Saipem Spa

Good morning. This is the Coruscant Conference Operator. Welcome and thank you for joining the SIPEM first quarter 2024 results presentation. 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. Alessandro Puliti, CEO and General Manager. Please go ahead, sir.

Good morning and welcome to the presentation of our first quarter 2024 results. I'm here with Paolo Calcagnini, our CFO, and with the rest of the top management team. I will start with the key highlights and then Paolo will cover the financial results in more details. I will then wrap up the presentation with some closing remarks before opening the Q&A session. Let's start with the highlights of the first quarter. I am pleased to report that in the first three months of the year, we have delivered strong growth and, most importantly, high cash flow conversion. Revenues stood at 3 billion euro, growing by 18% year on year, largely driven by the contribution of our offshore activity. EBITDA stood at 268 million euro, growing by 40% year on year. EBITDA margin stood at 8.8%, increasing both year-on-year and sequentially. The evolution of both revenue and EBITDA in the first quarter is in line with our overall targets for the full year. Most importantly, the first quarter saw a net cash flow generation of 68 million euro, which is fully in line with our target for the year of generating approximately 300 million euro of cash. The deleveraging of the company has continued also in the first quarter, with net debt decreasing both on pre- and post-IFRS basis. notwithstanding the net increase in lease liabilities of about €16 million. As already discussed on several occasions, the deleveraging of our capital structure is part of our overall de-risking strategy, and it is one of the also important factors behind the decision by Moody's to upgrade our credit rating a few days ago. The order intake in the first quarter was in line with our expectation at 2 billion euro. The backlog at the end of the first quarter stood at 29 billion euro and remains close to record levels. In summary, the first three months of 2024 have shown excellent operational delivery and financial growth consistent with our objectives and with the 2024 guidance published last February. Let me now give you an update on our commercial activity. We have received the authorization to proceed by Exxon on Whiptail in Guyana, a project that represents roughly half of the order intake of the first quarter. Our scope of work entails engineering, procurement, construction and installation of a subsea production facilities which will be placed at the water depth of around 2,000 meters. We will use our FDS-2, Castorone and Constellation vessels for the offshore campaign. We will also utilize our Guyana facility for the construction of part of the subsea infrastructures. Moreover, we are also signing a letter of intent with BP Equinor & Total in relation of the APC and installation of 145 km of offshore pipelines to transport CO2 from the T-side industrial cluster in the UK to a subsea storage site. Once past the FID stage, this project should increase our backlog by more than half a billion euro. The offshore pipeline operation will be performed by Saipem's vessel Castorone, and the near-shore operations will be performed by our shallow-water vessel Castoro 10. It is very encouraging to see momentum in the CCUS sector picking up. As a reminder, we already announced in July last year a letter of intent for a carbon capture project in Sweden for Stockholm Exergy. And we also are in advanced discussion for another project in the Far East, where we would combine gas production with CO2 reinjection. We believe the outlook for CCUS is very promising, and Saipem can be a key enabler of this energy transition opportunity. In CCUS, we can cover several steps of the value chain, from capturing the CO2 to the transportation phase by laying dedicated pipelines to the final sequestration site. A significant part of the CCUS value chain is expected to relate to offshore APC activity, which, as you all know, is where we are able to extract very good margins. It is also worth noting that our historical oil and gas clients are also the main customer for CCUS projects. which means that we can leverage on established track record to expand our activity towards the energy transition. In addition, We are in advanced discussion on two sizable opportunities in West Africa, which related the first one to a deep water offshore project where we would install both rigid pipeline and flexible flow line, and the second, a sizable FPSO and surf integrated project. Lastly, let me mention that we see the oil and gas clients securing capacity for contractors well in advance of their own final investment decision. This is a further proof of the positive tension that is characterizing our sector. And now let me hand over to Paolo to cover the financials in more details.

Thank you, Sandro, and good morning, everyone. We'll start from slide six. Our revenue grew by 18% year on year, and our EBDA grew by 40%, mainly due to the performance of our offshore businesses, both E&C and drilling. In the first quarter, we also saw a significant improvement in the EBDA margin, which reached 8.8%, increasing by 1.4 percentage points compared to the first quarter of 2023. and by 0.7 percentage points compared to the fourth quarter of 2024. The higher EBDA margin is the result of a positive contribution of each of our divisions and of a more favorable mix given the increasing relevance of our offshore ENC business. The net result was 57 million euro compared to a breakeven result in the first quarter of 2023. Most importantly, the operating cash flow was positive for 221 million euros, showing the strong progress in cash flow conversion, as well as a significantly lower impact from the legacy projects. Let's now look at the different businesses. We will begin with the asset-based services on page 7. Revenues were 1.6 billion euros in the first quarter of this year, a 38% increase from last year, driven by the contribution of conventional oil and gas projects, which more than compensated for the reduction in wind offshore activity and the associated backlog. The EBITDA was of €180 million, this is a 55% increase from last year, with an EBITDA margin reaching 11%, rising by 1.2 percentage points from last year and 0.7 percentage points from the fourth quarter of 2023. The higher EBITDA margin is mainly due to the higher share of projects acquired in the last two years and the higher operating leverage. For the whole 2024, we anticipate revenues and EBDA for the division to grow significantly from 2023 with a substantial margin improvement. With the results of the first quarter, we have also revised upwards our revenues and EBDA assumptions for the division compared to our initial budget for the year. Let's now move to the drilling offshore on page eight. The division had quarterly revenues of 210 million euros, which was 17% more than the same period last year, while EBDA rose by 18% to 80 million euros, and EBDA margin grew by 0.3 percentage points to 38.1. The main factors behind the first quarter performance were the growth of the fleet and the higher average day rates. In particular, growth was underfinned by the start of the operations of the new drill ship DVD, which began operating in Ivory Coast in the fourth quarter of the last year, of the Perro Negro 12, which started operations in January, and by the higher number of operating days for the Perro Negro 11 compared to the Q1 2023, when the rig was under preparation. The solid operating performance was partially upset by the cyclical maintenance of the semi-sub Scarabeo 9, which lasted for most of the first quarter of 2024, and by the startup costs related to the J-CAP Ferro Negro 13. For the whole year 2024, we expect revenues and the BDA for the division to grow compared to 2023. Now, in relation to Saudi Arabia, The temporary suspensions on Saipem affect three jackups in 2024. For the first jackup, our budget for 2024 already incorporated the assumptions of delivering it back to the owner around the middle of this year. For the second jackup, we will cover most of the suspension in 2024 with planned maintenance works. While for the third jackup, we will most likely redeploy it in a different geographical area, in substitution for another rented unit that will be delivered back to the owner. In conclusion, the flexibility provided by our asset-light strategy, coupled with the good market conditions for premium jackups, will substantially mitigate the impact of the temporary suspension from Saudi Aramco in 2024. Let's now look at energy carriers on page 9. Revenues in the BDA remain broadly flat year-on-year at €1.2 billion and €8 million respectively. The Division's main priority is to finish the outstanding legacy backlog that still waits for more than 35% of our revenues, while we are very selective about accepting new projects. The delivery of the old projects is a key condition for the start of our gradual recovery path for the Division. For the whole year 2024, our target remains to demonstrate a gradual recovery in margins in line with our business plan targets. We can see the complete income statement for the group on page 10, especially the items below a BDA. DNA has grown year-on-year by 45 million euros, as it partly includes also the leases paid on the vessels that have recently joined our fleet on a capital life basis, as well as the depreciation of the CAPEX of 2023. Financial expenses dropped year-on-year by 12 million, mainly due to the lower amounts of traded derivatives and lower hedging costs, while financing costs, including net interest expenses and leases, were stable year on year. Income taxes slightly dropped year on year by 3 million euros to 34 million, reflecting an implied tax rate of 37%, which is consistent with our expectations of moving towards a normalized level of between 30% and 35%. As a result, the net result was positive for 57 million euros from a breakeven result in the Q1 2023. Moving to the net debt evolution on page 11, we remain extremely focused on cash generation with the aim of further deleveraging the company and sustaining future dividend distribution to shareholders. In the first quarter of 2024, Cypem has generated €221 million of operating cash flow or €174 after lease payments, €135 million of free cash flow or €88 million after lease repayments and €68 million of net cash flow. The cash flow generation of the quarter has led to a further improvement in our net financial position by 68 million euros on a pre-IFRS basis and 52 million euros on a post-IFRS basis. At the end of March, we had a consolidated net cash position of 284 million euros on a pre-IFRS 16 basis and a consolidated net debt position of 209 million euros on a post-IFRS basis. On page 12, you can see the breakdown of our net financial positions. We still have a comfortable level of liquidity on our balance sheet, which was 2.9 billion euros at the end of March, with 470 million euros of unused RCF. In the first quarter, we spent some of the liquidity to pay back the remaining amount of the sachet term loan for €237 million, so the level of liquidity went down slightly by €218 million. These payments, along with the payback of other credit lines, resulted in a decrease in the nominal value of our gross debt by €280 million in the first quarter of this year. Lowering gross debt and extending maturities are still a key priority for CYPEN. We are also very pleased to report that Moody's has raised our credit rating by one notch to BA2 and maintained the positive outlook. This upgrade is a further confirmation of our de-risking strategy. I will now pass it on to Sandro for some final comments.