LETTER TO THE SHAREHOLDERS
2022 was a challenging and intense year for Saipem, relaunching the Company and posing the base for a new and sustainable growth phase.
The recovery was triggered firstly by the completion of the capital increase transaction in very challenging times, which fits into the wider context of the Financial Package to strengthen Saipem's capital and financial position. The support of financial and market institutions, together with an extraordinary commitment from the Company’s over 30,000 employees made the transaction successful and renewed Your trust in our work.
The economic and financial performance in 2022 demonstrates how the Company was able to make significant progress in securing projects included in the backlog review (Onshore E&C and Offshore Wind) which negatively contributed to previous year’s results. In particular, technical solutions were identified in response to operational issues which arose in 2021. In agreement with customers, schedules of work to be performed was reviewed, and in some cases, after recognition of the exceptional commitment by Saipem, compensation was obtained for the extra costs incurred to reduce realisation times on some projects.
At the same time, work was done to strengthen the governance system in the commercial and risk management areas; the Company selectively participated in the bidding and favoured high-margin business (Offshore, both Engineering & Construction, and Drilling). We believe the current order portfolio composition is, therefore, the key factor to the Group’s relaunch.
It is important to highlight how Saipem has seized the opportunities offered by the growing market to close some extraordinary transactions. The sale of the Onshore Drilling business was concluded with the primary objective of corporate asset valorisation; in addition, within a favourable and positive situation of the market, the Company acquired the drillship Santorini, expanding the fleet in the Offshore Drilling sector, historically a high-margin one, while maintaining an unchanged guidance on the year’s net debt.
At the same time, the Company is pursuing the capital-light strategy with the goal of promptly responding to the needs of a quick-expanding market (mainly in Offshore Drilling), minimising exposure in terms of capex.
The 2023-2026 Strategic Plan, approved by the Board of Directors the past February, aims to: (i) consolidate Saipem’s presence in geographical areas with higher profitability in the Asset Based Services sector; (ii) pursue a selective approach to LNG, CCUS and Fertilizers (Gas Monetization) initiatives in the Energy Carriers sector; (iii) restart commercial activities with a focus on low-risk initiatives in the Offshore Wind area, exploiting possible strategic partnerships; (iv) seize possible opportunities from PNRR in the Sustainable Infrastructures sector, and finally; (v) support energy transition (advanced carbon capture systems – CCUS – through proprietary solutions, Plastics Recycling, Subsea Asset Integrity). Within the Plan horizon, we expect to acquire projects for €46 billion, of which 25% in a low-carbon sector.
Efforts made in the year in order to gain economic-financial balance allowed to exceed all the economic and financial objectives set and the 2022 results, which do not include contributions from the Onshore Drilling sold business and represent proof of this evolution.
The acquisition of new orders, revenue and significantly growing margins confirm the improvement of the Group’s operational performance. 2022 closed with revenue of €9,980 million, up 53% compared to 2021. Adjusted EBITDA in 2022 was positive for €595 million (negative for €1,192 million in 2020), thanks to contributions from Offshore Engineering & Construction and Drilling.
The value of new contracts, equal to €12,941 million, is almost double compared to 2021, thank to significant acquisitions of new contracts mainly in the Middle East. The backlog at the end of 2022 stood at €24,017 million, of which over 50% from Offshore business projects. The net financial position at the end of 2022 stood at €264 million compared to €1,541 million at the end of 2021, thanks to the rigorous financial discipline, and to the positive contribution made by the collection of overdue debts.
The capital expenditure in 2022, including the purchase of the seventh-generation drillship Santorini, amounted to €523 million (€246 million in 2021).
Towards a sustainable business
The declination of sustainability in Saipem’s complex business model represents a challenge and a commitment that is constantly renewed, since the integration of environmental, social and governance topics is a key factor for the company’s future and success, as well as a guarantee of its work towards the expectations of all stakeholders: clients, partners, shareholders and financial community, employees, local communities, public authorities, associations, world of research and academia.
In order to strengthen this purpose, in addition to the economic and financial rebalancing and reorganisation of the company, in 2022 a four-year Sustainability Plan was prepared, updated annually, which outlines, consistently with the business strategy, the short and long-term sustainability strategic priorities, assigns challenging objectives and defines concrete actions to implement them. The Plan also takes into account stakeholders’ contribution through their involvement in the annual materiality analysis (carried out with “double materiality” method) to identify the most relevant sustainability topics for the company and the creation of value.
These elements represent a significant reference for the definition of the structure of the seventeenth 2022 Sustainability Report and to clearly and rationally define the contents of a wide reporting.
In addition, in accordance with EU Directive 95/2014 and Legislative Decree No. 254/2016, the Consolidated Non Financial Statement (NFS), which constitutes a section of the Directors’ Report, was prepared and integrates the disclosure on climate change (previously a standalone document), in line with the recommendations by the Task Force on Climate related Financial Disclosure (TCFD), and broadens that on human rights and “Modern Slavery Topics.
In terms of performance, our focus is prioritising the topic of occupational safety. Despite injury rates remaining well below average in the reference sector, the TRIFR - Total Recordable Injury Frequency Rate increased to 0.43 in 2022, a year in which some serious accidents were recorded, one of which unfortunately was fatal. Nothing, apart from our condolences to the family of the missing contractor, can mitigate the tragedy of the event. We can only firmly reiterate our primary commitment towards a zero-injury objective. “We Want Zero” is our programme and our objective, and we will not be satisfied until we reach it.
In 2022, Saipem kept up its commitment to countering the effects of the COVID-19 pandemic by promoting the vaccination campaign, which produced a high sensitivity among Saipem’s personnel and a subsequent high vaccination coverage, a crucial condition to operate in the majority of our scenarios.
Regarding the reduction of out carbon footprint and contribution to contrasting climate change, Saipem announced in 2022 the goal to reach Net-Zero within 2050 for the emissions in Scopes 1, 2 and 3, by integrating the intermediary steps of “carbon neutrality” of Scope 2 emissions in 2025 and 50% reduction of those in Scopes 1 and 2 in 2035, already introduced last year.
Among the numerous initiatives to combat climate change, many solutions have been taken which range between the energy efficiency of our operations and assets, to the recent agreement signed with Eni for the progressive adoption of biofuels (HVO) and start of activities for the certified offsetting of our emissions.
Saipem also pursues the objective of contributing to energy decarbonisation along its value chain, working in particular with the complex supply chain in order to progressively improve the monitoring of Scope 3 emissions, as well as identifying areas of reduction. As a result, the company achieve the double effect of reducing its carbon footprint and also that of its clients, for whom the company is increasingly becoming a technological partner in their path to Net-Zero.
In addition, the objective of a stable 25% low-carbon orders in the portfolio was confirmed, a distinctive trait in the evolution of our business.
This business sustainability strategy and its related performance have resulted in 2022 in the recognition by financial stakeholders and international analysts, who confirmed Saipem’s position as sector leader in the most important ESG ratings and sustainability indices, such as the Dow Jones Sustainability Index, which has seen an increase in the evaluation score received by the Company and its leadership for the fifth consecutive year.
The business scenario confirms growing trends in Offshore E&C and Offshore Drilling. Outside of traditional Saipem business, the Offshore Wind represents a potential for market growth which Saipem intends to seize by focusing on low-risk activities, where skills and distinctive assets will represent a success element in the competitive context.
Beyond 2022, with progress in project execution, further efficiencies, and an increasingly selective commercial activity, we expect a return to adjusted EBITDA and cash flow growth and a resumption of the reduction path in net financial debt.
March 14, 2023
On behalf of the Board of Directors
The Chairman The Chief Executive Officer-CEO
Silvia Merlo Alessandro Puliti