Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Saipem SpA (SAPMF, Financial) recorded the highest quarterly EBITDA since Q4 2019, with a 36% year-on-year increase.
- Revenue grew by 22% year on year, reaching EUR3.4 billion, driven largely by offshore activities.
- The company generated EUR110 million of net cash flow in Q2, an acceleration from EUR68 million in Q1.
- Order intake was strong at EUR5.1 billion, with a book-to-bill ratio of 1.5 times, and the backlog stands at a record level of over EUR30 billion.
- Net debt has decreased both on a pre- and post-IFRS basis, indicating effective deleveraging and risk management strategies.
Negative Points
- The EBITDA margin remained at 8.8%, showing no improvement from the first quarter.
- The offshore drilling division faced downtime and startup costs, impacting overall performance.
- Temporary suspensions from Saudi Aramco affected three jack-ups, leading to a slight decrease in expected EBITDA for the second half.
- The energy carriers division reported a 0% EBITDA for Q2, impacted by provisions for the Thai oil project.
- There are ongoing challenges in the offshore wind market, with fewer bidding opportunities and higher costs affecting project economics.
Q & A Highlights
Q: The order intake was very strong in the first half of the year. Can we expect similar performance for the full year? Also, can you discuss your commercial pipeline, particularly in the Middle East?
A: While the market is strong and opportunities are present, it's prudent to maintain a normal approach. The market conditions are favorable, but winning tenders depends on various factors, including competition. Regarding fleet utilization, achieving 70% is considered optimal, and we are confident we will reach this level in the next 6 to 12 months.
Q: Can you provide an update on the clean fuel project in Thailand and its profitability?
A: We have taken further provisions for expected extra costs on the Thai oil project and are in discussions with the client for relief on these costs. The project is progressing in alignment with our co-venturer.
Q: On Mozambique LNG, the revenue guidance included the restart of the project. What gives you confidence in maintaining the guidance despite the project not restarting yet?
A: Out of the expected EUR500 million in revenues, EUR400 million are related to the suspension contract, which is ongoing. The actual restart of the project has a non-material impact on our revenues and EBITDA, so we do not need to compensate with other projects.
Q: Can you discuss your strategy regarding leasing new vessels and the ideal duration of these leases?
A: The JSD6000 vessel is leased on a five-year firm period with two-year options. This reflects our strategy to match market demand with a mix of owned and leased vessels, allowing us to handle market peaks without the burden of long-term ownership.
Q: There is an implied step-up in margin in the second half of the year. Can you provide some color on which divisions will drive this improvement?
A: The margin improvement will primarily come from our offshore division, with better fleet utilization and project performance. Additionally, we expect fewer provisions for projects like Thai oil, which affected Q2.
Q: What is the remaining value of the legacy backlog, and is there any margin sacrifice under the new derisked EPC model?
A: The remaining value of the legacy backlog is EUR950 million. There is no margin sacrifice under the new model; controlling risk ensures we can make margins, as opposed to the previous model where uncontrolled risks quickly eroded margins.
Q: Can you provide guidance on when the first drilling for the Courcelles project will happen and update us on the Mozambique LNG project's cost and margin expectations?
A: The first drilling for Courcelles is expected in the coming weeks. For Mozambique LNG, there are no ongoing negotiations; the plan is set, and the project will resume on a reimbursable basis without impacting margins.
Q: Given the high vessel utilization, is your revenue guidance conservative, and are there any issues with the availability of engineers for new onshore projects?
A: We have not revised our guidance as it is based on planned work. Regarding engineers, we do not face significant issues; the industry is attracting new talent, and we have no criticalities that could impair project progress.
Q: What is your current stance on new offshore wind projects, and are you considering entering new projects in this sector?
A: The offshore wind market is promising, but currently, there are not many tenders. We expect more opportunities starting from 2025 and are preparing for floating offshore wind projects, which will be crucial for meeting renewable energy targets.
Q: Can you provide guidance on CapEx and cash flows for the full year?
A: We target EUR300 million in cash flows for the year, and we are on track to achieve this. CapEx is expected to be around EUR450 million to EUR460 million, with EUR200 million already spent in the first half.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
