Italy’s Prysmian navigates supply issues to 35% quarterly profit rise

MILAN (Reuters) -Prysmian said on Thursday it had managed problems with its supply chain by increasing stocks of raw materials, as the Italian cable maker posted a 35% rise in first quarter core profit after a solid performance from its energy businesses.

“The supply chain has run smoothly thanks to the stocks of raw materials we built,” Chief Executive Valerio Battista told analysts, adding that Prysmian had “carefully” increased its inventories to manage supply chain difficulties.

Prysmian said its performance in January to March meant it now expected 2022 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) would be towards the higher end of a 1.01-1.08 billion euro range forecast in March.

“We’re not yet ready to revise the guidance. I want to see second quarter results before. I am quite confident we will raise it, but be patient,” Battista said.

Prysmian’s energy business, which is benefiting from the transition to cleaner power generation, accounted for more than 65% of its adjusted EBITDA in the first quarter.

Nevertheless, commodity price inflation is weighing on its costs, with Chief Financial Officer Pier Francesco Facchini saying Prysmian estimated higher metal prices would add 1.4 billion euros ($1.46 billion) this year.

In March, Prysmian estimated a free cash flow of around 400 million euros for the year, plus or minus 15%, but with cash generation of 86 million euros in the first quarter, Battista said the final result might be at the lower-end of this.

“The mid-point is possible, the high-end is hard, but not impossible,” Facchini added.

Prysmian’s adjusted EBITDA was 288 million euros for the quarter, helped by a 15 million euro exchange rate gain. This topped a company-provided consensus of 249 million euros.

Despite inflationary pressure, exacerbated by the Ukraine crisis, Prysmian said its business was being supported by the global energy transition. This had spurred an increase in the value of interconnection projects to 8 billion euros last year, from 3 billion euros in 2020, it said.

“We expect the energy transition to drive a strong and growing momentum,” Battista said, adding: “This trend is expected to continue over time”.

($1 = 0.9604 euros)

(Reporting by Giulio Piovaccari; Editing by Maria Pia Quaglia, Mark Potter and Alexander Smith)