What emerged from the review of the 2022-25 Strategic Plan approved by the board of directors is a financially strengthened and repositioned Saipem in the business: on the one hand a strong injection of capital and cost cutting, on the other the strengthening of the traditional business of offshore and the reduction of onshore activity for which negotiations with a primary international operator are also in sight.
Eni and Cdp committed to subscribe a total of 43%
To cope with the profit warning of January which indicated the loss of a third of the capital, the company, led by ad Francesco Caio, in the emergency flanked by Alessandro Clean (Eni) as general manager and from Paul Calcagnini of Cdp, has launched a capital increase maneuver of 2 billion, as well as other immediate financial resources that act as a bridge to this operation. The reference shareholders Eni and Cdp have undertaken to subscribe a total of approximately 43% of the capital increase, in proportion to the stakes respectively held in the company's capital, while the remaining about 57% it is covered by a pre-underwriting agreement with leading Italian and international banks. Downstream of the financial manoeuvre, the group expects one net financial position of approximately 800 million euros at the end of 2022 and thanks to the evolution of the business and the contribution of financial resources from the maneuver, a net financial position close to zero is expected at the end of 2025, says a note.
The accounts at the end of 2021 gave no alternatives, a net loss of 2,46 billion
After all, the accounts at the end of 2021 were clear: Saipem recorded a net loss equal to 2,46 billion euros, more than doubled compared to the 1,13 billion recorded in 2020. In the fourth quarter 2021 red is equal to 1,34 billion euro against -120 million in the same period of the previous year. 2021 revenues are down by 6,8% and stand at 6,87 billion (7,3 billion the previous year), the gross operating margin (EBITDA) adjusted marks a red for 1,19 billion (positive for 614 million euros in 2020) and the negative operating result (EBIT) adjusted amounted to €1,71 billion, compared with a previous profit of €23 million. With the new plan, however, the company aims to change pace so as to arrive at the end of the year with a positive adjusted Ebitda (adjusted gross operating margin) of over 500 million and over 1 billion at the end of the plan. The Board of Directors has convened the Ordinary and Extraordinary Shareholders' Meeting, for 17 May 2022 in a single call.
The financial bazooka: cost cutting, immediate fresh money and capital increase at the end of the year
First step, you have to cut the Costs. Given the trend of recent months, the first action of the new management is aimed at a "thorough review of general and administrative costs" which will lead to an increase in the target for 2022 to over 150 million euros and over 300 million euros regime in 2024. Second step, injections of fresh money. In addition to the capital increase of 2 billion euro (above the 1,5 billion mostly expected), the budget package also provides for a new revolving credit line (RCF) up to 1 billion euro with respect to which le 7 banks participating in the operation (Banco BPM SpA, BNP Paribas, Citibank, NA, London Branch, Deutsche Bank SpA, HSBC Continental Europe, Milan Branch, Illimity Bank SpA, Intesa Sanpaolo SpA and UniCredit SpA) will participate preliminary for approximately 450 million of Euro.
They will also be signed financing lines on a bilateral basis by the same banks for a total amount of approximately 1,35 billion euro. However, pending the completion of the capital increase -which will be implemented in the second half of the year- they are expected immediate financial interventions. By next March 31, liquidity of 645 million euros will be injected by the majority shareholders, which suggests that there will be no fears for the repayment of the 500 million Saipem bond maturing on April 5. Among other loans, a liquidity line of 855 million euro was also launched, 100% assisted by a specific parent company guarantee issued by the shareholder Eni. A correction of the 2021 net profit emerged from the Eni financial statements, from 6,128 to 5,821 billion euros, precisely following "the estimate of the fourth quarter result of the Saipem joint venture".
Offshore above all, the core business in which Saipem has a competitive position
The refocusing of the business on offshore activities (both E&C and drilling) is the first change in the helm of Saipem, the sector in which the company boasts extensive experience and a competitive position and from which a higher margin. In particular, the company expects the offshore E&C market to grow with a 2021-25 CAGR of 8% (driven by the Conventional and SURF segments) especially in the Middle East and Africa and sees in the 22-25 Plan horizon order acquisitions for around 24 billion euros, increasing the 14% growth target compared to the October 2021 plan.
Negotiations underway for the sale of 83 onshore rigs, expected return of over 500 million
On the contrary, Saipem has decided to reduce business acquisitions Onshore E&C approximately 15 billion euros, down 14% compared to the October 2021 plan, favoring orders with a higher technological content in the LNG segments and in gas valorisation (Urea and Ammonia plants). Precisely in this context - it was underlined in the call - the negotiations for the sale of 83 plants of ground drilling positioned in the Middle East and Latin America, which should lead to a financial return of over 500 million. The deal will close by the end of the month.
For offshore wind sector the company divided the plan into two parts. In the period 2022-23 it will move on low-risk assets with an expected acquisition plan of 800 million, down from the October 2021 plan which envisaged 2,4 billion euros. Instead, in the second part of the plan (2024-25), the group expects an acceleration of acquisitions for around 2 billion euros, through a renewed commercial strategy also through strategic collaborations. The issue of. remains central to Saipem energy transition and the circular economy, focusing on the construction of modular plants in the carbon capture supply chain, on the recycling of plastics and on the development of subsea-type robotic technologies. In this context, the expectation is of project acquisitions amounting to approximately 1,3 billion euro
They have also been identified additional actions -which are not included in the 2022-25 Plan- which could bring potential additional liquidity of over 1,5 billion euros which include the monetization of assets, the renegotiation of existing contracts and the enhancement of the onshore drilling business for which Saipem has in negotiation with a primary international operator. The plan does not envisage the acquisition of new orders in Russia, which currently represents a limited portion of the existing order backlog.
Rothschild was financial advisor to Saipem.
