- EBITDA: EUR870 million for the first half of 2024.
- EBITDA Margin: 11.1% for the first half of 2024.
- Free Cash Flow: Almost EUR900 million over the last 12 months.
- Transmission EBITDA: EUR150 million in the first half of 2024, up from EUR116 million in the first half of 2023.
- Transmission EBITDA Margin: Almost 14% in the first half of 2024, targeting 14.5% for the full year.
- Power Grid EBITDA Margin: 13.2% for the first half of 2024.
- Electrification EBITDA Margin: 9.5% in the first half of 2024, adjusted to 10.1% after normalizing for one-offs.
- Industrial and Construction EBITDA: EUR224 million for both 2023 and 2024.
- Specialty Business EBITDA Margin: 11.5%, with a target of 11.5%-12% for the full year.
- Digital Solutions EBITDA Margin: 11.6% for the first half of 2024, with Q2 close to 13%.
- Group Net Income: Exceeding EUR400 million for the first half of 2024.
- Financial Charges: EUR53 million, stable versus EUR54 million last year.
- Tax Rate: 23.9%, benefiting from the Encore Wire acquisition.
- Net Debt: EUR750 million as of June 2024, with an expected reduction of EUR110-120 million in the second half.
- New EBITDA Guidance: EUR1.9 billion to EUR1.950 billion for the full year.
- New Free Cash Flow Guidance: EUR880 million midpoint, with a stretch target of EUR920 million.
- CO2 Emission Reduction: 36% reduction in Scope 1 and 2 emissions versus the 2019 baseline.
- Revenue from Sustainable Products: Increased from 37% last year to 43% this year.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Prysmian SpA (PRYMF, Financial) reported a strong EBITDA performance, reaching EUR870 million, with significant growth in the second quarter compared to the previous year.
- The company achieved an 11.1% EBITDA margin for the first half of 2024 and generated a robust free cash flow of nearly EUR900 million over the last 12 months.
- Prysmian SpA (PRYMF) successfully completed the acquisition of Encore Wire, integrating it swiftly and aligning commercial forces to avoid market disruption.
- The transmission business saw a 10% organic growth and a leap in EBITDA from EUR116 million to EUR150 million in the first half of 2024, with a target to reach a 16% EBITDA margin by next year.
- The company made significant progress in its sustainability goals, achieving a 36% reduction in Scope 1 and 2 CO2 emissions and increasing the recycled content in its cables from 12.5% to 15%.
Negative Points
- Organic growth was slightly negative at 3%, impacted by the digital solutions business, which is still recovering from a tough comparison with the first half of 2023.
- The electrification segment faced some one-off issues, including VAT adjustments and higher LME values, which affected the EBITDA margin.
- The industrial and construction segment showed stability in EBITDA but experienced margin dilution due to one-off impacts and incremental LME values.
- The specialty business unit, despite a growing EBITDA margin, faced a negative organic growth due to varying levels of mix and country-specific factors.
- The digital solutions segment, although rebounding in the second quarter, still suffers from a low order intake in the first half of 2023, affecting overall performance.
Q & A Highlights
Q: Can you provide more clarity on the one-offs in electrification and the pricing normalization for your business and Encore Wire?
A: We had a VAT adjustment in Q2 related to 2023, requiring some provision creation. The normalization in low voltage aluminum prices is softening, while copper building wire prices are strengthening, especially in North America. The 9.5% EBITDA margin in Q2 suggests stabilization.
Q: Despite utility announcements, power grid growth seems small. Is this impacted by capacity, and when will we see benefits from expansions?
A: We are constrained by existing capacity. The first wave of capacity increase came online in Q2, and the real fruition will happen towards the end of 2024, with further capacity coming in late 2025 and early 2026. Expect gradual growth over the next 18 months.
Q: How does the Encore Wire acquisition impact the tax rate, and what are the implications for the end of the year or next year?
A: The tax rate benefits from the usage of cash in the US for the Encore acquisition, preventing tax-inefficient redistribution. This freed up some deferred tax liabilities, positively impacting the tax rate. The normalized tax rate should be around 26%.
Q: What drove the big acceleration in transmission revenue growth between Q1 and Q2, and what projects contributed?
A: Additional capacity came online, particularly in terrestrial HVDC cables and expanded installation activity. This capacity will continue to drive growth, with significant new capacity expected by mid-2025.
Q: Can you explain the specialty business's performance and the expected margins?
A: The specialty business includes various verticals like defense, marine, and renewable energy. The organic growth was negative due to different project mixes and regions, but the EBITDA margin is expected to reach 12% for the full year, driven by a solid backlog.
Q: What is the size of Prysmian's and Encore Wire's revenues in data centers, and what growth is expected?
A: Prysmian's exposure is around EUR700 million, and Encore Wire's is estimated at EUR100-150 million. Data centers drive demand across all segments, including transmission, power grid, electrification, and digital solutions, with significant growth potential.
Q: What are the first steps in integrating Encore Wire, and are their CapEx plans maintained?
A: The integration focuses on harmonizing the commercial sales force and cross-selling products. Encore Wire's CapEx plans, including vertical integration and additional capacity, are maintained to maximize operational synergies.
Q: Can you provide an update on the digital solutions segment and the impact of antidumping measures in Europe?
A: The digital solutions segment saw cost benefits from restructuring and a rebound in North America. The antidumping case in Europe is ongoing, aiming to protect the market from low-cost imports, with support from Corning.
Q: What is the expected organic growth and EBITDA margin for the transmission segment in the second half of 2024?
A: The organic growth is expected to continue at around 10%, with an EBITDA margin higher than 14.4%, aiming for 14.5% for the full year.
Q: What is the outlook for M&A, and are there plans to expand geographically or integrate existing markets?
A: Prysmian continues to explore M&A opportunities, focusing on expanding in North America, Europe, and complementing the telecom product range. Specific targets are under investigation, with a strategic approach similar to the Encore Wire acquisition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
