Prysmian Upbeat on Submarine Cable Business in 2015

 

Prysmian SpA, the world's biggest cable maker, is confident of bagging orders this year to keep its high-margin subsea business order backlog at between 2.2 billion euros ($2.4 billion) and 2.3 billion, the head of the unit told Reuters.

"The outlook for this year is very positive," Prysmian energy projects head and board member Massimo Battaini said in an interview.

Italy's Prysmian, which in 2011 became the world's largest supplier of cables for uses ranging from telecoms to elevators when it took over Holland's Draka, generates around 30 percent of core earnings from its subsea and high-voltage business.

The two businesses, which command healthy margins of more than 20 percent, generated core earnings of 1.3 billion euros last year, 75 percent in Europe.

"On average 2.0 to 2.2 billion euros of submarine projects are awarded in the business globally every year ... this year it could be 2.5 billion euros," Battaini said, adding Prysmian's historic market share was more than 40 percent.

While the global cable market is regional, fragmented and oversupplied, the submarine business is a niche market with high entry barriers because of skills needed and high investments.

The subsea business, dominated by Prysmian, ABB Ltd and Nexans SA, is driven mainly by demand for cables from the renewable energy sector and interconnectors that transport power across Europe's borders.

Brussels has called on EU states to beef up interconnections so each country can import at least 10 percent of its demand.

"There's been no slowdown in submarine demand in recent years since EU targets on green energy and interconnection have fuelled the business," Battaini said.

Germany's decision to phase out nuclear and upgrade renewables targets has generated a lot of cable work in offshore wind farms and Prysmian to date has won around 75 percent of the business.

Prysmian is in the running for 13 other key projects in Europe, the main one being the NSN project to build a power cable between Norway and the UK. "That's worth 1 billion euros," Battaini said.

Prysmian has three submarine cable factories in Europe, in Finland and Norway as well as Italy, all of which are working at full throttle.

Battaini said markets outside Europe were not growing as strongly at the moment, but said the company wanted to expand and could look in future to Asia.

"We might consider the idea of opening a factory in China," he said. ($1 = 0.9194 euros)

($1 = 0.9197 euros)

 

(Editing by David Holmes)