Saipem: First half 2015 results and turnaround plan. Repositioning Saipem to compete and create value in the new market context

Highlights: 
 
In-depth review of Saipem’s competitive positioning in a highly deteriorated market environment:  
o Total write-downs of €929 million of net current and capital assets  
o Rationalization of construction yards and disposal of vessels  
o Expected cumulative savings for 2015-2017: €1,300 million  
o Repositioning the company towards higher value core business segments
o Strategic plan brought forwards, to be issued by the Q3 results announcement

First-half results take into account the termination of the South Stream contract and write-downs carried out in the second quarter: 
o Adjusted EBIT: €-579 million, which includes the impact of €718 million of write-downs of net current assets
o EBIT: €-790 million, which includes €211 million in write-downs of capital assets 
o Adjusted net profit: €-709 million
o Net profit: €-920 million
o Capital expenditure: €268 million (€329 million in the first half of 2014)
o Net debt at June 30, 2015: €5,531 million (€4,424 million at December 31, 2014) including a negative cash impact of €502 million relating to FX hedging derivatives maturing during the semester
o New contracts: €3,500 million (€13,132 million in the first half of 2014)
o Backlog: €19,018 million at June 30, 2015 (€22,147 million at December 31, 2014).

Updated guidance for 2015, which takes into account write-downs carried out during the quarter: 
 o Revenues: ~ €12 billion  
o Adjusted EBIT: ~ €-250 million
o EBIT: ~ €-450 million o Net profit: ~ €-800 million
o Investments: less than €600 million
o Net debt: less than €5 billion (excluding potential impact of US dollar fluctuations)
 
Stefano Cao, Saipem CEO, commented: 
 “Results for the second quarter of 2015 reflect a market that has greatly deteriorated.  The further steep fall in the oil price has resulted in a major disruption, which is not likely to be reversed in the short-to-medium term and has resulted in Clients taking an increasingly rigid approach in the operational and commercial management of contracts. 
In this market scenario, Saipem needs a step change to respond more effectively to the new requirements of its Clients. 
 We have therefore launched an in-depth process of transformation throughout the Company, which involves the rationalization of assets and the review of all processes, and which will generate cumulative savings of €1.3 billion between 2015 and 2017. 
This will enable Saipem to improve its competitiveness, recover profitability and create value, leveraging on its remarkable competitive advantages – a solid and diversified backlog, robust and consolidated  relations with its Clients, a state-of-the-art fleet and a wealth of technology, competencies and experience which make it unique in the market.” 

Saipem operates in the Engineering & Construction and Drilling businesses, with a strong bias towards oil & gas-related activities in remote areas and deep-waters. Saipem is a leader in the provision of engineering, procurement, project management and construction services with distinctive capabilities in the design and execution of large-scale offshore and onshore projects, and technological competences such as gas monetization and heavy oil exploitation.

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