Weak Q3 and mixed forecasts for 2022 overshadow Saipem’s new plan

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MILAN, October 28 (Reuters) – Weak quarterly results and mixed forecasts for 2022 overshadowed a new Saipem business plan (SPMI.MI) on Thursday, which caused shares in the Italian energy services group to fall more than 8%.

In his first strategic plan, CEO Francesco Caio said Saipem is expected to grow again over the next year as the offshore business and drilling recover from the pandemic and core profits return to pre-COVID levels in 2023.

But the 2022-25 goals for some traders have been outweighed by more worrying news in the near future.

“The year 2022, which should be the ‘transition year’, is short,” said a Milan-based retailer of 1.6 billion euros, according to a Refinitiv SmartEstimate.

Saipem’s shares fell the most in the Italian blue-chip index (.FTMIB) this morning.

Demand for oil and the company’s products collapsed in the wake of the global downturn sparked by the pandemic, leading oil companies to cut investments and postpone projects to save cash.

Saipem, a leader in subsea engineering and construction, has sought to develop new business areas to meet its customers’ increasing focus on green technologies, including offshore wind, carbon capture and hydrogen. However, some analysts have expressed concern that such companies are not generating the same margins as their oil and gas development activities.

To spur growth, Saipem separately announced Thursday that it had signed a commercial agreement with oil field service provider TechnipFMC for certain subsea umbilicals, risers and flowlines (SURF) projects.

As part of the 2022-25 Plan, Caio has committed cumulative investments of around € 1.5 billion to support a business model based on a dual strategy: helping traditional customers implement their decarbonization strategies; and the construction of modular, standardized and scalable systems as well as the provision of technologically and digitally advanced services.

The plan forecasts average annual revenue growth of 15% through 2025 and net financial debt of less than 1 billion euros by then.

However, the expected growth in operating performance in 2022 will be offset by the absorption of cash “due to the dynamics of working capital and investment,” according to the company.

In the three months to the end of September, Saipem posted an adjusted loss before interest, taxes, depreciation and amortization of € 25 million, negatively impacted by higher costs for offshore wind energy.

For the second half of the year as a whole, it forecasts adjusted core earnings with expected sales of 4.5 billion euros.

To implement the new plan, which foresees an initial cost reduction of 100 million euros in 2022, Saipem will introduce a new organizational model that is divided into four business areas.

($ 1 = 0.8622 euros)

Reporting by Maria Pia Quaglia Editing by Lincoln Feast and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.


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