LETTER TO THE SHAREHOLDERS
Dear Shareholders,
upon completion of the capital increase (July 2022) which allowed the Group to strengthen its capital and financial structure and taking into account the success of the issue of the convertible bond (September 2022), we continued our commitment to create real and sustainable value for our stakeholders. We started from good economic and financial results, and improved reliability, security and reputation of our projects by investing in low environmental impact technologies for sustainable business, as well as developing ethical values and competences of our people, expanding our responsibilities on social, local development and environmental issues, and consolidating our role as facilitator of the ecological and energy transition.
2023 results exceeded the expectations of the Strategic Plan, showing a continuous growth of revenue and margins during the year, a good flow generation, and a significant improvement in the financial situation. The net profit of €179 million at the close of the year and the amount of new orders, around €18 billion, testify to the Group’s recovered competitiveness.
Saipem renewed the strategic lines presented in February 2023, confirming the Group’s improvement in performance and its ability to benefit fully from the favourable situation of the market. The 2024-2027 Strategic Plan entails an increase in economic and financial objectives and a diversification of supply in favour of the low/zero carbon segment for energy transition.
The 2024-2027 Strategic Plan is based on fundamental pillars, such as (i) excellence in the execution of the €30 billion order backlog with a higher integration of skills and optimisation of asset use, and (ii) the “One Saipem” approach, with the ability to implement integrated onshore/offshore projects, which will constitute around 20% of forecasted pan revenue, associated to (iii) operational flexibility, also thanks to a vessel management strategy based on a capital-light approach aimed at maximising operational flexibility and financial discipline without neglecting (iv) innovation and energy transition solutions with a commercial focus on consolidated technologies such as Offshore Wind, CCUS (Carbon Capture Utilization and Storage), green and blue hydrogen, ammonia and subsea robotics, in addition to research and development of new groundbreaking technologies in the low/zero carbon sector. The Board of Directors also approved a dividend policy that includes the payment of the dividend in 2025 on the results expected in 2024. The return to dividend for stakeholders supported by the forecast of a significant cash flow generation, with a 30-40% payout ratio on Free Cash Flow (after rent).
2023 results
The acquisition of new orders, revenue and significantly growing margins confirm the improvement of the Group’s operational performance. 2023 closed with revenue of €11,874 million, up around 20% compared to 2022. Adjusted EBITDA in 2023 was positive for €926 million (€595 million in 2022), thanks to contributions from Offshore Engineering & Construction and Drilling, while the net profit amounted to €179 million (loss of €209 million in 2022).
The capital expenditure in 2023 amounted to €482 million (€523 million in 2022), including the purchase of the jack-up Sea Lion 7 (now Perro Negro 10).
The net financial position pre-IFRS 16 at the end of 2023 is positive for €216 million, improving from the €56 million at the end of 2022 thanks to the strict discipline in working capital management. The net financial position including the IFRS 16 lease liability of €477 million was a negative €261 million (negative €264 million at the end of 2022).
Acquisitions of new contracts amounted to €17,659 million, an increase of around 40% compared to 2022, also thanks to the significant acquisition of the Hail & Ghasha contract for Adnoc in the Middle East, awarded in the last quarter of 2023; the project is a concrete expression of Saipem’s ability to carry out large integrated onshore/offshore projects for its clients. The backlog at the end of 2023 stood at €29,802 million, of which over 70% from Offshore business projects, both Engineering & Construction and Drilling.
Towards a sustainable business
The Sustainability Plan “Our journey to a sustainable business”, approved by the Board of Directors for the period 2024-2027, is fully integrated into the company’s strategic business guidelines and is based on three pillars: climate change mitigation and environmental protection; the centrality of people; value creation.
The Group developed for the second consecutive year the four-year structured Sustainability Plan, which showcases consistency and suitability of the objectives defined in a complex and articulated strategy aiming at creating value for all our stakeholders, as well as the relevant company performance on environmental and social impacts through a voluntary sustainability reporting and the mandatory Consolidated Non-Financial Statement.
Saipem’s eighteenth sustainability report 2023, structured around the Sustainability Plan’s strategic areas, is no longer just the moment of synthesis of all that the past year entailed in terms of initiatives and results; instead, it also presents a concrete vision of our future with precise objectives, indicators and targets to measure their achievement, as well as responsibilities and resources allocated.
The phase of uncertainty that still characterises the market and our reference sectors, seen through the lens of the energy and ecological transition, has not abated. The criticality of certain geopolitical aspects and conflicts in progress in various parts of the world, the resulting social upheavals, the value chain issues, also concerning the supply of certain strategic raw materials, and the challenges that new technological frontiers are posing to all actors, define scenarios that need careful analysis and monitoring, and sense of responsibility. Markets are ever changing by nature, more so in the current context of instability. Thereby, primary players like Saipem must be aware of the elements and trends that characterise them in order to identify and make the most appropriate long-term strategic decisions to achieve their objectives, also contributing to the achievement of their clients’ ones and in general creating sustainable value.
Within the organisation and expectations of an industrial entity like Saipem, committed to developing infrastructures in the energy and transportation sectors in various areas of the world, sustainability entails three key components.
Firstly occupational safety, which in 2023, was characterised by very positive results in all reference indicators, an unprecedented achievement for the company. In particular, the Total Recordable Injury Frequency Rate (TRIFR) stood at 0.32%, down 26% compared to the previous year. The results confirm the adequacy of the procedures and the effectiveness of the actions implemented. Despite this, unfortunately, events were recorded that involved our personnel and subcontractors, among which there was a fatality in Saudi Arabia. We deem this unacceptable, thus not only we launched new training initiatives and are advancing with the “Leadership in Health & Safety” cultural strengthening programme, guided by our LHS Foundation, but we also strongly reiterated within our organisation that our goal of “We Want Zero” for accidents is a top priority. To help us in the achievement of this objective and strengthen the aspects of safety and prevention, we are also focusing our attention on new technological solutions, such as the video analytics technology that we have recently implemented in Saudi Arabia, which through Artificial Intelligence can detect hazardous situations in real time, while in compliance with privacy issues, by utilising devices available at our worksites. A very effective solution which we intend to extend progressively to our projects and onboard our vessels.
Our commitment to social aspects, both direct and indirect, is the second component of sustainability. This includes human and labour rights, and our contribution to the local development of the countries in which we operate, a contribution that we can quantify in terms of job creation, economic impact and human capital development.
The last component is the ability to direct our business actions towards solutions that allow our clients and suppliers to tackle their carbon impact and wider ecological footprint and sustainable development.
The COP28 on climate conference in Dubai, despite the long and complex path still ahead to achieve the carbon neutrality objectives set with the Paris agreements, made some progress which is quite indicative of the efforts needed for a fairer and more sustainable energy future.
In this perspective, Saipem’s decision a few years back to launch its own “Net Zero Programme” with measurable goals for reducing its carbon footprint in the short, medium and long term across our carbon footprint has proven far-sighted. The programme includes a structured and periodic plan of initiatives regarding energy efficiency and renewable energy applications on board our vessels and, more broadly, serving our operational activities. Moreover, since 2023, a CO2 parallel “offsetting” programme of investments has been unfolding, aimed at protecting forests, biodiversity and ecosystems, and generating value for community. The vision underlying the programme is to represent a benchmark in quality and reliability for clients who need solutions for decarbonisation of their productive assets, even in sectors different from ours. In this complex and dynamic scenario, we are in fact committed to seize this business opportunity providing our contribution and not only qualifying ourselves as a responsible industrial organisation willing to challenge its own climate impact and to implement a sustainable business model. During the COP28 event Saipem was recognised with the “Energy Transition Changemaker” award for its innovative plant developed at St. Félicien, Canada, by applying the “CO2 Solutions by Saipem” proprietary technology, based on enzymatic solution for CO2 capture and reuse applicable to “hard to abate” industrial sectors. This significant recognition attests the role and contribution that our company can provide in the field of decarbonisation.
This comprehensive strategy combines ambition, transparency, flexibility and a virtuous and ethical collaborative approach; these are elements which will allow us to reach the sustainable success of the company and of all stakeholders who will join us on this journey.
Market scenario
The current situation of the market is characterised by a positive cycle in the traditional Oil&Gas sector and by a growing need to access secure and sustainable energy sources on a global level.
In line with the COP28 agreements, Saipem will continue to play a leading role in supporting its clients in the energy transition. The Company can rely on a strong position in the execution of both offshore and onshore projects and has gained significant experience in the offshore wind sector through the years. In addition to the energy transition, Saipem is also active in the construction of sustainable infrastructures (such as high-speed rail) and can boast extensive experience in the fertilizer industry. Through its proven experience and the related competence portfolio, Saipem is ready to support its clients in this path.
March 12, 2024
On behalf of the Board of Directors
The Chairman Chief Executive Officer and General Manager
Silvia Merlo Alessandro Puliti
