Saipem Spa

Good morning, this is the Car School Conference Operator. Welcome and thank you for joining the Saipan First Health 2021 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance due to the conference call, let me signal an operator by pressing star and zero on the telephone. At this time, I would like to turn the conference over to Alessandro Puliti, CEO of Saipen. Please go ahead.

Good morning and welcome to the presentation of Saipen results for first half of 2024. 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 with my closing remarks before starting the Q&A session. Let's start with the key highlights. I'm pleased to report that in the second quarter of 2024 Saipem recorded an acceleration on both order intake and cash flow generation. We also posted the highest quarterly EBITDA since Q4 2019. Revenue stood at 3.4 billion euro, growing by 22% year-on-year and 11% quarter-on-quarter, largely driven by the contribution of our offshore activity. EBITDA stood at 297 million euro, growing by 36% year-on-year and 11% quarter-on-quarter, EBITDA margin stood at 8.8% in line with the level of the first quarter of the year. In the second quarter, we generated 110 million euro of net cash flow in acceleration compared to the 68 million recorded in the first quarter. Net debt has decreased both on a pre and post AFRS basis, notwithstanding a net increase on lease liabilities of about 49 million euro. The deleveraging process is part of our overall de-risking strategy, coupled with specific actions related to the APC model, which we will cover in more details later in the presentation. The order intake in the second quarter was very strong, at 5.1 billion euro, implying a B2B of 1.5 times. Our backlog currently stands at more than 30 billion euro and remains at record levels. We are on track to achieve our 2024 guidance. In particular, in the second part of the year, we expect a further acceleration in the performance of the asset-based services. Let me now give you an update on our commercial activity. Since the beginning of the year, new awards stood at more than 7 billion euro, with a good level of diversification between clients, geographies and type of projects. This reflects both strong market conditions and also our ability to capture opportunities. In Angola, Saipem has been awarded an offshore contract by Azul Energy for the development of the Ndungu field located 180 km off the coast. Our scope of work entices the engineering, fabrication, transportation and installation of 60 kilometers of rigid pipelines, as well as subsea facilities at the water depth of more than 1000 meters. In addition, we will transport and install flexible flow lines, jumpers and 17 kilometers of umbilicals. Still in Angola, Total awarded us the CAMINIO project, which consists of three integrated contracts for the development of CAMEA and GOLFINIO oil fields, which are located 100 km off the coast. The first contract refers to the APC transportation and commissioning of the CAMINIO FPSO vessel. The second contract is for the operation and maintenance of the FPSO for at least 12 years. The third contract relates to the APC plus installation, pre-commissioning, and assistance of the SORF package, which includes 30 kilometers of subsea flow lines, risers, and umbilicals. The Camino Award confirms the competitiveness of our integrated business model. We have a strong presence in Angola where we already operate three FPSOs and where we own and manage iHeart in the city of Ambritz. For the offshore campaigns of both Ndungu and Camino, we will deploy our FDS vessel, which will be operating in Angola in 2026, 2027 and 2028. Moving to the Middle East, we have been awarded two offshore projects by Soliaranco. The first one is the APC of a 50 km crude trunk line for the Abu Sabah field. The second one is related to the production optimization programs of the Berry and Manifa fields. As we already mentioned in the Q1 call, we expect activity in the Middle East to further pick up in the second part of the year. While the awards in Angola and in Saudi Arabia are traditional oil and gas projects, we are also making full progress on our low-carbon offering. In July, we have been awarded an EPC contract in Northern Europe for a large-scale green ammonia storage tank. This tank will be part of a new green energy import terminal. where the stored green ammonia will then be processed to produce green hydrogen. This project further consolidates Saipem's track record in the energy transition. Let me now deep dive on the de-risking of our EPC business. While we are confident in our strategic positioning as contractors, the world we live in has become more complex and volatile than ever. In this light, we have proactively decided to lower the level of risk associated with the traditional APC scheme. We are doing this by moving away from the traditional lump sum model by increasing the portion of our contracts being covered by the risk provisions. This is something we have talked extensively, but today we are pleased to share with you some hard numbers. The risk portion of our APC contract grew from 6% for the pre-2022 awards to the 22% for 2022 and 2023 and 36% for the contracts signed so far in 2024. Some of these de-risking provisions cover the procurement side of the contract, while others cover the construction and fabrication activities. In particular, on the procurement side, we typically include price adjustments clauses. We have clients purchasing directly long-lead items, or we enter into pre-agreements with vendors. On the construction and fabrication side, we typically include reimbursable or remeasurable scope of work, price adjustment clauses, and pre-agreements with subcontractors. Utilization. These are portions for which we take full risk, while the risk in provision relates to areas where we cannot control risk directly, such as procurement and construction. In addition, we are increasing the number of competitive feeds that can evolve into APC contracts as well as increasing our project management consultancy activity, focused specifically on the onshore ENC. In summary, we shifted significantly our approach to EPC and we remain in commitment to continue to apply a significant degree of the risk-taking to all new EPC awards going forward. Together with the derisking of the EPC model, we continue to focus on reducing financial risk and lower our debt. I am pleased to report our net financial position continues to improve at a steady pace. At the end of the second quarter, we recorded a net cash position pre-AFRS of €394 million, which is supported by €1.3 billion of available cash. We now reported four consecutive quarters of positive net cash flow generation, for a total reduction in net debt of €360 million. Cash flow generation has accelerated since the end of June last year, due to the reduction of the weight of the legacy projects and thanks to the growth of our offshore E&C business. The market for both financing and guarantees is wide open for Saipem. In the last two years, we have built the largest backlog ever for Saipem, which currently stands at 30 billion euro. The offshore ENC portion has more than doubled in the last 24 months, and currently stands at 16 billion euro. In particular, the weight of the offshore ENC backlog has grown from 33% to more than 50% of total backlog. In addition, more than 80% of the current backlog relates to projects worn from 2022 onwards. These are projects with a much better condition compared to previous vintages, both in terms of pricing and risk profile, as demonstrated by the increasing portion of the de-risking incorporated in recent contracts. The size and the quality of our current backlog grant us very good visibility on our strategic plan targets. Visibility is also high when it comes to the utilization rate of our fleet. As you can see from the chart on slide 9, the expected level of utilization of our ENC vessels has increased materially in the last 18 months. We are currently fully booked for both 2024 and 2025. and we have a substantial level of expected utilization for 2026. We are also starting to allocate vessels to projects for both 2027 and 2028. This is the result of a very strong market condition for offshore development, both conventional and deepwater, and a sign of market tightness when it comes to availability of vessels. As a reminder, our focus is to utilize as much as possible our own ENC vessels and meet any extra demand with chartered vessels, such as the JSD 6000, which has joined our fleet at the beginning of Q3. Let me now spend some time on Courcelles. The project will allow SIPEM to complete its current track log in wind offshore foundation. So far, we have mainly performed projects based on jackets, while this time we are installing monopiles. As you know, we completed the construction and assembling of the drilling system in Q1. All the 64 monopiles and transition piece are ready. The drilling system is now mobilized on the Volovanje cap vessel and is currently on location. In these very hours, we are doing commissioning of the drilling system on the testing location assigned to us by EDF at Coursales, in order to be ready to drill the first foundation socket. All support vessels are mobilized and ready to start operations. I am confident that we will complete the project successfully by mid-2025. Let me now hand over to Paolo to cover the financials in more details.

Sandro, thank you and good morning to everyone. We will begin from the slide 12 with a summary of the financial results for the first half of 2024. Group revenues increased by 20% year on year, and our EBDA increased by 38%, mainly driven by the performance of our offshore business, both E&C and drilling. In the first half, we also experienced a significant improvement in EBDA margin compared to the last year, with the EBDA margin reaching the level of 8.8%. The higher EBITDA margin is the outcome of a more favorable mix, given the growing relevance of our offshore ENC business. The net result was 118 million euros compared to 40 million euros in the first half of 2023. Operating cash flow was positive for 455 million euros, more than three times the level achieved in the first half of 2023. This is the proof of the progress made in terms of cash flow conversion, as well as the significantly lower impact from the legacy projects compared to the previous years. Let's now go through the different businesses. And let's start from the asset-based services. The division had revenues of 3.4 billion euros in the first half of this year, up 32% from last year. thanks to the performance of the traditional and subsea oil and gas projects, which more than made up for the reduction in wind offshore activity and backlog. ABDA was 391 million euro, up 50% from last year, with ABDA margin at 11.3%, increasing by more than 140 basis points from the first half of the last year. The main reason for the higher ABDA margin was a better project mix, especially the lower share of the wind offshore projects. For the second half of this year, we expect the division to have higher revenues and ABDA than the first half, driven by the schedules of some key large projects in the Middle East, West Africa, Europe and Latin America, only partially offset by the completion of mature projects. Let's have a look at the drilling offshore, page 14 of the presentation. The division reported the revenue of 446 million euros, 24% increase from the same period of the last year, while the ABDA went up by 18% to 166 million euros. The main drivers of the top line growth in the first half were the expansion of the fleet and the higher average day rates, partially offset by the startup costs for jack-up in Saudi Arabia. Growth was supported by the beginning of the operations of the DVD and the Perro Negro 12, by the higher number of operating days for the Perro Negro 11, and by the day rate increase of one of our deep water floaters. The strong operating performance was partially offset by the downtime for the Scarabeo 9, that underwent maintenance, by the startup cost for the Perro Negro 13, and by the impact of the temporary suspensions in Saudi, especially on the Perro Negro 9. As a reminder, the temporary suspension from Saudi Aramco affect three jackups. Two of them started during the second quarter, while the suspension for the third one will begin in the fourth quarter of this year. Our plan for the three jackups remains the one we discussed in April. One jack-up will be returned to the owner in the second part of this year. A second jack-up will go through planned maintenance works. And the third jack-up will most likely replace another unit in a different geographical area. And the replaced unit will be returned to the owner. For the second part of this year, we expect drilling offshore revenue to remain stable and ABDA to slightly decrease compared to the first half. This is mainly due to the Saudi suspensions of the three jackups, as well as the maintenance activity already planned for the second half of this year, partially offset by the positive contribution to the top line of Peronegro 13 and Scarabeo 9. Let's go through the energy carriers on page 15. The revenues increased by 7% year-on-year at €2.5 billion, APDA in the second quarter of 2024 reflected an extra potential loss on the Thai oil project, which were 2.5 billion euro. APDA in the second quarter of 2024 reflected an extra potential loss on the Thai oil project, which was balanced by the one-off positive effects from other projects in our portfolio. As we said before, the division's main goal is to complete the remaining legacy backlog. while we remain very selective when taking on new projects. Completing all legacy and difficult projects is key for improving the division's profitability. I also want to point out that our sustainable infrastructure business continues to perform well in terms of growth, profitability, and cash flow generation. The full income statement for the group is shown at page 16, And we can highlight some items below the ABDA. DNA stood at 310 million euros. This is an increase by 92 million compared to the last year, mainly driven by the higher leases paid on the best sets that we added to our fleet on a capital-like basis. For the full year 2024, we expect DNA in the range of 710, 720 million euros. and as such, 410 million euro for the second half of 2024. The increase from the level of the first half mainly reflects the growth of the fleet on a chartered basis. Financial expenses stood at 73 million euro, decreasing slightly by 14 million euro compared to last year, mainly due to the lower hedging costs, while financing costs, including net interest expenses and leases were stable compared to last year. For the full year 2024, we have budgeted a level of financial expenses in the range of 190, 195 million euros. As such, approximately 120 million euros are expected for the second half of 2024. While the financial expenses will largely depend on the edging cost on certain currencies, our budget on financial expenses might actually prove to be conservative at the end of the year. The results from equity investments was stable year on year, while income taxes decreased slightly by €4 million compared to the last year to €74 million, implying a tax rate of 39%. Finally, the net result was positive for €118 million, increasing by €78 million from the level reported in the first half of 2023. Let's now have a look at the net debt evolution. The company remained very focused on generating cash flow with the goal of reducing our debt and supporting dividend payments to shareholders. The cash flow we generated in the first half of this year improved our net financial position by €178 million on a pre-IFRS basis. This is from a net cash of €216 million to €394 million. and by 113 million euros on a post-IFRS basis. This is from a net debt post-IFRS of 261 million euros to a net debt of 148. We achieved these results by generating 455 million euros of operating cash flow and 271 million of free cash flow. In the second quarter alone, we recorded a net cash flow of 110 million euros. This is an increase from the 68 million euros that we had in the first quarter of this year. In the second half of the year, we expect a net increase in lease liabilities of about 80 million, considering that the fleet is expanding on a chartered basis and that the JSD 6000 has officially entered the fleet in the third quarter of this year. On page 18, you can see the breakdown of our net financial position. As you can see, we hold a comfortable level of liquidity on our balance sheet, which was €3.1 billion at the end of June, including €470 million of unused RCF and almost €1.3 billion of available cash. Available cash grew by more than €200 million only in the second quarter of this year. Our current level of available liquidity fully cover our gross debt maturities up to the full year 2028. Lowering gross debt and extending maturity remain a key priority for Citem with the aim of further de-risking the company and facilitating future credit rating upgrades. Moving to page 19, I would like to give you an overview of the liability management exercise we did in May. During the month of May, we took advantage of the favorable market conditions to issue a six-year bond for 500 million euro. At the same time, we bought back part of the 2025 and 2026 bonds for a total of approximately 360 million euro. The liability management exercise was very successful, and it allowed us to reduce materially our short-term maturities and to increase the average tenor of our debt by more than one year. The tender offer also allowed us to book €3 million of capital gains as the bonds were repurchased below par. As already mentioned, our available cash position currently covers our debt maturities up to the full year 2028. We obviously remain active in looking for opportunities to further optimize our capital structure. I will now hand over to Sandro for his closing remarks.

Thank you, Paolo. Let's put our second quarter in the context of the results achieved in the last two years. The consolidation of Saipen's performance continues at a steady pace. We are achieving steady revenues, growth and increasing profitability as our activity shifts in favor of the offshore ANC projects. In addition, profitable growth is turning into strong cash flow generation. Last four quarters, we converted more than 80% of our EBITDA in operating cash flow, a material improvement compared to the last few years. And now wrap up before starting the Q&A session. The entire organization is fully focused on cash flow generation and debt reduction. The order intake to date is materially de-risked and is progressively shifting toward offshore activities and integrated projects. We're making steady progress in executing legacy projects. and we are on track to meet our 2024 guidance and we are very positive on our medium term targets, considering the visibility granted by our current backlog and our strong commercial pipeline. Thank you for your attention and we can now move on to the Q&A session.

Excuse me, this is the call school conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. To remove your question, please press star and 2. Please pick up the receiver when asking questions. Once again, that's star and 1 for questions. The first question is from Pozzi Alessandro from Mediobanca. Please, go ahead.

Good morning. Thank you for taking my questions. The first one is on the order intake. It clearly was very strong. in the first half of the year. If we look at the full year, can we multiply by two or should we be more conservative given the big order that you won in the second quarter? Maybe that's an opportunity to talk about your commercial pipeline from what we see A lot of opportunities are for grabs in Middle East, Qatar, the Emirates and Saudi Arabia as well. The second question is on the fleet utilizations, full capacity as you mentioned. As we look at 2026, it's above 60%. In order to get to more than 70%, what sort of profitability you have in mind to achieve on the next acquisitions to get above the 70-75% that you mentioned? and maybe just an update on the clean fuel project in Thailand and how the profit, the margin profitability of the project basically is going. Thank you very much.

Okay, thank you. I hope to recall all the questions. So the first one on order intake, conservative versus aggressive. The future, certainly the market is positive, but you never know whether you will win tender or you will not win tender. So I will stay in a normal approach. This is my suggestion. I tend to be always prudent in a way or in another. Nevertheless, it's true that the market is strong. And that's a fact. That's a fact. Opportunities are there and we are actively participating. Whether we will win bids or not, this is depending on us, but also depending on competition. fleet utilization uh 70 percent what can we do to achieve 70 percent more in 2026 onward now you saw the slide 70 percent has to be understood as really in a commercial way almost 100 why because the vessel agencies because we cannot run projects really back to back without any float between one project and the others. So the 70%, 75% is considered a sort of optimal utilization of the vessel fleet. So when we are at that level, we are really fully satisfied. So this is just to clarify the slide meaning. In 2026, we are not yet there, but we are confident we will be there in the next six to 12 months, because as I said before, market opportunities are there, market for sure vessel is pretty tight, so I do not see a reason why we should not be able to come in the next 12, from six to 12 months, to a full booking of the fleet also in 2026 as i as i explained during the call for example fds is already fully booked for 2026 and is also almost fully booked even 2027 and 2028 so we do expect almost in the next from 6 to 12 years to come to the same on the other vessel of the fleet

On the question of the utilizations, my question was you're probably going to be very selective on the type of projects that you will acquire to get to 70% plus. What sort of a profitability you can afford basically to achieve to get to that level on new projects?

As we said a few times the target margins for surf activity are in the high double digit area and for the conventional activity they are in the mid double digit area. Obviously when the schedule of our vessels become so tight it's also a matter of finding the job that fits into the schedules not only picking the best rate. If you have a If you have a tight schedule and then you have to send your vessel from East Asia to South America, it's probably not the best option rather than working close to the previous project. So it's a mix of these two factors. When the schedule is very tight, you keep up those projects that are limiting the idleness of the vessels moving around the world rather than... picking the best, best price just for the sake of making a 0.5 additional margin. But the targets remain what I said before, a high double digit for surfactivity, mid double digit for conventional.

Okay, so we move to the Thai oil. Yes, in this quarter, as Paolo explained, we have taken a further provision. that covers what we currently believe are expected extra cost on the project. We are doing this in full alignment with our co-venturer in the project and we are also in We have also opened the table with the client to get a relief for the extra cost we are incurring. This is the status of the OctaIOIL project.

Thank you.

The next question is from Guilhem Levy from Morgan Stanley. Please go ahead.

Hi, good morning. Thank you for taking my questions. The first one on Mozambique LNG, I understand that the revenue guidance provided in the beginning of the year between 12.7 and 13.3 billion euros, it included the restart of Mozambique LNG from the middle of this year. And from previous conversations, I understand that was almost half a billion euros. So I was just wondering if the project not restarted so far? What has given the company confidence to not change the guidance? Is it an anticipation of other onshore projects that were maybe expected to be done later on, or is it just related to the strength in the offshore business? And then on the second question, just thinking about new vessels that the company could potentially lease, could you say a few words on your ability to get new vessels at the market at the moment? and also looking at the ideal duration of your releases. You have a slide there that you're showing an increase. Is there a target that you would like to have in terms of duration? Thank you.

You recall correctly we have expected revenues of around 500 million in to the project in the second half. What I would like to clarify is that out of that 500 million, 400 were related to the suspension contract that is still ongoing and is still ahead, and it will go ahead until the project will be restarted. And only 100 million were related to the actual project to be restarted. So basically the effect of the actual restart date in the second half of the year is non-material in our revenues and the EBITDA generated by the project. So really we do not need to compensate with other projects the expected EBITDA. So you may say that we were pretty prudent while booking Mozambique in our account. Veselys, which is the ideal, but in the current... Very difficult to say what it is ideal. I will tell you what it is, JSD 6000, the vessel that has just entered last week in our fleet. This is leased on a five years firm period, plus two year options at our choice. you can immediately imagine which is the lifespan we see ahead of us for the utilization of this vessel. But, you know, this vessel is pretty peculiar because it is a multipurpose. It can do JLA, SLA, pipelines, as well as working on SARF projects. And it has also a 5,000 tons lifting capacity. So this is really multiple poles. Maybe other kind of vessel, more specialized, we may look for a shorter period of lease. But this is evaluate case by case. We are looking for, what I can say now, that we are looking also for another vessel more specialized to be leased. but I cannot disclose more at this stage.

Understood, thank you.

The next question is from Massimo Bonisoli from Equita. Please go ahead.

Good morning and thank you for the presentation. I have two questions. One regarding the implied step up in margin in the second half implied in your guidance. It should move from the 9% to about 11% to match your guidance. So if you can give us some color on a divisional basis. You already highlighted some development for the second half. but just to understand if it's mainly coming from offshore or let's say also onshore will help to increase that margin level. And the second question on the slide on page six, you give us some color on the risk portion of the new contract. What about the lump sum portion? I imagine you have better contingencies there versus the previous year contracts. So what about the contingencies you have there and difference versus the former period thank you you you pointed rightly in the second half we do expect margin rise

clearly to our offshore division. As you recall, beginning of the year, we had some difficulties at the very beginning of the year with the project of Scarborough with Castorone. Now the project is going nicely. We completed almost 65 percent of the of the line and so uh we do expect a better contribution uh also for more fleet utilization in the second part of the year rather than in the first part of the year you know that this business is always characterized by A certain seasonality other than the problem I highlighted before. So second half, certainly we will see a greater contribution of the offshore. And also some, let's say, extra provision, for example, than the one that I was mentioning before on Thai oil that affected the coup two of our anchor, or for example, than the one that I was mentioning before on Thai oil. uh that affected the coup two of our anchor uh hopefully will not be replicated so we should be see also some improvement also on the uh on the anchor business so if you combine the two this is what is giving us the possibility to grow in the in the second in the second half regarding the uh lump sum and contingencies in the risking, you know, we already did a very huge effort in moving from a mere 6% of the risk portion on our APC lump sum let's say the one that we are delivering and coming from the period from 2018-2021, we're now in the new awards standing at 36%. And this is also a very big move because the reimbursable portion and remeasurable portion, they are really pointing the portion of the lump sum that are more risky. So it's not linear, the percentage. The percentage really is affecting the most risky part of the project. Nevertheless, it's not that the lump sum portion is not getting the right attention. As I said before, part of this portion are cost and risk that are directly under our control so there is a de-risking on its own i mean engineering activity when it comes to activity that we done directly with our fleet those are risks that are fully under control Then there is a main part of risk that our activity does by our subcontractors. And that's rightly, you said, and we can cover that only by having the right level of contingency in our activity. So that's the third party good and services that represents a residual risk that we cover with contingencies.

Thank you very much.

The next question is from Daniel Thompson from BNP Paribas. Please go ahead.

Hi, good morning. Yeah, so I just wanted to follow up from a comment you made last quarter on the remaining legacy backlog. I think it was $1.4 billion last quarter. Could you let us know what the updated number is now? And then just following up on the de-risked model versus traditionally a more fully lump sum risk model, you know, is there any margin sacrifice under this new model? I mean, obviously, through cycle, I think this is probably due to a better outcome. under normal market conditions can you put any numbers around the margin differential on an average project under under a full epc risk approach versus an increased reimbursable portion thank you okay so the the first one will reply paulo and the second one i will do myself yeah so so so the the one for 1.4 billion

say 950 as a remaining value of the contours that were underlying the profit warning. So it's down an additional half billion compared to the last data point that we shared.

Okay, so regarding is imposing a margin sacrifice. I would say no, in principle no, there is no margin sacrifice. And I would like to recall you also that anyway, the risks that were associated in the past to cost escalation and to, let's say, also not remeasurable quantities, there were order of magnitudes that were greater than the margin we could do in the project. So now, for us, it's definitely much more important to control the risk So then we can, by controlling the risk, we sure we can make margins. Because before, unfortunately, not having the possibility to control the risk was very quickly eroding any margin we projected when the project was awarded. So I believe that this is the risking of the margins. This is what we can really really say about the strategy.

Okay, thank you.

The next question is from Kevin Rodger of Kepler-Chevreux. Please go ahead.

Yes, good morning. I have one follow-up please on Thai oil. Is there any possibility for you please to give us the provision that you have taken on this project and basically the scope of work, the duration, etc. that remains to be done on this Thai oil project? And if I'm not mistaken, in the comments, you say that you have offset this provision by exceptional on some of your projects. Also, if you can give us a bit of color on those one, please.

Thanks, Kevin, for the question. So unfortunately, we cannot share the numbers on single projects, especially when we are in JV with other partners. I mean, those are numbers protected by confidentiality agreements. I mean, the provisions we made, as Alessandro said before, are material and they are what's our best estimate of the losses through the entire life of the project. So it's the amount of money necessary to get the project done. This is what we can share on Thai oil. And then, yeah, I said one off, When you get close to completion, you can free up contingencies and margins. And there is a number of projects in the Middle East that went very close to the completion, and therefore they gave us a positive contribution in terms of... ...work to be used is... projects getting close to the end and therefore releasing the contingencies that turn into margin in the divisional P&L. And obviously then there is a number of other projects that are producing positive margins, especially those that were acquired in the last two years. And as they are kicking in in terms of revenues and margins, they obviously push up the

the margin for the for the division compensating the write-off that we made on on thai okay thanks the next question is from kate of sylvan of city please go ahead

Hi, thanks for taking my questions. Just a follow-up there again on energy carriers. You know, we saw 0% EBITDA this quarter down from last quarter, and you've provided some helpful comments that it was harbored by the Thai project. But I know you don't guide on a segment basis, but how are you expecting overall energy carriers potentially to trend in the second half margin-wise? Secondly, I just guess on offshore capacity, one of your competitors purchased an offshore vessel this month as they determined the price was competitive versus multi-year charter rates. I know you've been quite clear you're operating a leasing model and looking for more vessels to lease, but interested to hear your view on opportunistic M&A like this. Thank you.

Yeah, I'll take the first question. The margins on onshore, as we said a few times, our business plan targets is to get to a mid-single-digit margin for the ENC onshore division with a path that was kind of, say, if not linear, very smooth, so moving from close to zero to the 5% over the next three to four years. And And this is what we can share. So we were projecting a positive margin this year, the first step towards the, let's say, 4% or 5% margin medium term. It could be from one quarter to the other a bit bumpy because it depends on where we make revenues and what projects contribute the most or the least. For the rest of 2024, we expect a positive margin for the energy carriers division, as we were originally planning.

Okay, regarding instead the fleet strategy, I would like to confirm that as Saipem, we will stay with our asset light strategy. That means that we will, let's say, offer uh to to match the demand in the market primarily with our own fleet and uh secondary we did for both our main offshore activities i would say both thrilling and enc enc fleet and that's where we see us going really really going ahead finding and having as we do have today the right balance between owned and lease fleet you know the lease fleet give us the ability to to catch the peak of the market without having the the burden of a new vessel that then has to take the job for a very long period. This gives us the ability to match the market in the best way, and I believe it's pretty successful because our vessels are really appreciated by the market. Even the new coming, as least vessel, they are, a very or they have already a pretty interesting backlog being built around. So the market in a way or another is proving the strategy as a rationale.

Thank you. The next question is from Victoria McCullough from RBC. Please go ahead.

Could you provide some guidance for when you expect the first drilling to happen? And then on Mozambique, obviously there have been some headlines this week about a higher cost estimate. Could you give us an update because you've been clear that you are you know, in negotiations with total on this and what we can expect on the higher cost estimate and what you're expecting margin wise, you know, in terms of what you expect to change in margin based on the enlarged work scope. Thanks very much.

Sorry. Problems we couldn't hear properly.

Sorry, can you hear better now?

Yes.

Great. Sorry, I'll repeat my question. Thanks very much. So on Curzai, if you could try to give us a guide on when first drilling is supposed to happen, maybe. And then on Mozambique, there's been public information this week that the budget on this project has increased for higher cost. Could you give us an update on the negotiations with Total and your expectations in terms of margin profile versus the initial tender? Thanks very much.

Okay, on the drilling on Courcelles, the first drilling we expect it to occur in the next weeks. Because as I said before, we are currently on the testing location. Today we started to test actually the drilling machine in the water. So that's the plan, it's a matter of next weeks now, in the coming weeks. the time to complete the testing and then move into the first location. Regarding Mozambique, we really do not have any negotiation ongoing. Things have been already set up in the previous quarters, so there is already a plan I would say there is a plan ready to action that when the JV, the Mozambique JV, they decided to go ahead, everything is already set up. There is no impact on margins. And as I said, in many situations, Until we come to the actual startup, we are working on a rembursable basis on all the preparation activities that are helping us to keep the project in a sort of hot standby.

If I could just ask a follow-up on that. Are you happy that that margin is competitive amongst the other work that you're seeing in the market and could tender on?

the margin the margin is in line with the with the pro with the other similar project we are getting in the march in in the market thank you very much the next question is from richard from belgium please go ahead hi good morning and thank you for taking my questions

And my first one is just to follow up on a previous question on the revenue guidance. So just looking at sales this year and for the first half of this year and then expected backlog execution across the second half, we're already around the sort of midpoint of guidance. And I appreciate vessel utilization is already very high, but my question is, is potentially that guidance conservative and is there any scope to increase that going forwards? And then second question, one of your competitors in the onshore engineering space recently flagged a shortage of engineers as a key risk. Are you seeing any issues with this when you look at sort of availability for workers and particularly just given 60% of the new awards in this quarter were done in the onshore space? Thank you.

Sure. We've currently not revised the guidance as 2024 backlog is estimated on the basis of the expected work that is planning and I would like and that has been elapsed since then. So that's really the situation. So we see, as I said before, a good second half coming from offshore and on our guidance. availability of workers and human resources, generally speaking, for our onshore activity. Clearly, those activities are very much dependent on geography, so we cannot have a general statement. If I would say regarding our ability of engineers in the quarter and in our engineering centers, I would say we are okay. I would say also that compared to the last five years, I would say that this kind of industry has returned to be attractive for new graduates, and this is good news. So we don't have difficulties in attracting new talent to the industry. Regarding instead blue collars, it's very much geography dependent, and it's true that there is a certain tightness In the Middle East, there are so many projects going on. For the construction, that's the situation, but I don't see any criticalities that could impair our ability to progress the projects we are doing. Thank you.

The next question is from Jamie Franklin of Jefferies. Please go ahead.

Hi there. Thanks for taking my question. So just the one from me on offshore wind. So thanks a lot for all the clarity on the Cassell offshore wind project. We're just wondering if you could talk about where you currently stand on new projects in offshore wind. Are you looking at anything at the moment? Does your bidding pipeline include any projects in offshore wind and maybe over what timeframe you might be considering entering into new offshore wind projects.

Thanks. Okay, so on offshore wind, as you know, we're always looking at this market. This market is very promising in terms of volume in the next years. So it's a market that we do to which we give attention. Unfortunately, in the very moment now, there are not many bidding going around. Clearly, We should well understand that the industry is coming from a period in which the price clients were willing to pay was much lower than the actual cost. Now clients are in the let's say in the process to review their budgets to align their cost expectation to the actual cost. And also regulators are doing the same. And we know that in the last bid for capacity, the offer price were much higher than in the past. just to cover the extra cost. We may not see something coming in the next months, but I would say that starting from 2025 and then 2026, picking up again the offer for tendering in this segment, and we will certainly be very active and very keen to participate. In the meantime, we are developing our concept for the floating offshore wind that is maybe a few years ahead than the opportunity on fixed wind, but this will come as well, because it's maybe a few years ahead than the opportunity on fixed wind, of fixed wind but this will come as well because without floating offshore wind there is no way governments that can match especially in europe they can match their ambition to cover the the expectation of new power being generated by uh by renewables So market very interesting. We developed all sorts of technology to serve this market in terms to ability to make foundation for fixed wind. We are preparing for the floating and we just wait clients to launch tenders to apply for them.

That's great. Thank you very much.

The next question is from Christopher Copeland from Bank of America. Please, go ahead.

Thank you very much. Just one more from me, please. I appreciate you've given us quite a bit of new guidance on things like financial expenses, depreciation. You've just commented on revenue as well. Would you mind completing the list and maybe comment a little bit about where you see CapEx and cash flows for the full year? Thank you very much.

Well, as long as the cash flows are concerned, we confirm that our target is to make 300 million euros of cash flows, which is the guidance we shared a few months back. If you run some simple numbers, we're a bit ahead of the target, because the cash flow that we made in the first six months is a bit higher than the 50%, that would have been dividing by two the target for the entire 2024. So we are confident that the 300 million euros, we are on track to make it. And that would be a big, large improvement compared to 2023. Then your second question was on the CAPEX. Well, the CAPEX will be in the range of around 460 million, 450 for 60, which is... in line with what we shared in our guidance. And we made about 200 in the first half of this year. So you can expect 250, 260 in the next six months.

Thank you very much. I appreciate that.

Once again, if you wish to ask a question, please press star and 1 on your telephone. For any further questions, please press star and 1 on your telephone. Alessandro Polinti, there are no more questions registered at this time.

OK. Thank you for participating to the first half 2024 results call. And see you next quarter.

Ladies and gentlemen, thank you for joining the conference now over. You may disconnect your telephone.