Fincantieri S.p.A.

Good morning. This is the Coruscant Conference Operator. Welcome and thank you for joining the Fincantieri First Quarter 2021 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need 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. Gallia, General Manager. Please go ahead, sir.

Thank you, and good morning to everybody. We're here to present the first quarter results. Giuseppe Dada, our CFO, is with us, along with the investor relations team. If you go to page five of the presentation, you will find the executive summary. I believe there are a couple of important messages The first one being is that it's a very solid start to the year. We confirm our guidance for year-end in terms of revenues and profitability. And the first quarter results are totally consistent with this statement. When you look at the number, you can see that revenues in the first quarter, excluding the pass-through we commented the last presentation, Revenues, as I was saying, are up by 9% plus, confirming the growth trend that were outlined in previous quarter. EBDA margin partially improved to 7% with, I would say, quite solid improvement compared to first quarter or last year, which, as you may remember, has been affected by a month by the pandemic. net debt increase this is due to a very tight delivery schedule which is concentrated in the third quarter and in fourth quarter which means that in the first half of the year there will be a very few cash in and there will be to sustain the cost for the constructions or the ships we are about to deliver in the second half kobe 19 related extraordinary items are running a touch less than 15 million euros. When we talk about 2021 guidelines, we are expecting, we're still expecting and confirming revenues in the region of 25 to 30% growth and with the DDA margin around 7%. And importantly, a net financial position which will stabilize in the second half of this year to go roughly in line with the level we've been presenting to you at the end of 2020. If you flip page and you go to page six, this is a brief business update. On cruise, we've been, you know, carry on with the delivery schedule as expected. Viking Venus, which is the first out of five cruise ships which are about to be delivered in the Italian shipyard, were successfully handed over in mid-April in our shipyard in Ancona. Defense has been taking part in the Sea Defense Project, which is aimed at providing technology which will be included in the next generation of naval platforms. We also signed a memorandum of understanding between our Naviris joint venture and Avantia, for a cooperation to develop European Patrol Corvette, which is a very important PESCO European program. And regarding our VARD subsidiary, VARD is to design a cable repair vessel for Orange Marine, one of our clients, and it's been designing, constructing three service operation vessels for North Star Renewables. We will be commenting later on that it's important to highlight that Varda is progressively, I would say successfully, shifting its focus from oil and gas, whose demand is very low, as you all know, to towards wind, particularly offshore wind. And this is a theme which will be characterizing the strategy of our group, particularly of Varda, in the years to come. We'll be commenting the final outlook, a few other themes regarding cruise and defense. If you flip page to page seven, an update on three other important themes. The first one is digital and innovation. We've been signing a very important agreement of collaboration with Amazon Web Services, which is designed to cooperate in the digital sphere technology development with a special focus on cloud computing. We're expecting significant improvement in the time to come. Regarding green, we've been working with another important partner, which is Alnaviva, an Italian IT and digital company, to support enhanced digitization in the transportation and logistic We are active in transportation as far as censorship and technology digital is concerned, but as you may know, Almavivas is the undisputed leader in this field, not just in Italy. We've been also signing an important agreement with ArcelorMittal and Paul Wirt, the former owner of Italimpianti, to consider drawing a reconversion plan for an existing integrated cycle in Taranto. using eco-friendly technology, and we've also been working on hydrogen regarding what is probably going to be the first zero-emission ship to be completed in 2021. And as far as sustainable mobility is concerned, we signed a letter of intent with Analyx regarding cold ironing, as you may know, It's about building and running next-generation poor infrastructure with electricity versus more polluting materials, which means having a lower environmental impact. What I would highlight of all these comments is that Fincantieri has been able to attract collaborations with world leaders in what they do because Fincantieri is world leader itself. and that is very important also when we look at the future of this company. Clearly focused on what we do, we do ships, but in our ships there's a lot of technology. Any kind of technology, any kind of new dynamics which are impacting businesses from digital to green to mobility are already in our businesses and we're just extending our know-how our knowledge, our competences, which is represented by years and years of working on very sophisticated international projects with top quality people. When we go to page eight, events, it's the first quarter, just to say that we signed new orders, three service operation vessels with North Star, as I said before. we have been delivering two ships, the logistic support ship Volcano for Italian Navy and the cruise coral geographer Coral Expedition, which is being manufactured in our Vietnam-based shipyard. When we look at page nine, and more importantly, you can see the visibility we have attached to our backlog. It's still a very important and very profound visibility through the years. We have visibility up to 2027. As far as cruise is concerned, cruise is still our main division. On naval, visibility is even higher. And regarding wind, visibility clearly is lower, but it's important to highlight the transformation path that Avard has begun. So two units delivered, three new orders, and a touch south of 100 ships in backlog. I will hand it over to Giuseppe for a commentary regarding economic and financial results.

Well, good morning, everybody. So we move to page 11 with the order intake and backlog. For the first quarter of this year, order intake came in at 340 million euros roughly. Of course, slightly up compared to the first quarter of last year. Well, you know, given the current situation, the order intake in the shipbuilding sector is influenced by, you know, wait-and-see attitude by our cruise clients. And we stand in this. Also last year, you know, the sector was in a difficult situation to say the least, but in any case, what matters here is our diversification in other businesses. Last year, I remind you, we had 4.5 billion euros in order intake in the worst year ever for our clients, of course. What really stands out in this first quarter is the order intake in the offshore specialized vessels in the wind segment. Like we said before, the acquisition of the three vessels for the Dogger Banks wind farm is a very important achievement for us as it marks a further entrance into this new and promising sector of the offshore wind farms. The oil intake in equipment systems and services stands at 148 million euros, roughly in line with last year's Backlog, 34.4 billion euros. Very important to note that it's, let me say, we preserved the backlog as of today. Of course, we didn't have any order cancellation in our backlog, and that's a very important message. Moving on to page 12 on revenues. The growth of revenues is on the right track. We grew quarter over quarter by roughly 9%. Notably in the shipbuilding segment, almost 13%, with a growth in cruise of 11.6% and in naval of 16.2%. Let me remind you that last year, We shut down production in the last two weeks of March at the beginning of the pandemic and with the loss of revenue, very important loss of revenue that was even higher in the second quarter. Overall last year, the revenue shortfall was a billion euros. This is to say that we are right on track to bridge this gap that we experienced last year. For instance, to give you a more physical number on how production volumes are progressing, the first three months of 2021, we did roughly 3.8 million hours of production in our Italian yards. Only in the month of April, we did cipher 1.5 million hours of production. So this is a clear indication of the progressive ramping up of production volumes. Revenues in offshore and specialized vessels went down or more than 20%. This is mainly due to the disposal of the private shipyard that was still operating in the first quarter of 2020. And of course, we still have to see the effect of the repositioning strategy towards the wind offshore segment. In equipment systems and services, Revenues were at 232 million euros, up 13.4% versus last year. On page 13, EBDA. As we said before, we stand at 7%, right on the spot with respect to the guidance that we gave for 2021. This performance is in line with the fourth quarter of 2020 and really marks a very good start in 2021, and we are right on track with respect to the guidance. Last year, the shortfall in EBITDA due to the shutdown of production, as a reminder, was approximately 15 million euros. With this result in the first quarter, we really breached this gap, and we show that the profitability embedded, we are more consistent, let me say, with the profitability embedded into our backlog. Of course, we mark also a slight uptick in the margin in the EBDA of the offshore specialized vessel segment at 2 million euros, First quarter of last year, we were breakeven, but with a minus one. So there is a slight improvement, and this is consistent with our strategy. EBDA margin in equipment systems and services was somehow lower, and this is due to the different mix of products and services within this segment. It was mainly affected by lower contribution coming from the ship repair and conversion business area. We move on to networking capital and net financial position. Of course, we are on track also here. Our networking capital has increased and this is This was expected. It's in line with our current delivery schedule, which entails the delivery of three vessels, three large-size cruise vessels, actually, in the third quarter of 2021. And we're going to have one more in the fourth quarter of 2021. um and you know as you see the the net financial position exactly mirrors the increase in networking capital uh and let me be uh you know clear here we do expect um in the second half of the year uh a substantial the leveraging here uh we are working at full speed to complete the the delivery program uh as i said before the ships are big ships large ships so they do require substantial of funds to be supported when it comes especially to the last stage of production which is the stage in which we do rely more on external supplies but of course this trend will deeply reverse in the second part of the year On the outlook, I leave the word back to Fabio.