Prysmian Q1 core earnings hit by UK project woes
By Francesca Landini and Massimo Gaia
MILAN (Reuters) - The world's biggest cable maker, Prysmian, said it could not rule out further losses due to technical problems at its Western Link high-voltage project in Britain, which hurt first-quarter results and its 2014 guidance.
Its shares dropped after Prysmian said adjusted core profit fell 32 percent in the first three months of 2014 to 78 million euros (£63.7 million) after a 37 million euro hit linked to problems with the project.
The company estimated that delays in completing the large-scale cable manufacturing project would cost it 70 million euros in lost margins this year and warned further losses could arise.
"Despite the current uncertainty over the recently identified technical problems, the directors believe at present that there is no element to suggest that contract costs will exceed contract revenues," it said in a statement on Thursday.
"This does not preclude that after further analysis and technical testing ... evidence might emerge that will lead to the recognition of additional losses in coming quarters."
Shares in the company fell 6.5 percent to close at 17 euros on the Milan bourse as analysts and investors said the fall in profits caught them by surprise.
"First-quarter results and full-year guidance are worse than expected," one analyst said.
The group, which overtook France's Nexans to become the world's largest in the sector in 2011, said it expected adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 530 million to 580 million euros for the year.
That target was down from a guidance of 600 million to 650 million euros for last year, which analysts had expected to be confirmed for this year.
The 2014 targets also included the negative effects of currency swings and an expected fall in average prices compared with last year, the company said in slides published after the results.
The difficulties at the Western Link project emerged just a week ago, Prysmian Chief Executive Valerio Battista told analysts.
"Our technicians are already seeking to overcome difficulties and resume work on this very complex project," he said.
In the first quarter, total sales amounted to 1.58 billion euros, up 3.2 percent on a like-for-like basis and excluding metal price and exchange rate effects.
(editing by Jane Baird)
