Above all, the difficulties encountered for specific offshore wind and onshore E&C (Engineering & Construction) contracts and which emerged in the review of the backlog caused the sharp deterioration in Saipem accounts 2021 emerged last January when a new profit warning indicated a loss of over a third of statutory capital.
The company is therefore forced to review the strategic plan presented last October and will return to focus on its more traditional activities (drilling and offshore E&C) "characterized by higher margins, thanks to Saipem's consolidated competitive position" for which the order book is still substantial. On the Stock Exchange, after an initial slide to -9%, the new guidelines indicated convinced investors: the shares lost 1,54% to 0,98 euro when the Ftse Mib sank to -3,8% due to the Russia-Ukraine war.
The financial situation is causing concern, which will need a new maneuver expected on March 15 with the support of majority shares and a pool of banks, while the April 5 deadline is looming when a 500 million bond will have to be repaid.
Saipem accounts 2021, negative Ebitda of 1,1 billion
For the whole of 2021 Saipem recorded a Ebitda adjusted consolidated management loss of 1.192 million euro and a loss of 901 million for the fourth quarter alone due to “the increase in difficulties on some specifications offshore wind orders and onshore E&C which were highlighted with the exercise of backlog review” says a note from the company controlled by Eni (30,5%) and by CDP Industria (12,5%) the day after the meeting of the Board of Directors.
“This, by virtue of the international accounting standards, resulted in the accounting in the fourth quarter of most of thecost increase and the reduction of the overall revenues expected in future years on the contracts in question, until their completion". So the new strategic plan setting will need to see a “repositioning on low-risk activities in the offshore wind”.
It's result positive on the other hand, for 120 million Ebitda net of the aforementioned contracts "confirming the overall solidity of the portfolio of activities operated by Saipem", supported by the results of the more traditional activity of drilling (drilling) and the offshore E&C business, excluding wind , says the company active in services, infrastructures and technologies for the energy sector.
Saipem's Board of Directors approved some adjusted consolidated management figures for 2021 and the guidelines for the revision of the 2022-2025 Strategic Plan - compared to the one issued last October - which will be approved on March 15th.
The 2021 preliminary balance closed with consolidated operating revenues adjusted amount of 6.875 million euros, down by 6,4% compared to 2020.
Will liquidity be sufficient to repay the bond on April 5?
La financial position net post IFRS-16 shows a improvement at the end of 2021 to around 1,5 billion euro, up from around 1,7 billion euro at the end of September 2021.
The focus is mainly on the liquid assets which at the end of 2021 amounted to 2,3 billion euros, of which approximately 700 million are available with the remainder mainly linked to joint venture projects.
The question facing the market is whether such funds will be enough to cover the next deadlines: April 5 must be repaid a bond of Saipem for 500 million euros issued in 2018 with a coupon of 2,75% whose price has fallen well below par in recent days. Mediobanca Securities analysts said in a note in recent days that "the available liquidity" in a framework that is described as "unclear" may "not be sufficient to repay the bond maturing in April, and to meet the increase in net debt over the course of 2022”.
Saipem accounts 2021, contracts in acceleration from oil & gas
Right from the industry drilling better winds could return for Saipem, with "positive market dynamics with an increase in demand and prospects for full use of the operational fleet".
The acquisitions of new contracts in 2021 they amounted to approximately 7,2 billion euro (book-to-bill greater than 1), with a strong acceleration in the fourth quarter (2,3 billion euro, over 5 times higher compared to the third quarter), confirming the recovery in demand in the segment offshore oil & gas E&C and of Saipem's centrality for the main customers in this segment, the note said. In the fourth quarter, offshore E&C activities - excluding wind - saw an acceleration in the acquisition of new contracts, equal to approximately 1,4 billion euros, compared to 0,2 billion euros in the third quarter.
Saipem, the anti-crisis plan changes strategy
For the remaining part of the strategic plan, Saipem will aim for one cost reduction structure, with an increase in the target for 2022 to over 150 million euros and instead an increase in the focus on the acquisition of offshore activities, both E&C and drilling.
In the aftermath of the profit warning in January, the two majority shareholders, Eni and Cdp, have placed alongside the managing director Francesco Caio In recent days, two managers for the restructuring of the company: Alessandro Clean, former general manager of Eni's Natural Resources division and now leading the new general management of Saipem e Paul Calcagnini, former deputy general manager of Cassa depositi e prestiti, who will manage the financial supervision unit.
The note underlines that "the new organization by business lines is confirmed, which goes beyond the divisional one with the aim of greater efficiency and a centralized risk control”. In recent days S&P Global downgraded Saipem's rating from BB to BB- due to the company's operational weakness and its high financial risks and Moody's cut its long-term rating to B1 from Ba3 in preparation for another downgrade.
Shareholders and banks at work, eyes on Cingolani
The expectations are for one maneuver of around €4 billion which could include a capital increase of around €2 billion, the renegotiation of a €1 billion credit line and the receipt of another billion from the sale of one of its drilling divisions.
Eyes on developments also on the side of the Italian government. In recent days there was a meeting at Palazzo Chigi between undersecretary Roberto Garofoli and ministers Daniele Franco and Roberto Cingolani to evaluate the methods and extent of a possible increase in gas extraction capacity from Italian fields.
Cingolani himself, on the occasion of the announcement of the decree law to control the expensive bills last Friday, spoke of the revival of national production “to reach approximately 5 billion cubic meters per year from the current 3,2 billion out of a total consumption of approximately 70 billion. The dl aims to optimize i existing deposits, without new drilling, obtaining the extra 2 billion from the Strait of Sicily and the lower Adriatic (Marches and Ravenna). Project in which Saipem could be involved.
