Saipem: Results of the First Half of 2021

The Saipem SpA Board of Directors, chaired by Silvia Merlo, approved, yesterday, the Consolidated Half-Year Financial Report as at 30 June 2021^[1].

Highlights of the first half-year

• Revenues of approximately €3.2 billion and adjusted EBITDA at a loss of €266 million. Operating results, reflect a slowdown compared to the first half of 2020, especially for the engineering and construction activities, mainly due to:

• • continued effects of the Covid-19 health crisis on operational activities, with the delays in project execution and the postponement of investment decisions in the sectors of interest
  • suspension of LNG onshore project activities in Mozambique
  • specific operational issues of an offshore wind project in the North Sea

• Signs of improvement in drilling with an increase in demand and potential for a full utilization of the fleet
• New contracts for approximately €4.4 billion in the half year. Consolidation of a backlog of approximately €26.2 billion^[2] (approximately 78% of the E&C portion not linked to oil), supporting performance in the medium-long term

• Net debt post-IFRS 16 at €1.4 billion (around €1.1 billion pre-IFRS 16), slightly reduced compared with the first quarter, as a result of the accurate management of cash flows

• Cash and cash equivalents at €2.3 billion following the 7 years €500 million fixed rate bond successfully issued in March 2021 and thanks to the significant cash availability of the consolidated companies and of the project joint ventures
• Availability of the fully undrawn €1 billion revolving credit facility
• Launch of transformation initiatives to ensure a new phase of sustainable growth:

• review of the business strategy ahead of the new Strategic Plan
• review of the operating model
• simplification of processes
• reduction of operating leverage

To date, 84 initiatives have been identified for total estimated annual run rate of savings of approximately €100 million

• Presentation next autumn of the new Strategic Plan
• Outlook for the second half of 2021:

• • revenues of between €4.5 and €5 billion
  • positive adjusted EBITDA
  • capital expenditure expected between €200 and €300 million and
  • net debt post-IFRS 16 around €1.6 billion at year end

Commenting on the results, Francesco Caio, CEO and General Manager of Saipem said:

“Saipem has the resources, the skills and the relationships with clients that enable us to plan the near future with a view to profitable growth, even in a challenging context which is still characterised by the uncertainties deriving from Covid-19.

The specific factors which have affected financial results do not alter the Company’s structural strengths on which I intend to build – with the contribution of the outstanding professionals working in the Group – an increasingly competitive Saipem.

With this perspective, I have launched a programme to simplify and focus our operations. Specific initiatives have already been identified yielding a potential yearly run rate saving of approximately 100 million euro; we will provide updates to the market. The order intake and the growing utilization of the drilling fleet represent further positive factors on which we can leverage for a renewed competitiveness, starting from a return to a positive EBITDA in the second half of the year. I have also started a strategic review for a new plan which I intend to present next autumn.

Concrete opportunities for growth are emerging on three fronts.

The first one is in our core business, where signs of a new investment cycle are strengthened in regions where Saipem has a consolidated presence, such as Middle East.

The second one is in energy transition, where Saipem is already active in industrial projects in renewables, biofuels and CO2 capture and it is expanding its technological portfolio through acquisitions, such as Naval Energy in floating wind, and through joint ventures established in green hydrogen sector and, with Versalis, in bioethanol process.

The third front is in Italy, where the NRRP (National Recovery and Resilience Plan) is opening a season of new investments in sustainable infrastructures, in the energy field and in high-speed railways, a sector where Saipem has a significant track record in sections of the national network and where we are presently working on the Brescia-Verona link.

These are opportunities we want to seize to consolidate Saipem’s presence worldwide and the role we play in our Country, creating value for the local communities through a sustainable approach across all of our businesses”.

Results for the first half of 2021:

• Revenues: €3,200 million (€3,675 million in the first half of 2020)
• Adjusted EBITDA: negative for €266 million (positive for €355 million in the first half of 2020)
• Adjusted net result: loss of €656 million (loss of €132 million in the first half of 2020)
• EBITDA: negative for €389 million (positive for €271 million in the first half of 2020)
• Net result: loss of €779 million (loss of €885 million in the first half of 2020)
• Capital expenditure: €135 million (€195 million in the first half of 2020)

• Net debt inclusive of IFRS 16 lease liabilities: €1,397 million (€1,226 million as at 31 December 2020)
• Net debt pre IFRS 16 as at 30 June 2021: €1,101 million (€872 million as at 31 December 2020)
• New contracts: €4,402 million (€4,837 million in the first half of 2020)

• Backlog: €23,602 million (€22,400 million as at 31 December 2020), amounting to €26,169 million including the non-consolidated companies’ backlog (€25,296 million as at 31 December 2020)

Outlook

2021 remains conditioned by the uncertainty resulting from the persistence of the pandemic. In the first half of the year, the health crisis effects on business coupled with issues on a project specific impacting operational performance. The business outlook for 2021 inevitably remains influenced by these events.

Outlook for the second half of 2021:

• • revenues of between €4.5 and €5 billion
  • positive adjusted EBITDA
  • capital expenditure expected between €200 and €300 million and
  • net debt post-IFRS 16 around €1.6 billion at year end

This scenario does not account for a further and possible deterioration of the macroeconomic and business environment following, for example, the intensification of the Covid-19 epidemic.

Update on Mozambique

On 26 April 2021, Total declared the force majeure on the Mozambique LNG project for safety reasons. Saipem evacuated the site, continued to manage the remaining part of project activities outside of the country, for those not subject to suspension. Furthermore, Saipem assessed, in close cooperation with the client, the measures to preserve the value of the project and to ensure a prompt restart of the works as soon as the safety conditions of the area will be restored. Therefore, no significant contribution is expected from the project in the remainder of 2021, except for the reimbursement of suspension and safety costs already incurred and those to be sustained in future.

As at 30 June 2021, the project remains in the backlog for an amount of approximately €3.6 billion, with a rephasing of project schedule.

Covid-19

During the crisis, the Company continued its commitment to the protection, health and safety of its people, in close relationships with clients and local authorities, in order to ensure the continuity of operations and safety at operational sites, and acting with responsibility towards the local communities.

Our employees’ health remains the top priority.

Saipem continues to monitor the persistent emergency crisis and is promoting, on a voluntary basis, the vaccination process of its employees worldwide.

To date, out of a total of around 32,000 employees, operating in more than 60 countries, the percentage of Saipem people who tested positive to Covid-19 has been around 16%, out of which around 280 are still infected and constantly monitored by the company.

^[1] The Consolidated Half-Year Financial Report is drawn up in accordance with the IAS 34 accounting standard “Interim Financial Statements” and subject to limited audit under completion. The Consolidated Half-Year Financial Report was made available by the Board of Statutory Auditors and by the Auditing Firm

² Includes the backlog of non-consolidated companies

Conference call and webcast

The results contained in this press release will be illustrated in a conference call and webcast which will be hosted by the CEO Francesco Caio and the CFO Antonio Paccioretti today at 9.00 am CET (8.00 am GMT, 3.00 am EDT, 00.00 am PDT). The conference call can be followed via webcast at www.saipem.com and by clicking on the ‘1H 2021 results presentation’ banner on the home page, or via the following URL:https://edge.media-server.com/mmc/p/oa6zykyx

During the conference call and webcast, a presentation will be given which will be available for download from the webcast window or from the “Investor Relations/Quarterly results and documentation/Reports archive” section on Saipem’s website (www.saipem.com) around 30 minutes before the scheduled start time. This presentation will also be available for download from the authorized storage device “eMarketSTORAGE” (www.emarketstorage.com) and Borsa Italiana SpA (www.borsaitaliana.it).