Prysmian Sees No Additional Impact From Western LinkChiara Remondini
Prysmian SpA, the world’s biggest cable maker, doesn’t foresee any additional costs or delays in the Western Link project that led the company to cut its full-year profit forecast after a manufacturing difficulty.
“Execution of the project is progressing well as Prysmian has confirmed its ability to manage unexpected issues and protect its reputation,” Chief Financial Officer Pier Francesco Facchini said in an interview in Milan yesterday.
Prysmian was awarded a contract in February 2012 for the development of the Western HVDC Link, a submarine high-voltage interconnector between Scotland and England, considered the biggest cable project award at the time and worth 800 million euros ($1.01 billion). The Milan-based company encountered technical manufacturing issues in April and, after an investigation, cut its profit guidance on July 31, estimating a delay of six to nine months for the project.
Even as net debt will increase to 900 million euros this year on the back of the Western Link issue, Prysmian aims to maintain a dividend payout similar to the level paid this year of 42 euro cents per share, Facchini said. The company has “a robust tender pipeline” to ensure future growth, including the Nordlink power link between Germany and Norway, worth about 1 billion euros, he said. Prysmian is increasing its focus on higher-margin niche businesses including terrestrial high voltage, submarine and industrial cables, the CFO said.
Prysmian in a presentation yesterday reiterated its forecast for earnings before interest, taxes, depreciation and amortization, adjusted for non-recurring items, of 506 million euros to 556 million euros this year. That sent the shares up as much as 4.3 percent before they closed 0.4 percent higher at 14.38 euros. The stock has fallen 23 percent this year, cutting the company’s market value to 3.09 billion euros. The cable maker said the Western Link technical issue will cut adjusted Ebitda by 94 million euros this year.
Prysmian, which acquired Dutch competitor Draka in 2011, still sees the cable market as “too fragmented” and said the company aims to be “a consolidator,” according to Facchini. The company may be interested in pursuing a deal with French rival Nexans SA, la Repubblica reported May 9, citing .
Prysmian isn’t currently holding negotiations with anyone and doesn’t consider acquisitions as a “short-term focus” as much as organic growth and resolving the unexpected issues from the Western Link project, Facchini said.
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