Fincantieri S.p.A.

Good morning, this is the Coruscall conference operator. Welcome and thank you for joining the Fincantieri 9 months 2022 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. Folgero, Chief Executive Officer and Managing Director. Please go ahead, sir.

Good morning, ladies and gentlemen. Thank you for joining us and welcome to Fincantieri 9 Months 2022 Financial Results Conference Call. This set of results shows revenues up by 17% to 5.3 billion euro, in line with expectations and with the development of the backlog. We recorded positive performances across all segments. In particular, the offshore and specialized vessels business increased by 86% year on year. This progression streamlines a potential window of opportunity that the wind offshore market may offer in the upcoming years for Fincantieri. EBITDA stands at 172 million euro, with the margin at 3.2%, impacted by first half lower marginality and the persistence of macroeconomical and geopolitical instability. Net of the first semester one-offs, EBITDA margin would have landed at almost 7%. In the first nine months of the year, we delivered 12 ships from eight different shipyards, highlighting how we are keeping the production pace in operations. On top of this, order intake came at 3.3 billion euro, well above last year figures, up by 41%, thanks to a revamp in cruise vessels demand. Let me remind you that in the sole third quarter, we signed three different agreements with three different ship owners. I will come back to it in a moment. Moreover, since the first half of the year, net debt improved by over 200 million euros, consistently with what we anticipated and committed to in the last conference call and aligned with production volumes, capital expenditure and the delivery schedule. Giuseppe will give you further details together with the main financial and operating performances of the period later on. Let's now move to slide seven, for some business updates. In the first nine months of the year, we witnessed a sound business operating performance. Along with the positive resumption in cruise orders, and I will do a deep, deep dive in a few seconds, in the third quarter we delivered two ships for a total of four in the first nine months of the year. Namely, and chronologically speaking, one for Princess Cruise, two for Viking and one for Norwegian. On the latter, the Norwegian Prima, first of the six new generation Prima class. It is based on a prototype project to enhance flexibility, ensuring an elevated customer experience and to set the technological benchmark with the specific attention on energy savings, emission reduction and high performances. On Naval, we are continuing to develop programs for our main clients, the Italian Navy, the Qatari Ministry of Defense, and the U.S. Navy. In 2022, we have already delivered the first and the second PPA, Multipurpose Offshore Patrol Ship, from our Italian naval shipyards. The program for the Qatari Ministry of Defense is also continuing at full speed, with three deliveries in the period. including two OPV offshore patrol vessels and one corvette. Moreover, earlier this year, the US Navy exercised the option to build the third Constellation-class guided missile frigate for a value exceeding half a billion dollars. On top of this, in mid-October, We signed with Naviris, Naval Group and Navantia a preliminary consortium agreement for the development of the modular and multi-role patrol corvette to maximize synergies, long-term efficiencies and cooperation among European shipbuilding industrials, while avoiding duplication in defense spending. The European patrol corvette will be a smart, innovative, affordable and flexible vessel designed to meet a wide range of future missions in a continuously evolving global context. The positive business operating performance sets the stone for forthcoming opportunities in our core business. Back to cruise order intake, during the third quarter we have signed major cruise agreements with three ship owners. The turning point now is the high performance and future-proof quality of the products we are developing and building. Green, innovative, flexible, forward-looking solutions that promptly anticipate the regulatory requirements. We continue to consolidate our relationship with long-lasting clients while exploring opportunities with newcomers' luxury brands. We strengthened the long-lasting partnership with Viking, with four additional cruise ships. Two are orders and two are options. To be delivered by 2028 and designed for hydrogen fuel cells propulsion and equipped with the most modern safety systems. Secondly, the memorandum of understanding with MSC, which envisages the construction of two additional hydrogen powered cruise ships for the new luxury niche brand, Explorer Journeys. Four cruise ships out of six will now be equipped with liquefied natural gas engines, which today is the cleanest marine fuel available and it can contribute to the cut CO2 emissions by up to 25% compared with standard marine fuels. Hydrogen fuel will power a six megawatt fuel cell to produce emission-free power for the hotel operation and allow the vessels to run on zero emissions in port with engines turned off. Finally, we build a ship for a new client in the sector, Ford Seasons, which is entering the cruise industry for the first time with an ultra luxury vessel offering ultimate privacy and spaciousness in all on-suit residential settings. During the first nine months of the year, we delivered 12 vessels from eight shipyards, highlighting the global outreach of our operations. We recorded 3.3 billion new orders with a book-to-bill ratio at 0.6, up compared to the 0.4 in the first half of the year. Let me underline how execution and the capacity to closely stick to the delivery schedule as agreed with the ship owners are key strengths of our business across all segments and that outlines the distinctiveness of our franchise. Looking at the medium long term, we confirm our visibility up to 2029, both in cruise and naval. As for the offshore segment, given the fast moving sector, we are confident it would afford a potential upside also driven by energy transition. The backlog coverage ensures more than five years of work compared to 2021 revenues, confirming the operational reliability of our business. Now I will hand it over to Giuseppe, who will discuss our financial results. Please, Giuseppe.

Good morning, everybody. We move on to page 11. but we can see how the order intake came in at almost 3.3 billion euros. That is more than double what we did in the first half of the year. Of course, with a very positive contribution from the shipbuilding segment, thanks to the order acquired that were mentioned before by Pierroberto. And we also had a year-on-year increase of over 40% in offshore. This order intake brings the total backlog at approximately 34.5 billion euros, with a total backlog including the soft backlog, of course, with a backlog of 24 billion euros. And not only we had positive signals in cruise orders, But as Pierroberto underlined earlier, we're now taking orders for next generation and innovative and greener vessels in a niche sector, the luxury sector of the cruise business. Also for newcomer brands that are expanding their operation into cruise. As with page 12, revenues were, group revenues were up 17.2% year over year with 5.3 billion and this is thanks to positive contribution across all segments. With a particular race recorded in the offshore year over year, we grew in the offshore and specialized vessels of over 86% compared to the same period of 2021. And this results confirms the successful repositioning strategy towards more promising markets like the offshore wind industry. Also, shipbuilding grew by 9.1%, thanks to high production volumes in the group Italian shipyards. And within shipbuilding, cruise accounts for 50% of the total revenues, whilst the defense vessel revenues came in at 22% of total revenues. The positive result is also attributable to efficiencies of the engineering and production processes launched in the past years. Of course, now our revenues, as you know, are supported by the Qatari Ministry of Defense program and the Italian Navy construction activities. Also in the equipment systems and services, we had revenue growth of about 25%, and this was driven by operations in the mechanics and complete accommodation businesses. Finally, 80% of the revenues were generated from international clients, and this confirms the vocation towards experts that our company has, our group has. Some comments on EBDA on page 13. We ended up the third quarter at 172 million euros of EBDA with an EBDA margin at 3.2%. And this, of course, has been impacted, the nine months, of course, have been impacted by the lower marginality in infrastructure and shipbuilding, mainly due to the non-recurring items that we have already reported in the first semester. And of course, we are still experiencing increase in, and this is focused in the U.S., increase in raw material prices and labor market shortages within our U.S. operations. In offshore, EBDA margin increased compared to nine months of 2021, and this is again due to the good revenue growth and the effective repositioning strategy towards the offshore wind sector. On page 14, the improvement in net financial position compared to First half of 2022 is of course consistent with the delivery schedule. We do expect a stable net debt levels towards the end of the year. Of course, this is still affected by the payment extension strategy granted to clients, partly affected, and this amounts at 132 million euros as of September 30th. Networking capital is positive at roughly 1 billion euros and main changes are related to the increase in construction contracts and client advances to work in progress. This is due to the delay in the delivery mentioned in the first half result, which we will most likely deliver at the end of November. We also had a slight increase in trade payables thanks to the production volumes registered in the period. We have also spent 183 million euros to support further efficiencies and to address the new production scenarios. This is to scale up Italian and US shipyards. As with the market outlook and the expectations for the end of the year, I leave the word to Pierrobert.

Thank you, Giuseppe. Now let's take a look at the markets in which we operate with our core businesses. Starting from cruise. At the end of the summer, 94% of the global fleet was back in operation, also thanks to major cruise lines dropping vaccination and pre-boarding COVID-19 rules. An important point to stress is that in the past few months we observed a significant value differential between cruises and land-based vacation, shifting further towards cruising. As a result, lately, few hotel brands expanded their business and entered in the cruise sector, as well demonstrated by the recent third quarter's orders. Indeed, The industry is seeing booking trends back to 2019 levels for some companies at higher net yields with passenger volumes expected to recover and surpass pre-pandemic levels by the end of 2023. Another crucial part of the outlook is driven by sustainability and innovation with IMO setting quite stringent requirements. In 2027, 29 ships will use LNG as primary fuel, but this is just a halfway step. As a matter of fact, ship owners are even more interested in green new propulsion systems, in particular hydrogen-powered zero-emission solutions for a fully decarbonized cruise industry. Over 200 ships equipped with short-sight power connectivity technological edge and less impactful functionality are also expected in operation by 2028. These are quite promising signals for a near comeback of the whole cruise market. As for the naval, global defense spending in 2021 was over 2 trillion US dollars. and given the current geopolitical scenario, it is expected to accelerate in the upcoming years. Needless to say, we are ready to catch further opportunities, given our leading competitive position in surface vessels, such as frigates and corvettes, and a wide client base. With this regard, we are continuing to collaborate with partners both in Italy and abroad, In this context, let me mention again the preliminary consortium agreement that we have recently signed with Naviris, Navantia and Naval Group to develop together the European patrol corvette that will factor in the expertise and excellence of the European industry. Turning to offshore, As of today, worldwide wind farms are delivering a nominal power of around 55 GW, accounting for nearly 7% of the total wind capacity in 2021, with the industry set to reach a total global capacity of 271 GW by end 2030. and more than 400 GW in 2035. Floating offshore is also growing and is set to reach 18 GW by 2030 and over 60 GW by 2035. To give you an idea of the potential capacity, in 2021 only 121 MW of floating wind was installed globally, over 75% in Europe. In addition, the pace and breadth of investments into renewables, including wind offshore, as part of the new energy transition might trigger a further demand of vessels. Let me once again remind you that our subsidiary VAR currently is the market leader for the production of service operation vessels and for client diversification. We are reaping the benefits of the turnaround strategy implemented few years ago that well positioned us to size opportunities in the sector, also taking into account that the global fleet of SUVs soon will double and expected to reach 128 out of 154 units by 2035. As concluding remarks, Assuming no further deterioration of current macroeconomic scenario for year end, we expect revenues higher than 2021 and second half margins better than the one recorded in the first semester. The net financial position to slightly improve led by the cruise deliveries during the fourth quarter of the year, although still affected by the need to finance the production activity of cruise ships. to be delivered in first half 2023. We are now evaluating strategic guidance and actions to reposition and strengthen the group's business portfolio. We are fully committed and relentlessly enhance our products and operations with a particular focus on the core business, namely cruise, naval and offshore. We leverage upon the entrepreneurial approach and managerial courage and will concentrate our attention on those projects that highlight an effective and material balance between value creation, risk adversity, and cost discipline. Leaping the green and technology transition is the name of the game to ensure our medium long-term growth. The development of increasingly innovative, sustainable, and integrated digital products such as green propulsion system is key to anticipate the future needs. The new strategic direction will contribute to reduce the group risk profile to the best position to drive through the market challenges. The solid leadership we gain throughout the years, the well-recognized excellence of our products, the expertise of our people, And our forerunner role in the digital and green transition are trademarks to consolidate even further our business distinctiveness in the international shipbuilding industry. With that being said, let's move to the Q&A session. Giuseppe and I stand ready to answer any questions you may have. Operator, go ahead.

Thank you. Excuse me, this is the Coruscall Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Matteo Bonizzoni with Kepler. Please go ahead, sir.

Yes, thank you and good morning. The first question is as regards to the profitability DVD which we should expect for 2022. So you have posted 172 million in the nine months. The consensus for the full year looking at the data provider is between 330 and 350 million. You have said that in Q4 more or less you are expecting revenues in line with Q4 last year, so flat here on here. what margin should we expect in you for and in particular should we expect a reversal a write-up of the 62 million charge for the delayed cruise ship which you have booked in the first half of the year second question is uh we know that it's still early for 2023 but more or less should you expect next year a return of the bda margin around seven percent which was a sort of normal margin for you for several years And are you targeting the leverage for the next year? Can you elaborate on that? The last question is on your strategy to reinforce your know-how and footprint in digitalization and energy transition. Is this strategy going to require significant in the next year?

Let me start from the end, and then I will ask the support of Giuseppe for the initial questions. You are somehow um you know you want us to give guidance on long-term epida percentage margin and our ideas on on the leveraging and not necessarily long terms because you're asking about 2023 epida margin let me say that our aim is to absolutely go back to the 7% EBITDA margin. Our idea is not only to get back to 7% EBITDA margin, but also to be more and more solid and focused in that direction in order also to do possibly better. So let me say 7% for us is absolutely a target. On deleveraging, we are in these days elaborating the new industrial plan. And the name of the game of the new industrial plan is absolutely deleveraging and de-risking. There are now other, I would say, titles of the book. How to do the deleveraging? As you know, the net financial position we have today is the consequence of a number of I would say exceptional postponement of payment from clients. And first of all, the beginning of the leveraging will be driven by the normalization of these phenomena. I wouldn't give you the numbers today, because I would spoil the value of the industrial plant. But I want you at least to acknowledge that we have, I would say, ambitions, understandable ambitions, either in terms of EBITDA target and in terms of deleveraging. And again, in order to do it, we will focus on the core business in terms of products, and the financial discipline in terms of processes. But I would like Giuseppe to step in for the initial questions you made.

Yes, on expectations for the end of the year, I reiterate the message that we gave in our press release, profitability, overall profitability in the second half of the year will be better than what we had in the first half of the year. That's a very plain statement if you wish, if you may, but we expect the improvement of profitability to continue also in the fourth quarter. Let me put it this way. And as with the expectations on 2023, I believe Piero Roberto has given you the answer. Maybe, Pierroberto, there was a question from Matteo on the strategy, on the digital strategy and whether it entails... Very good, very good, very good.

The digital strategy is for sure a kind of position that in the short term is a way to attach extra distinctiveness to our product. I strongly believe that Fincantieri large ships and complicated ships are considered a kind of benchmark in terms of management of complexity. I believe that our future proof strategy is to keep remaining the leaders in the integration of the additional systems and equipment and layers that are to be more and more integrated on top of the platform we already have. So the digital is first of all a source of distinctiveness in the short term. In the medium and long term, the digital is the way to evolve the business model from being a supplier of capex, so from being a supplier of a vessel as an investment, we would like to move from a supplier of CAPEX to a supplier of CAPEX and OPEX. So to get into distinctiveness that is driven by a total cost of ownership, i.e. CAPEX plus OPEX, that are distinctive vis-a-vis the competition. so i believe that being a leader and pioneer in the digital ship is a is a way to add a kind of star to the brand of incantieri in the short term while in the medium and long term it's a way to compete not in being reckless at the moment of uh preparing and you know calculating estimating the price, the lump sum price for a ship, but to procure that the Fincantieri ship is not only at the right CAPEX, but it's also leader in the OPEX for our ship owners, so that the NPV of the Fincantieri ship is the sum of the CAPEX in T0 and the OPEX in the life cycle of the owner. You know my point? So that's the way. You are asking about the capital we want to invest in this respect. I believe we have already a lot of solutions in place. So I believe that the step number zero is to procure that this, I would say, distributed set of solutions already, I would say, put together and validated all over the group are concentrated into a unified offer, a unified offering, and this offering today is ready to be marketable because today the market is demanding it. So the market is increasingly demanding for digital ship kind of services. Needless to mention the possibility to measure, I would say precisely, emissions on a ship and smashing emissions on a ship. But needless to mention also all we can do in terms of energy management on a ship. So please acknowledge that on a large cruise ship the power, the power generation is in the region of 60 megawatts, six zero. Can you imagine with a base like that with available technology we have, how we can procure that this cost is optimized using sensors that today are not used, using IoT that today is not sufficiently, I would say, leveraged, using data management on a ship, so adding to the traditional automation system of a ship a layer of additional I would say IoT and data management layers. We have extensive experience in this respect because we are doing it for the military business, which is another synergy I want the market to appreciate more and more. So at the moment of proposing something to our, I would say, esteemed cruise sector clients, we can put together ideas that are already there in the military business. So sensors in the military business are already there. So I believe in this new, I would say, era of the digital ship, Fincantieri is most and best positioned to procure that the digitalization of the ship is not something for newspapers, but kicks in as true industrial innovation.

Thank you.

The next question is from Emanuele Galazzi with Equita. Please go ahead.

Yes, good morning, everybody. Two questions from my side. The first one is on the shipbuilding division, which reported a low margin at around 5% in the third quarter. If you can just comment on it. In the press release, you mentioned some U.S. twins Just can you quantify the impact of these elements? And then on the consortium for the European Corvette, can you elaborate more on the opportunity of this agreement and the potential timetable, and if you see other similar opportunities in the naval segment? Thank you.

Again, let me start for the second, and then I will ask the support of Giuseppe for the rest. On EPC, on European Patrol Corvette, and in general on the naval business, let me say that the world is the Mediterranean first, and the world in general, namely the Asia-Pacific region, are increasingly demanding two kinds of products. One are the anti-song, surface vessels which basically are our free gates that are associated with the sonar system in this sense are anti-song so the name of the game will be to have i would say well well armed and very efficient surface vessels radiant capable to monitor submarines first of all in the Mediterranean, and then in the Asia-Pacific region. Let me say that if this is the macro trend of the next several years, again, Fincantieri naval expertise is unique because probably we are the best in frigates, in anti-sun frigates, and we are, I would say, along with Germans, the only one capable to deliver submarines, modern submarines. So in a world that would be submarines and anti-sun surface vessels, I believe we have a lot to say. First of all, in the Mediterranean. Why in the Mediterranean? Because U.S. submarines, understandably, will move more and more from the Mediterranean to Asia-Pacific. And whoever has relationship with U.S. establishment will appreciate that, you know, Taiwan is the next big concern. So Italy and Europe in general will have to take care of what is called the southern side of the enlarged Mediterranean. And Europe, and Italy in particular, will have to take care of it, somehow filling the gap that the focus of US to Southeast will increasingly generate. So this is the name of the game. European Padre Corvette. European Padre Corvette is a fantastic example of being ready for European defense spending. You know, a lot of money will be allocated again in the next several years because we are entering a new era in which the defense is no more something to be done for the sake of it, but the defense will be done for, you know, I would say react to a new geopolitical order that is very uncertain. So in this new era, European Paddle Corvette program is a perfect example of being already set up to spend European defense money. You know that there will be specific regulations in order for this European money to be spent. And this specific regulation will depend on alignment of more nations on the same requirements, i.e. Europe wants nations to get along in setting requirements, but two, Europe wants nations also to get along in terms of industries. So according to this new regulation, in order to be eligible for European defense money, it has to be more than one, at least three nations aligning requirements. and at least three industries participating to the program. So let me say that Naviris is already there. So Fincantieri is probably one of the few existing platform along with Naval and along with Navantia that can, I would say, embody in the short term, this new vision. But this is in term of readiness, I don't think you need more color on EPC, but EPC we start with engineering of this new model Corvette. Money is being allocated on this engineering project. You know that engineering means that you are breaking the ice and you will progressively then start to envisage the procurement of long lead items and then finally and eventually the construction. So the fact that we are breaking the ice with the engineering, it's a further testament of what I was anticipating before with respect to Naviris. But Giuseppe, help me with the other questions, please.

Well, as we said in the press release, yes, we are experiencing, as with the third quarter, margin shipbuilding, we are experiencing some increased costs in raw materials and shortages in labor in the United States. As is well written and well known, inflation in the States is eating hard, and therefore we had some cost increases. That's it. Of course, we will see how things develop in the future, and we expect to let me say, offset these cost increases, but it's exactly what we've written in the press release.

Thank you very much. You're welcome.

The next question is from Monica with Intesa San Paolo. Please go ahead.

Good morning, everyone. I hope you can hear me. I have some questions. The first is in the offshore segment and the opportunities in the field of the floating wind farms. Maybe it's too early to ask, but anyhow, would you see possible for BARD the achievement of a mid-high CLD margin already from 2023, or should we wait a bit longer? to see a profitable margin for BARD. I remember that you told us that in the future BARD has the opportunity to come back to a double-digit margin in line with the historical level. And the second question is for the equipment system and services. I'm not asking about infrastructure. Let's put it another way. Can you tell us what is the size and the profitability of all those activities which have nothing to do with infrastructures? The third question is for housekeeping. Can you give us a rough indication of the expected CAPEX by year end? Do you still confirm the Euro 300 million CAPEX that the group indicated in occasion of H1 conference call? And very, very last, sorry if I insist, the group aims to have 7% margins. I did not understand if this target is really achievable in 2023 or it's just a, let's say, two-year target. Thank you very much.

thank you for your very interesting question on the offshore segment let me say that in a sense 2023 it's a kind of moment of the truth what i mean i mean in the in the wind offshore there is a largely expected positive micro trend that to me in 20 2023 need to become visible So it is clear to everybody that the future is there, but in 2023 we would like to start appreciating the magnitude of this microtrend. Let me be even more precise. There are two sub, let me say, sub-microtrends. One is in the direction of fixed wind farms, offshore wind farms, and the other one is the floating offshore wind farms. On the fixed, I think the trend is there and it's a matter of gaining momentum. And this is what I would expect for 2023. Let me also say that Bard, Fincantieri Bard, is already expressing, I would say, a large but even a dominant market share in supply offshore vessels, you know, connected with the fixed offshore wind farms. 2023 will be also the year in which we will start a new macro trend to be visible being the floating ones, the floating wind farms. which will be longer term, which will be, I would say, more for the following years, but will be there. Floating, it's a world in which, let me say, what I call the Archimede Law is more and more important, and it's a business in which we could associate the what we have in term of competencies in the wind farm fixed with our expertise in whatever is floating and you know the size will be even bigger so the other characteristic of the floating is that it will be you know in term of single investment higher ticket So that's why 2020 will be a very important year because probably we will experience this acceleration in the fixed and this, you know, kind of breaking the ice in the floating. Moving on your second question. So marginality of VARD and double digit getting back to oil and gas previous ones. Come on, it's direct function. of this 2023 acceleration. So the more in 2023 we will see this new macro trend materializing, the more the expectation to get back to a strong performance will follow. So that's why let's look at 2023 carefully in this respect. Moving to our known infrastructure business included in our known shipbuilding business. Obviously, there you have a lot of captive market because you have a lot of marine interiors business, i.e. our vertical integration in the cabins and in whatever is related with cabins, but also public areas, but also, let me say, whatever is outfitting of our platform. Another big trunk has to do with all the, I would say, electromechanical jobs that we deliver in our ships, but we learned also to deliver for third parties. So the second part of this non-infrastructure business included in that basket of businesses is related to electromechanical. So the more we have The workload, the more they work active, the more we have to, the more we have already delivered that component on the ship, the more they work out. And when they work outside, they are very disciplined. So let me say they are accustomed to do electromechanical works for third parties with good discipline. So maybe Giuseppe, you can help us in giving more color, but all in all, that That is the second component. The third component has to do with what we call Fincantieri Next Tech, which is the company that was created in order to get into a little bit more into the electronics of the Navon business along with other technologies. The business is not that big. But it's interesting because it's providing us with those new technologies I was mentioning before. For example, in the simulation systems, in the combat management systems associated with the ship management systems. So let me say in whatever automation systems that are very sophisticated in the naval and that can be imported, I wouldn't say LKL, but can be imported from the naval to the cruise. So those are the main areas. And I believe in the next tech domain, we will do a lot. We will focus a lot in whatever is instrumental to our new vision of being, as I told, experts in the digital ship. And we will focus more and more on that and less on other kinds of technologies that are not instrumental to the ship core business. Giuseppe, can you give us a little bit more of color?

Yes, on profitability, given what Pierroberto has said, you know, the equipment systems and services without The infrastructure business is in the, let me say, high single digits area at this point in time.

Okay. Okay, thank you, Giuseppe, sorry. I can't hear you well.

You can't hear me well? Okay, I'll repeat that. I have the mic in front of me. This new mic doesn't work, probably. Well, I said the profitability in the equipment systems and services segment uh, X infrastructure is in the high single digits area currently. Okay. Uh, about CapEx, we confirm, uh, the, um, around 300 million CapEx for the year. We've done, we have done 183 the first nine months. We confirmed the target at this point in time. And what else? On offshore, I believe we have answered. That's it, I guess.

Okay. Thank you very much, Giuseppe and Piero. Thank you.

Thank you.

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

Good morning, Heather. A few questions. The first one is on the cruise segment. And I was wondering if you can give us more color on where do you think the negotiating power is now at this point of the cycle? Because we are coming off a few quarters with very little orders. Now the cycle is started again. Usually, when you are in this situation, the clients tend to have more negotiating power when it comes to the commercial discussions around vessels. However, we also know that the shipbuilding is very consolidated and not many opportunities where the client can go to have the cruise ship built. basically if you can give us more color on the margins embedded in the new orders and whether maybe they are consistent with the margins that you have booked maybe before COVID. The second question is on Greece. I believe you signed an MOU a few weeks ago. Maybe you can give us your thoughts about naval opportunities in Greece. And final question is an update on the deferral that you're supposed to receive from a client for payment deferral. Thank you.

The question is about negotiations and margins. I believe that needless to say that this is a tough market. So whoever is not approaching this business being very well trained and very well equipped, so whoever is touching this business without having the right muscles for sure is not easy and I would say comfortable. But having said that, so having said that this is a business for very experienced, a very I would say, reliable and fully fledged and fully equipped kind of player. Let me say that Fincantieri worked a lot on increasing the productivity of shipyards. And the reason why I'm touching base on the investments in productivity, it is because the only way to be competitive is not to fight, is not to try to be aggressive with your clients, but the only way is to get impeccably into the delivery. So the more your shipyards are productive, the more you invest in your shipyards, the more you can approach the delivery with the organization and with the tools in order to be impeccable. Because if you are not impeccable, for sure your clients will not be indulgent. And if they are not indulgent, your margin will not be comfortable. So that's the issue here. So the reason why I'm answering this way is because I had the possibility to look into these shipyards. I had the possibility to appreciate how much we have invested in our shipyards. And I had also the possibility to get with our world-class client around our shipyards and hearing from them in term of appreciation for the modernization of our shipyard. So let me say, this is the only way to protect your margin. So if you don't invest in your shipyard, you will end up having tough clients in front and issues in your execution. It's never finished, so the modernization of client is never enough. In Monfalcone we did a lot. Now we are replicating it in the other shipyards. We will do more and more it also in the naval shipyards as well. This is our strategy. Modernization means change of cranes, change of equipment, and whatever is the other, I would say, important tools for the productivity, but also changing the process. So working more onshore, working more before the ship is is out of the shipyard so there are a lot of re-engineering in the process on top of investing in equipment and then there is a third lever that is the digitalization of the ship so I believe we are also pioneering a lot of I would say digital instruments starting from the engineering of the ship kind of dimension 4D kind of tools in order to anticipate construction interfaces and typical pitfalls and typical pain points at the moment of getting into the construction phase. So I believe that the combination of the modernization already associated with our shipyard plus the progressive adoption of digital solution will protect our margin more and more and will procure that we are very, very effective with our clients. Then, obviously, we will have to cope with the increase in the raw materials, needless to say, that the margins are also made of external costs. But first of all, let's manage impact of the internal costs in order to deliver. Moving to the...

visibility on the naval the the orders can support a margin of seven percent that we expect maybe uh going forward sorry i didn't catch you yeah so basically uh should support at least a seven percent if you die margin

This is obviously the rule and this is the golden rule, needless to say. Then hopefully there are prototypes and then there are repeated shapes. So needless to say that we are here to do better than that.

On your second question on the deferrals, as I said before, 132 million of deferrals still are impacting our net debt levels. Plus, as I said, there is the deferral on the delivery that was originally planned in the first, well, actually it was planned in the third quarter, end of July, but it has been postponed to the fourth quarter. And, of course, you will see this effect being offset at the end of the year when the ship will be delivered.

Thank you. I think there was a question on Greece as well.

On Greece as well?

Yes, so I was moving to the visibility of naval opportunities We made no secret that we are in advanced negotiation with the client for their investment in naval vessels in Greece. We are in competition with Naval, which is probably the only, I would say, a competitor that can match to the possible extent our product offering in that respect. There is a lot of geopolitical matters around, as you know better than me, so the outcome will depend also a lot on how the Italian system will support something like that, a counter like that. But in terms of I would say positioning, in terms of appreciation of our offer, in terms of willingness to buy Fincantieri naval vessels, I think we are very well positioned. The last mile in an institutional business as a this business is, but the last mile is driven by geopolitics. Then obviously in the naval business, as I clearly said before, there is a lot to do with the Italian Navy. The Italian Navy is a very sophisticated client, a very reliable client. It's the client with whom we put together and validate our products and you know the collaboration with them is absolutely strong and the Italian Navy is in a sense a kind of international partner of Fincantieri at the moment of proposing our products far from home so they are clients for Italy but they are also kind of system partners in order to promote it all over the world. But even for the Italian need and requirement, as you may have appreciated from the newspapers, there are a lot of discussions going on that could materialize even in the short term.

Thank you.

The next question is from Giuseppe Grimaldi with BNP Paribas. Please go ahead.

Good morning, everybody. I have a few questions. The first one relates to the cruise. We saw a nice improvement in the order intake into the quarter. You mentioned new operators joining the queue, occupancy ratio improving. So my question is, what should we expect in terms of order intake into the incoming quarters? On this, I will add just another follow-up on the on the negotiation that you're having with client. Do you plan to include in the further contracts some automatic price adjusting mechanism in order to mirror the changing in raw materials that may take place into the execution of the contract? And the last one is on financial. I guess you have faced some no recurring items in your EBITDA into the first nine months. My question is if you can quantify them and also if you can give us some granularity on these cost items. Thank you.

Thank you.

On cruise and on the recovery of the industry which is ongoing right now and all the operators, the fleets are almost fully operating. roughly 95% of the vessels in business were in business as of the end of September. What notably, what is good is the signals that come from the 2023 reservations and ticket sales because 2023 is at the level of 2019, if not better for some operators. So, the recovery is solid. Now, withstanding this, the cruise owners have to repair their balance sheet because they have incurred billions of emergency debt, let's call it this way. Therefore, they are somehow more selective when it comes to CapEx. By no means we expect to see the booming years preceding COVID. I refer to 2017 to 2019, which we had record levels of new orders. So by no means we forecast that. But there are a few leads, commercial leads going on, and the conversations with clients is always ongoing. for two reasons. First reason is that because we are building their ships in our yards and interacting with them in the context of the projects we are undergoing, of course discussions are also concentrated into new ideas. New ideas because there are two trends which are visible in the other intake we realized in the third quarter. know decarbonization so greener ships and you know uh regulatory uh uh trends uh uh related to to decarbonization and also the growth in the uh you know in the luxury segment all the ships that we have signed and agreed upon in the third quarter are uh uh with different colors of course uh within the space of the upper premium luxury segments and you see viking you see msc and you see a new entrant uh for seasons yachts so uh a very known well-known brand in in the hotelery market uh making making his and its entrance in in in the new space with a very specific specific offer. So it's really too early to establish a correlation between the recovery of the market and a quantity, a volume of new orders coming in the short to longer term future. But the fundamentals of the business are back on track. Again, there is a need be very cautious with CapEx on the side of the owners. But being the fundamentals of the business fundamentals very good, this can spur a new resumption, I would say, of orders that by no means will be close to the trend we saw in the past three years before COVID. That's it. On the possibility of introducing a price adjustment mechanism, I don't think it's a case of reality. What I can tell you is that any new order that comes in right now is factors in very conservative cost assumptions on raw materials and also on other items that are let me say, subject to price increase, have been subject to price increase at this point in time. On the one-off items, I believe we have talked about it in the first semester. We need roughly 200 billion of write-offs or one-off items, not write-offs, it's not proper. as the first semester of this year. Thank you.

Thank you to you.

The next question is from Gabriele Gambarova with Banca Agrus. Please go ahead.

Yes, good morning. Thanks for taking my questions. The first one is on Indonesia. There was this announcement in June 2021, so I was wondering if the talks are still ongoing, if you made some progress on this front. Any news, any call would be interesting. The second is on Vard. I was wondering... If you see any... I mean, I understand, perfectly understand the offshore wind opportunity. I was wondering if you can perceive any opportunity even on the oil and gas, the old oil and gas segment, because it seems that the CAPEX, they are recovering somehow. And the last one is on... This write-down, you made the 62 million write-down you made in the second quarter in connection with the delay of the delivery of one ship. I was wondering if there are, let's say, the premises to maybe reverse this write-down possibly in Q4. Thank you.

On Indonesia, the discussions will be developed gradually depending on the budget allocation and depending on the implementation of the program. depending on the Ministry of Defense and the Indonesian government developments. So obviously, in our business, investments are very large. And so in order for investment decision to be finalized, there are a lot of political jet slash economical steps to be completed. So let me say that The process is being slow. The contact is there because it's in our soft backlog. But in order to be translated into a hard backlog, we need these steps to be finalized. And it's up to the local government to do it. So let me say that we are following it from near. So we are pushing hard. but we don't see developments in the very short term. We are positioned. The fact that Leonardo signed some contracts on certain different businesses, smaller and different businesses, it's a sign that the Indonesian spending on defense is moving forward. is touching up, but in order for a large contract to be finalized, there are certain internal steps that need to be developed. On VARD, yes, you're right, it's not all about wind farms, supply of short vessels. There is the possibility that oil and gas would pick up again, You know the Norwegian cluster, the northern European cluster, it's very rich of oil and gas reserves, so it makes sense. But let me touch base on also other kind of ships in which Vard is proving to be very strong, which is the cable layers business. Again, this is the era of electrification and the era of electrification calls for investment also in electric cables. And you know, cable layers are very valuable, either in terms of value of the ship, but also in terms of value of the rentals. So it's a market that is developing and it's a market in which VARD is very focused. So you made, you did well. in touching base on alternative business of art on top of wind farms. One is oil and gas, yes, but please consider also the cable layers on top of fishery vessels, which is, I would say, a tradition in that part of the world.

On your third question, the 62 million write-down, if we expect to reverse it, if and when we will deliver the ship. We'll see what happens. I'd like to take a prudent stance there, but of course we will do whatever the accounting principles allow us to do, as always.

Okay.

The next question is from Michele Baldelli with BNP Paribas. Please go ahead.

Hi, good morning to everybody. Just to follow up on a previous question, concerning the costs that are not included in the EBDA, like the asbestos claims, can you give us an update of how many costs were not included in your EBDA, please?

If I understood well, the question is what's not included in the EBDA as a cost right now? The only thing we do not include in the EBDA is the asbestos, the provisions for asbestos claims at this point in time. During COVID, we did report below EBDA the so-called COVID-related cost, but we have no more of that at this point in time. Therefore, the only line item, the only cost that is reported below EBDA is the cost for asbestos claims.

Okay, so...

and this is the amount with each one like 15 million 14 15 million per quarter uh on on asbestos claims you mean uh yeah roughly roughly in that in that range yes okay perfect thank you very much you're welcome gentlemen there are no more questions registered at this time

Thank you.

Thank you very much for attending and let's continue next time. Thank you. Goodbye. Bye-bye.