PIRELLI ENERGYCABLES AND SYSTEMS
PIRELLI ENERGYPIRELLI ENERGYCABLES AND SYSTEMSCABLES AND SYSTEMS
400/225 kV
225/63 kV
63/20 kV
20/1 kV
NUCLEAR POWERPLANT
20/1 kV
90/20 kV
225/90 kV
225/90 kV400/225 kV
HYDROELECTRIC POWERPLANT
Oscar CristianciOscarOscar Cristianci Cristianci
PIRELLI ENERGY CABLES AND SYSTEMSPROFIT & LOSS
PIRELLI ENERGY CABLES AND SYSTEMSPROFIT & LOSS
Net SalesNet Sales
EBITEBIT% on Net Sales% on Net Sales
Euro mnEuro mn
EBITDAEBITDA% on Net Sales% on Net Sales
2,5672,567
1221224.7%4.7%
19991999
2252258.8%8.8%
3,1623,162
58581.8%1.8%
20002000
1651655.2%5.2%
EmployeesEmployees 13,11513,11514,38414,384
FactoriesFactories 50505454
EBIT (w/o overhead)EBIT (w/o overhead)
% on Net Sales% on Net Sales154154
6.0%6.0%102102
3.2%3.2%
The energy cable market is characterisedby a high fragmentation of competitors
Pirelli (+ BICC)NexansBICC GeneralYazakiSouthWireFurukawa* SumitomoSuperiorDrakaFujikura* HitachiMarmon GroupPhelps DodgeLeviton GroupShowaNKT (F&G)Delphi PackardMadecoIndustrias AxasMitsubishi cableTOTAL
Pirelli (+ BICC)NexansBICC GeneralYazakiSouthWireFurukawa* SumitomoSuperiorDrakaFujikura* HitachiMarmon GroupPhelps DodgeLeviton GroupShowaNKT (F&G)Delphi PackardMadecoIndustrias AxasMitsubishi cableTOTAL
9,3%6,54,23,83,32,92,92,62,52,21,81,41,31,01,00,90,90,80,70,750,5%
9,3%6,54,23,83,32,92,92,62,52,21,81,41,31,01,00,90,90,80,70,750,5%
Top 20 competitors50,5%
Others 49,5%(with Mkt Share <0,7)
Top 20 competitors
Source: Pirelli estimate
PIRELLI ENERGY CABLES AND SYSTEMS COMPETITORS IN THE ENERGY CABLES MARKET
world = 35,8 bn Euro
PIRELLI ENERGY CABLES AND SYSTEMS COMPETITORS IN THE ENERGY CABLES MARKET
world = 35,8 bn Euro
(*) JV in Power Utilities
NORTH AMERICAPirelli share:6%
SOUTH AMERICAPirelli share: 19%
WESTERN EUROPEPirelli share: 22%
ASIA PACIFICPirelli share: 2%
EASTERN EUROPEPirelli share: 32%
EASTERN EUROPEPirelli share: 32%
AUSTRALIAPirelli share:35%
Power CablePirelli share:10 %
G.M. + SpecialPirelli share:4%
Power CablePirelli share:20 %
G.M. + SpecialPirelli share:17%
Power CablePirelli share: 32%
G.M. + SpecialPirelli share:16%
Power CablePirelli share: 33%
G.M. + SpecialPirelli share:32%
Power CablePirelli share:40 %
G.M. + SpecialPirelli share:32%
PIRELLI ENERGY CABLES AND SYSTEMSWORLDWIDE MARKET SHARES
PIRELLI ENERGY CABLES AND SYSTEMSWORLDWIDE MARKET SHARES
AFRICAPirelli share: 9%
Power CablePirelli share:10 %
G.M. + SpecialPirelli share:8%
YearsYears
PerformancesPerformances
2001200120002000
PIRELLI ENERGY CABLES AND SYSTEMSVALUE CREATION: STRATEGY
PIRELLI ENERGY CABLES AND SYSTEMSVALUE CREATION: STRATEGY
RestructuringRestructuring
Market FocusMarket FocusNew productsNew products
GrowthGrowth
Medium VoltageMedium VoltageMedium Voltage
PIRELLI ENERGY CABLES AND SYSTEMSTHE BUSINESS STRUCTURE
PIRELLI ENERGY CABLES AND SYSTEMSTHE BUSINESS STRUCTURE
ENERGYENERGYENERGY
Sales at December 31, 2000 (Euro mn)Sales at December 31, 2000 (Euro mn)
World # 1World # 1
UtilitiesUtilitiesUtilities GeneralMarket
GeneralGeneralMarketMarket SpecialsSpecialsSpecials
Low VoltageLow VoltageLow Voltage
Building cablesBuilding cablesBuilding cables
High VoltageHigh VoltageHigh Voltage
Medium VoltageMedium VoltageMedium VoltageBranchementBranchementBranchement
AutomotiveAutomotiveAutomotive
Pro
du
cts
Pro
du
cts
Pro
du
cts
Sales: 3,162
Employees: 14,384
Factories: 54 (6 shared)
Sales:Sales: 3,1623,162
Employees:Employees: 14,38414,384
Factories:Factories: 54 (6 shared)54 (6 shared)
EnamelledEnamelledEnamelled
O.E.M.O.E.M.O.E.M.
IndustrialsIndustrialsIndustrials
1,4941,494 1,0811,081 587587
ROS 1.8%
ROS w/o overhead 3.2%
ROS ROS 1.8%1.8%
ROS w/o overhead ROS w/o overhead 3.2%3.2%
Low VoltageLow VoltageLow Voltage
Subm. SystemsSubmSubm. Systems. Systems
AccessoriesAccessoriesAccessories
InstallationsInstallationsInstallations
Utilities strategy Impact on suppliers
è Focus from “purchasing cost” to“total cost of ownership”
è Aggressive purchasingtechniques
• Encouraging importers• Speeding up the homologation
process
è Downsizing/restructuring• Deskilling• Unstable organisations
è Long term partnership with globalsolutions providers
• 5 years or more on single sourcebasis
è Management services for LV & MV• Stock holding/management• Cut length schemes• Delivery to site• Accessories
è Outsource of design, build and MVprojects management
Ø Pirelli’s offering system is anticipating the delivery of global solutions to matchrenewed utilities’ strategy
ØØ Pirelli’s offering system is anticipating the delivery of global solutions to matchPirelli’s offering system is anticipating the delivery of global solutions to matchrenewed utilities’ strategyrenewed utilities’ strategy
PIRELLI ENERGY CABLES AND SYSTEMS EVOLUTION IN THE UTILITIES BUSINESS STRATEGYPIRELLI ENERGY CABLES AND SYSTEMS
EVOLUTION IN THE UTILITIES BUSINESS STRATEGY
Distributors strategy Impact on suppliers
è Growth through acquisition world-wide
è Added value improvement:• new product lines• (electrical à electronic)• new application (residential,
industrial, utilities…)• new services and customer
relationship (training…)
è Cost reduction:• Supplier rationalization• New logistic platform
è Global Supplier in one international frameagreement
è Broader product range technology/innovation requirement
è Supply chain and informationtechnology integration
è “Brand” awareness through a direct andmore relationship approach(C.R.M.,fidelization system…)
PIRELLI ENERGY CABLES AND SYSTEMS EVOLUTION IN GENERAL MARKET BUSINESS STRATEGY
PIRELLI ENERGY CABLES AND SYSTEMS EVOLUTION IN GENERAL MARKET BUSINESS STRATEGY
Ø E-business, key management accounts, full range supplierØ Cost leadership, sell-out partnership
ØØ E-business, key management accounts, full range supplierE-business, key management accounts, full range supplierØØ Cost leadership, sell-out partnershipCost leadership, sell-out partnership
OEM/ Contractors strategy Impact on suppliers
è Refocusing on their core competence
è Centralisation of Purchasing dept.• from local buying to global contract• Headquarters negotiation and local
executions• Product standardisation to
overcome local barriers
è Rethinking Total Cost of Ownership /Installation
è Opportunity to catch new customers
è Deeper knowledge of customer’sapplication field
è Few global players (manufacturers orvalue added resellers)
è Local presence and global key accountmanagement
è Cable services (precutting, harnessing,delivery to site)
PIRELLI ENERGY CABLES AND SYSTEMS EVOLUTION IN SPECIALS BUSINESS STRATEGY
PIRELLI ENERGY CABLES AND SYSTEMS EVOLUTION IN SPECIALS BUSINESS STRATEGY
Ø Targeting global accounts at local and central levelØ Refocus the global product offer through world excellence center with Supply chain
reengineeringØ Launch of “Technergy”, the new world-wide Integrated Cabling Solution
ØØ Targeting global accounts at local and central levelTargeting global accounts at local and central levelØØ Refocus the global product offer through world excellence center with Supply chainRefocus the global product offer through world excellence center with Supply chain
reengineeringreengineeringØØ Launch of “Launch of “TechnergyTechnergy”, the new ”, the new worldworld-wide Integrated Cabling Solution-wide Integrated Cabling Solution
PIRELLI ENERGY CABLES AND SYSTEMSENERGY INNOVATION
20 PIRELLI PATENTS (15 Filed / 5 under Filing)
PIRELLI ENERGY CABLES AND SYSTEMSENERGY INNOVATION
20 PIRELLI PATENTS (15 Filed / 5 under Filing)
LVMV
On these 5 product lines strong patents have been filed
AFUMEX TM low smoke - zero Halogen
GMGM UTUT
LV LVMVHV
COMPACT TM Weight / dimension reduction(same power transmission)
AIR BAG TM New protection system concept for underground
PIT STOP TM Self repairing cable system
HYBRID TM Multifunction cable(Energy / Communication)
Armoured Air Bag
Damaged Repaired
SPSP
LV LVMVHV
LVMV
LV LVMV
LVMV
LVMVHV
LVMV
LV LVMVHV
LVMV
20002000
71%
29%
67%
33%
58%
42%
20012001 20022002
* Bare conductors and enamelled are excludedIndonesia, South Africa, China included from 2001
NEW PRODUCTS MATURE PRODUCTS
PIRELLI ENERGY CABLES AND SYSTEMSENERGY BUSINESS: PRODUCT INNOVATIONENERGY BUSINESS: PRODUCT INNOVATION * *
50%
50%
20032003
P. SALES (Mn Euro) WORLD
∆ Contribution Margin % New vs Mature∆ Contribution Margin % New vs Mature
+2 %+2 % +3 %+3 % +5 %+5 % +6 %+6 %
COMPETITIVEINNOVATIVE SOLUTIONS
ENVIRONMENTAL FACTORS(EMF, visual impact…)
NETWORK AVAILABILITYRELIABILITY
SAFETY FACTORS
CONVERGENCE OF FACTORS WHICH ARE UNFAVOURABLETO OVERHEAD LINES
CONVERGENCE OF FACTORS WHICH ARE UNFAVOURABLETO OVERHEAD LINES
A competitive cable system is thebest solution to environmental,
reliability and safety issues
PIRELLI ENERGY CABLES AND SYSTEMSPIRELLI ENERGY CABLES AND SYSTEMS
UNDERGROUNDUNDERGROUNDUNDERGROUND
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Reduced time for assembly, fewer joints
Land value not consideredLand value not considered
PIRELLI ENERGY CABLES AND SYSTEMS150 KV CABLE SYSTEM: ECONOMICAL COMPARISON
Traditional vs Innovative
PIRELLI ENERGY CABLES AND SYSTEMS150 KV CABLE SYSTEM: ECONOMICAL COMPARISON
Traditional vs Innovative
Advantages on single components (lightweight, self protection, longer lengthts) are amplified in the system
Traditional Innovative
Compact Air Bag design, reliable water and mechanical protection
Compact joints , no resin filling,
Fewer joints ( longer lengths)
K Euro/km1,031
K Euro/km217
K Euro/km180
ACCESSORIES
CIVIL WORKS
PIRELLIWORKS
CABLE
Aerial
Compact trench and joint bay,
faster cable laying
K Euro/km335
InnovativeFully Mechanized
•“zero” magnetic field• zero visual impact• higher reliability
•“zero” magnetic field• zero visual impact• higher reliability
Aerial
K Euro/km206
Past Present
YearsYears
PerformancesPerformances
2001200120002000
PIRELLI ENERGY CABLES AND SYSTEMSVALUE CREATION: STRATEGY
PIRELLI ENERGY CABLES AND SYSTEMSVALUE CREATION: STRATEGY
RestructuringRestructuring
Market FocusMarket FocusNew productsNew products
GrowthGrowth
