Saipem has told investors to brace for a big loss for 2021 as the pandemic and increased costs hit profitability and squeezed margins.
The Italian engineering and fabrication giant said on Monday that “financial statements for 2021 are expected to close with losses in excess of one-third of company’s equity, which trigger the application of Article 2446 of the Italian Civil Code”.
It added: “The occurrence of such conditions may, following the expiry of the contractual terms (where applicable), and in the absence of a specific waiver from the banks, give rise to the right of the banks to accelerate the repayment of certain outstanding loans to the Saipem group.”
Costs and logistics
The company said it has initiated discussions with banking counterparties and key shareholders aimed at working out a financing package.
“Saipem has also initiated preliminary discussions with the shareholders exercising joint control over the company” — ENI and CDP Industria — aimed at ascertaining their “willingness to support an appropriate and timely financing package”, it added.
Saipem noted that it had recently initiated a review of the backlog of contracts, as drafting of 2021 results indicated “a significant deterioration of the full life margins of some projects related to [engineering and construction] onshore and offshore wind, due to the persistence of the pandemic and the current and prospective increase of the costs of raw materials and logistics”.
Subsequently, it has decided to withdraw the outlook announced last October.
Compared with its previous outlook, Saipem said Ebtida for the second half of 2021 was down by about €1 billion, while consolidated revenues contracted from €4.5 billion to €3.5 billion.
Onshore E&C projects were affected by increases in costs for materials and logistics.
The company said further difficulties occurred in offshore wind projects, for which “impacts from delays in critical supplies are combined with revised estimates of execution times and costs”.
Amid rising financial concerns, Saipem said last year that it will shut two fabrication yards and scrap three vessels in 2022 as a part of its strategy to reduce fixed costs amid a general reorientation centred on adapting to the energy transition.
Chief executive Francesco Caio has admitted it will not be easy, but stressed it is necessary.
Speaking during Saipem’s 2021-2025 strategy presentation last year, he said “we have decided to exit the fabrication model that Saipem has been working with for quite a while”, and highlighted its “detailed plan” to close three fabrication yards by 2025.
Caio said the closures were aimed at reducing fixed costs and pursuing opportunities that add more value than fabrication work.
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