Saipem shifts focus after earnings slump
Engineering, procurement and construction contractor Saipem announced February 24 that it would revise its strategic outlook for the next three years to help secure financial support from its backers.
The company will focus on clients in the offshore engineering, construction and drilling segments. After warning last month it expected to book a loss equal to more than one third of its equity in 2021, Saipem is reframing its business to secure more offshore and onshore oil and gas contracts, while taking a longer-term view on its offshore wind EPC business.
|
Advertisement: The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business. |
Onshore, Saipem says it will prioritise technically demanding contracts in the LNG and gas valorisation segments.
Saipem issued a profit warning to shareholders last month on the back of a provisional €1.2bn ($1.3bn) earnings deficit for 2021, before interest, taxes and depreciation (EBITDA). The loss has been blamed on final quarter complications for Saipem's offshore wind contracts, with Bloomberg reporting delays on 54 wind turbines contracted to EDF, as well as problems in onshore engineering and construction.
The difficulties forced Saipem to adjust revenue and cost projections to reflect new delivery timelines, in accordance with international accounting standards. Had the problems been avoided, Saipem believes it would have turned in a positive EBITDA of around €120mn.
Saipem expects to make structural cost reductions of €150mn this year, and will deploy active asset management strategies to maximise cash flow. It said the plans would help prepare the business for a new financing package, strengthening its financial and capital structure.
Saipem completed a strategic review of most of its service backlog last month, having looked at 22 projects in total. The company, part-controlled by Italian energy group Eni, originally finalised its strategic plan in October. It will now submit guidelines for the revised targets to be approved by its board of directors on March 15.
Saipem cited better fourth quarter news from its offshore E&C segment, excluding wind, as proof that its fundamentals remain strong. The segment generated €1.4bn from new contracts last quarter, which is more than half of the €2.3bn reported by Saipem as a whole.