Fincantieri S.p.A.

Good morning. This is the Coruscall Conference Operator. Welcome and thank you for joining Fincantieri 9 Months 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. I'm here with Giuseppe Dato, our CFO and team, to present to you our third quarter results. We can start on page five of the presentation deck with the executive summary. Let me say that these represent a very solid set of results. Revenues are up by 28%, about $4.5 billion, better than what we're seeing in line with expectations, with EBITDA going up by 65%, with a margin of 7.3%. As indicated in the presentation, it's lined again with our forecast, which is likely north of a billion. Backlog and therefore visibility, long-term visibility, is 36 billion, represented by 110 units. And we can confer our 2021 guidance. I would also like to take the opportunity to say that the company has been managing, I would say effectively, this pandemic and even in circumstances, behavior in our yards has been very conscious. Therefore, I would like also to say that these set of results highlight what is the resilience of our business been able to do in the face of the pandemic. We can move to the next chart regarding business update. This chart will somehow highlight our performance as being resilient and positive across all of our segments. We've been delivering four units in the third quarter in the cruise sector. As we speak, there is a delivery of Silver Dawn in our shipyard in Ancora. But you can also see from this page how diversified has been our delivery platform. In defense, we've been running up to speed with all our major commitments. Qatari Minister of Defense has been the launch of the third corvette and the delivery a few weeks ago of the first corvette of the Azubara class. The program for Italian hail is progressing according to plan, while also in U.S. Navy we already commented about the second option which has been awarded a few months ago and has been MOU in Europe with Navantia. In offshore and specialized vessels, again, as somehow was evident in the last few months, the offshore wind sector is going in the right direction. With eight SOVs in our portfolio, according to official statistics, we've been becoming a market leader in this specific area. While on equipment systems and services, we already commented about the initiative in Miami for MSC Cruise Terminal and the progress by our tech subsidiary with the acquisition of IES Group. We've been also continuing our investment plan in our Italian yards and in our American, US-based yards and investing in technology. The group evolution recorded in the past years has been quite significant. We diversified both in terms of products, in terms of clients, creating synergies across different geographies and business units. Investment plans allowed us to be more competitive and the increase in technology investments is becoming more and more a feature of our group. We try to extend our skills, our competences, and try always to get synergies for what we do, trying to serve our clients better and focusing more and more in higher margin solutions while keeping a strong focus in best-in-class execution, operations, integration capabilities, and adding to this technology in order to become what RCO called a tech platform. Page seven, we have a sustainable strategy page. It is important to highlight that there is a timeless effort to become a model in our industrial work. We've been believing in this responsibility for many years. We can say that sustainability is somehow embedded in our culture. Somehow this is also certified by the ratings we've been given. For example, by DE, we are in the advanced range and we rank first among our peers this year. You can also read the other ratings we received by CDP and from others. We want to extend the number of key ratings firms in order to be able to communicate in a more effective way with investors and all stakeholders. Clearly sustainability is about culture, behaviors, it's also about actions and investments. We continue to invest because part of this path for our companies, I would say for the whole economy and society. It's about also investing in technology and innovation. This is really a key part of our DNA and we continue to do that directly and also through different partnerships. You can see that we have agreement with major players for hydrogen, for green hydrogen, decarbonizations, And it's also important to highlight that we have a day-to-day dialogue with our key suppliers, particularly with reference to propulsion, and you know that this is a key part of our business. We have a number of initiatives we will have the opportunity to comment in the months to come, but it's important to highlight how deeply committed the company is. We can flip to page eight and see new orders and deliveries. I will just highlight the fact that the new orders reached 2.3 billion. You can see what is the split between shipbuilding and offshore and specialized vessels. And we've been delivering 13 ships this year. These are coming from 10 different yards in three different continents. And again, I'd like to highlight diversification and the fact that all of our components of our industrial footprints are efficient and delivering according to schedule. At page nine, we have the backlog development. Again, we can confirm the long-term visibility, the diversification of both client and product base, which is really essential for a lower and safer risk profile of the company, we recorded no cancellations. And you know how important that is also for our financial profile. And it's also, closing my initial remarks, important to highlight that after the pandemic, our clients, particularly in the cruising segment, are in much better shape and conversation regarding new projects received. Therefore, no orders, but conversation regarding new projects which somehow testify a different environment. I will hand over to Giuseppe for financial results.

Okay, thank you, Fabio. Good morning, everybody. You can go to page 11 and start commenting on the intake back, or in general, the numbers really signify full recovery of the business of the whole group. We had no water cancellation which is a significant achievement and on the back of the COVID-19 pandemic we were able to preserve, fully preserve the backlog despite the challenges of the pandemic. In the first nine months of 2021 the order intake came at 2.3 billion up 25% year-over-year, with a very positive impact, as we mentioned before, from the offshore specialized vessels, the equipment systems and services, and also the shipbuilding as well. And this segment was we did not have any new orders for cruise ships. maintaining a good order intake coming from the defense business. Our U.S. operations were awarded the second FFG-62 class frigate, and we had further orders. Total backlog is approximately 36 billion, including 9.4 billion in soft backlog. This is thanks to the recent achievements in the defense, as we said. Long-term visibility, again, because the opportunity to shape a medium-term investment plan to create production efficiencies whose results are starting to materialize, and we'll see this in the following numbers. If we go to revenues, first nine months of 2021, a strong revenue performance. driven by exceptionally high production volumes. We had roughly 12 million, in excess of 12 million production hours in the shipyards. This is despite safety protocols in place. And this comes on the back of the 3 million hours that we lost, as you remember, in 2020 due to the pandemic. Given these production volumes, revenues closed at 4.5 billion euros excluding pass-through activities, which were 235 million. Revenues excluding pass-through activities grew in excess of 28%, with shipbuilding contributing to most of the growth. And within shipbuilding, we had the cruise business growing almost 26% and defense 36%. Cruise still accounts for more than 50% of the total revenues, while in the defense business, we moved from 21 to 23%, and this also has a good, although slight, impact on margins. The reduction in offshore and specialized vessels compared to In the same period of 2020 we grew 15.3%. We are recovering the volumes lost in the first part of the year. Also in the equipment systems and services we grew almost 30% for all the operations aimed at supporting the OEM business in shipbuilding. Going to EBDA, 330 million. That's an exceptional growth with respect to last year, 65%. 330 million at 7.3%. We improved from 5.7 to 7.3. And this is higher than the guidance of around 7% EBITDA margin that we provided for year-end. In this respect, the Q4 marginality is expected to be in line with the previous two quarters. Therefore, we are confident that we can reach over 7% of EBITDA margin year-end. This very positive operating result is mainly driven by the shipbuilding segment, with an EBDA margin of 7.6, especially thanks to the very positive performance in cruise deliveries. I remind you that we delivered three vessels in a month in July. Also, we had a positive contribution from offshore and ESS. In offshore in particular, 6 million euros of positive EBA, we are reaping the benefits of the turnaround strategy that we have implemented starting from 2019 and that sees vast repositioning in more promising markets on which we have already a leadership position. Well, slide 14 shows you better than my words where the recovery came from. And the 130 million more that we did comes, we can split it exactly in two, in part for roughly 50% of it, 67 million comes from the full recovery in production volumes, with most of the contribution coming from shipbuilding. And for the other half, in improvement in operating margins, and this comes from the fact that, as we already said in our business plan back in our 1822 business plan, right now we are working on ships that were acquired at very good prices first. And thanks also to all the technological development and the investments that we did in the past years, we were able to perform better than expected in the construction activity. This is not withstanding the pandemic, and this clearly, clearly shows in our growth in EBTA. Let's move on to page 15 on the CAPEX. This comes mainly from the scaling up of the United States and the tail of the scaling up of our European shipyards, notably the two main cruise shipyards, Marghera and Monfalcone. in order to compress lead times and improve efficiency. And this first nine months of 2021 show that investments from this perspective are paying off. Networking capital and net financial position. Networking capital is negative at 398 million going down with respect to the beginning of the year and this is mainly driven by the deliveries that we did in the third quarter. Net debt is stable with respect to the end of last year and improving with respect to the levels we had in June. Remember that for first quarter and June of this year, we said that net debt levels would have reached a peak. And from there on, we're going to see an improvement. And the improvement is already ongoing. Net debt is roughly at the levels we see for year end. We also had an improvement in construction loans, which were at 976 million euros. We reimbursed roughly 350 million of construction loans. We see these debt levels going to year end with a growth in construction loans, though, because we need to finance the very, very numerous delivery plan that we have for the first six months of 2022. Most of you, we have the first delivery at the end of January of 2022. As with the outlook, I give the floor to Fabio final words on how we see the end of 2021.