railway sales were good, while those of Renewables, Crane and Nuclear soft. The Elevators business recorded a slight slowdown due to the delay of some projects in China. Double-digit organic growth and improved margins marked the results of the Automotive business, thanks to solid performance in North America, South America and APAC, while reorganisation of the manufacturing footprint in Europe improved the business's competitiveness in the region. Lastly, the Network Components business recorded a positive performance for Medium and Low Voltage accessories, offsetting the weakness in High and Extra High Voltage. France, Italy and the Netherlands were affected by unfavourable market conditions, while the United States, Britain and Brazil recorded solid growth.