Fincantieri S.p.A.

Good afternoon, this is the course call conference operator. Welcome and thank you for joining the Fincantieri first quarter 2024 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 afternoon, ladies and gentlemen. Thank you for joining us. And let me welcome for 2D Fincantieri Quarter 1 2024 financial results. Before discussing the first quarter, I would like to tell you more about the recent executed transaction for the acquisition of underwater armament systems from Leonardo. We are very proud of this transaction because we believe it's a crucial milestone in our equity story, and it's a big step ahead for the implementation of our underwater armament This transaction follows a number of previous agreements aimed at creating the new ecosystem of the underwater agreement with Cabis Cataneo, agreement with Leonardo, WSENSE being a company in the telecommunication underwater IoT, and CYPEM. having some good already on-the-market solutions for the underwater domain. This company is highly specialized in the development and construction of defense systems, including torpedoes, but we want to put the spell on the sonars and on the acoustic heads. So on telecommunication solutions, technological solutions, for the traditional underwater communication. It originally, according to page number four, number five, it originally was established as Whitehead Alenia Systemis Subaqui, having long, long roots in the historical know-how of the country in the underwater domain since the very old times. Revenues are in the region of 160 million, and EBITDA is at 34 million euro, and is located in two sites in Italy, one in Livorno and the other in Pozzuoli. In the same company, we will find also a 50% stake in Eurotorp, which is a business dedicated for the commercialization of a specific torpedo, more in general UAS enjoys a strong positioning in EU with EU navies but also in Middle East and also in Far East being two very strategic geographies in our business plan. We believe that it will be a perfect complement to Fincantieri's underwater strategy and in particular because it will accelerate also our market footprint in the underwater domain. First of all, with the Italian Navy, enhancing the relationship with the Italian Navy, including also this kind of technology, leveraging on the interface with Fincantieri surface ships and traditional submarines, Again, it will also help in developing new products, new vessels, new underwater vessels, non-conventional underwater systems, considering the application in the defense, but also enlarging the application on agencies in the civilian market, such the drones for energy infrastructure, underwater energy infrastructure, and other agencies, such as seabed mining and other application on the seabeds. At a glance, the transaction is characterized by a value of the acquisition equal to $300 million as fixed enterprise value, which will be subject to price adjustment mechanism. On top of it, there will be a maximum 115 million amount as a variable component, which will be based on certain growth assumptions linked to the performance of the business in 2024. The total maximum amount as enterprise value will be, therefore, equal to 415 million euro. Since we are aiming at having a flexible capital structure, at the same time consistent with Group's growth strategy, as per our 2023-2024 industrial plan, we will work, and the transaction is expected to be funded through a share capital increase by way of rights offering. Such capital increase will have an amount maximum of 400 million euro to be offered in option to shareholders. The underwriting commitment for the controlling shareholder GDP equity is already there. And on top of it, a pool of primary financial institutions have signed an agreement to enter into an underwriting agreement for the subscription of the newly issued shares. All in all, shareholders subscribing to capital increase will receive also free warrants to be exercised in the future for the second tranche of capital increase up to 100 million euro. This acquisition marks the move to a new business segment which is characterized first of all by strong margins, more than 21% in terms of EBITDA margin. This new business, as a first step, will be also managed in combination with Remazel, being immediately accretive in terms of EBITDA margin. which will move from the 5.2% standalone to 5.5% pro forma in 2023. Then, obviously, we expect higher marginality for Remazel, and therefore this accretive calculation is just a starting point for the way forward. Pincantieri revenues in 2023 will reach, therefore, €7.9 billion, and the growth of it will continue even better than the standalone results. Pincantieri is for sure fully fledged to become a leader in the underwater domain. We want to be a catalyst and a consolidator of the existing technologies and existing realities in the underwater domain, which are currently fragmented and mostly SMEs. Fincantieri enjoys long roots in the underwater business, having produced under 80 submarines so far, being the legacy of the country, having a vast and historical experience, either in Italy and in the exports. And, you know, the newly acquired companies, this legacy, this tradition of the past, and our role of consolidation and association, quote, unquote, of the other existing SMEs in the industry is expected to be a very powerful setup for Italy, for the Mediterranean Sea, and for the expectation of Europe to work on strategic autonomy and developing a strong Mediterranean geopolitical footprint. Let me move now at page 10 to the highlights of the first quarters, where we are recording solid performance in all key financials and metrics, absolutely along the line of the guidance provided for 2024. First of all, revenues were in line. while we are recording a very impressive performance at EBITDA level, achieving 5.7% in the direction of the guidance provided at 6% for the full year. In terms of net financial position, we are at 2.4 billion, being fully aligned with our deliveraging path. In terms of deliveries, we deliver four ships as we speak, and we have 85 ships in portfolio with deliveries up to 2030, with a total backlog, including soft backlog, at more than $39 billion. being a record level in the history of Fincantieri equivalent to approximately 5.1 times the revenues of 2023. We believe we are very well equipped for our journey to strengthen our position in the underwater space acting as an aggregator, acting as a catalyst, as I just mentioned, in the defense fields, and not only in the defense fields. In February, we closed, again, the acquisition of Remazel, and we are eager to finalize the transaction with Leonardo. Let me tell you more about the record high commercial pipeline as of today. Commercially, the performance is being increasingly and consistently positive. Over the period, we signed more than one billion of contract with the Ministry of Defense of Indonesia. This is another milestone for our strategy. Southeast Asia was definitely a key market being our entry point for the Southeast Asia. Geopolitically, it's a very important quadrant. It's a very important theater because it's a very big 250 million inhabitants with the Muslim religion. living on 17,000 islands in front of China. And we are very happy with this achievement. Again, in the quarter, we signed four offshore units with different clients, having basically two important features. One is that we are, again, touching base in Far East, in Taiwan, and two, because we are experiencing also a restart of the oil and gas offshore vessels. So it's not only this big trend in the direction of wind farms, offshore wind farms, but it's also some early signs of restart and quote-unquote renaissance of key oil and gas offshore investments. The third very important element of the commercial performance of the first quarter has to do with the Norwegian Cruise Line holdings. It's again another milestone, another cornerstone, testifying the relationship with Norwegian Cruise Line, testifying the solid restart of the cruise industry as anticipated in the past months. It's a deal with two legs. One leg is already financed and already in execution. A second leg is related to a new generation of jumbo ships currently in negotiation for the financing of the relevant financial institutions and expected to be finalized in the course of 2024. Moving to the deliveries again, we delivered four vessels Sun Princess being the first in Sun Princess sphere class, 178,000 growth stones, basically the largest ship ever built in Italy, very modern in terms of digital applications, but also in terms of propulsion system being driven by LNG. It's a great success and we are very happy with this achievement. And then we delivered Queen Annie to Cunard, being a kind of legacy in cruise liners from Europe to U.S. It's an historical brand. On top of it, in May, we received other offshore vessels that are, again, testament of this continuing growing financial performance. A few words on the order book. Visibility up to 2030. We are going full swing and we are crystallizing a very solid and visible backlog, driven by the dynamics in the cruise sector, but also driven by the geopolitical scenarios that are calling for novel expenditure in different countries, and in particular in Middle East and Southeast Asia, where we are very, very focused. Now, I will hand over to Giuseppe, and we'll get back later. Thank you.

Giuseppe D' Good afternoon, ladies and gentlemen. We move quickly over page 14 and 15. We pretty much already commented the performance in terms of order intake, and of course, being the order intake at a little less of 600 million. This is a stale number, as Mr. Fulgero mentioned, referring to the Indonesia project and the other cruise projects for the brands of NCL. These two orders, the first one subject to financing, but we are quickly moving to effectiveness of the Indonesia contract, and the other orders, which are already effective and signed in the first days of April, add in excess of 5 billion euros to the 593. Of course, within the 593, we have to note the consistent performance in terms of other intake of the offshore business, both in the wind offshore, and we're seeing some signals of restart of orders also in the oil and gas offshore segment. On page 15, our total backlog has reached record levels as we mentioned before. Almost 22 billion euros in backlog plus 17 million billion euros in soft backlog and we expect this soft backlog to turn pretty quickly into fresh new orders. The delivery plan is confirmed with visibility up to 2030 with 85 ships in portfolio. Of course, these 85 ships do not include Indonesia and NCL, for which that will be included in the second quarter results. Page 16, revenues, almost 1.8 billion euros, pretty much in line with the first quarter last year, but as you already know, we do expect pickup in production activity and therefore in revenues in the coming quarters, most notably in the second half of the year. Shipbuilding accounts for 70% of total group revenues, and of course, within shipbuilding, cruise is at almost 50%, 48%. In the offshore and specialized vessels, we keep growing, plus 25.7% vis-a-vis last year, and this is thanks to the very strong order intake of last year and the contribution of the wind offshore orders acquired last year, most notably in the last quarter of 2023. In this business, we are a leading player for the construction of vessels for the offshore wind sector. Equipment systems and infrastructure recorded a 5% increase in revenues. This is thanks to the consolidation of Remazel Group, 14 million euro in the mechatronics segment, sub-segment, I would say. On page 17, EBDA, 100 million euros, up 16% year-on-year. $87 million as of the first quarter of 2023 with EBDA margin that stands at 5.7% and margin improvements across all the segments. Shipbuilding at $84 million with an EBDA margin of 6.2% versus 5.4% of first quarter of 2023. €13 million in the offshore with an EBDA margin of 4.3%. And this is pretty much in line with the margin recovering path of VARD and the business plan and the targets that we set in our business plan. Equipment systems and infrastructure stands at €16 million in line with our expectations with a margin of 5.8%. Of course, we have also here the contribution of Remenzell Group, which is roughly 3 million euros as we consolidated Remenzell starting in February. On page 18, we are perfectly on track with our deleveraging path. Net financial position is slightly more negative with respect of the end of last year, but dramatically improved overall. quarter over quarter last year in the, in the first quarter of 2023, we were at roughly 3 billion euros. Right now we stand at 2.4 billion euros. Of course, you know very well that the net financial position is affected by the delivery dates of cruise vessels in which we have a large cash inflow. Of course, We still have in our books non-current financial receivables granted to clients in the COVID aftermath of roughly 633 million euros, and we are working towards cashing in this money. Networking capital is negative at 245 million euros, pretty much in line, and thanks to higher trade receivables due to the delivery of a cruise ship in April and the related increase in trade payables. Now back to our CEO.