Maire S.p.A.

Good afternoon and welcome to our call. My name is Silvia Guidi, Head of Investor Relations, and I'm joined today by our CEO, Alessandro Bernini, and our CFO, Fabio Fritelli. Given the rising importance of technology in our group, Mohamed Nafid, CEO of NextChem, is also with us and is ready to address your questions on our technology roadmap. Today, we plan to cover MIRES operating and financial results for the first half of 2023. At the end of the presentation, we will be happy to take your questions. Let me now hand over to Alessandro for his introductory remarks and operational performance overview.

Thank you. Thank you, Silvia. Good afternoon, everyone, and thank you for joining MIRE's first half results conference call. The first half of 2023 has continued to show a robust performance. with revenues EBITDA and net income all growing double digit vis-a-vis the corresponding period of last year. Our 9 billion euro backlog was strengthened by 2.4 billion euros of new contracts awarded in H1, the highest order intake since 2018. These results start to benefit from the implementation of our industrial plan as announced last March. Our current strategic approach is based on our position as enablers of the energy transition and entails a dual business model with a new organization based on two business units. The first one, Sustainable Technology Solutions, is the home for solutions designed to enable innovative and sustainable processes offering technology licensing, high-value-added services, and proprietary equipment. The other one, integrated engineering and construction solution, is the home for a solution to realize future-proof, technologically advanced plans, thanks to our specialized know-how and world-class engineering expertise. A flexible and adaptable business model where technologies and ENC can be offered to our clients through an integrated approach, but it can also live independently. During our Capital Market Day, we shared the underlying growth drivers of the two business units. Let's look into how we deployed our plan over the last few months. We want to provide you with tangible examples of the effectiveness of this business model, starting with sustainable technology solutions. The increasing need for energy transition technologies, both in our reference market and in other air-to-abate industries, has led to a year-to-date order intake of approximately 200 million euros for STS. It represents a five-fold increase versus the first half of 2022. Our unique technology offering has been an essential success factor to achieve this outstanding result. In line with our plans, we keep working on the expansion of our portfolio, and our R&D department is focused on the development of innovative and increasingly sustainable solutions. Such an effort has resulted in approximately 90 additional patents so far this year, bringing the total number to over 2100. The development of additional technologies has also been pursued through external acquisitions with the purchases of concert and the cut technology, starting a trend that is expected to continue over time. The activities we are carrying out to keep expanding our technology portfolio have a positive impact on the whole business. In the first half of the year, for example, we were awarded three projects which involved STS as the technology provider and EMC as the executioner. We also cooperated with other partners. For example, we were among the founders of 30GEE, a consortium established by a cross-value chain combination of investors to accelerate the low-carbon transition of the EU agricultural industry. As we continue to develop our integrated strategic approach, we keep fostering the cross-fertilization of ideas within our group, which is crucial in the innovation environment. Moving on to integrated ENC, The powerful drivers which are expected to ensure significant growth of this business continue to be strong. In the current spending cycle, low carbon investments are gradually picking up, while hydrocarbons, mainly natural gas, will continue to bridge the gap to full carbon neutrality in the long run. It is exactly in this field that Myra can play a major role, thanks to our well-established leadership in our traditional markets. This can be clearly seen in the strong order intake of 2.3 billion, more than twice the same period last year. The growth in our S.p.A. business is delivering additional opportunities to be executed. For example, Of the three integrated projects mentioned in the previous slide, one is related to a green ammonia plant to be built in the United States based on our proprietary technology. We will see it in more detail later on. We are also seeing an increasing activity related to the revamping and upgrading of existing plants as clients are adapting their infrastructure in order to comply with more stringent regulation and market needs. In recent months, for instance, we have been particularly supporting our clients in the upgrading of refineries to produce higher value chemicals and products. Finally, we keep strengthening our presence in the extended EMC value chain, To this effect, we continue to be proactive in pursuing seed contracts, a value-added service which allows us to be engaged with clients since the very early stage of the project. We have seen how our two business units are positioning for growth. Now, we want to share with you more details about the evolution of our technology portfolio in the four clusters. in which we operate. Nitrogen fertilizers have always been a stronghold of our group, based on Stamicarbon's 60% market share in URA licensing. Our technology offering is well established in the market and spans from low energy fertilizer to blue and green ammonia. With new additional technologies that will complement our portfolio, our main objective is to accelerate the use of green ammonia as a fuel and energy carrier. We have been active in hydrogen since the early 70s, and we are now leveraging on our protected technologies in steam methane reforming. such as our unique cost-effective electric blue line route technology to produce clean hydrogen. On the green hydrogen side, we are developing cost-effective high-precious electrolysis solutions to lower the overall hydrogen cost and enable its direct storage and transportation. We are also looking at profitable ways to capture and, most of all, valorize CO2, transforming a cost into a possible revenue stream for our clients. We are working to expand our presence in synthetic fuels and chemicals. We are leveraging on our proprietary solutions to recycle municipal solid waste via gasification. We also have bio-based solutions for renewable fuels and chemicals, including sustainable aviation fuel, an area that will see a dramatic growth in the years ahead. Last but not least, our technology offering in polymers is wide and among the richest. Our sustainable portfolio includes plastic upcycling, chemical recycling and biodegradable monomers from fossil sources. This portfolio has also been strengthened thanks to the recent acquisition of CONSER and the CAT-C technology. In fact, the inclusion of both CONSER and CAT-C into our group has allowed us to jump start in the technology expansion, which is at the core of our strategy. In the few months since its acquisition, we have been able to expand the concept technology package to catalysts, and they extend the commercial geographical reach. At the same time, we started the activities from the scale-up of the CAT-C technology. Our portfolio expansion was not limited to M&A activities. We further internally developed other technologies to enhance our offering, including, first of all, NETCPO, a proprietary technology to produce a syngas via natural gas oxidation, which can be used to lower emission in refineries, decarbonize steel manufacturing, and to produce ammonia and sympulses. Second, the LEAPS pretreatment units, a proprietary technology for the pre-treatment of contaminated oil feedstock, like fats and oil, to produce sustainable aviation fuel. For both these technologies, the complete offering we can provide to our client includes licensing, process design package, and proprietary equipment. Overall, a bright feature which is expected to represent a key source of competitive advantage for the implementation of our strategy. Let's now look at the operational performance of the first half in more detail. The first half was characterized by a variety of new awards and initiatives. WIDELY DIVERSIFIED IN TERMS OF SCOPE OF WORK AND TECHNOLOGIES INVOLVED, REFLECTING THE POSITIVE MARKET MOMENTUM. IN THIS RESPECT, THE ORDER INTAKE OF BOTH BUSINESS UNITS REFLECTS THE DUAL EXPOSURE OF OUR GROUP TO THE TRADITIONAL BUSINESS AND TO THE SECULAR GROWTH IN ENERGY TRANSITION. Among the new awards, a common element was the growing demand for solutions able to reduce the emissions, improve energy efficiency, and lower the consumption of natural resources. In this slide, we have depicted some of the main awards and initiatives achieved in the first half, including the launch of the first circular hydrogen service station in Rome, to be built by Q8, where NexChem will act as the exclusive technology provider for circular hydrogen through its waste to chemical process to produce hydrogen from no recyclable waste. Let's now have a look at our order intake. Our order intake was very strong in the first half. with 2.4 billion euro of new awards. It was driven by a multi-billion dollar project in Middle East, making the intake the highest since 2018. The geographical breakdown reflects the leading role of the Middle East in the current environment investment cycle, driven by an increasing demand for downstream assets, while leveraging on the opportunity to move towards higher added value products. Our trailing book-to-bill ratio is 1.3, representing a tangible sign of our business growth. We expect an even stronger second half, which potentially could lead to one of the highest order intake and backlog ever. Thanks. to the strong order intake, our group backlog at the end of June was €9 billion, leading to a backlog cover of 2.4 times and good visibility in the short and medium term. A 25% expected runoff in the second half of this year provides a solid support to our 2023 revenues guidance. The geographical breakdown reflect again the spread of clients investment across the globe with a good balance outside the Middle East. Let's have a more detailed look at each business unit level. Starting from SPS, the effectiveness of our strategic approach can be clearly seen in the strong order intake achieved in the first half. The acquisitions were driven by nitrogen fertilizers and our offering spending from technology licensing to proprietary equipment and other high-value services. At almost 100 million euros, the order intake has more than doubled, leading to a backlog of 214 million euros, up by 54 million since the end of last year. A geographical breakdown is driven by the current nitrogen fertilizer project in Asia. While these months, July, 100 million Urea licensing and proprietary equipment award in Africa, be careful, not yet part of the June backlog, is expected to contribute to an increased geographical diversification. We remind the short cycle nature of this business, reflected by a backlog cover, which is at the parity. Moving on to ENC, the first half order intake was extremely sound, with a €2.3 billion of new awards. At the end of June, the €8.8 billion backlog and the resulting backlog cover of around 2.5 times provide good visibility on the years ahead, while representing a solid backbone to our business. Let us now look at a couple of recent acquisitions in more detail. At the end of June, we were awarded a $2 billion petrochemical contract in Saudi Arabia. The annual project relates to a major initiative set up by Aramco and Total Energy to develop a world-scale petrochemical complex integrated with the Satorp Refinery in Dubai. The project aims to convert field stock produced directly by the refinery, such as its off-gases and NAFTA, into higher-value chemicals. The award consists of two separate packages related to two polyethylene units each with a capacity of 500,000 tons per year and the derivatives unit. The scope of work entails complete engineering services, equipment and material supply, construction activities, pre-commissioning and commissioning. The project will have a duration of about four years, and it is expected to attract additional investment in a variety of industrial sectors. This award is a further recognition of Teclimon's world-class capabilities to execute complex projects in complex environments and confirms our leadership in downstream petrochemicals. Likewise, it consolidates MIRE's strategic position in the Middle East. On the other hand, a clear example of the advantages of our integrated approach is provided by the Green Ammonia Award related to one of the largest green fertilizer complexes to be built in the United States. This project sees the involvement of both our business units. Stonic Carbon is in fact providing the licenses and the basic engineering design, while KT, is carrying out the early engineering works on a reimbursable basis. Upon completion of these early works and subject to the clients in final investment decision, the activities will enter the engineering procurement and construction phase to be carried out by our ENC subsidiaries. This award is a fruitful proof of our capacity to act as a one-stop provider of proprietary technology and high-value engineering solutions. Moving on to the Group's commercial pipeline, we were pursuing opportunities worth over €56 billion, up by over €2 billion compared to March. In general, we continue to see a healthy set of attractive projects, driven by the resilience of our core business and supported by clients' willingness to invest in energy infrastructures and technologies for the transformation of natural resources. The previously mentioned step up of concert commercial efforts together with a significant increase in the other clusters has led to an almost doubled S.p.A. pipeline. Our technological leadership is also evidenced by over 2,100 patents across 160 families, a portfolio that keeps improving every year. Our drive toward technology innovation gained a new recognition in June when MIRE joined the Euronext Tech Leaders, an initiative dedicated to high growth and leading tech companies. In this respect, our group has been included in the subsector green production practices, of the cleantech cluster, encompassing companies developing production practices, products or services to reduce the consumption of natural resources. Let me now spend a few words on our international footprint. Our engineering workforce represented the DNA and growth engine of this group. For this reason, We are continuously strengthening this base with more than 650 new engineers hired in the first half alone, and the opening of a fifth office in Mumbai, in India. Further additions are expected over the next months in order to support an ever-growing backlog with a top-notch engineering workforce. We have progressed in the implementation of our ESG agenda also, with several activities carried out in the five areas of our sustainability strategy. Among the most important initiatives, we started implementing a new methodology for the calculation of Scope 3 emissions with the view of setting a reduction target before year-end. In the area of people, We have joined the Target Gender Equality United Nations Global Compact Accelerator Program. We have also supported the Women in Science engineering initiative led by aimed at encouraging young girls from rural parts of India to pursue higher education in science, technology, engineering and mathematics. This program led by the Indian Institute of Technology in Bombay, involved 165 girls this year. I will now hand over to Fabio for his review of the financial results. Please, Fabio.

Thank you, Sampoor. Our financial results show a double-digit growth across all the main KPIs. Revenues were just shy of €2 billion, up 21.7%, driven by steady project execution. GNAs were €41.5 million, up by €5.1 million, but with a decreased incidence over revenues, from 2.3% to 2.1%, thanks to our continuous focus on achieving efficiencies. EBDA was 120.9 million euro, up 24.1%, mainly thanks to higher revenues. Margin was 6.2%, up 20 basis points, and in line with the 2023 guidance. Net financial charges were 17.4 million euro, up 3.8 million due to the increase in interest rates on the floating rate portion of our debt. partly upset by a higher financial income. Moving to the bottom line, such a positive operating performance has led to a consolidated net income of €54 million, up 33%. Let's now analyze the financial results by business unit. STS revenues were €117.4 million, up 30.2%, thanks to the constant growth recorded in the technological solutions and services to support the energy transition. As a reminder, the first half 2023 figures include the contribution of the recently acquired sponsor. EBDA was 25.6 million, up 48.8% as a result of higher volumes. EBDA margin was 21.8%, 270 basis points higher thanks to our focused high value added products and services. ENC revenues were 1.8 billion euro up 21.2% thanks to the backlog consistent execution. EBDA was 95.3 million up 11.8% with a margin of 5.2% in line with last year. Moving on to the balance sheet, let's analyze the cash flows dynamics. Our adjusted net cash position at the end of June was 104.6 million euro, up by about 11 million compared to year-end 2022. Such a positive improvement is driven by a strong operating cash generation, which more than compensated 2022 dividends for 40.7 million euro. the Shared Buyback Program for €2.2 million, as well as net capex of €40.1 million, not including €17.6 million of acquired cash. In particular, the gross capex of €57.7 million includes €48.4 million for SDS, mainly dedicated to expand our technology portfolio, and €9.3 million for EMC, mainly related to projects on digital innovation. Let us now take a look at the working capital dynamics. The adjusted net trade working capital improved by 37.2 million euro from negative 113.8 million euro at year end 2022 to negative 151 million euro at the end of last year. This positive change is mainly driven by the project's advancements and reflects a normal dynamic of a significant backlog characterized by several multi-billion projects. I now hand over to Alessandro for his closing remarks.

Thank you, Fabio, and let's move to the conclusion. In conclusion, our first half of financial results demonstrate a strong momentum in both technology and execution. Our 9 billion backlog provides a solid platform to deliver a double digit growth in 2023 and even beyond. Margin expansion will be supported by our recognized know-how and technological solutions and expertise and will encompass and increase the contribution from higher value activities. Capital expenditure will be focused on technology portfolio to foster future growth. Investments are expected to be covered by the operating cash flow in line with our usual financial discipline. At the same time, our robust commercial pipeline is expected to deliver a higher level of order intake in the second half. providing a solid driver to the group's growth over the next few years. Given these solid financial results and the positive outlook for the rest of the year, we therefore reconfirm our 2023 guidance. This concludes our presentation, and now self, Fabio and Mohamed, We are ready to answer any question you may have. Operators, please go ahead.

Thank you, sir. 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 your question, please press star and 2. Please pick up the receiver when asking questions. The first question comes from Kevin Roger of Capuchinville.

Yes, good afternoon. Thanks for taking the question. The first one is related to the guidance that you have for the full year. And just to understand why you do not fine-tune at least the top-line guidance, because you have done almost $2 billion in H1 based on the dynamic that you have in the top line from the engineering and construction activities. This is likely that the top line will be above 1 billion both in Q3 and Q4, if I'm not making any mistakes. So that would mean that the 3.8 billion low end of the range for the guidance is quite unlikely. So I was wondering why are you very cautious still keeping the 3.8 billion as a possibility just on the top line? The second question is related to the short-term commercial opportunities and notably the ones that have been mentioned over the past weeks. So the first one is a big opportunity that you have in Abu Dhabi with Technib that have been the subject of a lot of comments recently. There has been a news last week in Upstream saying that AdNoc has given some limited notice to proceed. So any update on this huge opportunity for you? How do you see those things materializing? And then in terms of new energies, we have talked about the past weeks about an opportunity on carbon capture also. So any updates here for carbon capture activities would be very appreciated. And the last one, IMPRESSIVE MARGIN ON THE S.T.S. IS IT A KIND OF ONE-OFF OR YOU EXPECT THE Q2 TO BE SUSTAINABLE FOR THE COMING QUARTERS?

THANK YOU, KEVIN. A LOT OF QUESTIONS. VERY INTERESTING. AND LET ME START FROM THE FIRST ONE. AS YOU HAVE CORRECTLY STATED, Of course, it is very easy to appreciate. By the end of June, we have already achieved a level of turnover close to $2 billion. In the second half of the year, revenues will be predominantly generated by the projects that are already on board, which are part of the backlog existing by the end of June. Of course, We expect new awards in the second half of the year, but it is reasonable to forecast that the new acquisition will generate a very limited contribution to the turnover of 2023. So in the second half, predominantly, the revenues will be relating to the runoff of the backlog existing by the end of June. And since our guidance indicates 3.8 up to 4.2 billion euro, I believe based on the present knowledge that it was reasonable to reconfirm the guidance, even if, of course, I can say that our expectation is to position our group at the top level of the guidance, at least for the time being. We have decided not to modify the guidance because the range that we have originally provided already satisfy the expectation of the production that we expect to deliver this year. Then, if in the second half there will be some adjustment, we have preferred to defer to the third quarter report when we release the nine-month results the potential adjustments to what we can deliver this year. But for the time being, we have considered appropriate to reconfirm the guidance that we have released in March. Then let me spend a few words about The commercial pipeline with a particular focus on the project that you have mentioned in Abu Dhabi. Commercial pipeline is extremely strong in both business lines. Let's now spend a few words together on the E&C business. Middle East, in particular, is has already the company based over there, which are the giants conglomerates have already publicly announced the multi billionaire investment plan for the next few years. Saudi Arabia, Abu Dhabi, Qatar, all of them, the company, national energy company based in those countries, have already officially launched several projects. All of them are multibillionaire projects. Why we are so optimistic? Because all of them are a little bit worried that due to the concentration of megaprojects in the short term, there will be a shortage of resources available in terms of construction capacity, supply chains, as well as the availability of reliable reputable general contractors, as well as those contractors which are also able to provide technological solutions. So what is what has been at least what we are seeing right now, all of them are accelerated their investment decision process in order to take the final investment decision as early as possible because in order to have secured the most qualitative resources available. So in this process, we, of course, we are one of the most reliable and reputable players And for this reason, we are optimistic as far as the new awards, in particular in the second half of the year. These, as in general terms, focusing for a while on the project in Abu Dhabi, I can disclose only very limited information because presently the project which is Highland ASHA project. Highland ASHA is one of the most important not executed, not exploited reservoir belonging to ADNUC which is located more or less 200 miles north of Abu Dhabi, close to the industrial city of Uruguay. This project encompasses an offshore scope of work, plus the realization of artificial islands, plus a very complicated onshore scope of work. The onshore scope of work relates to the gas processing plant in the Manaif area, plus off-site facilities and utilities, pipelines, tie-ins, control buildings, and so on. So very complicated. It's a very important project. Of course, this represents one of our most significant targets. But, of course, now, since... The commercial process is in a quite sensible momentum. Let me take the possibility not to provide any major additional information because these, let me say, could lead to detrimental consequences to the commercial process, but for sure, What I can say that is for sure, our organization is working hardly on the commercial process. And to the extent that the client will take the final investment decision soon, we are, of course, working in order to be successful. But, of course, this will depend on the client decision. However, this one for sure, useless to say, that in that part of the world, in particular in the Middle East, this represents our most significant target for 2023. But on top of this project, there are other projects, again, in the Middle East, in the Gulf area, not only in Abu Dhabi. Saudi Arabia, Aramco has already launched several projects. All of them are multibillionaire projects. And since most of them, both either in Saudi Arabia as well as in Abu Dhabi, most of them are not committed only by the local energy company. Due to the size of each individual investment, the local companies very often prefer to team up with Western-based international energy companies. Why this factor is important? Because on top of the traditional solution, the sensibility about the decarbonization is also enhanced due to the presence of the Western-based partners. along with the traditional products that we are able to deliver, the tender, the client, are more and more requesting additional solutions in order to decarbonize their industrial process. And, of course, being able to aggregate the competencies of our ENC arm, namely Tecnimont, With the technological arm of our group, which is NexChem and the NexChem Group subsidiaries, of course, we are able to satisfy all the potential needs of the client. So we are really very, very optimistic about the incoming future from a commercial standpoint for both business units. As far as the carbon capture business, let me take the opportunity to pass the floor to Mohamed, who is our CEO of NexCam, which for sure is able to provide all the colors you may need about this issue. Please.

Mohamed, are you on the line?

Yes, sir. One moment, please.

I'm on the line. Can you hear me?

Yes, we can, sir. Please go ahead.

Okay. Thank you. So, CO2 capture and storage is a domain that is very important for both our integrated E&C businesses as well as sustainable technology solutions. As we see, it is a topic that is very often integrated with larger scale integrated projects, as Alessandro mentioned before. But specifically for sustainable technology solutions, we are seeing the team specifically in Europe gaining a lot of momentum. We are in well-advanced stages in discussion with the investors that are evaluating their business cases, especially in mainland Europe, to look into how to realize carbon capture for hard to abate industries. For us, this is a very strategic topic and we expect to deliver some positive news in the coming years.

I believe that there is Another another question that you have raised and if I will remember relates to the sustainability of the margins of S.p.S. moving for the very, very interesting question, Kevin. But I believe that it is quite easy for me to answer because first of all, because we have already on board a very interesting from an economical standpoint backlog for S.p.A. by the end of June. And on top of that, probably you have noted that in the first part of July we have already announced a very important project which has been awarded by a client located in the sub-Saharan part of Africa of a giant project. We can define giant, of course, for S.p.A. business because it was something close to 100 million euro alone. So it is a very, very, very important project, a significant portion of which is due to be transferred into PNL in the short term. So for sure, as far as 2023 and in particular, The second half of the year, we are extremely optimistic about not only the possibility to double the results that we have already delivered the first half of the year, but even to improve the economical performance. Then, of course, you know, the industrial cycle of S.p.A. is not a pluriannual cycle. The industrial cycle of this type of business is much shorter. So for sure, of course, moving forward, the possibility and the capability to maintain both the volumes and then the margins will rely on the new awards that we expect to get moving forward. But as I stated before, considering both the new opportunities which can be pursued by STS alone, And on top of the opportunities resulting from the integration with the ENC, we are not absolutely worried about the possibility to maintain the growth that we have communicated at the beginning of March when we have released our pluriannual strategic plan. So we are completely on track, or even better, we are even... accelerated the process of growth that we were expecting with our 10 years plan.

Okay, thanks a lot for all those callers. Thanks a lot.

The next question, sir, is from Marco Cristofori of Intesa San Paolo.

Good afternoon, everybody. Just a couple of questions. Coming back to your guidance, I remember that in the last conference call you said that book-to-deal should surpass 100% into 2023. And given the results of the third half, can you confirm this target? The second question refers on the new contract, particularly in the Middle East, but also in the rest of the world. Are you seeing any price pressure from the client to lower the pricing, though we are still in a very favorable moment. And last week, if I may, I noticed that in the second quarter, the weight of the raw materials on sales were down compared to last year and even with Q1. S.p.A. S.p.A. S.p.A. S.p.A. S.p.A. S.p.A.

which I have disclosed before and referring to the expectation of to face a shortage of reliable resources in the short run. In order to have secured these reliable resources, the clients are ready to recognize proper prices. So the consideration, which at least based on our experience and what we have presently under discussion, the major element of the discussion is not the price, is the timing, is the availability of resources, is the possibility to confirm to cope with the client expectations in terms of execution in terms of timing of execution of the project and in order to cope with their request the clients are conscious that must be ready to properly remunerate the contractors. And this is exactly what we are experiencing, not only in the Middle East, but also in other regions of the world. Also because the clients are enjoying a cash flow from the production of the units of their industrial infrastructure, which are already producing, They are enjoying cash flow from the sale of their product, which they never experienced in the past. So there is, let me say, quite a positive combination which supports the recognition of proper prices for the projects which are expected to come on stream in the next few months. As far as the cost of materials, you have done a very detailed analysis of our PNL. I have to recognize, but you know, the incidence of materials compared to the incidence of service costs depend on the phases of the various projects because For certain projects, last year has prevailed the procurement campaign, and now we are progressively moving into the construction. So today prevails the service rendered by the subcontractors compared to the past. But I am honest. I didn't exactly the calculation, but we are talking about a very light difference. We are talking about, if I will remember, a couple of percentage point difference. So this really depends on the phases of the various project. It's not something linked to the prices, to the price pressure of... the supply chain is exclusively due to the phasing of the project under execution.

If I may add, if we are on the expectations on prices of raw materials going forward, and if we see a stabilization of prices, yes, we have seen a stabilization of prices in the first part of the year. But in these very days, if we go on the market and ask for forecasts on the prices of the commodities we use more, like copper, palladium, aluminum, and others, they are expected to increase again in the second part of the year. So the markets are still quite volatile. The only commodity where we see a potential decline going forward is on steel. But the market is still quite volatile. And then I think, Sandro, there was another initial question on the expectations on the book to build where we stated, you know, 100% of replacement being the target. Yes, but clearly when you have in front of you multi-billion projects as those that Sandro mentioned, it's hard to do the mathematics. We will see.

Okay, thank you. Very clear.

The next question, sir, is from Massimo Bonazzoli of Equita.

Good afternoon to all of you. Two questions. One back to the question of Marco on the risk in the Middle East and the securing of resources in the Middle East considering the number of projects piling up there. Just to understand how you secure resources in Middle East. We are talking about engineering capacity, contractor capacity. What else? Can you make some examples for us to understand better? And the second question on the green fertilizer project in North America. just to understand the potential value of the project and the comparison of the traditional ammonia cost versus this green ammonia as far as breakeven is concerned.

Let me spend a few words on your initial question. You are completely right that everybody, including ourselves, of course, we expect, but predominantly the clients, is expected to face a shortage of reliable resources. But I am not talking about engineering capabilities, because as far as engineering capabilities, at least as far as our group is concerned, I believe that you have already appreciated that we have strengthened our engineering workforce, both in Italy as well as in India, by hiring additional 750 additional resources, which we expect even to increase additionally in the second half of the year. Thanks to this process that we have initiated not only last month, but we were forecasting this situation already in the second half of last year. So we have initiated this process to strengthen the engineering capabilities in the various disciplines already effective from the second half of last year. So now I believe that already today, But more and more, moving forward, we are well equipped to serve not only the existing backlog, but we are well equipped from an engineering standpoint and project management as well standpoint to serve also the new project that we expect to get in the second half of the year. What is more critical, could be more critical, is the construction capacity, so the availability of construction companies to be engaged in the APC project. And since this phenomenon was already expected by our people, by our commercial guys, we have already entered into AGREEMENTS WITH CONSTRUCTION COMPANIES BASED IN THE AREA BECAUSE ON TOP OF THE VARIOUS DIFFICULTIES, IT IS NECESSARY MOVING FORWARD MORE AND MORE TO RELY UPON CONSTRUCTION COMPANIES WHICH ARE BASED IN THE COUNTRY WHERE THE PROJECTS ARE LOCATED. SO YOU HAVE TO REFER TO THE LOCAL CONTENT. CONSIDERING ALSO THIS CONSTRAIN, WE HAVE ALREADY ENTERED INTO AGREEMENTS WITH LOCAL RELIABLE COMPANIES, CONSTRUCTION COMPANIES, WHICH ALREADY COOPERATES WITH US OR HAVE ALREADY COOPERATED WITH OUR GROUP IN PREVIOUS OCCASIONS AND WITH THEM WE HAVE AGREED ALREADY THAT THEY HAVE TO MAINTAIN AVAILABLE a certain portion of their organization in order to serve our request. So with the combination of the already existing engineering workforce, which is able to cover also the needs of project directors and project management and coordination, to cover the coordination activities the proper way, And having already secured the availability of the reliable construction companies, we are very well equipped to face all the challenges that the particular Middle East will deserve moving forward. So we are, of course, monitoring the situation on a daily basis, but we are already putting in place appropriate actions in order to limit the risk that you have mentioned. Then, as far as the project in the U.S., I believe that also for this project, Mohamed can provide you with additional color on top of what I have already provided during the presentation.

Thank you, Alessandro. The project, the green ammonia green fertilizer project in the United States is a flagship project by several metrics. Not only is it the largest or at least one of the largest true green ammonia plants in the United States, it is also one of the largest fully integrated green ammonia plant going all the way down to the fertilizer. So we are connecting the renewable energy all the way to the fertilizer that the farmer will use for the food production. And this is this is very, very important. And we're very proud of this of this award as it gives us the opportunity to link several proprietary technologies in an integrated way. So not only the ammonia, also the nitric acid, the urea and eventually the high value added urea ammonium nitrate. The question was, how does the ammonia pricing relate to the conventional pricing or the blue ammonia pricing? Well, there are several considerations here. One is, of course, the Inflation Reduction Act is very much in the heart of this project and supporting the project in various ways. But more importantly is that the ammonia price is one factor in the final price of the product, because in the end, it's about the fertilizer. And the United States, specifically in the area where this plant is located, has a very big advantage to be closer to the farmer and benefits from the logistical advantages that the fertilizer will have. So for us, the business case is strong. We are helping the client further now to optimize the CAPEX, and especially our integrated technology design is helping for the most efficient design that allows for a business case that can, in our view, sustain the metrics.

Thank you.

The next question comes from Alessandro Pozzi of Mediobanca.

Hi there. Thank you for taking my two questions. Just wanted to go back to the pipeline and the potential order intake for the second half. I believe you mentioned that in the second half it could be even better than the first one, so potentially getting towards 5 billion awards. I was wondering of all the opportunities that you see in the short terms in terms of technology, which one do you think is the technology that is most probably appealing to the clients or where you see most of demand? I've seen that you provide a breakdown in the pipeline and it looks like chemicals and fuels make most of the the almost 50% of the pipeline. And I was wondering if you can give us maybe a bit more color on the technology that you think could be successful there. Also, STS, as you pointed out, in the pipeline has gone up since the last update. And I was wondering, again, if you can give us maybe a bit of more color there as of why we've seen this large jump. And also you completed the acquisitions of a cut C. And I was wondering basically how the acquisitions of the two companies that you've acquired is going. And maybe you can give us your thoughts on the potential upside that you see by integrating those two companies into your business.

I think maybe some of the first part of the question is for Mohamed, but the second part is more strategic.

Yeah, let me start from the second part of your question. As we have already provided, I believe, some information during the presentation, CAT-C and CONSERV represent two important ELEMENTS WHICH BACK THE GROWTH THAT WE ARE FORECASTING FOR STS FOR THE TIME BEING CAT C IS NOT YET PROVIDING ECONOMICS BECAUSE IMMEDIATELY AFTER AS WE HAVE ALREADY COMMUNICATED AT THE TIME OF THE ACQUISITION Even if the technology that we have acquired has already proved to be extremely effective and efficient, now we are scaling up the plant in order to demonstrate which of the same efficiency and effectiveness is maintained at a commercial level, by the plant at the commercial scale. which the investment which will require very limited amount of money will be completed in a couple of years time. And then after that, we expect the combination of the revenue generated by the producing plant associated by the licensing that we expect to get from the marketing of the license, these, for sure, will contribute a significant and additional significant growth in the return and the earning generation of the S.p.A. But not in the short. In the short, for sure, is concert. The technologies retained by concert has already proved to be a very important margin contributor. The geography which has been cultivated by concert, which is has been until the time of the acquisition China. But now leveraging on our international presence, it is possible, of course, to expand the marketing of such technologies, not only in just one country, even if China is a huge country, but also in the remaining part of the world. And we are extremely optimistic based on the sign of appreciation that we have already received by other countries in the Middle East. Far East, Southeast Asia, and we are also receiving some sign of appreciation also from some European countries. But more than that, we are not limiting to the production, to the commercialization of the technology, so a license, but as we are doing for all the technologies which are in the portfolio of next camera in the S.p.S. technological portfolio. We have integrated the marketing proposition with also the catalyst. The catalysts are due to represent one or another important pillar to back the growth of S.p.S. moving forward. So This, as far as the acquisitions is, all is on track, or even better than what was expected at the time of the acquisition. Then, as far as the third part of your question, I leave the floor to Mohamed.

Thank you, Alessandro. So an important note that you already raised, Alessandro, is the fact that we are broadening our offering for all our proprietary technologies, meaning next to the necessary engineering services, process design packages, basic engineering design packages, we are moving much broader into the proprietary equipment and the catalyst. I think this is a very important driver for the growth in the next years. Next to that, we will also see much more new areas emerging that are requesting our proprietary technology. So it's traditionally very active in Europe, very active in North America and India, but now we're seeing strong interest also from the Middle East and certain countries in Southeast Asia. It is also an important element of our strategy is to try to see where we can be the first to deploy our technologies, where we have client first movers that we that want to step into the energy transition, leveraging on our proprietary solutions. If we look at technology wise, going cluster by cluster from the nitrogen fertilizer cluster, I think it's very clear that next to the urea fertilizers and especially the low energy urea fertilizer, which is very, very popular and in strong demand, especially in Southeast Asia, we are seeing significant momentum for the green ammonia technology that we have due to its superior capex profile and also the fact that it's very versatile and easy to implement in downstream projects. If we go to hydrogen and circular carbon, we expect our methane reforming technologies to continue to show the growth that we have seen also in the past years. Next to that, our integration services on green hydrogen and carbon capture will gain momentum, especially we believe that one of the growth drivers in that cluster will be our C.P.O. technology to decarbonize hard to wait industries and also to have an efficient way to convert CO2 rich gases. In the fuels and chemicals, and this is a very exciting cluster, We have two main drivers of growth. One is well known is the Waste2X technology, our proprietary gasification to go to methanol, ethanol and hydrogen and especially in Europe. But we are seeing a lot of momentum in the United States and also recently also in the Middle East that clients are considering investments specifically for our Waste2X technology. And next to that, we have a very strong portfolio and commercial pipeline in the biofuels. So small-scale HVO2Saf technology leveraging on our proprietary PTU technology. In the polymers, we are, especially in Europe, seeing strong demand for our mechanical recycling and upcycling technology, especially focused on valorizing waste streams that can be converted into compounds with a strong driver into the future, leveraging on what the big pet chem industry is requiring in terms of recycled compounds. I think we have strong growth drivers in each of the clusters that will fuel the growth in the next couple of years.

Thank you. Just a couple of follow-up questions. In terms of biofuels, where do you see most of the demand from a geographical point of view? And also, in Europe, we are seeing on Petchem very low margins. Is this, it could be a headwind for the Petchem business, a traditional one?

For the biofuels, we're seeing a lot of interest in Europe, actually in Europe. We're seeing a lot of interest in Southeast Asia, and we're seeing interest in some areas of Middle East. So this is, as you may know, the biofuels, especially from the olio feedstocks is very much driven by the feedstock availability. And we see that our small scale concept is very powerful for investors to consider regional projects, smaller scale, and especially if the business case can be supported by leveraging on more contaminated waste streams, our PPU technology can help them significantly boost the financials of their business case. And this is something that we see specifically in Europe for regional demand. As far as the mechanical recycling, of course, the polymer prices in the global market, the virgin prices, have been under pressure. But the long-term perspective that we see, especially clients that have been in the industry for a long period of time, sustainable investors, would like to position themselves because, as you may know, the polymer prices is a cyclical business. So especially partner parties, clients that are in the business for a longer period of time would like to have an asset where they can lever on and where they can be flexible in terms of converting their waste streams into high value added compounds. Typically, these are clients that are already in the value chain. They own the waste feedstocks and are looking on looking for proprietary technologies to be able to diversify their product portfolio.

All right. That's very clear. Thank you very much.

The final question is from Roberto Ranieri of Stifel.

Yes. Good afternoon, everyone. Thanks. Congratulations for the results, and thank you for taking my question very quickly. A follow-up on guidance, you say, I think that the 3.8 and 4.2, I think that the top of this range could be achievable. And in that case, if this is the case, my question is, Is it possible that the APDA margin will improve versus the current 6.2%? That's my first question. My second question is a follow-up on the SDS, and you were saying that you are moving to proprietary equipment. So my question for this item is if you are going towards that direction, do you think that can we expect higher volumes for the SDS project acquired in the future? Thank you very much.

Hi, Roberto.

So as far as the first one, the first one was relating to the guidance and the EBITDA margin. I believe that as far as the guidance in terms of volumes, I have already clarified why we have confirmed what we have anticipated by the end of February, early March. And I reconfirmed that based on the latest information and latest estimates that we have prepared, it is reasonable to position ourself at the top level of the guidance that we have communicated. Then Of course, maintaining the traditional discipline that we pay in maintaining as much as possible lower the indirect cost, the GNAs in particular, it is reasonable that higher volumes could deliver a little bit higher margin. For this reason, We have communicated the guidance in the range of between six and seven percent. By the end of June, we have delivered on average. So combining ENC and STS and a bit the margin in the region of six point two. And considering that in the second half revenues will be predominantly delivered by the project which are already on board, so we do not expect any major deviation from what we have estimated, I can confirm you that there is room to improve additionally the marginality that we have delivered by the end of June.

Thank you, Sandro.

Gentlemen, there are no more questions registered at this time. Would you like to make some closing remarks?

If there are no more questions, I believe that we can say hello to everybody. So have a nice vacation to everybody.