Fincantieri S.p.A.

Good morning, this is the Chorus Call Conference Operator. Welcome and thank you for joining the Fincantieri Fulia 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 might 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 2022 Financial Results Conference Call. This set of results shows a solid top line with revenues up by 12% to €7.4 billion, in line with expectations and with the development of the backlog. EBITDA stands at €221 million with a margin of 3% impacted by first half lower marginality, especially in infrastructure, as a result of the thorough risk analysis carried out by the management in the second half of the year, by no recording items of the period and by inflationary pressures due to the macroeconomic scenario. In 2022, we delivered 19 ships from nine different shipyards. This underlines once again how sturdily are our industrial and production capabilities. Order intake came at 5.3 billion euro, well above last year figures, thanks to a revamp in cruise vessels demand. As a matter of fact, during the second half of the year, we signed three different agreements with green and next generation cruise ships, strengthening the partnership with consolidated clients and welcoming newcomer luxury brands. On the defense side, the US Navy exercised the option for the third frigate, renewing the full trust in our franchise. Turning on net debt, since the first half of the year, it improved as anticipated during the last conference call in November. Net loss for €324 million, hit by extraordinary and non-recurring items for €238 million, of which Euro 164 million non-cash items, namely goodwill and intangible assets impairment. Giuseppe will give you further details on the main financial and operating performances of the period later on. Let's now move to slide 7 for some business updates. Our operating performance has been consistently positive throughout the year. Indeed, the group's shipyards are running at full speed with 14 vessels delivered in 2022. On cruise, in the sole fourth quarter, we handed over three ships, namely one for Viking, one for Virgin and one for MSC. On the latter, the MSC Seascape is the largest and most technological advanced cruise ship ever built in Italy. She is the fourth for the client as part of a 7 billion euro investment package for up to 10 ships and stands at the forefront in terms of environmental sustainability. On naval, we delivered the third corvette to the Qatari Ministry of Defense and the multipurpose offshore patrol ship to the Italian Navy. Indeed, construction activities for the ongoing programs are continuing as agreed with our main clients. In offshore, the subsidiary VARD confirms its leading position in deconstruction of service operation vessels, with 10 total units in backlog. Besides, in the fourth quarter, a new order came in for a second cable-lying vessel for Prismian Group. In addition, in January, our US subsidiary has signed a contract with Crest Wind, to design and build a service operation vessel while last week we signed a contract worth 250 million euro through the subsidiary VARD for the construction of four SUVs units for a new client EDA Wind. This confirms Fincantieri as prime mover in the sector of offshore wind support vessels with a market share of around 38% regarding SUVs. We set very ambitious targets to further validate our commitment to become an even more sustainable company, as well as acknowledged already by major rating agencies and institutions in Italy and abroad. It is worth mentioning the A- score we have received for the third year in a row by CDP, formerly Carbon Disclosure Project. that recognizes our commitment in fighting climate change. For the second year, Sustanalytics, part of Morningstar, which evaluates how companies manage ESG risks, positioned Fincantieri in the low risk range with a score of 17.3, now ranked 11th out of over 400 companies in the machinery sector. During 2022, we delivered 19 vessels from 9 shipyards, highlighting the global outreach of our operations. We recorded €5.3 billion in new orders with a book-to-bill ratio at 0.7. In the medium-long term, we confirmed our delivery plan up to 2029. With 31 vessels in portfolio, offshore guarantees the production of the next few years. Please note that it is typically a fast-moving business with a quicker turnaround and shorter production times. We are confident it will benefit from an increased demand for offshore wind specialized vessels driven by the decarbonization and higher investments in renewable energy. The total backlog coverage secures 4.6 years of work compared to this year 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, ladies and gentlemen. I'm moving now to page 11, discussion on total backlog and order intake. We closed with a total backlog of 34.3%. billion euros in line with the first half and this includes 10.5 billion euros in soft backlog thanks to the recent order achievements in the cruise and offshore businesses. We have a total of 109 ships of which 88 vessels in backlog and 21 in the soft backlog. 5.3 billion euros of order intake with a very positive contribution from shipbuilding segment and offshore, plus 65% year over year, with 10 new specialized vessels ordered. And in order intake, not only we witnessed positive signals in cruise orders, which came in earlier than previously expected, but as Pierroberto underlined earlier, we are now taking orders for next generation, innovative and greener vessels in a niche sector, luxury, for newcomer brands that are expanding their operations into cruise. Revenues are up almost 12% with a positive contribution from offshore and specialized vessels. We landed at 7.4 billion euros in revenues. The contribution was good across all segments but offshore, year on year, came at plus 64.7%, which is a very important increase, and this is thanks also for the pickup in demand for wind offshore vessels. Shipbuilding grew 4.5%. We had high production volumes in the Italian shipyards of the group, both in cruise and naval vessels. Cruise still accounts for almost 50% of total revenues and defense revenues account for 22%. The result is also attributable to efficiencies of the engineering and production processes launched in the past years together with the high production volumes. Moreover, defense revenues will reflect the progress in the Qatari and Italian and US naval construction activities. The growth in offshore up almost 65%, as we mentioned before, is again a result of the successful repositioning strategy we have implemented towards the offshore wind sector. We also had an increase in the equipment systems and services revenue, 18%. This is driven by the operations in the mechanics and complete accommodation businesses. Still a very large share of revenues, 87% are generated from international clients and this confirms the unparalleled leadership with a highly diversified backlog and a global client portfolio. On page 13, EBDA. ABDA stands at 221 million euros. As we mentioned in the first half conference call, we said that second half would have been better, and it was better than the first half. Although ABDA margin for 2022 dropped at 3%, and this comes from the impact of the lower marginality in infrastructure and in shipbuilding, due to non-recurring items already reported in the first half, raising raw material prices that further increased in 4Q2023, along also with some inflation pressures and shortages we had in the U.S. labor market. And notably in shipbuilding, the causes of the The decrease in EBDA was particularly hit by high inflation rates and energy costs, and also a write down of work in progress due to the reassessment of a client credit rating, which we already had in the first half of this year. Offshore EBDA margin came at 2.9%, a slight improvement compared to 2.1 in 2021. While finally in the equipment systems and services, the reduction, the sharp reduction in marginality comes from the infrastructure business that has recorded a negative EBDA of 126 million euros with revenues of 262 million euros. And this is the result of the risk analysis we undertook in the first half of 2022, especially on a couple of projects. And of course, commodity price inflation as it across all the segments. On page 14, net loss at 324 million euros, and of course, this comes after the EBDA at 3%, the EBDA margin at 3%, but we also had, one-off items in the period, 238 million euros, and these include 52 million euros of asbestos, related costs for asbestos litigations, 164 million euros of impairment, goodwill impairment, and 22 million euros of write-offs for offset agreements. Moving to balance sheet items. We had an improved net financial position compared to, as expected, let me say, compared to the first half of 2022. We closed with a net debt at 2.5 billion, thanks also to the deliveries we had in the second half of the year. We had an implied net cash generation of roughly 765 million euros. We are moving with net financial position, we're moving consistently with production volumes and delivery schedule. And the situation as of 12-31 fully reflects networking capital evolution in the cruise business. We are going to have three vessels be delivered in the second quarter of 2023. Of course, we still suffer from the deferrals we granted to clients during the pandemic. At this point in time, we have roughly 94 million euros in vendor loans granted to clients. Networking capital is positive at 618 million. It was 440 as of the end of 2021, and the main changes are related to the increase in work in progress, construction contracts and client advances, and also this increase has been partially offset by the increase in trade payables, roughly 200 million euros. We have spent roughly 300 million euros in CAPEX to support the strengthening of our asset base and to improve technological standards, which are essential features to pursue the sustainable growth strategy of the group. In 2021, this number was 360 million euros. In the last three years, we almost spent a billion euros, 960 million, And these CAPEX have been directed towards production sites both in Italy and abroad in order to optimize production, strengthen our positioning, and adjust shipyard facilities to sustain the sizable backlog acquired in recent years. Now I give the word back to Pierroberto for the outlook and the concluding remarks. Thank you.

Thank you, Giuseppe. Let me tell you more about the market outlook. Thank you Giuseppe. Let me tell you more about the market outlook. Some updates on the market in which we operate with our core businesses. First of all, looking at cruise, at the end of the year, 93% of the global fleet was back in full operation. Booking trends are now back to 2019 with passengers' volumes expected to overcome pre-pandemic levels by the end of 2023. IMO regulations for sure represent a potential catalyst for more sustainable, green and innovating solutions. As a matter of fact, we saw in the past few months an increased demand for ships equipped with the high-tech features and next-generation engines to reach a fully decarbonized cruise industry by 2050. In particular, we are fully committed to applying new propulsion technologies and new fuels, such as LNG, methanol, ammonia and hydrogen, leveraging on solid in-house skills and production capabilities. Not only we witnessed the first signs of order resumptions, but also new luxury niche operators entered the cruise market, with orders for medium to small vessels. our consolidated leadership put us in the best position to seize further opportunities from the near comeback and the green transition of the whole cruise market. As for the naval, global defense spending is expected to further accelerate in the upcoming years, fostered by the current geopolitical scenario and the NATO guidelines, up to 2% of national GDP. In such business, we are second to none in the construction of high-tech surface vessels, such as frigates and corvettes, and are able to benefit from a wide client base, both in Italy and abroad. Turning to offshore, as of today, worldwide wind farms are delivering a nominal power of around 55 GW, that is expected to rise fivefold to reach a total global capacity of around 270 GW by 2030. In addition, further opportunities may arise from an increased demand for offshore vessels to maintain and operate wind farms, driven by the pace and breadth of investments into renewables, with floating offshore wind rapidly ramping up. Let me once again stress that we have a strong track record in development of cutting-edge offshore units, featuring green propulsion and remote control solutions with VARD, currently the market leader in the production of service operation vessels, for the number of units in portfolio and for client diversification. Let's turn now to the last slides of the presentation. Before moving to the Q&A session, please let me remind that in December 2022, we set the route for the new 2023-2027 business plan and here are some outlines. The plan is grounded on five strategic pillars, streamlined through a set of strategic projects and concrete actions to be carried out over the plan horizon with a focus on human capital, enabling technologies and supply chain. The utmost focus will lie on core business, namely cruise, naval and offshore, triggered by the green and digital transition as a catalyst to strengthen further the group distinctiveness and competitive positioning in the shipbuilding industry. In the first months of 2023, we have already launched a few strategic initiatives in order to further strengthen our industrial engineering and production efficiencies. We have already taken steps to further enhance procurement processes and cost governance. Regarding the potential challenges of the core business may face, the group is integrating its offerings, scaling up digital and automation solutions to spur the transition from a capex supplier towards a leading service supplier. In addition, we keep on rationalizing our capabilities to become a prime contractor and complex system integrator in the defense business. Furthermore, as fully aligned with the emission reduction roadmap for cruise ships, we plan to deliver in the first half of 2024 the first dual ship propelled mainly with liquefied natural gas and featuring high lubrification systems for reduced friction resistance. Passing on financial targets, net of a further deterioration of microeconomic scenario and other unforeseeable operating and financial consequences related to the conflict between Russia and Ukraine and the persistent imbalances caused by the pandemic outbreak, in 2023 we expect to maintain production at full speed, revenues in line with 2022, and marches improving up to 5%. As we announced last December, The target outlines of the business plan include revenues in 2025 at 8.8 billion and margins at around 7%. The ratio between net financial position and EBITDA will range between 4.5 and 5.5. Breakeven is all suspected from 2025. At the end of such industrial plan in 2027, revenues will land at almost 10 billion. with a marginality of around 8%. The debt to EBITDA ratio will stand between 2.5 and 3.5, in line with business dynamics and with the leveraging expected over the planned horizon. The management team will present the new strategic direction during the first quarter 23 results. Moving on the conclusion, I would like to reiterate that we are currently working on deploying our new 2023-2027 Business Plan and Sustainability Plan, which will be thoroughly explained and presented during the first quarterly results. We strive to strengthen our competitive positioning and business distinctiveness in the global shipbuilding scenario to optimize our operating performance and anticipate clients' future needs. In particular, we will focus on high added value core shipbuilding business with increasing expansion to competencies towards the digital and net-zero ship. We will further strengthen the Italian and foreign shipyards through the review and the digitalization of the production processes. resulting in an increase in productivity and efficiency. We will continue with the relentless attention to cost governance and financial discipline. The new strategic direction will, on one hand, lower the group's risk profile and, on the other hand, confirm the role as a sustainable player able to create value for all stakeholders. with no further deterioration in the microeconomic scenario and other unforeseen operating and financial consequences following the unbalances caused by the pandemic outbreak, we expect for 2023 revenues in line with 2022 with margins improving up to 5%. Net financial position broadly in line with this year and with cash absorption due to the delivery schedule in offshore and in infrastructure business to be completed in early 2024. Again, in May, we will present the group strategic plan in much more details in an investor day dedicated for the financial community. Please pencil it down and stay tuned for further information. 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, please go ahead.

This is the Coruscant 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 touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking question. Anyone who has a question may press star and one at this time. That's star and one.

We will pause for a moment while participants are joining the queue.

The first question is from Monica Bosio from Intesa San Paolo. Please go ahead.

Good morning, everyone, and thanks for taking my questions. I have actually four questions. So the first one is I'm trying to focus on the last quarter results, and I was wondering if excluding the energy cost, what would have been the group's margins in the last quarter of the year? And if I may ask, Did you account any provisions in the last quarter of 2022 ahead of the business plan deployment? The second question is on the margins in 2023 as for the shipbuilding. Is it correct to assume an EDBA margin for the shipbuilding of at least 5.5% above the margin of the group? or maybe I missed something in my estimate. And export infrastructure business, I can imagine that you still expect losses for the infrastructure business. So I was wondering what could be a sustainable margin for the equipment system and services division, excluding the infrastructure. And the very last is on the cost of debt. Can you give us some highlights on the cost of debt and the level of financial charges in 2023 and across the plan?

Thank you very much.

Hello, good morning, Monica.

Good morning.

Five questions is a lot of questions.

Sorry.

No, don't worry about it. First, our last quarter results. I will answer to one and two at the same time. In the last quarter, we have experienced, let me say, the highest peak in energy prices at a time in which we were, let me say, doing our business plan calculations for the future. We, of course, these two elements tell you a lot on what's factored in the accounts for both last quarter results and for the forecast I've had for the business plan. Of course, there is a lot, a lot of volatility in the raw materials markets. in commodity prices and also in energy prices. Therefore, our accounts and our numbers account for this volatility. Margins of shipbuilding for 2023. Of course, we guide for the total, for the overall EBITDA margin for the group, which we expect it to be around 5%. Of course there is a mix within this target and considering that shipbuilding still has the largest chunk in the total revenues of the group with cruise having roughly half of the total revenues of the group, we could say that it's going to be slightly above the total margin we are guiding right now for 2023. What's a sustainable margin for equipment systems and services? I would say that without the infrastructure business, 2022 would have been very good. I mean, we gave you a higher disclosure with respect to the past. on the infrastructure business because the performance of the infrastructure business was very, very bad. So if you take out that margin, we would close roughly at 7% EBDA margin? Yes. The target, and you know, looking at how this business performed historically without the infrastructure business, I think we could, we should target, again, a double digits margin, but of course this is, let me say, a long-term scenario exercise. By no means it is a guidance, but without the infrastructure business, 7% up is a reasonable number. On financial charges, For the average cost of debt for 2023 onwards, we are roughly at 2.6%. We are progressively, let me say, increase in our edge ratio, edging from floating to fixed rate interest, we are right now at 70% of total liabilities fully edged at fixed interest rate. And this is the average cost.

Okay, so just to find out check, sorry, the very last, no provisions in the fourth quarter of the year to be released across the plan.

Is it correct?

Sorry, say that again. I lost you.

Did you account any provisions in the fourth quarter of the year that maybe could be released across the business plan? Just that I didn't get for this time. I didn't catch this answer.

Sorry for intervening because I'm too curious. What do you mean by that?

I mean that maybe you take some batch of prudence and you account some provision that could be released with an upside.

It doesn't work like that. When you account provisions, it is because they are possible to be provisioned. So if you see provisions in our profit and loss, it is not because we are putting somewhere money in order to use them afterwards. We are not rich enough to do it and or, I would say, experienced enough to do it. So we are simple creatures. So when you account costs, it is because we believe that they need to be accounted.

Yes, I didn't mean that. I was just curious because maybe something could go better than the initial expectation given such a volatile scenario. So it would be wise to account some provision, to account for some potential cost, and then if things go wrong, the better there's room to deliver, to meet the provision.

Let me put in a different word. If you are saying if we are managing volatility with the instruments that are permitted under international accounting standards, the answer is absolutely yes. If it is prudence, I don't know if it is prudence, because we are facing such uncertain times that unfortunately there is no space for prudence. I would say that we are managing certain, uncertain, sorry for the joke, variables, and we are managing these variables trying to factor in as much as possible the volatility. So for example, on energy, we are taking a view. On steel, we are taking a view. And obviously, we are taking a view that is to the best of our knowledge as of today. Then obviously, if in six months' time the energy costs would collapse and the steel and other raw materials would collapse, we could have some positive developments. Conversely, if by chance the view we are taking will be, you know, not enough, we will have a negative outcome. So let me say, this is what I mean by volatility. When you manage volatility, you take a view, you try to anchor your view as much as possible on sources that are reputable, and then you wait and see. So I have to say, what's happened in the last two, three years was absolutely unexpected. So it's very difficult today to take such a bold view saying we are taking prudent accruals. We are reading the future through our, you know, defectable lens.

Okay, that was my point. Thank you. You are being very clear. Thank you.

Thank you. Thank you for your question.

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

Yes, thank you and good morning. So the first question is as regards this profitability restatement at full life of contracts which you described in your press release in both Cruise and Naval. So I wanted to know a little bit more about that, in particular Was it more related to cruise, more related to naval? And as regards naval, it seems that it was particularly involved in the US operation. Does it include, I think, the Constellation contract? So the question is if you can provide a little bit more color on this profitability reassessment at full life of the contract, which you implemented in the last quarter of the year. The second question is on financial charges, I was not listening well to your previous answer, Giuseppe, to the question of Monica. The total amount of financial charges in 2023, is it correct to estimate in the region of slightly above €150 million? And the third and last question is regarding the offshore segment. The intake evolution is proving particularly positive, particularly for offshore winds up our vessel. and it should remain positive for longer. So the question is, are you planning? In the past, you shut down some capacity at VAR, particularly in Norway. Are you now planning to expand capacity in the offshore segment in the next years to accommodate rising intake? And what are your margin targets for the offshore segment for the long term?

Ciao Matteo.

On the first question on the profitability restatement on shipbuilding, it's mixed between cruise and novel. Of course, commodity price inflation, energy inflation, and also labor inflation in the case of the United States has affected across the businesses. Of course, when it comes to the United States, we also, we already said it in third quarter, the deterioration in margins were mainly related to the constellation program. And we had a few projects, a specific risk arising on a few projects in cruise for which we are not let me say, concern at this point in time. On financial charges, you say 150, I say it's going to be higher than that. We forecast it to be higher than that in 2023. How much higher, we can give you details in further conversations. On offshore wind, we are not planning to expand capacity in Norway. There is a capacity expansion plan in the form of capital expenditures in Vietnam to, let me say, increase our execution capacity related to the wind offshore business that is facing a huge growth in demand. Right now, according to our estimates, these are our calculations based on market intelligence, we have roughly 38% market share in the support operation vessels for wind farms. But again, The expansion is only related to the increase of production capacity in the Vietnam yard. By no means we want to open new yards. And it's already factored in the assumptions, CapEx assumptions for the business plan.

Okay, thank you very much.

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

Good morning, all. I have two questions. The first one is I was surprised by two items, the low Q4 EBITDA margins, which I believe you explained well. and also the flat revenues guidance in 2023. I mean, looking at the plan, I was expecting a more linear progression, but probably you're going to have a flat revenues in 23 and more of a step up in 24. So I was wondering if you can maybe give us a bit more indication of the path of growth to 2025 in terms of a top line expansion. And also going back to the margins, I think Q4 was particularly weak, but you assume or you foresee an improvement, a material improvement from Q4 into 2023 as you have a 5% EBITDA guidance. Can you give us maybe an indication of what are your main assumptions around that 5% guidance? For example, how much you assume in the infrastructure business and also maybe an indication of where you see raw material costs or energy costs. What are your assumptions basically behind the 5% guidance? So that's the first question. The second question is how should we think about the order intake in 2023? We are seeing a strong recovery in cruise, but also a number of opportunities in defense. And also at the same time, you mentioned a couple of times during your presentation, next generation ships, highly technological request from your clients, and I was wondering, Is this an opportunity to improve margins in the shipbuilding or is it an opportunity to improve market share or maybe both in the shipbuilding? That is the second question.

I will answer with pleasure to your last question on which are the market developments in terms of order intake and which is the marketing, quote unquote, of our product for the time being. On the market developments, again, 2022 has been quite emblematic, quite indicative of the micro trends. So we are experiencing a progressive, I would say, willingness to invest. of our traditional clients that are interested either in the substitution of the capacity, which is something natural in the management of the fleet and certain expansion, because we made no secrets that let's say 2025, 2026, the market will experience a gap between supply and demand in terms of expectation of customers. So the most entrepreneurial cruise shipbuilders are taking a view in the direction of increased investment. So 2022 is already a testament of what is going to happen in 2023. So we believe that the more we get closer to this gap between supply and demand, the more we will appreciate willingness to invest of our investors, of our shipbuilders. So on the cruise, the path is set and the path is there. On the naval business, we are serving Italian Navy and exports. The Italian Navy is absolutely in line with the program. So, you know, we are implementing progressively what was called Legge Navale. And according to Legge Navale, we will continue with submarines and we will continue with what is called PPX, which is a patrol vessel that will be formalized in the coming months. So this is with respect to Italian Navy. Then there is the big export. So there is the ambition of Fincantieri to extract additional value from the set of products we have with new navies in new geographies. So we're being very, very, very, very active in Greece, which is something we will have to, you know, cross finger, wait and see in the next weeks. Then we're being quite active in Southeast Asia. Malaysia and Indonesia are two markets in which we are being very concentrated. You know, by the way, that Indonesia was already in the radar of incantation. Malaysia will be more and more And then there is the Middle East. In the Middle East, as you may have appreciated from the press, from the newspapers, we have been active in order to position Fincantieri with a new partnership scheme in order to have access to the investment program of Abu Dhabi. You know, Middle East in general is rethinking its geopolitical role in a world that is changing the geopolitics and the geoeconomics more and more. So Middle East is not only Middle East, but it's a cluster of countries that needs and believes to play a different role in the geopolitics of the world. So their ambition in the defense and in particularly Naval will grow a lot. So Qatar is being a tremendous business card, tremendous reference in the region because we're delivering our ships on time and on budget during COVID when Qatar was experiencing a lot of delays, you know, in the investment program, for example, of the World Cup, football World Cup environment. So, all in all, we are best positioned in the Middle East because Qatar is a good reference. Abu Dhabi is a market we are already tapping in, we have already experienced, and then the other big market of the Middle East is Saudi. So, probably it's not for 2023, but Saudi will have to be a market for Fincantieri. First of all, because Saudi will invest a lot in regionalization of production. And we are the only shipbuilder in the world that is accustomed to go closer to clients and accommodate their regionalization strategy. So believe me, it will play as a marketing tool very, very powerful, in particular in the naval business where our competitors are very rigid, are very traditional. uh this is what will be hot in 2023 again saudi and abu dhabi not necessarily in term of order intake but in term of preparation of the ground for for good developments in the short term nevertheless let me move then obviously needless to say that we're looking also to latin america which is a market in which Italians in general have good credentials and Italy has a good geopolitical platform. Let me move to the offshore sector. What is happening in the offshore is absolutely remarkable. As you may have appreciated, we have announced the cable layer of 2022, but also a set of SUVs last week, another cable layer yesterday, so Vard is going to become, as expected in the business plan, a source of good commercial satisfactions in a company that has credentials that are simply unique compared to competitors. Not only because it's European engineering, but because it has the Vietram shipyard, that couple the commercial reliability of Norway with a very quote-unquote cheap execution model in Vietnam. We are enlarging our investment in Vietnam because we are very satisfied with the productivity and the unit cost we are achieving over there. So please consider VARD perfectly set to penetrate the offshore market, because with VART you can have at the same time the reliability of European engineering and at the same time the profit and loss of a Far East player. And the combination of the two is very, very, very powerful in a market with a growing demand. And then there is the possibility to use Romania as an additional shipyard in case the workload, as it happening, as it is happening, will grow and grow. So I don't believe, let's touch wood, that the issue for Fincantieri will be accessible market. I don't believe that the issue with Fincantieri will be top line. Yes, we have some phasing effects, 2022, 2023, 2024, We can draw the line with different, I would say, stiffness. But at the end of the day, the issue is never, ever the top line. Our greatest effort is to manage the profitability. First of all, at a bidder level, then in terms of bottom line, and then in terms of cash generation. So we will present you with a lot of emphasis, with a lot of, I would say, focus, why we believe that we are credible at the moment of setting the bar on profitability, bottom line and cash flow generation. And we will make this big effort in the, I would say, first week of May, second week of May, when we will present the first quarter result because we would like to give you as much visibility as possible on which are the bottom-up actions that we are undertaking to make this improvement happen. You touched base on technology. What's the role of the technology? What's the role of the digital? What's the role of the green? Let me say that, first of all, we want to validate our new products. So in these days, we are already capable to put on the table digital solutions in front of our clients. There will be the Sea Trade in Miami, end of March, and that will be the place in which we will showcase what we have already delivered. Because the first target is to let our clients know that there is much more technology in Fincantieri than what you think and what they think. So we want to, you know, occupy the space and quote-unquote conquer their trust as technology partners. Once it is done, we will have two positive effects. One, we will continue to differentiate the relationship and the distinctiveness of Fincantieri. So we will put another star close to the name of Fincantieri. Two, we will technically attach to Fincantieri ship an extra NPV value, which is the value of the optimized OPEX of a Fincantieri ship. So once you NPV this improvement in the OPEX, you are somehow attaching more competitiveness to Fincantieri offer, because you don't evaluate Fincantieri offer with the glasses through the lens of CAPEX, but through the lens of CAPEX past OPEX. So this is the turning point. So I don't believe that the first digital product we are selling will change the profit and loss of Fincantieri. I don't believe that the cash we received with the payment of the first invoice for a digital service will pay the salaries of the management of Fincantieri, but I strongly believe that it will be the moment in which we create the perception of a Fincantieri that is a companion of journey for the life cycle of the ship. So you don't need to think of Fincantieri simply as a capex suppliers, but as a capex end an OPEX supplier, which will make the difference. And this is exactly what we do in the naval business. So in the naval business, when we sell a ship, we manage the ship. So that's the strength of Fincantieri, the fact of being naval and cruise. So we can cross-fertilize the cruise business with what we do in the naval business. So that's the second point will be very important during the investor day. To let the market understand why Fincantieri is different from competitors, not only because we'll be more digital, but because we have a set of competencies which is different from our cruise shipyard competitors. As simple as that. So when we tell a client in the cruise business, that we will be a lifecycle companion of Journey, they probably will appreciate because this is exactly what we do with Qatar Navy. This is exactly what we do with Italian Navy. So now we know exactly what does it mean to manage OPEX of a complex ship, either in terms of maintenance cycles, either in terms of how to add extra technology to have extra economic benefits. So I don't want to make the presentation today, even if I would like, but I will invite you for the second week of May.

Yeah, and I will be there. So I guess from your very extensive and helpful answer, the order intake this year has gone up by 60%. Probably it will go up again in 2023, given the set of opportunities that you just described.

Giuseppe, please, if there are any, I remember Mr. Pozzi was making some extra points.

Yes, well, order intake, Alessandro, is a number we do not guide, but we do expect, of course, orders to pick up with respect to the years, you know, I would say 20 and 21. And when it comes to your first questions, flat revenues in 2023, it's not a surprise that revenues are forecasted flat in 2023 as we did not experience substantial order acquisition in the years from 19, 20, and 21. And it's not a surprise that revenues grew heavily in the past few years, leaving aside, of course, the COVID year, because I recall that in 2019, we closed our revenues of roughly 5.8 billion euros. Right now, we reached 7.5. This growth came out of the huge order acquisition we performed up to 2018, notably in the cruise business. 2018 and 2019 were record years for order acquisition in cruise business. Of course, 2023 revenues are an inflection point in our growth. We are taking a pause because we took a pause in order acquisition in the previous years. I mean, if you plot orders and revenues, you see how the two figures are linked together. And when it comes to cruise business, not only we lacked new orders in 2021 and probably 19, but also we reached, we are working since three years at full production capacity and we reached the peak in terms of revenues at 4 billion euros. The peak both with respect to our capacity and with respect to the orders that we have. We are stable at five to six deliveries per year, also in 23 and 24. And of course, for revenues to pick up, we have to wait for a new wave of orders, both in cruise and in the naval business. And when it comes to offshore, the other intake is surprising us in the upside, especially in terms of how fast this is happening. We have good, good forecasts in terms of new orders, and that is why, as I said before, as an answer to Matteo's question, we are ramping up capacity in Vietnam, which is already a very efficient yard with the highly skilled labor. But the rate, the pickup in the growth in other acquisition in the offshore business has surprised us on the upside. And this is already visible also in the revenues considering the shorter production cycle that we have in offshore.

Thank you.

On your question on margins, you want more color and guidance. Of course, we expect, we are guiding for an overall group level EBDA margin at roughly 5% for 2023. The largest contribution to this 5% margin, of course, will come from SHIB building that still has the largest chunk in revenues for the group will come from a further pickup in EBDA margin from offshore. You know, the story of Vard's recovery is a very long story. Vard has had a very, very bad performance for eight straight years. And we said that, first of all, we were going to reach breakeven in terms of EBDA break even in terms of EBIT, and then net result. Well, next year could be a very good year for VARD. Also, considering what I said in terms of the anticipation of the order intake, we talked about before of the EDA wind order, which was a very good sign of this pickup in the orders. So, we have good vibrations, let me say, from the insurer business.

I was interested in the delta between the Q4 margin, EBITDA, and the 5% in 2023. So I guess part of it is the recovery in VAR, but also part of it probably is infrastructure as well, recovering.

Well, infrastructure business, considering that we reassessed the whole life cost of the projects, notably of one project, we expected to move on at basically at zero EBDA contribution because all the loss was, as per the accounting principles, of course, was booked in the year 2022. And these are our expectations. Of course, having an EBDA margin of zero dilutes the total margin of equipment systems and services. But I'm sure you appreciate that we slightly improved our disclosure by giving you the numbers on infrastructure business. We do not expect any improvement. We expect flat zero margin. Okay. That's fine.

Thank you. You're welcome.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Gabriele Gambarova from Banca Acros. Please go ahead.

Yes, thank you for taking my question and good morning. The first question is about CARPEX, 295 million in 2022, so I was wondering what could be the number for 2023. The second question is on your outlook for net financial position. You are saying that there will be a certain level of cash absorption with reference to offshore and infrastructure. Is it possible to understand what could be in absolute terms this level of absorption and if you can remind me how the networking capital works for offshore in particular is it the same in terms of advanced payment as coolies or different and then third question on ship building I see that again on margin I'm sorry in Q4 basically you I mean The BDA was $135 million lower vis-à-vis Q4 2021. Would it be possible to break down this delta between high-ergo materials, energy? The moving parts of this delta would be very interesting. And the last one, I promise, is on... In Italy, there is, I would say, a certain level of the news flow on the Ponte Sulo Stretto, basically the bridge linking the continent to Sicily. It's something we have been speaking for 40 years, I think. Do you believe that the Fincantier infrastructure might have a significant role in this important project? Thank you.

I will give you a feedback on this last point and then I believe Giuseppe and the team either during the call or separately can give you as much details as needed. On the infrastructure business, I believe that it's very important that we strengthen Fincantieri infrastructure because we have a backlog, so before getting into the Ponte sullo Stretto, which is not something in which Fincantieri can be a player, because we are not famous for building such big bridges. But let me tell you more about what we are doing with Fincantieri infrastructure. First of all, as I said from the very beginning, we need to deliver our backlog. So we have to be very, very serious with our clients and thinking, for example, of the Adiga di Genova, because once you put a signature, then you have to deliver. And I know by heart what does it mean to deliver infrastructure. So you have to prepare yourself. You have to be very good in control management. You have to have very kind of vertical competencies and know-how. And so that's what we are doing today while we speak. So we have hired a new CEO with a lot of experience in this segment, having experience either in managing and building hospitals, in managing and building a different kind of infrastructure. And that's the That's the first target for me. So before thinking of the future, let's think of the present. And in order to have a sustainable future, let's have a livable present. So that's what we're doing today. So obviously, as we said several times, we don't see synergies between this business and the business of shipbuilding. And I strongly believe that the challenge we have in the SHI building is so beautiful and so, I would say, energizing that it is going to collect 100% of our entrepreneurial energy, managerial energy and financial energies. Having said that, we have the responsibility of Fincantieri Infrastrutture and at the same time, so at the same time, we are also strengthening Fincantieri Fincantieri Infrastrutture in order to deliver its backlog in respect of the contractual obligation and in respect of our clients. Let me touch base more clearly on the Ponte sullo Stretto. The Ponte sullo Stretto will be a kind of gigantic, monumental, iconic, super important infrastructure of the country. And obviously, if Italy is incurring such a very, very, very ambitious program, we will never step back because we don't want to give the perception to the government, to the country that Fincantieri is not entrepreneurial or is not set up to take challenges. I strongly believe that if Incantieri will be there, because there is the need of having a reliable, well-known, connected party on board, for sure we will not be the driver of it, because the driver of it should be someone having the skin, the skill, the references, the track record, the people, the project management, you know, it has to be kind of a black belt, let me use this word, in infrastructure. And frankly, I can understand that Fincantieri can be there to guarantee the success, to have reliable people around, but we don't think, I don't think that Fincantieri is black belt in infrastructure. And let me say the profit and loss and the blood test of Fincantieri infrastructure is supporting my reading. So I hope I was not misunderstood and I hope I was quite black and white in the answer. So we want to strengthen Fincantieri because we want to deliver on the backlog, no jokes. Then if the country is asking us to join the most critical and important infrastructure of the country. We will not step back. We will be there to support. We will be there to help with what we can do. But for sure, we are not famous in the world for building straight to the Messina bridges. We're famous in the world to build the most complicated ships and the largest ships in the world and the ships with more technology. So that's what we, let me say, strive every morning when we wake up.

Okay, thank you. Very clear.

Gabriele, on your first question, 2023 CAPEX, they're going to be broadly in line with 2022. On your second question, cash absorption on offshore and infrastructure business. Of course, on the infrastructure business, what you saw in terms of results in EBDA results for 2022, you will see the cash flow consequences of this throughout the completion of one project that is expected to occur by 2024, end of 2024. So it's going to be diluted in the next 18, 20 months. On networking capital absorption in offshore, to be on the safe side, terms of payment are more similar to cruise business than to now business. with a highest share of payments during construction. I would say instead of having the 80-20, 20-80 split, we have a 30-70 split. This is what's factored in our assumptions for 2023 onwards. Let's see if we can do better. Let me put it this way. On your third question, we could maybe reconvene in separate meetings because these are modeling questions that I would not like to take during this call. Thank you.

Okay, no problem. Thank you very much.

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

Good morning everybody. I have actually two questions. The first one relates to DSS division. You said you have roughly 4 billion of order backlog there. If you can sort of give a sense of which is the share of the infrastructure business, at least a very rough number. On this point, given you have a very large backlog in this kind of business, is it fair to expect to have some growth in 2023. The second question relates to the cruise. Based on the number of deliveries that you plan for this year, my question is, and yet that you're running it at full capacity, is it fair to sort of say that you can have stable revenues compared to 2022?

Yes. fair to say that revenues are going to be stable in 2023 over 2022. In previous questions I said that revenue growth is, let me say it, an inflection point considering the pattern of order acquisition we experienced in the past few years. So stable growth is a fair assumption on cruise. Cruise revenues have reached four billion euros and still account for more than 50% of the total revenues of the group. As in the share of the infrastructure business in the equipment systems and services backlog, as the CEO said before, we are fully concentrated on executing At best, our backlog, it's the total backlog of the equipment systems and services includes also orders for captive business, the accommodation business, the mechanical business, the electronics business. So it's gross, the number you mentioned is gross of this component also. The share of the backlog of the infrastructure is roughly 2.2 billion euros. That is 8% of the total backlog we have in the group of the 24 billion. And of course is 2.2 billion, it's 60% of the 3.84 billion you mentioned before. Thanks a lot.

And maybe on this point, how long does it take to execute this backlog on average, clearly?

How long?

Does it take to execute all this backlog? So, I mean, the duration of the backlog.

I would say a couple of years.

Okay. Thanks a lot. Very clear.

Mr. Dado, there are no more questions registered at this time.

Thank you, gentlemen. Thank you. Thank you, ladies and gentlemen.