Fincantieri S.p.A.

Good morning. This is the course call conference operator. Welcome and thank you for joining Fincantier's full year 2020 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. If anyone needs assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Giuseppe Bono, Chief Executive Officer of Fincantieri. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and welcome to our conference call. 2020 has been an extraordinary year for everyone. The pandemic has indeed affected us all. I hope you are well. I am proud to say that we at Fincantieri reacted with great determination to safeguard our people, our operations and our backlog. We can still confirm that we received no ordinary cancellation and that we entered 2021 with an intact and robust backlog maintaining a sound funding capacity thanks to our talented people our expertise and our tenacity we were able to deliver all the cruise ships scheduling prior the covet with obviously delivery, including a very important ship at the end of September. Our 100th cruise ship, Princess, was handed over to Princess Cruise, a Carnival Group brand. I have said many times before, we believe in the resilience of the cruise industry, and so we are collaborating with the ship owners to build their ship with the most innovative solution in the future, implementing all the safety standards in order to offer to cruise passengers the best and the safest experience ever. A few years ago, we envisioned a European champion for the shipbuilding industry. While for a mutual agreement, we decided not to pursue the consolidation in the cruise business area, taking account of the situation. We are on the right path with one of the naval business areas. Naviris JV with Naval Group is full operational and it is going forward with the contracts signed with the OCA, the European Agency for Defense Procurement. Moreover, we have just signed the Memorandum of Understanding for the Development of the European Patrol Corvette Programme. a very important project that will bring forward our idea of a European champion. Italy is committed to order aid of this new patrol corvette. Despite being heavily affected by the pandemic, 2020 was a year of success. and improvement. We confirmed ourselves as a partner of choice in the naval segment, and we became, for the first time, prime contractor for the U.S. Navy. First time not only for Ficatieri, but for the whole industry in the world. We are also taking advantage of the excellent now we developed in the offshore business during the 2020 we shifted away from the oil and gas sector to a greener and more business. In fact, during the 2020 risks. to a more sustainable segment such as the one of the renewable energy sector in which we strongly aim to establish ourselves and to reach a position of leader. Moreover, we kept improving and increasing our competencies and capabilities to prove ourselves as leaders in sectors such as infrastructure, electronics, and cybersecurity. We can count on our strong project management skills and system-integrated capabilities. Such know-how allows us to further stand out in complex, non-maritime projects. The delivery of the Genoa Bridge is only one of the many more accomplishments to come. We delivered the bridge in record time. For what concerns our economic and financial result, as I said before, 2020 was deeply impacted by the health emergency. However, Fincantieri found the way to safeguard the health of all the people in its sites while gradually ramping up tradist production again with new processes. The results of the last two quarters of the year show how fast we were able to rise and adapting our operations to the new safety standards, and this is a clear sign of what is to come. We are confident that we are back on the road path we undertook a few years ago, reaching the marginality embedded in the current backlog and returning to profit this year and to give the dividend to our shareholders in 2022. I'd like to tell you that the business plan for the next year could show a growth of revenues of about 10 percent for years with an inevitable margin between Thank you and good morning to everybody.

We'll start at page six of the presentation we uploaded on the system at our executive summary. Health and safety and preserving backlog as the CEO I just said being our top priorities in this extraordinary year. We believe we are on the right path to growth and profitability, but let's start with some numbers regarding 2020. People's safety and their health. Less than 4% of our workers tested positive, and I'm sure you can appreciate the importance of this indicator in a tough environment like shipyards. That tells you about investments in people and tools and health and safety checks to protect those who are building our ships. We've been also able to protect our best practice, our engineering and construction capabilities in this very difficult and challenging period. which has been preserved from the crisis. No orders being canceled. We have a total backlog of roughly 36 billion at the end of last year. And the production programs have been, I would say, successfully rescheduled and I will say in full agreement with our clients. Seven cruise ships have been delivered in the past year. This is very important indicator also of the relation we have with our clients and the resilience of the industry. Importantly, we will see that later on 12 more ships have been delivered in the naval and the offshore and specialized vessel sectors. In terms of strategic developments, new orders have been achieved in the region of 4.5 billion. That is 18 new units thanks to excellent performance by our naval department and our wind and offshore sector. The consolidation global defense industry has been very constructive both at the domestic level and the international level. We continue to strengthen our position in the infrastructure sector in a very selective and prudent way. while at technology and digital division, which is our new Fincantieri Next Tech, development is being encouraged, encouraging, as has been also testified by the important agreement we reached with Autostrada and IBM for monitoring the Italian highway network through sensors, AI, drones, and I would say state-of-the-art technology. If we go to page seven, we have the results. You can see that our revenue base has gone from $5.8 billion to $5.2 billion. That is the best way to appreciate and gauge our revenue capabilities because this number, which is 5.2, excludes the effect of the so-called pass-through activities. which has been basically carrying zero margin to debt. The accounting figure is 5.8, basically in line, but the real figure is 5.2, and to that we also compare our EBITDA, which has gone from 320 to 314, which is a margin of 6.1, when we compare to the revenue base of 5.2. It's important that excluding this pass-through activities, we can better appreciate the impact of COVID in the past year and what will be the rebound expected in 2021. Net debt increased from 736 million to 1 billion 62 million, which by the way is a sharp decrease compared to 1 billion, 425 million of the third quarter. When we consider the COVID-related impact, we have to consider that being a manufacturing company, we lost roughly 20% of our production hours, which is 3.2 million hours. That has an impact of roughly 1 billion and 50 million. That cost the company 80 million in reduced VDA, We also had to account for roughly 200 million of COVID-related extraordinary costs. And we also had the capacity, the financial soundness, to provide our clients in the cruise sector with 450 million of financial flexibility, very much appreciated by those clients. When we look at the bottom left, The evolution of our quarterly revenue and ABDA, you can see that Q2 has been, as expected, the worst of the year, which has been the one most impacted by the virus. But as we already commented during the third quarter presentation, results at the end of September showed a rebound in production and revenue and a significant rebound in EBDA with margin going to 7%. EBDA margin we basically maintained in the fourth quarter with 114 million in terms of EBDA with a sharp increase, roughly 50%, compared to the sequential quarter, the third quarter. We continue to maintain sound, robust funding capabilities. At the end of the year, we had 1.3 billion cash and cash equivalent, plus 1 billion available credit lines. We have a very, very significant portion of our debt, which is long-term, medium to long-term, with no financial covenants. Turning page, the business update. Just a few comments regarding our strategic developments. On cruise, we delivered seven cruise ships, five from our Italian shipyards and two from our Norwegian shipyards. It's testifying not only the resilience of the business, but also our production commitment and how overall the sector is ready for a new start. On defense, very positive commercial achievements have been recorded in 2020 in the naval, and in what is offshore specialized vessels on the naval, both domestically and internationally. We include also two frigates and two submarines of the new generation for the Italian Navy. We confirmed our role as a prime contractor for U.S. Navy, plus the Navieris joint venture with our French counterparty has been fully operating signing also two new contracts with OCAR in 2020 and a memorandum of understanding with Navantia for European patrol corvette. Offshore is not just about restructuring, a theme we've been discussing quite frequently in the past couple of years, but it's also about conversion, redirection of our strategy towards more sustainable businesses. like fishing, but more importantly, wind. We're talking about a wind offshore platform, which is a business which is projected to grow in a very significant way in the 10 to 15 years to go. And they would need vessels specializing for installing, maintaining these platforms, laying cables. And we're talking about ships and vessels with being able to product for the oil and gas business. Now we're adopting those skills, the engineering and those commercial capabilities towards this new growth sector. In equipment systems and services, we've been enhancing our high-value added sectors from the infrastructure to accommodation, which is our marine interior. And very importantly also on the technology, digital, and cyber business, which is Fincantieri Next Tech. Also in the infrastructure sectors, an acquisition of Inso and its hospital maintenance business has been completed. Roughly 3,000 cabins have been supplied to our joint venture with the CSSE in China. Last but not last, Sustainability Fincantieri is among the leaders in the fight against climate change and also, I would say, in a cleaner ocean. Our rating has been upgraded from B to A- by the Carbon Disclosure Project and by DG OIRIS. We are the first in a group of 53 peers in the sector worldwide in terms of our effort for a better world. Page 9, we have the new orders divided by shipbuilding and offshore and specialized. I won't go that much. You have all these figures, but it's important to highlight that the Italian Navy has been ordering two new of French brigades plus two new submarines with two further options. And you can see that this is providing significant visibility in terms of delivery in the years to come. I would say for the decade to come. Offshore specialized vessels, I would like wind, and we already talked about that before, fishing, and also aquaculture. and also eight marine robotic vessels. The same trends which are applying to the auto industry, which is electrification and autonomous, are being applied also to the naval business with a strong impulse to invest more and more in technology for more digitalized vessels and also cleaner ones. Plus the cable-laying vessels, which is again linked to the wind offshore. I would also like to highlight the very important factors. What has been in the last years is a strong diversification of our client base, and also in terms of engine of growth. It's not just cruise. We got the naval, which is pumping ahead. We got new sustainable sectors like the wind offshore. And you can also see that in the 2020 deliveries, A single client didn't have a weighting above 20%, which is a very important factor in terms of diversification for us. Page 10, you can see what I just mentioned. And very importantly, we celebrate our 100th cruise ship, which is Enchanted Princess, delivered amid the pandemic. Backlog development improved visibility up to 2029 in the naval business. Three new units acquired in the offshore specialized vessels also gave the sense of the work which has been done in Norway and offshore specialized vessels. You can see how those orders are being distributed throughout the next few years. and you can also appreciate the impact of new orders which have been seized and captured in a tough year like 2020. Our backlog is intact. Actually, it grew in 2020 and is more diversified than ever. Basically, to sum it up, 19 units delivered, 18 new units, 97 ships in backlog with 116 ships if we include the soft backlog. Now let's go to throw down the numbers and hand it over to Giuseppe D'Addo, our CFO.