Fincantieri S.p.A.

Good morning. This is the Chorus Call Conference Operator. Welcome and thank you for joining Fincantieri 9-month 2025 Results Conference Call. As a reminder, all participants are in list and 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. Folgiero, Chief Executive Officer and Managing Director. Please go ahead, sir.

Good afternoon, ladies and gentlemen, and thank you for joining us today to discuss Fincantieri's nine-month 2025 results. We are pleased to present another solid set of results building on the positive trajectory of the first half of the year. Revenue growth remains robust across all segments, supported by favorable market tailwinds, while increased operational efficiency includes an higher contribution from the defense business, keep driving margin expansion at the group level. Our underwater segment is growing according to plan and continues to deliver premium margins, strengthening its position as a key value and profitability driver for the group. We also enjoy exceptional visibility on our long-term business outlook, backed by a record-high backlog that provides a strong foundation for future growth. Finally, our initiatives to improve working capital dynamics are supporting our rapid leveraging trajectory, enhancing both financial flexibility and capital efficiency. Let's now move to page four for a brief summary of the financial and commercial highlights of this video. Revenues grew by 20.5% year-on-year to €6,725,000,000, supported by strong contribution from all business segments, in particular shipbuilding. We also achieved a significant increase in profitability, with EBITDA posting an impressive double-digit growth of 40.4%, reaching €461 million. EBITDA margin improved materially to 6.9% compared to 6.3% at the end of 2024 and 5.9% in the first nine months of 2024. This substantial and rapid growth is particularly noteworthy given that operate in a heavy industry sector with low biorhythms. came in at 1.65 billion euros, slightly better than 167 billion euros recorded at the end of 2024, with a net debt to EBITDA ratio of 2.6 times, improving compared to the ratio of 3.3 times recorded at the end of 2024. Turning to page 5, our commercial performance was remarkable in the first nine months of the year. We recorded an order intake of 16 billion euro rising by 88.4% compared to the previous year and higher than record value achieved in the whole of 2024 with a book to bill of 2.4 times. The backlog reached 41 billion euro increasing 32.3% compared to the end of 2024 with a total backlog reaching a record level of 61.1 million euro, approximately 7.5 times 2024 revenues. This gives us an exceptional visibility on the long-term business outlook and revenue stream, and represents a key part of our strategy. With the delivery schedule all the way to 2036, we can turn to our supply chain partners and agree on terms which favor both parties thanks to the long-term commitment and higher volumes we can guarantee. Let's move to page six. 2025 represents the consolidation and progress of our vision and strategy. We confirmed our guidance for year end as a demonstration of our ability to set an ambitious trajectory and to deliver it. Avenues for 2025 are expected to reach approximately 9 billion euros. EBITDA margin is foreseen in excess of 7%, building upon the material increase in profitability already recorded across all our business segments in the first nine months of this year. This leveraging path is well ahead of our 2023-2027 business plan target, and we confirm the net debt EBITDA to remain between 2.7 and 3 times in full-year results. Finally, we expect positive net income at the end of the year. Let's move now to page seven for some insights on the commercial opportunities ahead. Our order intake continues to benefit from a solid pipeline with further tangible commercial opportunities valued at approximately 26 billion euro, supported by our strong market positioning and powerful dynamics across all business segments. Cruise maintains its extraordinary momentum with a vertical increase in order across all product segments. Last September, we signed a contract with TUI for the design and construction of two vessels belonging to the Intuition class, confirming once again our strong relationship with all world's most prominent cruise operators. In defense, a preliminary agreement was signed with Greece for the transfer to the Atlantic Navy of two vessels of the Italian Navy. Hence, we expect these two ships to be replaced with new orders to the Italian Navy in the near future. Demand in the offshore specialized vessel segment remains solid. Several new orders finalized in 2025 through our subsidiary VAR, including a contract for two hybrid SUVs for North Star, confirming our leading position in this market. Lastly, in the underwater segment, we are seeing the tangible benefits of our strong commercial positioning, also thanks to vast solution for top-tire navies and to a broad portfolio of products with application in defense, commercial and dual use, as we can see more in detail on page eight. A clear example of excellence in our unmanned management system and underwater business is the Sand Marine Drone, a manned surface vessel designed for a wide range of missions, enhanced by the onboard integration of the large system, which enables the deployment of underwater unmanned vehicles. In the field of offshore subsea infrastructure protection, we signed an agreement with Jean Deneuve for the design and supply of an advanced system developed by Remazel for the transport and laying of rocks on the seabed to protect cables and pipelines called rock dumping. More recently, we signed an agreement with DEFCON, supporting Fincantieri in developing and integrating deployment capabilities for autonomous surface vehicles on its novel units. Finally, last October, we presented DEEP, an integrated and cutting-edge solution for the protection, development, and maintenance of critical underwater and port infrastructure. The system consists of a network of underwater sensors for early warning, a command and control center, a team of autonomous underwater vehicles, and an AI-based platform for data analysis and processing. These high-tech solution and partnerships showcase our positioning as an orchestrator in the underwater domain. Moving to page nine. You can see how our commercial efforts are translating into an impressive order book. The first nine months of the year, we secured a significant number of new orders, further consolidating Pincantieri's expansive global reach across all business segments and ensuring deep visibility up to 2036. In the first nine months, we delivered 19 units from nine shipyards and, as we speak, We have a full slate of deliveries scheduled up to 2036, with more to come. One prototype ship we expected to deliver at the end of 2025 will be delivered at the beginning of 2026, being a highly technological project for which we want to ensure the utmost quality at delivery. Now, I will end the call over to Giuseppe, who will discuss our financial results in more detail. Please, Giuseppe.

Thank you, Roberto, and good morning, ladies and gentlemen. I move on to page 11 on order intake, which was at 16 billion euros, greater than the whole of 2024, with a book-to-bill at 2.4 times revenues. This indicates a very strong and sustained growth of the Concrete Commercial Pipeline. fueled by demand across all our core business segments. In Chi Building in particular, we posted 4.6 billion euros in orders. That is more than twice the first nine months of 2024. Also in offshore and the other segments, orders were robust and accounted for almost 2 billion euros. On page 12, of course, The very high owner acquisition brings us again to a record high backlog of 61.1 billion euros, which stands at over seven times full year 2024 revenues, and a backlog of 41 billion euros with a soft of 20.1 billion euros. In this backlog, Cruise accounts for 34 units. Defense 29 underwater for submarines and offshore 33 vessels for a total of roughly 100 units with a clear and deep visibility for the years to come with deliveries, as we mentioned before, deliveries up to 2036. In the first nine months of this year, we have so far delivered 19 units from nine different shipyards. On page 13, financials, revenues. Illegal in excess of 6.7 billion euros up to 20.5% year-on-year. Here we have a strong contribution coming from the shipbuilding segment, which posted a 22.7% growth. And this growth is across crews and defense, but particularly in defense, we grew 38.5%. This growth is partly driven by the contract that we finalized in the first quarter of 2025 for the sales of two multipurpose combat units to the Indonesian Navy. SHIBELDINI roughly accounts for 68% of all group revenues. and offshore which accounts for 14% of total revenues rose as well but by almost 13% and this reflects the sustainable trajectory of recent years underpinned by the progressive development of the group's border backlog. Underwater revenues came at 386 million euros also driven by the consolidation of vast submarine systems in the first quarter of 2025 and the ramp up of the construction of the first submarine for the Italian Navy, which is going to be delivered in 2029. Finally, equipment systems and infrastructure revenues are stable year-on-year at 927 million euros. This is despite the reclassification of the subsidiary Cionics to the offshore and specialized vessel segments. Let's turn to page 14 with the EBDA, which is up 40.4% versus the first nine months of last year, and reached 461 million euros. EBDA margin grew to 6.9%, steadily improving from 6.3% reported at year end 2024, and 5.9 reported in the first nine months of 2021. Shipbuilding recorded an EBDA of €316 million, increased by 33% versus the previous year, with an EBDA margin of 6.5%, up 0.5 percentage points compared to the same period of 2024. And this is thanks to two drivers mainly, results of the operational efficiency initiatives deployed in the cruise sector and the growth in the defense business, higher profitability. The offshore and specialized vessels EBDA reached 57 million euros, increased by 21.4 percent compared to the 47 million euros at the end of September of 2024. An EBDA margin of 5.4 was roughly 5 percent in the first nine months of last year. The underwater delivered an EBITDA of 67 million euros with a margin of 17.3%. This confirms the segment's premium profitability. In the equipment systems and services infrastructure segment, EBITDA increased by almost 37% compared to the first nine months of 2024, reaching 68 million euros. with an improving EBITDA margin at 7.4. This improvement is mainly driven by the mechatronics and the infrastructure business. Finally, on page 15, networking capital and net debt. As of the end of September, we posted a net debt of 1.6 billion euros, roughly, in line with the 1.6 1,644 million euros recorded at the end of the first half of 2025 and slightly better than the 2024 year-end figure, which was 1.668 million euros. The leverage ratio improved to 2.6 times, and this is significantly lower than the 3.3 times of year-end 2024. In this matter, we continue to work On the optimization of networking capital, which stands at negative 465 million euros and stable compared to year end 2024, we have an increase in inventories and advances in trade receivables that more than offsets the increase in trade payables and the decrease in work in progress, construction contracts and client advances. With that, I will now hand

Thank you, Giuseppe. Let me now summarize some key takeaways of Phase 17. We have delivered strong operational and financial results, which provide full visibility on achieving our year-end targets. Margins improved solidly year-on-year, supported by higher operational efficiency in CREWS, a greater contribution from defense, and the continued strong performance of our underwater business. We benefit from deep backlog visibility up to 2036, enhancing profitability and cash flows thanks to working capital optimization, capacity saturation, and increased procurement efficiency. At the same time, the current global geopolitical environment is creating significant growth opportunities in defense, which we are well positioned to capture. We are consolidating our position as a leading orchestrator in the underwater domain, expanding both our product offering and business development capabilities, also through targeted acquisitions and strategic partnerships. Finally, as we speak, we are working on the new business plan to be approved by year-end, that will lay the foundations for the next phase of growth and value creation. The strong results achieved in the first nine months of 2025 allow us to confirm our guidance for the full year 2025. Revenues are approximately €9 billion, EBITDA margin greater than 7%, net debt to EBITDA between 2.7 and 3 times, and positive net income. With that, we are now open to take your questions.

This is the Coruscall conference operator and 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. We kindly ask to use handset when asking questions. Anyone who has a question may press star and 1 at this time. That's star and 1. The first question is from Emanuele Galazzi with Equita. Please go ahead.

Good afternoon, everybody. Thank you for the presentation. Three questions from my side. The first one is if there is any news from the U.S. market. I'm referring to, let's say, both the constellation program and the new opportunity in both civil and the naval shipbuilding market. The second one is on cruise. If you can just give us a sense of the current profitability for the business and also considering the strong momentum on the order intake, would you say that last orders have a better profitability embedded? And the third one is on the Net debt, given that you are already at 2.6 times net debt on EBITDA in the last 12 months, are you more confident to be at around 2.7 times by year-end, or is there something on, for example, networking capital we should consider for the forequarter?

Thank you.

On the USA question, thank you, Emanuele, for your intervention. On the USA question, there are no significant information to be shared. We continue to pursue the strategic market of US as a very important investment, very valuable contribution to the renaissance of shipbuilding in the US. We strongly believe that we can carry a long-term mentality, which led our investment, again, 20 years ago. But this long-term mentality will pay back very soon. What about cruise? and profitability on-cruise. Yes, we are experiencing a level of interaction with our partnership owners, a level of interaction that is giving us the perception of better profitability. More in general, I strongly believe that this big wave and multiple wave of awards will create the preconditions for a stronger execution simply because our business is, since ever, a business of saturation. The more you can achieve saturation in your infrastructure, the more you can optimize the common cost and fixed cost. One and two, this very profound, very long-term aggregation of job and orders creates another very important precondition, which is the ability to negotiate, I would say, repetitive contracts with vendors, giving to vendors extensive visibility and therefore apply a level of prices and entrepreneurship in general, which is higher and higher. So, this good momentum increase, let me summarize, creates very good conditions with the clients, but most importantly, saturation in the employment of the infrastructure and optimization of the pricing and the relationship with the supply chain with a mentality of having a long-term alliance rather than a pure commercial play. Moving to the debt, I would rather leave the floor to Giuseppe, but I believe it is very linear.

Well, the answer straightforward is yes, we're very confident on stay where we are and close here and between 2.6, 2.7 ratio. So in the lower part of our gardens, very confident.

Okay. Thank you very much.

The next question is from Antonio Gianfrancesco with Intermonte.

Please go ahead.

Yeah, good morning, and thank you for taking my question. I have two. The first one is about future margin expansion, because looking back over the last couple of years, Fincantieri demonstrated strong execution and efficiency, deflected in a strong margin improvement. Now, looking ahead, I would like to understand the main factors that could lead to a faster margin expansion in coming years. I mean, it is fair to say that most of cruise efficiency work has been done and that faster margin expansion will be more linked to a better business mix with a greater contribution from naval and underwater activities, or do you think that there is even more space also in decreased business? The second one is more specifically on defense and underwater business. The market there remains extremely supportive, and I imagine your pipeline of potential new orders is quite strong. So I would understand in which geographical areas there is greatest push to convert briefly the higher defense budget into actual investments, and therefore the greatest likelihood of orders in short to major term.

Thank you.

Thank you, Antonio, for your questions.

With respect to the first question, We still reiterate and we still believe that we have two engines in terms of enhanced profitability. The first engine is the continuation of the activities and efforts we are injecting in the cruise business, which is a business of volumes, which is a business in which the enhancement of margins is strongly dependent on the saturation, again, of the infrastructure and fixed costs. And as I just finished to say, your ability to negotiate with the supply chain with a long-term deal rather than with an opportunistic deal. So I believe that this engine is still on. It is still pushing forward. Then as you properly said, there is a second engine, which is the engine of the revenue mix, which is an engine whereby the, you know, improving the marginality kicks in as soon as the defense revenues will go up. So I think there are still both the opportunities there And it is our, I would say, relentless effort to make it happen. And the new business plan will be the place in which this dynamics will be factored in. Moving to your second question, which is more on the fence, which are the geographical areas in which we feel the commercial temperature, quote unquote, up and up. I would say there are three concentric circles. The first one is Italy, where the Italian Navy is accelerating, as the rest of the armed forces, the cycle of investment and contractualization. So according to the existing, I would say public, planning of future investment in naval defense. There are expected in short term several possible awards, namely the destroyer, namely the EPX program, the LSS logistic ships program, the LXD, which are landing platforms. So there is a very clear roadmap of acceleration for the Italian Navy, let me say, which is the first circle. And there is a second concentric circle, which is Europe. As you may know, the SAFE program is a facility for 150 countries which is reserved to nations which already secured an allocation of this 150 billion, which is secured to nations according to three criteria to be verified. One is the ability to spend money within 2030. The second one is that at least two nations have to collaborate, i.e. European Union is pursuing defragmentation. Condition number three is that 65% of the content, so of the supply chain of the ship, of the armament system, has to be produced in Europe. So this is happening. So it's $150 billion. There are many navies that are discussing, I would say each other, including with us. And so we believe that the 2030 condition, which is, again, one of the three compulsory conditions, but the 2030 condition will be a big push for this defense market to accelerate. Because basically, The European Union wants nations to invest in defense and is prepared to give money if you're doing it now in the short term. Then there is a third food-centering circle, which is the export outside Europe. And as several times specified, We are very focused on two regions, two extra European regions. One is the Middle East and the other one is Southeast Asia. In Middle East we have a lot of presence already. We have very good credentials and therefore we are very active in very important nations such as Emirates and Saudi Arabia having domestic ambition, but also international ambitions. Middle East and Southeast Asia. Southeast Asia. We are, as you know, very well, very happy with the flag we put in Indonesia, which is, you know, an emblematic Example of what is the level of attention to the naval, I would say, environment of that part of the world. The same is Malaysia, the same is Thailand, Philippines, Vietnam. So there are several programs going on. I would say in Southeast Asia, Fincantier is very well positioned to pursue them. Obviously, with the level of velocity, with the level of speed that is typical of the procurement cycle of the public administration, i.e., there are no bleeds overnight. It's a business for farmers. It's not a business for hunters. But you have to be there. You have to, you know, take care of the soil, pour the water, and, you know, look after the small opportunity until it becomes a large award. We are very satisfied with our international expansion, with our commercial internationalization process, which is leading us to have a very, very, very detailed and ramified presence all over the world.

Okay, very clear. Thank you very much.

The next question is from Marco Vitale with Mediobanca. Please go ahead.

Good morning. Thank you for the presentation. I have a couple of follow-ups on the defense segment. The first concerns the underwater business. You were mentioning that you're making a lot of efforts to expand the portfolio in this division. Are you targeting also export opportunities for the system you are putting now into the market or do you expect this to be specifically devoted for your domestic customer? Second question is about, we read about memorandum of understanding signed between Emirates and Angola to cooperate on the and the Navy upgrade program, and we expect these to provide you with additional opportunities for your export segment, considering the that you have with the main defense of the Emirates. Thank you.

Thank you, Marco, for your question. Number one, underwater product, whether there is an export opportunity or not. Absolutely, yes. I would say that the new navies that are looking into new international navies that are looking into the opportunity of expanding in Avalbase Those navies are particularly interested also in new technologies, in new attributes, I would say. So, by the way, the more your new technology is validated by the National Navy, the better it is. So this is the old school, I would say. But in the new industrial environment, it is true also the contrary, i.e. that... And new navies, international navies, are more than happy also to shortcut and become themselves the partner of choice for those new technologies, also depending on the specific characteristic and requirements of the missions that these new drones or new technologies are expected to perform. So there is a lot of demand. the market is very, very sparkling, quote, unquote, and we feel very well positioned because we can associate the traditional products and the new attributes and new products in a way that is, you know, maximizing the sum of the parts. Moving to your second question, the Emirates agreement with sub-Saharan Africa, I would say at large. We were kind of a pioneer in the idea of joining forces with Abu Dhabi in order to go to sub-Saharan Africa and to other regions. The joint venture we put together with EDGE, or better, one of the most important tasks and objectives of the joint venture we put together with EDGE was exactly this one, i.e. to join forces where we contribute our industrial capabilities and strength. They join their industrial capability and strength, behave as an export platforms in geographies in which the Abu Dhabi perspective, the Abu Dhabi geopolitics, the Abu Dhabi ability to financially support the defense capabilities and defense industrial base is very strong. So whenever Abu Dhabi is, you know, working and cultivating government-to-government relationship in the defense, our joint venture with Edge, which is called Maestral, is naturally involved because this is the core strategy for Fincantieri and for Edge in order to address those markets.

Mr. Vitale, all your questions have been answered? Yes, thank you.

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

Yes, good morning, and thanks for taking my questions. The first one is on, again, on underwater, on the Philippine and the Polish opportunities. Is there an idea of when the award may take place and what is your competitive advantage in your perspective? Is it possible that you could provide better delivery times apart from the product? Everybody knows it's very, very strong. But are there other, let's say, aspects that may position you better than the competition? So this is number one. The second is on Rheinmetall, the move they made, they announced this, let's say, purchase of the Lursen shipyard. So I was wondering what's your opinion on that. And the third one, if I may, is on Norway. That was the award of the frigate contractor, They chose the Type 26. I understood, this is my interpretation, that there was also politics, let's say, played a role there. I was wondering if you got some feedback, some comments on the products you submitted that is the Constellation. Is it too young as a platform or something similar? I mean, any lesson learned from this experience would be Thank you.

Thank you very much, Gabriele. On Poland, obviously we depend on the public announcement of the procurement officer, quote-unquote, of the nation, of the government, of the Polish government. Our latest news are, you know, the same, i.e., that the process is expected to be very fast. There is a lot of, I would say, preparation work already performed in the last months. So my information is that it's a short-term development. It is not a long shot. I believe that our offering is very robust. First of all, from the technical perspective, because we have, you know, extensive experience and the summary we offer is very well proven. But most importantly, I believe that it's better to go fast because this opportunity can be financed with a safe facility. And in order for it to happen, it's very important that the process is finalized very, very soon. So I strongly believe that the access to SAFE will obviously create a kind of advantage of European players against non-European players for the bid. technical expertise and reliability to uh finance ability quote unquote it's safe uh point number three is delivery time as you hinted before i totally agree with you that in the new defense environment and space it is so important that you can be faster than expected, and you can, in a sense, cut corners in order for the asset to be at sea sooner rather than later. So also in that respect, we are putting together very, I would say, very, very solid ideas that can truly procure that there is a strong differentiation of our offering vis-a-vis the others. Moving to your second question, what's my gut feeling on ring metal and Lusse? I think it's always good news when Europe gets more and more focused on the defense industrial base. This is exactly what nations are, I would say, constantly and consistently asking to players, to industrial players. So I'm very happy to see that Germany is, which is a very important country, so focused on defense, so focused also on naval defense. I think that the involvement in the shipbuilding is not a, I would say, downhill exercise. I think it's a very different business model with very different constraints, with very different, I would say, dynamics. from many respects, in terms of supply chain, in terms of labor, in terms of appetite for risk, in terms of dependence on external parties, infrastructure. So it's a totally different exercise, but at the same time, I believe that Raymetal is a very sophisticated company, and they will find their way to become knowledgeable about such a different business. Moving to Norway and the partnership with UK, I 100% agree with you. It's a very clear example of geopolitical exercises rather than business exercises, which is the name of the game. Because when you sell defense, you don't sell a product. It's not a commercial game. It's a very serious geopolitical story. So our interpretation is that Norway is taking a view which is a kind of, I would say, geopolitical view that UK is a partner in the defense industry. and not only a supplier of ships. That's our interpretation of the tender, and I think that's what consistently happened throughout the, our process. That's it. We, as Fincantieri, we are very well proven, very, very well proven free gate platform, which is much more, fashionable in the Mediterranean Sea.

Understood. Thank you very much, Roberto.

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

Hi. Good afternoon to everybody. I have a couple of questions. The first one relates to the Greece order. Can you elaborate on the timing that we may see it in your P&L if you can share it with us? And the second question relates, I know that there could be a business plan presentation, therefore more details around it. If you can anticipate something around the expansion CapEx plan, how do you see the defense capacity going on in the next few years and what steps will you do?

Thank you. Thank you, Michele.

On your question, with respect to your question on Greece, I think it's not possible nor appropriate to give details because it's a commercial prospect we are working on. What I can tell you is that this is the result of a long-term effort you know, to create the partnership between Italy and Greece. This long-term effort has been pursued by the Italian institutions, the Italian Navy, First Line, Minister of Defense, the minister himself. So I believe it's a very strong and very written in the stone kind of partnership There are a number of next steps, very clearly agreed by the parties, which are being managed in accordance with expectations in terms of timing. I think that the, I don't want to give too many details, but I think that the signature will be obviously in 2026. And this signature will be, I would say, a big achievement for Fincantieri because you know that once the Italian frigates will be sold and delivered to Greece, at the same time, the Italian Navy will place an order for two new frigates We call it the evolution model, so the latest of the family. So new order intake for two frigates will take place at the same time. So it's very, very good news. On your second question about the expansion of capacity, I think that the business plan disclosure would be the right time to give all the relevant details, you know, which will be directly proportional to the market we see in front of us, the MOFA awards in the defense. What I can anticipate today is that we have a lot of elasticity and flexibility. So what we discovered in this, months of preparation, what we discovered is that the system of shipyards of Fincantieri is a formidable tool, source of flexibility in moments like that. So we have, I would say, kind of a production footprint that can truly move and get along with the priorities of the market in a way that is for a big part, seamless. What seamless means with the same existing infrastructure, with the same existing footprint, we can build much more. Working on the production techniques, methodologies, small investment in incremental equipment. But, you know, we can do a lot with the same infrastructure, which means that we can pursue this growth in defense without the, you know, necessary time lag for the new investments to happen. So that's what I mean by having a versatile system of shipyards and being able to be flexible and, you know, very responsive to market demands. So we can increase a lot our construction hours in defense with the same existing installed infrastructure. That's what I would like to anticipate today. The rest of the, I would say, disclosure, and unveiling will be done with the numbers in the right location.

Thank you.

Gentlemen, there are no more questions registered at this time. The floor is back to you.

Thank you very much.

Thank you very much for your attendance.

Thank you. Bye-bye. Thank you. Bye.