Fincantieri S.p.A.

Good morning. This is the course call conference operator. Welcome, and thank you for joining the Cinque Terre full year 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. Bono, Chief Executive Officer. Please go ahead, sir.

Good morning, ladies and gentlemen. Thank you for joining us, and we call for the financial result for the 2021 conference call. Let me start by saying that I am very proud that even during the year, I still affect By the pandemic and the increase of raw materials prices, we at Fincantieri achieved excellent results. In such difficult times, we did react with great determination and overcome challenges that affected the full sector, and in particular, still now, our clients in the Swiss business. Indeed, we managed to preserve our orders and operations while keeping our workforce safe. In 2021, we reached a record high EBITDA at 495 million, with a margin of 7.4%. exceeding the guidance for this year. In terms of the ratings, we go 28.3%. This is for last year, improving across four segments if compared to the pre-pandemic levels. Bottom line, in 2021, we recorded an adjusted net profit at 92 million versus the negative 42 million recorded last year. And the last result at 22 million compared to the negative 245 million in 2020. This shows the need and determination of this company react to profitability during a year and how the strategy is taken to here. We are best in class in Exxon. We believe in the promise. We are seeing the progress of our investment program. Creating different production efficiencies and the cost of automation. Once again, our strategy proved to be successful. Our performance is robust. Our solutions are innovative and tailor-made. Our client base is extremely loyal and in some sectors we are within such range. Our business is sustainable to give long-term value for our stakeholders. Those are elements essential to maintain our leadership in the sector the competencies in the current global economic scenario. We are a technological platform with a global footprint. We characterize our unique sector, our wide competencies, long lasting experience and complex projects. Our project management skills and and our system integration capabilities to create the synergies across the company business, fitted from mutual know-how to sales and trust opportunities. I am also pleased to our effort in ESG has been internationally recognized. Confirming our full commitment to a sustainable business, the foundation for long-term growth are set. I am personally proud of the commitment and the determination, the sense of belonging of our people, our suppliers and also all together make Finca Gary an even stronger global leader. We think global, but we act local. Thank you.

Thank you, Giuseppe. Good morning to everybody. At page six, you have an executive summary of the main numbers regarding 21 results. As has been said with our CEO, there's a very robust set of numbers in an unprecedented difficult environment with revenues going above $6 billion, $600 million. With EPDI growth, which is almost 60 percent and reaching almost half a billion, maintaining a very solid and sustainable backlog, and very importantly, notwithstanding what happened to raw materials and other constraints we have to face, we met the guidance given a year ago. I would also mention, beyond the numbers you can find here, that almost 90% of our revenue comes from international clients, while almost 80% of the production is being performed, made locally in Italy. That really gives you the sense of a global leadership by an Italian manufacturing company. There has been a record volume in production, more than 16 million hours in our yards that also thanks to the the the economy of scales reached the investment which has been done over the years and the reaction the reactivity by by by our colleagues allowed us to maintain and significantly improve profitability and that has been done notwithstanding the environment you know well we've been also able to preserve the backlog while also capturing new orders with a different mix, but we'll go to that afterwards. It's also important to highlight that we've been delivering 19 ships in the last 12 months, and that has been done in 12 different yards from three different continents, which tells you about the global reach of FinCAP. Operating cash flow has been positive. It has been supported by our capex plan and the investments which will be commented later on will also tell you that we are building and improving our competitive advantage versus our competitors. So this is basically the sense of page six. If you go to page seven, helicopter view of the major events quarter by quarter. I won't go through any information, but you can see that this company is really large, is engaged in several different businesses, has been delivering in each of these segments. In the shipbuilding, you can see the very important European project for a European patrol corvette, the order from Indonesia and the Ministry of Defense, and very importantly, US Navy confirmed exercising the second option for the FFG new class frigates. MSC seashorts represent the largest ship ever built in Italy and the first corvette for the Qatari Ministry of Defense has been delivered just like the second logistics support ship or LSS for the Italian Navy. In the offshore specialized vessels, no new orders have been, I would say, captured by anybody in the oil and gas. On the other hand, we've been able to transform VARD and make it a leader, a global leader in SOV business, which relates to the maintaining, manufacturing and maintaining offshore wind farms. In terms of ESCs and the other division, ESS, the important landmark project of Port Miami for the cruise terminal for MSC, and we've also been finalizing IDS acquisition, which is a small but very important company for the technology it embodies. Partnership, you can find here at page 7 what has been already announced. It's also important to note that we're very active also in sustainable finance. It has been testified that the first trade finance credit line for the manufacturing of green cable layers and the first sustainability link construction loans. Page 8, an update on ESG. As you can see, numbers speak for themselves. Renewable electricity, we more than doubled the percentage of electricity done by renewable sources. Carbon intensity measures as tons of CO2 over revenues and is less by half. Why continuing to commit our capital in R&D, an important factor to keep and improve our competitive position? Safety is still at the very heart of what we do. Why on the gender distribution on our board, you can see that it's being represented in a very balanced way. Why continue also to invest in talent and in people? That has been somehow endorsed by the most important rating agencies and other institutions, which basically awarded us with one of the most important, highest ratings, and that is true for CDP or BE. We also committed, as we promised, new rating agencies like S&P Global and Sustainalytics, and being For us, a kind of debut, the ranking has been really, really high, and we're very proud of that. Some awards have also been saying, as far as our attractiveness on the labor market, on health and safety, which is really important, that is coming from U.S. authority. Also, sustainability, Green Star awarded us with one of the most important and best-run company with that respect. If we flip to page 10, deliveries and orders, you can see not just the numbers, but we highlight how diversified our client base and our ability to be competitive in different segments of our sectors, by far exceeding results of our competition. And even when we look at orders, clearly the mix, as I said before, has been changing because the pandemic really hit the cruise sector, but we've been able to compensate with the naval business and with the offshore. In terms of backlog, at page 11, you can see that it's well-balanced, diversified. You can see 29 vessels in portfolio. in the cruise portfolio, 36 in naval, and 26 in offshore and specialized vessels. This breadth, this diversification, and we've got to that also soft backlog, allows Fincantieri to count on a long-term visibility, on a diversification, and even new sources of emerging growth in our business. Now I hand it over to Giuseppe Rado, our CFO.

Good morning ladies and gentlemen. We move now to page 13 and let's comment a little bit more in depth on the financial results. As with the order intake and backlog, we managed to preserve our backlog despite the challenges faced in the last two years by Fincantieri and most of all by our clients in the food sector. In 2021, order intake came in at $3.3 billion, with a positive impact from offshore specialized vessels and ESS business. Withstanding the fact that the cruise sector is still characterized by old stands, new orders in shipbuilding amount to more than $1.8 billion, and this was mostly thanks to the contribution of the naval business. where our U.S. operations were awarded with the second frigate for the U.S. Navy. And also in the equipment systems and services, the order intake almost doubled compared to last year, thanks to the order mentioned before also by Mr. Gallia for the cruise terminal in Miami. The total backlog is approximately at 35.5 billion, including 9.7 billion euros of soft backlog, thanks to the recent achievements in the defense business and the agreement, of course, with the Indonesian Navy. This ensures long-term visibility and gives us the opportunity to shape a medium-term investment plan to create the production efficiencies that you have seen rippling down to the results of this year. As with revenues on page 14, up 28.3%, so perfectly within the range, the guidance range that we gave at the beginning of the year. And the performance was driven by exceptionally high production volumes. We exceeded the mark of 16 million production hours in our shipyards. And this came despite higher safety protocols in place to manage the COVID-19. Revenues were at roughly 6.7 billion euros excluding pass-through activities. And in the shipbuilding segment, the contribution of the segment was 27.1% in growth, basically offsetting all the revenues that we lost in 2020. And the travel business increased by 36.3%, while the cruise business, roughly 26%. The cruise revenues still account for 52% of the total revenues and we recorded a slightly higher weight of defense business up to 23% compared to 21% of the previous year. The offshore and specialized vessels revenues increased by almost 24% compared to 2020. And this shows the recovery of the volumes that we lost in the first part of the year. These results confirms the successful repositioning strategy towards more promising segments, like the offshore wind, in which we expect still further growth. On the equipment systems and services, we grew almost 28%, and this is mainly driven by the operations in support of crews and novel vessels. As Mr. Gaglia mentioned before, 87% of the revenues were generated from international clients with a 79% share of production in Italy. Let's move on to the page 15 where we comment EBDA. 495 million euros up to 55% compared to pre-pandemic levels compared to 2019, and 57% compared to last year. And this came from both higher production volumes, so a higher operating leverage, and, of course, enhanced margins. And this is despite the effect of increasing commodity prices that we were able to offset most notably in the shipbuilding segment. The EBDA margin improved from 6.1% in fiscal year 2020 to 7.4%, and this is higher than the guidance of around 7% EBDA that we provided for year-end. And this very positive performance is mainly driven by the shipbuilding segment of 194 million euros. with a VBDA margin of 8.3%. And this came thanks to the higher revenues in the defense business, but mostly came from the very positive performance that we had in the cruise production in the year 2020. Again, despite the very difficult work environment that the pandemic has created. EBDA in offshore was positive for 10 million, and we started to reap the benefits of the turnaround strategy implemented back in 2019. And this came as the fruit of the repositioning of VARD in the wind offshore business. ESS EBDA was down 25 million. And this is due to lower margin in the infrastructure segment where as of yet we were not able to offset the increase in commodity prices in the projects. What I just commented is clearly pictured in page 16 where you can appreciate the very high contribution to the EBDA improvement by the shipbuilding segment, both for the operating leverage and the higher operating margins. The higher operating margins did not come by chance, of course. This is thanks to the execution of of a very, very robust backlog in terms of marginality thanks to the benefits that we are reaping from the new investments that we did in the past years, thanks to the changes in engineering and production process that we implemented in the past year, thanks to all the things that we talked about in the past three years. We move on to page 17 on the net results. We are back to profit at 22 million euros thanks to what we described before and notwithstanding a very high burden in extraordinary items. Still very high investors litigation related costs at 55 million euros and this particular line item. We believe that we saw 50 million, roughly 50 million also in 2020. We're starting to see a peak here. We do expect the amount of claims to go down in the next few years, although we still maintain a conservative stance. And we also have 30 million euros of COVID-19 related extraordinary items. Another item we do not expect for the year 2022. On CapEx, 358 million euros, up 10% with respect to 2020, at 5.4% of group revenues. Basically, investments, we're still scaling up our productions, our production capacity, notably in the US for the execution of the new frigate class program for the U.S. Navy. We're going to start to cut steel of the first frigate during 2022, so production is going to start this year. And this is both to scale up production and to keep compressing lead times and improve efficiency. notably in our main cruise business yards of Marghera and Monfalcone. And you see in the results how this investment plan is paying off. So, as a matter of fact, 163 million came of CAPEX came as capacity increase. million were for safety and maintenance, 52 million for efficiency improvements, and 31 million for the IT infrastructure. Phase 19, the networking capital and net financial position. We closed with a negative networking capital of 670 million euros, and this is mainly due to the very substantial delivery program that we conducted and did successfully in the year 2021. We lowered also the construction loan level at roughly 1 billion, and net debt was 159 million euros. In these net debt levels, we are slightly better than the guidance that we gave, and Both the decrease in net working capital and net debt levels, one mirroring the other, is mainly due again to the delivery of eight cruise vessels and this delivery program came with one more ship than expected because we were able to deliver one ship in advance before the closing of the year and originally this ship was scheduled for delivery in 2022. Of course, net debt levels are still affected by the strategy of deferrals granted to clients, which at the end of 2021 amounted roughly 200 million euros. Again, regarding our debt structure, we are basically immune from any dramatic shifts in interest rates, and our debt structure does not have any covenants, so it's pretty flexible, I would say. Now I give the floor back to Mr. Gallia for the outlook for next year, for this year, for 2022, of course.

Thank you, Giuseppe. We go to page 21. We can have a focus on our core businesses, Cruise and Evo. As you might be aware, basically almost full capacity will be reached this summer season, and this information is also public because most of our clients are listed and have reported a number of useful information. open, accessible to everybody. Interestingly, booking trends for 22 and 23 are back to 19 levels with higher prices. And passenger volumes are expected to recover and surpass 19 levels next year in 23. The target of 30 million passengers, which are expected to grow in 26 to 34 million I think this is an important indicator clearly confirmed by the evolution of the external environment because we believe that resumption in orders will be possible next year. Clearly one of the major themes across any industry, including cruise, is reaching net carbon neutrality by 2050. Our association and even operators and owners' associations are forecasting a few numbers, 26 energy-powered cruise ships, and almost 180 cruise ships will have, respectively, energy powers, which means a less impactful kind of propulsion, and shore-side power connectivity. Clearly, that has a prerequisite, the installment, working infrastructures, which means also another major themes, which we'll see Fincetier's group somehow involved with other different businesses. On naval, you know that this conflict has been a game changer for the industry, not just for a few countries. We already made public announcements for the rest. Europe is working on a strategic contest, and we believe that this might also accelerate certain trends and certain dialogues which have been going on in the last few years. And I think that there will be change I would just mention that assuming that an increasing portion of those investments would go to the sea, that means to the naval business, We have to also highlight the fact that we are leaders in some of the vessels which are characterized by highest growth rate, like frigates, like and submarines. Therefore, we are exposed with a diversified client base even geographically in auto-forming sectors. Next page, 22, and this is the last page of the slide. On this presentation, we elaborate a little bit about the 22 company outlook. You all know the current uncertainties which relate to our health situations and also to geopolitical, whether reverberations on supply chain, raw materials, energy, which are affecting the lives, not just the company, but every fellow citizen. I think there are a few things we might say. First of all, assuming that there will be no further relevant deterioration in these two major variables, geopolitical and health, we do believe that long-term growth and profitability is ensured by diversified client base, backlog, and positive contribution from all the different business lines. some revenue growth is expected to increase in exceeding 21 levels. And let me point out the fact that we have very, very high visibility on what is going to be the revenue base. As you know, that is basically almost guaranteed by existing orders. Marginality, which means margins, EBDI margins, will be maintained, notwithstanding what's going on on commodities and energy. And, importantly, on the CAPEX, let me just add a few comments to what Giuseppe said before. Investments clearly drain cash, but the improvement in these results and even in margins and being allowed, also thanks to the investment cycles, cycle which has been characterized our life. That means increasing our capacity, production capacity, increasing efficiency, working and installing new technologies, safety, and we're working also for the environment. An investment cycle which is a heavy one, like the one which is almost behind our shoulders, is something which is about to build and strengthen the competitiveness of Fincantieri in the next five to ten years. And that has been already true and visible in these numbers, particularly if you compare it with the conditions of our competition. The debt is expected to stay more or less in line with the 2020 levels, and we believe that there is a well-proven capacity to face in an unforeseen event. So that when looking up in the future, I think we can see that it is exposed to very interesting growth vectors. One is tourism. It can be cyclical. It can be impacted by some extraordinary items. But tourism is outperforming GDP growth, and cruise is expected to outperform the trend of the relevant sector. Defense, and we are world leader in sectors, which means vessels, which are outperforming the growth of the sectors. Renewables, even assuming that there will be no other investments in oil and gas, we are becoming the world leader also in this renewable sector. technology and even which is pervading more and more the life of any citizen and clearly any company and we get some specific technology and competencies and skills which is I would say the consequence of what we do in our core business. So that proves that the strategy the right one, and will be continuing to capitalize on the company's core strengths. First of all, our values and our people. The fact we are a global leader in a competitive environment, but I think it did manage to strengthen its position as a global leader. Also thanks to operations, technology, the international footprint, the diversified client base, and the capacity to integrate and manage difficult, complex projects. So whatever the environment, we strongly believe the FinCAT theory can outperform competition and capture opportunities which might turn up after these unexpected events. I would stop here and leave the floor to you for questions.

Excuse me, this is the chorus call conference operator. we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove your question, please press star and two. We kindly ask you to use handsets when asking questions. We will pause momentarily for participants to join the queue. The first question is from Monica Bozio of Intesa San Paolo. Please go ahead.

Good morning, everyone, and thanks for taking my questions. I have a few ones. The first one is, can you please give us more highlights on the moving parts in the group's margins in 2022? So, I mean, do you expect that the pricing increases might still offset the rise in raw matter and energy costs? or the maintenance of the profitability will be possible mainly thanks to an higher contribution from the naval business? And more in general, are there in place some intersection mechanisms at the company level and how do you manage the purchase of raw materials? I know that there are a lot of questions on this side, I'm sorry, but I have to ask. And the second question is on the equipment system and services division. Now it's quite big, 1.4 billion in revenues. Can you give us any breakdown in the revenues and the flavor on the impact of raw materials in 2022? Thank you very much.

Good morning, Monica Giuseppe speaking. Hi, Giuseppe. On your first question, on 2022, the margin levels, despite we live in very uncertain moments, will still, the drivers to margin will be the same we saw in 2021. And let me list them again. Higher contribution from NAVO, We still expect a growth in revenues in the cruise business. This is due to the execution of our order portfolio. We do have seven deliveries both in 2022 and 2023. Somehow these deliveries are not the same, but the average size of the ships is higher. Therefore, we do expect growth in revenues in the cruise business, and these revenues have very good margins because these revenues relate to ships we acquired in the booming years of 2016, 2017, 2018, and 2019. And with the commodity price inflation, The numbers we saw in 2021 and the numbers that we will see in 2022 factor in commodity prices at current market levels.

Okay?

Okay. We were able to offset price increases, and in certain items, these price increases came at 50%. from what we had in our project budget. But again, we said it several times, the budgets of the projects that we are executing right now were very robust and very conservative. And this conservative approach, you see it in the numbers, is paying off, okay? That is why we stand in the fact that we are not giving, let me say, a clear quantitative guidance. We do expect to continue the growth both in revenues and EBDA margin levels. On equipment systems and services, yes, it's a very diversified set of businesses. We do want to give more disclosure, but we still think that it's early. Yes, we did experience lower margins, notably in the infrastructure business, because in the infrastructure business is a newly acquired business, because we were not able to offset commodity price increases, we do expect a recovery in the margins in 2022. That's all I can say at this point in time.

Okay, thank you very much. Come back in the queue. Thank you.

The next question is from Alessandro Pozzi of Mediobanca. Please go ahead.

Good morning. Thank you for taking my questions and congratulations for the good set of results. The first question I have is on the order intake. The order intake has been coming down for the last couple of years for the reason we all know about. And I was wondering how we should think about the order intake going forward. Is 2021 a tough year? And also, you've gone a long way in diversifying the business, and we've seen that the benefit in the ESS. So I was wondering what segment are you most excited about in the short term when we look at potential new opportunities in the order intake? Also, defense is likely to be a big element as well. And I was wondering, are you seeing signs that the defense budget could translate into higher order intake for Filcantier in the short term?

Thank you, Sandro, for the question. Cruise, we briefly mentioned before, a dialogue with our major clients has always been basically going on and that has been accelerated over the last few months, but clearly the uncertainties also provoked by Omicron and now by the conflict clearly is making our clients, I would say, I'm not saying careful, but really thinking a lot about new investments. But we know that order intake will resume. It's more a matter of time. We've been very conservative in our assumption for our projections for 2022 and also for the years to come. And as I said, we are conservative because we don't know when this kind of exceptional environment will end. But we know, as I said before, that we are in a world which, in normal conditions, will have more and more people traveling. And more and more people will choose cruising as a preferred option. That has been clear and evident in the last 15 to 20 years, and that trend has accelerated. It's also considered now, according to a survey, one of the safest ways to spend your time with your family. And that is accelerating also beyond the traditional cruise markets like U.S., Australia, and Europe. And if you look forward, we're also well positioned should something positive happen also in one of the most popular countries in the world. So we are positive. I will also mention that one of the key features in selecting the partners will be the robustness of the company, and we are a solid company, the effectiveness, the competitiveness of the proposal, and the attention to the new propulsion systems which can be available in years to come. Again, being a global leader, maybe I said it another time in the past, allows us to submit a condition to receive the first call by any providers when technology is concerned. And as a matter of fact, we're working, we're partnering with some of these in order to be the first one to provide innovative solutions which respect environment and allows our clients to also have this selling proposition. On NAVL, I have not much to add to what we said before. You know what used to be the growth rate expected for the sectors with Asia outperforming outperforming Europe, which was expected to outperform the U.S. Now there's a game changer, unfortunately, with what happened in Ukraine. You're seeing all the declaration by the different statesmen around the world. There will be, we believe, a few dynamics. And it's important that you are ready for when something will happen. We do believe it will. And by providing competitive solutions in terms of performance, well proven experience and track record, new technologies, new way also to help the dialogue with the respective defense and that we believe it's a sector in which we are very, very well positioned, not just in Europe, but more in the world, not to mention our very strategically important position in the U.S. Oiling gas, as you know, basically evaporated in the last 10 years. BARDA has been able to reinvent itself in building vessels for installment and maintenance and other services in the wind farms. If you look at the growth rate expected for installment of floating, not just floating but offshore wind farms, It's an important one, one of the highest, the most attractive area to invest in. We're there, and we're there, and I would also mention with a global leadership position in SOE, Service Operation Vessels, and also thanks to a very flexible and competitive industrial footprint, also thanks to our presence in Vietnam, where they have skills and a competitive cost. to build these vessels. We're also exposed to aquaculture, to trawlers, and that is what we see. We might expect that something else will change on the energy side, and when we look at those trends, and there will be changes for sure, we are in the position to deliver a number of products and services and with, I would say, global references. Therefore, we believe that we are well positioned to capture also something. Think about power electronics. Think about hydrogen technology and other business. Therefore, I've been elaborating a little bit further, but we believe that this year will still be a kind of transitional period, which is hard to make. prediction when these things, the situation will add a how, when and how, but we do strongly believe, as we said before, that as our CEO said, we are, whatever the environment, we will be able to outperform competition and do our best for our stakeholders.

Okay, thank you. So overall, still a transition year potentially with a stronger pickup, let's say, from 2023, I would say. in terms of weather intake. That would be my take.

Alessandro Giuseppe speaking. If I may add a few numbers. According to the Cruise Lines International Association and plotting the long-term growth in the cruise business, there's going to be a demand capacity a demand offer gap by 2026. And that is comparing the number of passengers with the number of lower beds available in the market. Consider that Carnival has scrapped roughly 22 vessels from their fleet in the past two years, profiting, let me say, taking the chance from the pandemic. And as the C4 Carnival declared, They're going to have a 10% more efficient fleet. So they're going to have a more environmentally friendly and efficient fleet. And also, you know, the secular growth of the passengers, as we said before, seems intact. So according to the projections, there's going to be a demand-supply gap by 2026. And that brings us to think that maybe from 2023 there's going to be a resumption of order. Right now, though, it's prudent to take a very conservative stance here.

Okay, that's very helpful. Thank you. I also had a second question on the net debt. I was wondering if you can give us a bit more color on the profile of the net debt throughout the year. but also any guidance on construction loans at year-end and also what sort of CAPEX you're assuming for 2022. We know that CAPEX has gone up because of capacity increases you mentioned and efficiency programs. I was wondering whether that is normalizing or I think 2022 is going to be still another year of heavy CAPEX for the group.

On that, as I said before, we still expect, we still have some growth to perform in cruise. In 2022, our revenues will be higher than the cash receipts. And that means we have to live an increase also in work in progress, which will not be billed And therefore we do expect to go that is why we're giving a guidance that we do expect Net debt levels including construction laws that are more similar to 2020 levels than to 2021 levels although This forecast is, again, as usual, prudent as we are not factoring in any advances coming in from the effectiveness of major defense contracts.

Like Indonesia, for example.

Like Indonesia, for example.

Okay.

On CAPEX, we still have to complete our production capacity increase in the United States, and we have the tails of the investment program in Italy. Therefore, CAPEX levels will be roughly similar to the levels that we had in 2021.

Okay. That was very helpful. Thank you very much. I'll turn it back.

The next question is from Matteo Bonizzoni of Kepler. Please go ahead.

Thank you and good morning. I have just a follow-up question as regards the Indonesian contract. You announced the contract almost one year ago, around nine months ago. Where we are in terms of definition of this contract? what are potential hurdles or in any case what is needed to have the closing of this contract and is it reasonable to think, you did not specify also a contract value, can you just confirm that the contract could be worth likely more than 4 billion with an advance payment in the region of 10%?

We confirm the numbers, the indications of the numbers that we gave The teams of Incantieri in the Indonesian Navy are working on the finalization of the contract. We do expect the contract to become effective by the end of 2022, although, again, we're not factoring in any advances coming in. Okay, thank you.

You're welcome. The next question is from Emanuele Galazzi of Equita. Please go ahead.

Yes, good morning, everybody. I just have one follow-up on the naval segment. Can you just share your view on the potential consolidation of the naval segment in Europe? And can you provide any, say, comment on Otomelara and the submarine business of this group? I think it would be very useful. Thank you.

Yes, thanks for the question. This is Fabio. Everything is suspended in the current environment after what happened. As we said before, we clearly are focused on our delivery, clearly keeping our eyes open, but everything is suspended, not just in Italy, I'm saying throughout Europe.

Okay. about the role of Incantier in the consolidation of the European naval segment, just to have your view.

It's exactly what I said, in the sense that we always keep our eyes open, but currently there's nothing going on. We do believe that, as we said before, what's going on now is a game changer for the industry. Focusing on what we do clearly, as again, analyzing potential options. But it's really important that whatever environment, whatever the future can present to us, we get there in solid, robust, competitive positions. This is our priority.

Okay. Thank you very much.

The next question is from Gabriele Gambarova of Banca Acros. Please go ahead.

Yes, thank you for taking my questions. The first one is on CapEx beyond 2022. I understood that your investment on the U.S. yard should be over by this year, so I was wondering, in a longer perspective, a normalized level of CapEx, what could be?

Well, of course, the levels that we have seen in the past years are not normalized levels. We believe that the peak in CAPEX is 21, 22. After that, we will slowly pace down to levels more similar to the levels of amortization and depreciation. But, of course, it's pretty early big about 2023 at this point in time, as we are now giving a long-term guidance.

Okay, very clear. Thank you. And then another housekeeping question on tax rate. I saw that it was pretty high, beyond 40%. So same question here. What could be, let's say, a normal level of taxation going on?

30%.

Sorry, I didn't get. Sorry. And then last question for me. I saw there is this DDX program for the Italian Navy, two very big, let's say, units that are being discussed by politics. So I was wondering if you have any, let's say, Any idea what could be the timing for this important 2.7 billion program? The timing of the award, I mean, do you see it coming next year? I mean, any explanation?

Not in 2022, at least in our numbers. Then we will see.

Okay, that's all for me, thanks. Thank you.

The next question is from Monica Bozzio of Intesa San Paolo, a follow-up. Please go ahead, madam.

Yes, thank you. Just a follow-up on the big features. Given that cruise business is expected to resume, and given that Naval is obviously a game changer, In your view, in a big picture, in a time frame of three, four years, how do you see the proportion between Cruises and Naval in the shipbuilding division? Now Naval accounts 23%. How do you expect this weight can increase and to which level? Thank you very much.

That is a crystal ball question because the events we are facing, we see right now may change the footprint of two industries, of course, cruise and defense. Leaving aside any forecast on the resumption of orders in cruise, I think that the share of the naval business is prone to Organically, considering the backlog that we have right now, we still have to see what will come in the future. I cannot give you a precise estimate at this point in time, but it is what it is right now.

Okay, it's too early to predict. A normalized level, okay, thank you very much.

It should be within the shipbuilding segment, between 30 and 40% Navajo and the rest shipbuilding.

30%?

This is very long term.

Okay, thank you very much.

You're welcome.

As a reminder, if you wish to register for a question, please press star and 1 on your touchtone telephone. Once again, for any questions, please press star and 1 on your telephone.

Just to add on to Monica's question, we said before, but it's important to know that we're talking about sectors in normal conditions will be growing and are performing GDP growth.

Thank you. For any further questions, please press star and 1 on your touch-tone telephone. So, Dado, there are no questions registered at this time, sir.

Thank you.

Thank you. Thank you. Bye-bye. Good morning to everybody.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.