Interim / Quarterly Report • Jul 24, 2015
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
(2013-2015)
Gianluca Ferrero (Chairman) Alessandro Michelotti (Standing member) Fioranna Vittoria Negri (Standing member) Claudia Mezzabotta (Alternate member) Flavia Daunia Minutillo (Alternate member)
(2013-2021)
PricewaterhouseCoopers S.p.A.
Oversight board (Leg. Decree 231/01) (2015-2017)
Guido Zanardi (Chairman) Stefano Dentilli (Member) Giorgio Pani (Member)
Information regarding the composition and functions of the Board Committees (the Internal Control and Risk Committee, which is also serving on an interim basis as the committee responsible for related party transactions, the Compensation Committee and the Nomination Committee) is provided in the Corporate Governance section of the Fincantieri website at www.fincantieri.it
Forecast data and information must be regarded as forward-looking statements and therefore, not being based on simple historical facts, contain, by their nature, an element of risk and uncertainty because they also depend on the occurrence of future events and developments outside the Company's control. Actual results could therefore be materially different from those expressed in forward-looking statements. Forward-looking statements refer to the information available at the date of their publication; FINCANTIERI S.p.A undertakes no obligation to revise, update or correct its forward-looking statements after such date, other than in the circumstances strictly required by applicable regulations. The forward-looking statements provided do not constitute and shall not be considered by users of the financial statements as advice for legal, accounting, tax or investment purposes nor is it the intention for such statements to create any type of reliance and/or induce such users to invest in the Company..
The structure of the Fincantieri Group and overview of the companies included in its consolidation will now be presented.
The Fincantieri Group is now the largest shipbuilder by revenue in the Western world (meaning Europe and North America) and one of the most dynamic and diversified players in the industry, with its focus on segments featuring high value-added, high-tech content and high product unit values, and a position of excellence in all these segments making it one of the most technologically complex groups internationally. In fact, the Group is a world leader in the design and construction of cruise ships, among the world leaders in the design and construction of naval combat, support and special vessels and of submarines, and one of the leading global players in the design and construction of high-end offshore support vessels (OSV).
Fincantieri is active worldwide on four continents (Europe, North America, South America and Asia), with 21 shipyards located in Italy, Norway, Romania, United States of America, Brazil, and Vietnam plus a joint venture in the United Arab Emirates, and a total workforce of around 21,600 employees.
This flexible, global production structure is able to cover all activities, from design and construction of hulls and certain critical components, to assembly and maintenance of the ships built. The creation of successful products is based on an optimized production model, inspired by the philosophy of a single large, flexible shipyard designed to ensure uniform product quality.
Outstanding engineering and technological prowess, strong customer relationships, and access to a highly specialized and reliable local supplier network are key factors in allowing the Group to defend its leadership position. Fincantieri is able to implement technologically sophisticated and innovative projects and, thanks to its capability as a system integrator, manages to coordinate complex processes from the earliest stages of concept development through to vessel delivery to customers.
Furthermore, the Group views product and process technological innovation as key to maintaining its leadership position and so invests in research and development, drawing on a series of specialized centers created in partnership with suppliers and leading research institutions and ensuring suitable transfer of know-how and expertise between the various businesses in which it operates. Fincantieri's business is widely diversified by end markets, geographical exposure and by customer base, with revenue evenly balanced between cruise ship, naval and offshore vessel construction, giving it an edge over less diversified players by being able to mitigate the effects of fluctuations in demand on the end markets served. In particular, the Group operates through the following three segments:
| page | |
|---|---|
| 10 | Introduction |
| 11 | Financial highlights |
| 23 | Operational review by segment |
| 29 | Other information |
| 34 | Enterprise risk management |
| 42 | Alternative non-gaap performance measures |
| 44 | Reconciliation of the reclassified financial statements used in the report on operations with the mandatory ifrs statements |
In 2014, through its listing on the Italian electronic stock market (Mercato Telematico Azionario or MTA), FINCANTIERI S.p.A. achieved a fundamental goal for driving forward the process of growth in both volumes and efficiency that has profoundly transformed the Fincantieri Group over the past ten years, making it a global player, the leader by diversification and the Western world's number one shipbuilder.
Over these years, despite a particularly difficult and challenging market environment, the Group has pursued a strategy of diversifying its product and customer portfolio both for cruise ships and naval vessels; at the same time, it has expanded into new areas of business, such as the design and construction of mega-yachts, the design and construction of marine systems and equipment, ship repairs and conversions and above all the offshore market, while strengthening its relationships with customers with whom the Group has established solid long-term partnerships.
In this context, foundations were laid in the first half of 2015 for the conclusion of major agreements which will ensure ever increasing visibility for the Group's prospective revenues through further significant additions to the order backlog. In particular, in the cruise area, it signed a historic strategic memorandum of agreement with Carnival Corporation & plc for five next-generation cruise ships, to be built over the period 2019-2022. The agreement also includes options for additional ship builds in the coming years. This fresh momentum for the partnership between Fincantieri and Carnival Corporation, announcing a program of this magnitude for the first time ever, is of the greatest strategic importance not only for the shipbuilding industry but also for the entire domestic economy through setting out a long-term program with a historic partner of the Group. In the same period, Fincantieri expanded its customer portfolio with the signing of a binding letter of intent with Virgin Cruises, a Virgin Group brand and new entrant to the cruise market, for the construction of three cruise ships. These agreements, whose finalization is subject to several conditions, including satisfactory shipowner financing, have not been included in new order intake, but treated as part of the soft backlog. With reference to the naval vessels business, the second quarter saw firm orders finally placed for 8 naval vessels (6 multi-purpose offshore patrol vessels, 1 logistics support vessel and 1 multi-purpose amphibious unit) under the Italian Navy's fleet renewal program and for the last two vessels under the Italian Navy's FREMM program. The US Navy confirmed the placement of another order with the subsidiary Marinette Marine Corporation for another ship under the LCS program, the ninth under the contract signed in 2010, as well as advanced procurement funding for the tenth and final ship under this same contract. Confirming the importance and strategic value of the LCS program, the customer has also awarded the American shipyard a priced option for an additional ship.
Following these extraordinary commercial successes, as at 30 June 2015 the Group could count on an expected total backlog worth more than euro 19 billion, of which euro 12 billion in order backlog (the residual value of firm orders not yet completed) and euro 7.2 billion in soft backlog (representing the value of existing contract options and letters of intent as well as of contracts under negotiation, none of which yet reflected in the order backlog). The significant value of soft backlog translates into an expected order book in excess of euro 23 billion.
In this context, Fincantieri is currently engaged in managing a particularly challenging order book, which includes a large number of new prototypes currently under design or construction, with 2 cruise ship prototypes already delivered in 2015 and another 4 due for delivery in 2016. Its efforts will ensure a solid workload and significant growth in volumes for the years to come, through the subsequent construction of additional sister ships already ordered or in the process of being ordered. In order to fulfil this sizeable order backlog, not only has the Company embarked on extensive reorganization of its Italian sites without resorting to lay-offs whilst improving the mix of skills with the recruitment of over 380 new staff in Italy over the past 18 months, it is also working to rebuild the subcontractor network seriously undermined by the years of crisis.
For the purposes of ensuring due efficiency in managing this backlog, the Company is still engaged in negotiations with trade unions for renewal of the supplementary labor agreement at its Italian sites. In fact, after extending the 2009 supplementary agreement for two years, Fincantieri announced on 30 March 2015, in the absence of an understanding with the unions, that the former was terminated once and for all. The Company believes it important to achieve labor relations better suited to competing in a global market, and to adopt mechanisms able to produce a marked improvement in the standards of efficiency, productivity and flexibility of the workforce in Italy in line with market demand, including through the use of variable bonuses linked to the business's economic performance. The achievement of such objectives will be one of the conditions for managing the significant competitive challenges ahead.
In terms of profitability, the first half of 2015 saw the Shipbuilding and Equipment, Systems and Services segments improve their performance on the same period in 2014, while the Offshore segment was still affected by the contraction in VARD's margins mainly due to continued problems with its operations in Brazil, partly as a result of the currently difficult political and economic situation in this South American country. The increase in Shipbuilding margin, accompanied by the growth in revenue mainly from increased activity in the cruise ship area, was achieved even though the margins on cruise ships currently under construction, most of which prototypes, reflect not only highly depressed pricing agreed during the crisis, but also not yet full utilization of the Group's production capacity in Italy. Period-end headcount decreased from 21,689 employees at 31 December 2014 (of whom 7,706 in Italy) to 21,553 at 30 June 2015 (of whom 7,780 in Italy). This is due to a reduction in the number of resources employed at the VARD yards, primarily in Brazil with continued downsizing of the Niterói shipyard, and in Romania, as a result of cost-cutting measures in response to the contraction in workload triggered by the difficulties in the Oil&Gas market in which the subsidiary operates.
The first half of 2015 has reported the following results:
| 31.12.2014 | Economic data | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|---|
| 4,399 | Revenue and income | Euro/million | 2,220 | 1,983 |
| 297 | EBITDA | Euro/million | 128 | 142 |
| 6.8% | EBITDA margin ( *) |
Percentage | 5.8% | 7.1% |
| 198 | EBIT | Euro/million | 74 | 93 |
| 4.5% | EBIT margin ( **) |
Percentage | 3.3% | 4.7% |
| 87 | Profit/(loss) before extraordinary and non-recurring income and expenses |
Euro/million | (7) | 48 |
| (44) | Extraordinary and non-recurring income and (expenses) |
Euro/million | (16) | (21) |
| 55 | Profit/(loss) for the period | Euro/million | (19) | 33 |
| 67 | Group share of profit/(loss) for the period | Euro/million | 12 | 24 |
| Financial data | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Net invested capital | 1,784 | 1,421 |
| Equity | 1,564 | 1,237 |
| Net financial position | (220) | (184) |
| Euro/million Euro/million Euro/million |
| 31.12.2014 | Other indicators | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|---|
| 5,639 | Order intake ( ***) |
Euro/million | 4,170 | 3,447 |
| 15,019 | Order book ( ***) |
Euro/million | 15,968 | 14,184 |
| 9,814 | Order backlog ( ***) |
Euro/million | 12,044 | 9,515 |
| 5.0 | Soft backlog | Euro/billion | 7.2 | 5.8 |
| 162 | Capital expenditure | Euro/million | 68 | 67 |
| (124) | Free cash flow | Euro/million | (256) | (25) |
| 101 | Research and Development costs | Euro/million | 48 | 49 |
| 21,689 | Employees at the end of the period | Number | 21,553 | 21,080 |
| 25 | Vessels delivered ( ****) |
Number | 15 | 15 |
| 31.12.2014 | Ratios | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|---|
| 13.9% | ROI | Percentage | 11.2% | 16.8% |
| 4.0% | ROE | Percentage | 0.3% | 6.9% |
| 0.4 | Total debt/Total equity | Number | 0.5 | 0.5 |
| n.a. | Net financial position /EBITDA | Number | 0.8 | 0.6 |
| n.a. | Net financial position /Total equity | Number | 0.1 | 0.1 |
*) Ratio between EBITDA and Revenue and income
**) Ratio between EBIT and Revenue and income
***) Net of eliminations and consolidation adjustments
****) Number of vessels over 40 meters long
n.a. Not applicable
The percentages contained in this report have been calculated with reference to amounts expressed in thousands of euros.
New orders received during the first half of 2015 amounted to euro 4,170 million (euro 3,447 million in the corresponding period of 2014), of which euro 4,085 million received in the second quarter of 2015, and of which 90% relating to Shipbuilding.
The book-to-bill ratio (between orders received and revenue generated in the period) was equal to 1.9 at 30 June 2015 (1.7 at 30 June 2014).
As regards the naval vessels business, orders were received for 8 naval vessels (6 multi-purpose offshore patrol vessels, 1 logistics support vessel and 1 multipurpose amphibious unit) under the Italian Navy's fleet renewal program, for the construction of the ninth and tenth Multi Mission European Frigates (or FREMMs), completing the supply of a series of 10 such vessels to the Italian Navy, and for another Littoral Combat Ship (LCS 21), while advance procurement funding was confirmed for another ship (LCS 23) under the existing program with the US Navy. The contract also includes a priced option for one more ship, the LCS 25, to be funded in 2016 and which is in addition to the 10 in the original contract, ensuring full continuity to the program.
The Group also recorded a significant increase in soft backlog during the period, particularly in the cruise ship business, with the signing of a historic strategic memorandum of agreement with Carnival Corporation & plc, announced on 27 March 2015, for five next-generation cruise ships to be built over the period 2019-2022. The agreement also includes options for additional ship builds in the coming years. The agreement is subject to several conditions, including satisfactory shipowner financing, and is reflected in the soft backlog. This fresh momentum for the partnership between Fincantieri and Carnival Corporation, announcing a program of this magnitude for the first time ever, is of the greatest strategic importance through setting out a long-term program with a historic partner of the Group. In addition, a binding letter of intent was signed with Virgin Cruises, a Virgin Group brand and new entrant to the cruise market, for the construction of three cruise ships. The finalization of these agreements is subject to several conditions and so the related value at 30 June has been included in the soft backlog. On 3 July, Fincantieri was also awarded a contract with the Bangladesh Coast Guard (BCG) for the supply of four Italian Navy "Minerva" class corvettes to be modernized and converted into Offshore Patrol Vessels (OPV) and for the provision of the related integrated logistics support services; this order has been included in the soft backlog at 30 June.
As for the Offshore segment, the persistent decline in oil prices already commencing in the second half of 2014 has significantly altered the spending outlook for oil exploration & production companies, which have scaled back their investment plans and initiated cost-cutting programs. As a result, order intake in the first half of 2015 was very limited, amounting to euro 140 million (for one OSCV) compared with euro 993 million in the same period of 2014.
Equipment, Systems and Services
During the first half of the year, the Equipment, Systems and Services segment finalized euro 306 million in new orders, partly in connection with the Italian Navy's fleet renewal program.
As a whole, foundations were laid in the first half of 2015 for the conclusion of major agreements which will ensure ever increasing visibility for the Group's prospective revenues and have helped take the soft backlog to euro 7.2 billion, on top of the significant level of order intake.
| 31.12.2014 | Order intake analysis (Euro/million) | 30.06.2015 | 30.06.2014 | |||
|---|---|---|---|---|---|---|
| Amounts | % | Amounts | % | Amounts | % | |
| 3,936 | 70 | FINCANTIERI S.p.A. | 3,680 | 88 | 2,041 | 59 |
| 1,703 | 30 | Rest of Group | 490 | 12 | 1,406 | 41 |
| 5,639 | 100 | Total | 4,170 | 100 | 3,447 | 100 |
| 4,400 | 78 | Shipbuilding | 3,752 | 90 | 2,396 | 69 |
| 1,131 | 20 | Offshore | 140 | 3 | 993 | 29 |
| 204 | 4 | Equipment, Systems and Services | 306 | 8 | 119 | 3 |
| (96) | (2) | Consolidation adjustments | (28) | (1) | (61) | (1) |
| 5,639 | 100 | Total | 4,170 | 100 | 3,447 | 100 |
The order backlog, representing the residual value of orders not yet completed, amounted to euro 12,044 million at 30 June 2015 (euro 9,515 million at the end of June 2014), with the order book's profile extending until 2025. The growth in backlog on a year earlier confirms the Group's ability to finalize contracts under negotiation, contract options and commercial opportunities and to transform them into order backlog. The backlog represents about 2.7 years of work in relation to revenue generated in 2014, with most of it in the Shipbuilding segment, which accounts for 83% of the Group's total order backlog.
It is also reported that on 13 March 2015, the VARD Group terminated the contracts for the construction of two vessels after the companies that had ordered them filed for bankruptcy. The value of these orders has been excluded from the backlog at 30 June 2015, pending their purchase and associated contract formalization by new customers.
| 31.12.2014 | Backlog analysis (Euro/million) | 30.06.2015 | 30.06.2014 | |||
|---|---|---|---|---|---|---|
| Amounts | % | Amounts | % | Amounts | % | |
| 6,877 | 70 | FINCANTIERI S.p.A. | 9,383 | 78 | 6,038 | 63 |
| 2,937 | 30 | Rest of Group | 2,661 | 22 | 3,477 | 37 |
| 9,814 | 100 | Total | 12,044 | 100 | 9,515 | 100 |
| 7,465 | 76 | Shipbuilding | 9,995 | 83 | 6,664 | 70 |
| 2,124 | 22 | Offshore | 1,609 | 13 | 2,608 | 27 |
| 300 | 3 | Equipment, Systems and Services | 513 | 4 | 304 | 3 |
| (75) | (1) | Consolidation adjustments | (73) | - | (61) | - |
| 9,814 | 100 | Total | 12,044 | 100 | 9,515 | 100 |
The composition of the backlog by operating segment is shown in the following table.
The soft backlog, representing the value of existing contract options and letters of intent as well as of contracts under negotiations, none of which yet reflected in the order backlog, amounted to approximately euro 7.2 billion at 30 June 2015, compared with euro 5.8 billion at 30 June 2014, and particularly includes the strategic agreement with Carnival Corporation & plc and the agreement entered into with Virgin Cruises.
| 31.12.2014 | Soft backlog (Euro/billion) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| Amounts | Amounts | Amounts | |
| 5.0 | Group total | 7.2 | 5.8 |
The following table shows the deliveries scheduled each year for vessels currently in the order book, analyzed by the main business units. With reference to the current year, the table presents deliveries completed as at 30 June 2015 in addition to the total number of deliveries scheduled for the full year 2015. Compared with the situation presented at 31 December 2014, it has been agreed with the cruise customers concerned to postpone the delivery of two cruise ships from 2016 to the first half of 2017 in order to ensure a better distribution of workload.
Furthermore, in the Offshore segment VARD has adjusted production schedules as a consequence of variation orders for several projects leading to extended delivery dates, resulting in an improved workload balance at the yards.
| Scheduled deliveries | ||||||||
|---|---|---|---|---|---|---|---|---|
| (number) | 30.06.15 completed |
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | Beyond |
| Cruise ships | 3 | 3 | 5 | 5 | 4 | |||
| Naval >40 m. | 2 | 7 | 9 | 8 | 3 | 3 | 1 | 8 |
| Offshore | 9 | 15 | 18 | 5 |
Capital expenditure totaled euro 68 million in the first six months of 2015, of which euro 12 million for Intangible assets (including euro 9 million for development projects) and euro 56 million for Property, plant and equipment. The Parent Company accounted for 65% of this total expenditure.
Capital expenditure represented 3.1% of the Group's revenue in the first six months of 2015 compared with 3.4% in the first six months of 2014.
Capital expenditure in the first six months of 2015 mainly related to the construction of new infrastructure, and to technological upgrades designed to improve production efficiency through greater process automation and to improve safety conditions and compliance with environmental regulations within the production sites.
There was also continued investment in developing new technologies, particularly with regard to cruise ships.
% capital expenditure by operating segment in 1st half 2015
| 31.12.2014 | Capital expenditure analysis (Euro/million) |
30.06.2015 | 30.06.2014 | |||
|---|---|---|---|---|---|---|
| Amounts | % | Amounts | % | Amounts | % | |
| 98 | 60 | FINCANTIERI S.p.A. | 44 | 65 | 40 | 60 |
| 64 | 40 | Rest of Group | 24 | 35 | 27 | 40 |
| 162 | 100 | Total | 68 | 100 | 67 | 100 |
| 98 | 61 | Shipbuilding | 46 | 68 | 37 | 55 |
| 47 | 29 | Offshore | 16 | 24 | 23 | 34 |
| 5 | 3 | Equipment, Systems and Services | 3 | 4 | 2 | 3 |
| 12 | 7 | Other activities | 3 | 4 | 5 | 8 |
| 162 | 100 | Total | 68 | 100 | 67 | 100 |
| 38 | 23 | Intangible assets | 12 | 18 | 14 | 21 |
| 124 | 77 | Property, plant and equipment | 56 | 82 | 53 | 79 |
| 162 | 100 | Total | 68 | 100 | 67 | 100 |
Presented below are the reclassified consolidated versions of the income statement, statement of financial position and statement of cash flows and the breakdown of consolidated net financial position, used by management to monitor business performance.
A reconciliation of these reclassified statements to the IFRS statements can be found later on in this report.
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| 4,399 | Revenue and income | 2,220 | 1,983 |
| (3,234) | Materials, services and other costs | (1,636) | (1,425) |
| (843) | Personnel costs | (459) | (406) |
| (25) | Provisions and impairment | 3 | (10) |
| 297 | EBITDA | 128 | 142 |
| 6.8% | EBITDA margin | 5.8% | 7.1% |
| (99) | Depreciation and amortization | (54) | (49) |
| 198 | EBIT | 74 | 93 |
| 4.5% | EBIT margin | 3.3% | 4.7% |
| (66) | Finance income/(costs) | (62) | (28) |
| 6 | Income/(expense) from investments | - | 1 |
| (51) | Income taxes | (19) | (18) |
| 87 | Profit/(loss) before extraordinary and non-recurring income and expenses |
(7) | 48 |
| 99 | of which attributable to Group | 23 | 39 |
| (44) | Extraordinary and non-recurring income and (expenses) | (16) | (21) |
| 12 | Tax effect of extraordinary and non-recurring income and expenses | 4 | 6 |
| 55 67 |
Profit/(loss) for the period Group share of profit/(loss) for the period |
(19) 12 |
33 24 |
Revenue and income in the first six months of 2015 amounted to euro 2,220 million, reporting an increase of euro 237 million (or 12.0%) on the same period of 2014 mainly due to higher volumes for the cruise ship business, which accounted for 37% of the Group's total revenue for the period (31% in the same period of 2014).
The Group's export revenue accounted for 84% of the total in the first half of 2015, up from 81% in the corresponding period of 2014.
EBITDA came to euro 128 million, representing a decline on the amount reported in the first six months of 2014. The EBITDA margin, calculated as the ratio of EBITDA to Revenue and income, was 5.8% compared with 7.1% in the corresponding period of 2014. The fall in margin was mainly attributable to the Offshore segment, whose six-month margin was 4.6% compared with 9.6% in the first half of 2014. This drop in margin is due to the gradual reduction in production volumes at some of VARD's European yards accompanying the continuing crisis in the offshore Oil&Gas market, and to the still weak operating performance of VARD's Brazilian yards. In addition, the Offshore segment's six-month profitability in 2014 had benefited from euro 15 million in utilizations from the provision for risks on contracts recognized at the time of the VARD Group's acquisition, all of which utilized by 31 December 2014.
EBIT amounted to euro 74 million in the first six months of 2015, compared with euro 93 million in the first six months of 2014. The decrease reflects not only to the factors discussed earlier, but also an increase of euro 5 million in depreciation and amortization charges in the first half of 2015. As a result, the EBIT margin (EBIT expressed as a percentage of Revenue and income) at 30 June 2015 decreased on the same period of 2014, from 4.7% to 3.3%.
Finance income and costs reported a net expense of euro 62 million (euro 28 million at 30 June 2014). The increase in the same period last year is mainly attributable to higher finance costs for construction loans (euro 18 million at 30 June 2015 versus euro 9 million in the same period a year ago) and to the recognition of euro 16 million in unrealized foreign exchange losses (without a corresponding monetary impact) on certain currency balances recorded by companies within the VARD Group.
Income taxes reported a net expense of euro 19 million in the first six months of 2015 (euro 18 million in the same period of 2014); the current half-year figure was affected by the non-recognition of deferred tax assets for losses at the VARD Group's Brazilian subsidiaries.
Profit/(loss) before extraordinary and non-recurring income and expenses reported a loss of euro 7 million at 30 June 2015, which included euro 16 million in unrealized foreign exchange losses arising on translation of the VARD Group's foreign currency balances, as discussed in the earlier comment on Finance income and costs. The Group share of this result is a profit of euro 23 million compared with euro 39 million in the first half of last year.
Extraordinary and non-recurring income and expenses reported euro 16 million in net expenses at 30 June 2015 and included company costs for the Extraordinary Wage Guarantee Fund (euro 2 million), charges connected with business reorganization plans (euro 4 million), and costs relating to claims under asbestos-related lawsuits (euro 10 million).
Tax effect of extraordinary and non-recurring income and expenses was a positive euro 4 million at 30 June 2015.
Profit/(loss) for the period was a loss of euro 19 million for the first six months of 2015, for the reasons described above. The Group share of this result was a profit of euro 12 million, compared with euro 24 million in the first half of last year.
| 30.06.2014 | (Euro/million) | 30.06.2015 | 31.12.2014 |
|---|---|---|---|
| 548 | Intangible assets | 533 | 508 |
| 926 | Property, plant and equipment | 977 | 959 |
| 76 | Investments | 69 | 60 |
| (17) | Other non-current assets and liabilities | (36) | (48) |
| (60) | Employee benefits | (58) | (62) |
| 1,473 | Net fixed capital | 1,485 | 1,417 |
| 475 | Inventories and advances | 461 | 388 |
| 735 | Construction contracts and advances from customers | 1,566 | 1,112 |
| (607) | Construction loans | (868) | (847) |
| 421 | Trade receivables | 432 | 610 |
| (997) | Trade payables | (1,017) | (1,047) |
| (133) | Provisions for risks and charges | (111) | (129) |
| 54 | Other current assets and liabilities | (164) | (18) |
| (52) | Net working capital | 299 | 69 |
| 1,421 | Net invested capital | 1,784 | 1,486 |
| 633 | Share capital | 863 | 863 |
| 352 | Reserves and retained earnings attributable to the Group | 488 | 447 |
| 252 | Non-controlling interests in equity | 213 | 220 |
| 1,237 | Equity | 1,564 | 1,530 |
| 184 | Net financial position | 220 | (44) |
| 1,421 | Sources of funding | 1,784 | 1,486 |
The Reclassified consolidated statement of financial position reports an increase in Net invested capital at 30 June 2015 of euro 298 million since December 2014, mainly due to the following factors:
Equity reports an increase of euro 34 million, mainly comprising the loss for the period (euro 19 million), the positive effects on the currency translation reserve arising from changes in the Norwegian krone and US dollar exchange rates against the Euro (euro 54 million) and the negative effects of currency hedges on the cash flow hedge reserve (euro 6 million).
The strength of the capital structure is confirmed by the ratios between debt (gross and net) and equity and in the capacity of equity to fund Net fixed capital.
Net financial position reports euro 220 million in net debt at 30 June 2015 (euro 44 million in net cash at 31 December 2014). This amount does not include construction loans.
| 30.06.2014 | (Euro/million) | 30.06.2015 | 31.12.2014 |
|---|---|---|---|
| 472 | Cash and cash equivalents | 406 | 552 |
| 75 | Current financial receivables | 58 | 82 |
| (67) | Current bank debt | (42) | (32) |
| (38) | Current portion of bank loans and credit facilities | (111) | (47) |
| (74) | Other current financial liabilities | (37) | (1) |
| (179) | Current debt | (190) | (80) |
| 368 | Net current cash/(debt) | 274 | 554 |
| 15 | Non-current financial receivables | 99 | 90 |
| (257) | Non-current bank debt | (295) | (290) |
| (296) | Bond | (297) | (297) |
| (14) | Other non-current financial liabilities | (1) | (13) |
| (567) | Non-current debt | (593) | (600) |
| (184) | Net financial position | (220) | 44 |
The above Consolidated net financial position, which excludes VARD construction loans, presents a net debt balance of euro 220 million (euro 44 million in net cash at 31 December 2014). The change in Net financial position is mainly due to the growth in funding requirements for increased activities in the cruise ship business.
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| 33 | Net cash flows from operating activities | (177) | 49 |
| (157) | Net cash flows from investing activities | (79) | (74) |
| 303 | Net cash flows from financing activities | 100 | 105 |
| 179 | Net cash flows for the period | (156) | 80 |
| 385 | Cash and cash equivalents at beginning of period |
552 | 385 |
| (12) | Effects of currency translation difference on opening cash and cash equivalents |
10 | 7 |
| 552 | Cash and cash equivalents at end of period | 406 | 472 |
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
| (124) | Free cash flow | (256) | (25) |
The Reclassified consolidated statement of cash flows reports negative Net cash flows for the period of euro 156 million (versus a net positive euro 80 million in the same period of 2014), reflecting negative Free cash flow (the sum of cash flow from operating activities and cash flow from investing activities) of euro 256 million, and euro 100 million in net positive cash flows from financing activities.
It is recalled that cash flows from operating activities include the change in construction loans.
The following table presents additional economic and financial measures used by the Group's management to monitor the performance of its main business indicators in the periods considered. The following table shows the trend in the main profitability ratios and the strength and efficiency of the capital structure in terms of the relative importance of sources of finance between net debt and equity for the periods ended 30 June 2015 and 2014.
The ratios presented in the table have been calculated on the basis of economic parameters referring to a 12-month period, namely from 1 July 2014 to 30 June 2015 and from 1 July 2013 to 30 June 2014.
| 31.12.2014 | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|
| 13.9% | ROI | 11.2% | 16.8% |
| 4.0% | ROE | 0.3% | 6.9% |
| 0.4 | Total debt/Total equity | 0.5 | 0.5 |
| n.a. | Net financial position/EBITDA | 0.8 | 0.6 |
| n.a. | Net financial position /Total equity | 0.1 | 0.1 |
n.a. not applicable
The change in ROI at 30 June 2015 compared with 31 December 2014 and 30 June 2014 reflects the increase in net invested capital and the reduction in EBIT, while ROE at 30 June 2015 has been seriously affected by the reduced result for the period.
The indicators of the strength and efficiency of the capital structure at 30 June 2015 are largely in line with those at 30 June 2014, except for the Net financial position/EBITDA ratio, which reports a slight increase to 0.8. At 31 December 2014, some of the indicators were not applicable because of the positive Net financial position at that date.
The Shipbuilding operating segment is engaged in the design and construction of cruise ships, ferries, naval vessels and mega-yachts, as well as in ship repair and conversion activities. Production is carried out at the Italian shipyards and, in the case of vessels intended for the American market, at the Group's American shipyards.
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| 2,704 | Revenue and income ( *) |
1,555 | 1,240 |
| 195 | EBITDA ( *) |
103 | 80 |
| 7.2% | EBITDA margin ( ) ( *) |
6.6% | 6.4% |
| 4,400 | Order intake ( *) |
3,752 | 2,396 |
| 10,945 | Order book ( *) |
12,353 | 10,142 |
| 7,465 | Order backlog ( *) |
9,995 | 6,664 |
| 98 | Capital expenditure | 46 | 37 |
| 7 | Vessels delivered (number) ( ***) |
6 | 4 |
*) Before eliminations between operating segments
**) Ratio between segment EBITDA and Revenue and income
***) Vessels over 40 meters long
Revenue from the Shipbuilding operating segment increased by 25.4% to euro 1,555 million at 30 June 2015 (euro 1,240 million at 30 June 2014), of which euro 826 million from the cruise ships business unit (euro 616 million at 30 June 2014) and euro 554 million from the naval vessels business unit (euro 472 million at 30 June 2014). Compared with the first six months of 2014, cruise ship revenue increased by euro 210 million, with 11 ships under construction at the Group's Italian yards (of which 3 delivered in the six-month period) versus 7 ships under construction at 30 June 2014. The growth in revenue from the naval vessels business was mainly thanks to a larger contribution by the FMG Group, which benefited from the positive trend in the USD/Euro rate, helping offset lower activity in Italy pending the start of work on the Italian Navy's fleet renewal program. Revenue from other activities increased to euro 175 million from euro 152 million at 30 June 2014.
The segment's EBITDA came to euro 103 million at 30 June 2015. The improvement on the same period in 2014 is largely attributable to increased volumes, allowing better capacity utilization at the Group's Italian yards. The EBITDA margin was 6.6% for the first half of 2015 (6.4% in the first half of 2014). Despite the increase in segment revenue, it should be noted that the margins on cruise ships currently under construction, most of which prototypes, reflect severely depressed prices agreed during the crisis. In this context, Fincantieri is therefore engaged in achieving a significant growth in volumes, with 2 cruise ship prototypes delivered in 2015 and another 4 due for delivery in 2016. In order to fulfil this sizeable order backlog, not only has the Company embarked on extensive reorganization of its Italian sites without resorting to lay-offs whilst improving the mix of skills with the recruitment of over 380 new staff in Italy over the past 18 months, it is also working to rebuild the subcontractor network seriously undermined by the years of crisis.
New order intake of euro 3,752 million in the first six months of 2015 refers to:
Lastly, the cruise ship business saw the signing in the period of a strategic agreement with Carnival Corporation & plc for five next-generation cruise ships to be built over the period 2019-2022, and of a letter of intent with Virgin Cruises for three ships, with the value of both agreements currently reflected in the soft backlog.
Capital expenditure on Property, plant and equipment in the first six months of 2015 mostly involved continuation of projects initiated in 2014 at the Marghera shipyard in Italy and at the Marinette and Sturgeon Bay shipyards in the United States, as well as the start of work on modernizing hull-building technology and logistical support at the Sestri and Monfalcone yards in Italy in support of production volumes. As far as Intangible assets were concerned, there was continued expenditure on developing new technologies that comply with new international rules on cruise ship safety and noise reduction, and which will be applied to the large number of new prototypes currently in the order book.
The number of ships delivered in the first six months of 2015 is analyzed as follows:
| (number) | Deliveries |
|---|---|
| Cruise ships | 3 |
| Cruise ferries | 1 |
| Naval vessels > 40 m long | 2 |
| Mega-yachts | |
| Naval vessels < 40 m long | 3 |
The Offshore operating segment is engaged in the design and construction of support vessels for the oil&gas exploration and production market. Fincantieri operates in this market through the VARD Group, FINCANTIERI S.p.A. and Fincantieri Oil&Gas S.p.A..
The VARD Group also provides its customers with turnkey electrical systems, inclusive of engineering, manufacturing, installation, integration testing and commissioning.
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| 1,580 | Revenue and income ( *) |
626 | 681 |
| 108 | EBITDA ( *) |
29 | 66 |
| 6.8% | EBITDA margin ( ) ( *) |
4.6% | 9.6% |
| 1,131 | Order intake ( *) |
140 | 993 |
| 3,623 | Order book ( *) |
2,917 | 3,575 |
| 2,124 | Order backlog ( *) |
1,609 | 2,607 |
| 47 | Capital expenditure | 16 | 23 |
| 18 | Vessels delivered (number) | 9 | 11 |
*) Before eliminations between operating segments
**) Ratio between segment EBITDA and Revenue and income
Revenue from the Offshore operating segment amounted to euro 626 million at 30 June 2015, down 8.2% from euro 681 million in the first six months of 2014, largely due to the negative impact of changes in the Norwegian krone/Euro exchange rate (euro 27 million). It should also be noted that the Offshore segment's operating revenue in the first six months of 2014 included euro 15 million in utilizations of the provision recognized at the time of allocating the VARD Group's purchase price in respect of delays and higher expected costs at its Brazilian shipyards.
The Offshore segment reported EBITDA of euro 29 million at 30 June 2015 compared with euro 66 million in the first six months of 2014, with the margin dropping from 9.6% in the first half of 2014 to 4.6% in the first half of 2015. This deterioration is the result of weak operating performance by some of the VARD shipyards. In particular, operations in Norway and Romania are seeing a gradual reduction in the volume of activity as a result of lower order intake in a considerably shrunken market, leading to ever-increased focus on reducing costs. In Brazil, affected by persistent problems linked to the difficult political and economic situation, (i) at Niterói shipyard downsizing continues in line with the decreasing workload following recent vessel deliveries: after the delivery of the first LPG carrier on 9 July 2015, in its orderbook the yard has only the outfitting work on the second LPG carrier and one AHTS which has incurred cost overruns during the semester; and (ii) margins at the new Promar shipyard have been affected by additional cost overruns and provisions for completion of the outfitting of the first LPG carriers, whose estimated completion dates have been further postponed.
New order intake amounted to euro 140 million in the first six months of 2015, including an order for an OSCV for Kreuz Subsea. Since the second half of last year the decline in oil prices has significantly altered the spending outlook for oil exploration & production companies, involving a general scaling back of investment plans and introduction of cost-cutting programs.
The order backlog stood at euro 1,609 million at 30 June 2015, relating to 29 vessels, of which 17 of VARD's own design, ensuring a high volume of activity until 2017.
It is also reported that on 13 March 2015, the VARD Group terminated the contracts for the construction of two vessels after the companies that had ordered them filed for bankruptcy. The value of these orders has been excluded from the backlog at 30 June 2015, pending their purchase and associated contract formalization by new customers, with no impact on first-half profitability. In fact, the subsidiary still intends to complete the construction of the 2 vessels currently in production at VARD's Vietnamese yard and to resell them to a new customer.
Capital expenditure in the first six months of 2015 mainly related to the final stages of completion of the Vard Promar shipyard in Brazil, as well as to projects for technological upgrades at the yards in Romania and Vietnam, designed to improve production efficiency through greater process automation.
A total of 9 vessels were delivered:
| (number) | Deliveries |
|---|---|
| AHTS | 1 |
| PSV (including MRV) | 4 |
| OSCV | 2 |
| Other | 2 |
"Skandi Angra" was delivered to Norskan Offshore (DOF group) by the Niterói shipyard (Brazil);
The Equipment, Systems and Services operating segment is engaged in the design and manufacture of systems and equipment and the provision of after-sales services. These activities are carried out by FINCANTIERI S.p.A. and its subsidiaries Isotta Fraschini Motori S.p.A., Delfi S.r.l., Seastema S.p.A. and FMSNA Inc..
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| 192 | Revenue and income ( *) |
95 | 86 |
| 21 | EBITDA ( *) |
11 | 9 |
| 11.1% | EBITDA margin ( ) ( *) |
11.9% | 10.3% |
| 204 | Order intake ( *) |
306 | 119 |
| 663 | Order book ( *) |
932 | 686 |
| 300 | Order backlog ( *) |
513 | 304 |
| 5 | Capital expenditure | 3 | 2 |
| 53 | Engines produced in workshops (number) | 18 | 19 |
*) Before eliminations between operating segments
**) Ratio between segment EBITDA and Revenue and income
Revenue from the Equipment, Systems and Services operating segment increased by 11% yearon-year to euro 95 million at 30 June 2015. This improvement was primarily due to higher sales volumes for systems and equipment, in line with the development prospects for this business.
The segment's EBITDA came to euro 11 million at 30 June 2015, with an improvement in EBITDA margin to 11.9% from 10.3% in the first half of 2014, mainly reflecting the change in mix of products and services sold in the six months compared with the corresponding prior year period.
New order intake for Equipment, Systems and Services amounted to euro 306 million during the first six months of 2015, mostly comprising:
Other activities primarily refer to the costs incurred by corporate headquarters for directing, controlling and coordinating the business, that are not allocated to other operating segments.
| 31.12.2014 | (Euro/million) | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| - | Revenue and income | - | - |
| (27) | EBITDA | (15) | (13) |
| n.a. | EBITDA margin | n.a. | n.a. |
| 12 | Capital expenditure | 3 | 5 |
n.a. not applicable
Like in 2014, the most significant items of expenditure included development of the information systems in support of the Group's business, particularly the updating of technical design systems, the improvement of supply chain management systems and the updating of the Group's management software.
The market capitalization of Fincantieri, at the closing price on 30 June 2015, was approximately euro 1.2 billion. In terms of stock liquidity, around 202 million shares were traded from the start of the year to 30 June 2015, with a daily average trading volume in the period of around 1.6 million shares.
| 31.12.2014 | 30.06.2015 | 30.06.2014 | ||
|---|---|---|---|---|
| 0.70 | Average share price in the period | Euro | 0.76 | n.d. |
| 0.77 | Share price at period end | Euro | 0.68 | n.d. |
| 1,692 | Number of shares outstanding at period end | Million | 1,692 | n.d. |
| 1,300 | Market capitalization ( *) |
Euro/million | 1,184 | n.d. |
(*) Number of shares outstanding multiplied by reference share price at period end.
The application period for the allocation of bonus shares to entitled shareholders commenced on 4 July 2015, as indicated at the paragraph 5.2.3.4 of the Initial Italian Public Offering Prospectus for the listing of its ordinary shares on the Electronic Stock Market (MTA), organized and managed by Borsa Italiana S.p.A..
The bonus shares will be made available by the Selling Shareholder Fintecna S.p.A. and will be reserved to subscribers who were allotted Shares under the Italian Public Offering, and have held full and continuous ownership of such shares for twelve months from the Settlement Date (i.e. from 3 July 2014), provided that the shares have remained deposited with a Bookrunner or other authorized intermediaries participating in the centralized management system of Monte Titoli S.p.A..
On 29 January 2015, Fincantieri announced the incorporation of Fincantieri SI, a company based in Trieste, to design, manufacture and supply integrated innovative systems in the field of electric, electronic and electromechanical industrial solutions.
On 4 February 2015, SEA Europe, the association representing the European maritime industry and to which all the continent's major shipbuilding countries belong, officially launched the association known as "Vessels for the Future". The initiative, of which Fincantieri is a founding member along with Rolls Royce, aims to promote research, development and innovation in the maritime field, with a particular focus on vessels of the future and their operational requirements. On 9 February 2015, the three winning project ideas were announced for Innovation Challenge, the Open Innovation initiative developed by Fincantieri with the Department of Chemical, Management, Computer and Mechanical Engineering at the University of Palermo. The ideas selected will become joint research projects between Fincantieri and the University of Palermo. On 13 February 2015, the Board of Directors of FINCANTIERI S.p.A. approved, as part of a company reorganization process, the unification of the Corporate General Management unit, headed by Mr. Vitaliano Pappaianni, and the Operations General Management unit, headed by Mr. Enrico Buschi, into a single General Management unit. At the recommendation of Giuseppe Bono, the Chief Executive Officer, the Board also voted to appoint as General Manager Mr. Andrea Mangoni, already member of the company's Board of Directors since June 2013, who took office with effect from 13 March 2015.
During March 2015, FINCANTIERI S.p.A. signed a historic strategic memorandum of agreement with Carnival Corporation & plc for five next-generation ships, to be built over the period 2019- 2022. The agreement between the two companies also includes options for additional ship builds in the coming years. The agreement is subject to several conditions, including satisfactory shipowner financing.
On 12 March 2015, the VARD Group was informed that Nordmoon Schiffahrts GmbH & Co. KG and Nordlight Schiffahrts GmbH & Co. had filed for bankruptcy in the court of Neumünster in Germany. The VARD Group is building a PSV for each of these two companies at its shipyard in Vietnam and has received a 10% advance payment in respect of one of these two vessels. On 13 March 2015, the VARD Group terminated the contracts for the construction of the two vessels. The VARD Group does not anticipate having to return the advance payment and expects to be able to sell the two vessels at a price that will allow it to recover their construction costs, net of the advance received.
On 13 April 2015, Vard Group AS (55.63% controlled by Fincantieri) announced the incorporation of Vard Contracting AS, a Norwegian-registered company in which it owns 100% of the shares. The new company's mission is to improve control over services provided by subcontractors at Norwegian shipyards, to strengthen the competitiveness of these yards and to defend the Group's know-how. In April, Fincantieri signed an agreement with Banca Mediocredito FVG, allowing the naval engineering group's suppliers to access factoring services and to benefit from specific banking products giving them easier and cheaper access to credit. The agreement will enable Fincantieri's suppliers, particularly those in the Italian region of Friuli Venezia Giulia, many of whom already customers of Banca Mediocredito, to receive earlier payment for receivables owed by Fincantieri and to be eligible for banking services only available to supplier arrangements between the parties, thereby providing suppliers with better financial support.
During April 2015, Fincantieri signed agreements with the University of Palermo and the University of Rijeka aimed at working and cooperating together for mutual benefit.
On 5 May 2015, the subsidiary Marine Interiors S.p.A. finalized the acquisition of Santarossa Contract, a company in a state of voluntary arrangement and a traditional supplier of Fincantieri for the design and creation of turnkey cabin solutions and refitting for the cruise industry. This acquisition confirms Fincantieri's strategy of extending direct control over higher value-added business segments, with the aim of expanding its areas of business whilst also reducing its procurement costs.
On 5 May 2015, an employee of a subcontractor was hit violently in the face and on the head by a metal pipe during end-of-warranty work aboard an Italian Navy vessel at the Fincantieri yard in Muggiano, involving the removal of pipes in the emergency compressor room on deck 2 of the vessel. The worker was immediately attended to by the ship's doctor and then by a hospital emergency team and members of the Fire Department, duly alerted by Fincantieri, and then transported by helicopter to St. Martin's Hospital in Genoa where, because of the serious injuries suffered, he died. On 22 May 2015, Fincantieri signed an agreement for the acquisition of a minority stake via capital injection in Camper & Nicholsons International ("Camper and Nicholsons"), a global leader in all luxury yachting activities. The agreement gives Fincantieri the possibility of increasing its interest in Camper & Nicholsons at a later date.
On 2 June 2015, VARD announced that the "Skandi Africa", an Offshore Subsea Construction Vessel (OSCV), had received the prestigious "Ship of the Year" award, instituted by the major Nordic shipping magazine, Skipsrevyen. The award was presented by Norwegian Minister of Trade and Industry, Mrs. Monica Mæland, at the Nor-Shipping international maritime exhibition to representatives of DOF Subsea as shipowner and of VARD as designer and builder.
On 2 June 2015, VARD announced the launch of its "A step forward" innovation project following its strategy and long shipbuilding traditions in developing high technology and new solutions. The goal of the project is to develop tools to enable higher returns on investment for shipowners, increase the efficiency and ease of operations, and provide an attractive work environment on board. On 23 June 2015, Fincantieri and Virgin Cruises, a Virgin Group brand and new entrant to the cruise market, signed a binding letter of intent for the construction of three highly innovative cruise ship prototypes, scheduled for delivery in the years 2020, 2021 and 2022. Subject to satisfaction of the usual conditions for the shipowner, the related agreements are expected to be finalized by the last quarter of this year.
On 24 June 2015, Vard Holdings Limited announced the acquisition of 100% of the shares in ICD Software AS and its subsidiaries. The ICD Software Group is specialized in the development of automation and control system software for the offshore and marine sectors and has 63 employees, half of whom in Norway and the rest in two subsidiaries in Poland and Estonia. The acquisition was made by Seaonics AS, a 51% subsidiary of Vard Group AS. As a result of the acquisition, Seaonics is expected to be able to expand its business in deck handling equipment and automation technology. The acquisition forms part of the initiatives taken by the VARD Group to enhance its product range and develop new areas of business.
On 29 June 2015, Fincantieri launched the "Active Safety" training project at all the Group's Italian yards, with a session devoted to the topic of "protection from slips, trips and falls", representing a major cause of shipyard injury. The project, involving about 4,000 employees, is part of the "Towards Zero Accidents" operational safety program started by the Group in 2011, which over the years has led to a more than 50% reduction in the number of on-site accidents.
On 29 June 2015, in implementation of an order issued by the Criminal Court of Gorizia, the Italian Military Police's Environmental Operations Task Force from Udine preventively seized some areas of the Monfalcone shipyard used for sorting process residues and essential for the proper conduct of the production process. The request for seizure forms part of an investigation initiated in May 2013, and had already been rejected by the examining magistrate (GIP) at the Court of Gorizia, and by the latter Court on appeal. Following acceptance of the subsequent appeal to the Supreme Court filed by the Court of Gorizia's Public Prosecutor, the latter court was invested with renewed authority in this matter and this time ordered the precautionary measure. Fincantieri was forced, in accordance with the aforementioned court order, to suspend working activities for all the workers involved in the production cycle at the Monfalcone shipyard with effect from 30 June 2015. Following the entry into force of Legislative Decree 92 of 4 July 2015, the Gorizia Prosecutor's Office subsequently ordered on 6 July 2015 the release of the seized areas in the Monfalcone shipyard, allowing all the shipyard's production workers to resume their working activities on 7 July.
On 1 July 2015, Fincantieri announced that the order for a new ultra-luxury cruise ship secured in the first half of 2014 is for the client Silversea Cruises. The unit will be named "Silver Muse" and is due for delivery in April 2017.
In order to secure its presence in the Chinese market, during the month of July Fincantieri has established a Shanghai-based subsidiary in China, under the name of Fincantieri (Shanghai) Trading Co. Ltd. Forming part of Fincantieri's international expansion strategy, the aim is to capture the important business opportunities offered by the Chinese market in several sectors, such as cruise ships, repairs and conversions, offshore and marine systems and equipment. On 3 July 2015, Fincantieri was awarded a contract with the Bangladesh Coast Guard (BCG) for the supply of four Italian Navy "Minerva" class corvettes to be upgraded and converted into Offshore Patrol Vessels (OPV) and for the provision of the related integrated logistics support services. These vessels, which will be decommissioned by the Italian Navy and replaced by new ones under the fleet renewal program, have been remised by the Italian Navy through a reselling contract executed by the Central Unit of Naval Armament (NAVARM) and Fincantieri. On 4 July 2015, in the presence of the Minister of Justice, Andrea Orlando, the Fincantieri shipyard in Muggiano (La Spezia) hosted the launching ceremony for the "Romeo Romei" submarine, the last of the four U212A "Todaro" class sister vessels ordered from Fincantieri by the Central Unit of Naval Armament (NAVARM) for the Italian Navy.
On 21 July 2015, Vard Holdings Limited (55.63% controlled by Fincantieri) announced the incorporation of Vard Electro Italy Srl, an Italian-registered company 100% owned by Vard Electro AS. The main business of the new subsidiary will be to deliver turn-key electrical solutions to other parts of the Fincantieri Group.
In general terms, the Group forecasts a sustained order intake for the second half of 2015, particularly in the Shipbuilding segment, thanks to the expected finalization of cruise ship orders under the strategic memorandum of agreement with Carnival Corporation & plc for five nextgeneration cruise ships and under the agreement with Virgin Cruises for three prototype ships. In particular, in the Shipbuilding segment, the Group will be engaged in managing a plan for a major increase in design and production volumes, with 5 cruise ships due for delivery in 2016, of which 4 prototypes. In order to fulfil this sizeable order backlog, not only will the Group take steps to further improve its mix of skills by recruiting highly qualified personnel, it will also work to rebuild the subcontractor network seriously undermined by the years of crisis. In this context, it is confirmed that margins will continue to be affected by the low prices on orders acquired during the crisis for cruise ships currently under construction, as well as by not yet full utilization of the Group's production capacity in Italy. As for the naval business, the period will see reduced production volumes, despite the start of activities related to the Italian Navy's fleet renewal program.
Fincantieri also continues to be engaged in negotiations with trade unions for the renewal of the supplementary agreement in Italy which, after being extended for two years after its original expiry and after long discussions since the start of this year, was terminated on 30 March 2015. Fincantieri hopes that it will be possible to achieve labor relations better suited to competing in a global market, having raised as a central point of the negotiations the need for a significant improvement in the standards of efficiency, productivity and flexibility of the workforce in Italy. Despite the significant competitive challenges faced, described earlier, Fincantieri is in a position to ensure a considerable workload for the years to come, assuming it is put in a position to guarantee a standard of performance and quality that matches customer expectations.
As for the Offshore segment, the rest of 2015 will be characterized by a still very difficult global market environment, particularly in the North Sea, although opportunities exists in some specialized segment and niche markets. In order to take up such opportunities, VARD will focus on developing new concept designs for highly innovative vessels. The subsidiary will also continue to pursue actions to improve efficiency and cut costs in order to adjust its production capacity flexibly in line with the new order development, by reducing the workforce while preserving the core competencies needed to capture any opportunities once recovery sets in.
The Equipment, Systems and Services segment can expect to see further growth in volumes in the rest of 2015, arising from the diversification strategy implemented by the Group, with confirmation of the positive margins achieved in previous periods.
Direction and coordination by Fintecna S.p.A., the main shareholder of FINCANTIERI S.p.A., ceased as from 3 July 2014.
In compliance with the provisions of the Regulations concerning related party transactions adopted under Consob Resolution no. 17221 of 12 March 2010 and subsequent amendments and additions, FINCANTIERI S.p.A. has adopted a "Procedure for Related Party Transactions" with effect from 3 July 2014.
As far as related party transactions are concerned, these do not qualify as either atypical or unusual, since they fall within the normal course of business by the Group's companies. Such transactions are conducted under market conditions, taking into account the characteristics of the goods and services involved.
No purchases of the Parent Company's own shares have been made on the market in 2015.
The "Report on Corporate Governance and Ownership Structure" (the "Report") required by art. 123-bis of Italy's Consolidated Law on Finance is a stand-alone document approved by the Board of Directors on 13 March 2015, and published in the "Corporate Governance" section of the Company's website at www.fincantieri.it.
The Report has been prepared in accordance with the recommendations of the Corporate Governance Code and modeled on the "Format for the report on corporate governance and ownership structure - V Edition (January 2015)" drawn up by Borsa Italiana S.p.A..
The Report contains a general and complete overview of the corporate governance system adopted by FINCANTIERI S.p.A.. It illustrates the Company's profile and the principles underlying the way it conducts its business; it provides information about the ownership structure and adoption of the Corporate Governance Code, including the main governance practices applied and the main characteristics of the system of internal control and risk management; it contains a description of the operation and composition of the governing and supervisory bodies and their committees, roles, duties and responsibilities.
The criteria for determining the compensation of the directors are set out in the "Remuneration Report", prepared in compliance with the requirements of art. 123-ter of Italy's Consolidated Law on Finance and art. 84-quater of the Consob Issuer Regulations, and published in the "Corporate Governance" section of the Company's website.
The Fincantieri Group is exposed in the normal course of its business activities to various financial and non-financial risk factors, which, if they should materialize, could have an impact on the results of operations and financial condition of the Group. Based on operating performance in the first six months of the year and the macroeconomic context, the risk factors foreseeable for the next six months of 2015 are described below according to their nature.
Due to operational complexity arising not only from the inherent nature of shipbuilding but also from the Group's geographical and product diversification and acquisition-led growth, the Group is exposed to the risk of being unable to implement adequate project management activities or to adequately manage such operational complexity or the process of organizational integration, with particular reference to the VARD Group.
If the Group was unable to implement adequate project management activities, with sufficient or effective procedures and actions to control the proper completion and efficiency of its shipbuilding processes, or if it was unable to adequately manage the complexity arising from its product diversification or if it failed to efficiently distribute workloads according to production capacity (equipment and labor) available on each occasion at the different production facilities, the Group's revenue and profitability might decline, with possible negative effects on its results of operations and financial condition.
To manage processes of such complexity, the Group adopts procedures and action plans designed to manage and monitor the implementation of each project throughout its duration. In addition, the Group has adopted a flexible production structure in order to respond efficiently to fluctuations in demand for ships in the various business areas. This flexible approach allows the Group to overcome capacity constraints at individual shipyards and to work on more than one contract at the same time while guaranteeing very short lead times.
The Fincantieri Group has many years of experience of building cruise ships for Carnival, an American shipowner and key player in the cruise industry, which operates not only through the Carnival line but also through other prestigious lines such as P&O, Princess Cruises, Holland America Line, Cunard and Costa Cruises. The special relationship with the Carnival Group is a definite strength for the Fincantieri Group. In the naval vessels business, the bulk of revenue has traditionally come from the Italian Navy, whose demand for new ships is heavily dependent on defense spending policy. The subsidiary VARD operates in the offshore vessels market, with strong established customer relationships.
The shipbuilding industry in general has been historically characterized by cycles, sensitive to trends in the industries served. The Group's offshore and cruise customers base their investment plans on demand by their own customers; in the case of offshore, the main influence is energy demand and oil price forecasts, which in turn drive investment in exploration and production, while in the cruise market the main influence is the trend in the leisure market.
Postponement of fleet renewal programs or other events affecting the order backlog with the Fincantieri Group's principal cruise ship customer could impact capacity utilization and business profitability; similarly a downturn in the offshore market could lead to a reduction in the level of orders for the subsidiary VARD. The lack of resources earmarked by the State for defense spending to modernize the fleet is a variable that could influence the Group's economic and financial performance.
The Fincantieri Group's policy of diversifying its cruise ship customers, together with optimum joint planning of Carnival's requirements, has made it possible to enlarge the customer base. In the naval vessels business, participation in international projects like the FREMM program between Italy and France, is very important, as is the Group's expansion into the United States, aimed at securing new opportunities to expand production for the defense sector in wider foreign markets.
In order to mitigate the impact of the cyclical trend in the shipbuilding industry, the Group has pursued a diversification strategy in recent years, expanding its business both in terms of products and geographical coverage. Since 2005 the Group has expanded into the businesses of offshore, mega-yachts, marine systems and components, repairs, refitting and after-sales service. In parallel, the Group has expanded its business internationally, including through acquisitions. Given the current decline in market volumes in the offshore business, the subsidiary VARD has initiated a workforce downsizing program at its facilities in Norway and Romania. This program includes those actions to improve efficiency and cut costs so as to adjust production capacity flexibly in line with new order development, by reducing the workforce while preserving the core competencies needed to capture any opportunities once recovery sets in.
The production of standard vessels is now dominated by Asian shipyards, meaning that competitiveness can only be maintained by specializing in high value-added markets. As far as civilian vessels are concerned, the Parent Company has been focusing for several years on the cruise ship and cruise ferry segments, where it has a long track record; following the acquisition of VARD, it has recently extended this focus to the production of offshore support vessels. Aggressive commercial policies, development of new products or increases in production capacity by competitors may result in price competition with a reduction in profit margins. As far as naval vessels are concerned, the Group has an established relationship with the Italian Navy, representing a strategic asset for the business. Maintenance of a leading position in its core business areas depends on the ability to perform well in terms of quality and on-time delivery.
The Group endeavors to maintain competitive position in its business areas by ensuring a high quality, innovative product, and by seeking optimal costs as well as flexible technical and financial solutions in order to be able to propose more attractive offers than the competition. As far as naval vessels are concerned, efforts are being made to develop international business through an active presence in the defense markets of the United States and other countries without their own domestic shipbuilding industry or, even if there is one, that lack the right technical skills, knowhow or infrastructure for vessels of this kind.
Despite the difficult market environment, the subsidiary VARD maintains a major focus on research and development having launched its "A step forward" project for the development of new design concepts for highly innovative vessels able to generate higher returns on investments for shipowners.
The pursuit of business opportunities in emerging markets, particularly in the defense sector, leads to increased exposure to country risk and/or risk of international bribery and corruption.
In pursuing business opportunities in emerging markets, the Group safeguards itself by favoring commercial prospects that are supported by inter-governmental agreements or other forms of cooperation between States, as well as by creating, within its own organization, appropriate safeguards to monitor the processes at risk.
The shipbuilding contracts managed by the Group are mostly long-term contracts for a fixed consideration, any change in which must be agreed with the customer. The price agreed upon signing the contract must take into account the costs of raw materials, machinery, components, sub-contracts and all other construction-related costs (including personnel costs and overheads); the determination of such costs is more complicated in the case of prototype or particularly complex ships.
Upward variations in costs not foreseen at the pre-contractual stage and not covered by a parallel increase in price can lead to a reduction in margins on the contracts concerned.
The Group takes into consideration expected increases in the components of contract costs when determining the offer price. In addition, at the time of signing the contract, fixed-price purchase options will already have been defined for some of the vessel's principal components.
Many factors can influence production programs and capacity utilization, and so impact the contractual terms of vessel delivery with possible penalties payable by the Group. These factors include, inter alia, strikes, events related to adverse weather conditions, design changes or problems in the procurement of key supplies.
If the causes of late delivery are not recognized by contract, shipbuilding contracts provide for the payment of penalties that generally increase the longer the delay.
The Group manages its contracts through dedicated structures that control all aspects during the contract life cycle (design, procurement, construction, outfitting).
A significant number of the Group's shipbuilding contracts (in general, for merchant vessels like cruise ships and offshore support vessels) establish that only a part of the contract price is paid by the customer during the period of ship construction; the balance of the price is paid upon delivery.
As a result, the Group incurs significant upfront costs, assuming the risk of incurring such costs before receiving full payment of the price from its customers and thus having to finance the working capital absorbed by ships under construction.
If the Group was unable to finance the working capital needs of ships under construction, it might not be able to complete contracts or win new ones, with negative effects on its results of operations and financial condition.
The Group maintains a more than sufficient level of committed and uncommitted credit lines and construction loans to guarantee coverage of the working capital needs generated by its operations.
The ships built by the Group can have a high contract price, meaning that its customers often rely on finance to finalize the placement of orders.
In the case of overseas customers, these are eligible for export finance schemes structured in accordance with OECD rules.
Under such schemes, overseas buyers of ships can obtain bank credit against receipt of a guarantee by a national export credit agency, which in the case of Italy is SACE S.p.A..
The availability of export financing is therefore a key requirement for allowing customers to award contracts to the Group, especially where cruise ship construction is concerned.
The lack of available finance for the Group's customers could have a significantly adverse effect on the Group's ability to obtain new orders as well as the ability of customers to comply with the contractual terms of payment.
Fincantieri supports foreign customers during the process of finalizing export finance and particularly in managing relations with the agencies and companies involved in structuring such finance (for example, SACE, Simest and the banks). In addition, the process of structuring finance is managed in parallel with the process of finalizing the commercial contract, the enforceability of which is often subject to the shipowner's receipt of the commitment by SACE and the banks to provide an export credit guarantee.
As an additional safeguard for the Group, in the event of a customer's default on its contractual obligations, Fincantieri has the right to terminate the contract, retaining ownership of the ship under construction and keeping the payments received. The customer may also be held liable for any uncovered costs.
The Fincantieri Group's decision to outsource some of its business activities is dictated by strategic considerations based on two factors: a) outsource activities for which there are insufficient inhouse skilled resources; b) outsource activities for which there are no in-house skilled resources and which would be too expensive and inefficient to develop.
A negative performance by suppliers in terms of quality, timing or costs causes production costs to rise, and the customer's perception of the quality of the Fincantieri product to deteriorate.
The Group has specific personnel in charge of coordinating the assembly of ship internal systems and managing specific areas of outsourced production. In addition, the Fincantieri Group carefully selects its "strategic suppliers", which must meet the highest standards of performance. As part of the Parent Company's Supply Chain improvement project, a precise program of supplier performance evaluation has been developed in this regard, ranging from qualitative measurement of the services rendered to the strict observation of safety regulations, in line with the Group's "Towards Zero Accidents" objective.
The Fincantieri Group has a vast accumulation of experience, know-how and business knowledge. As far as the workforce is concerned, the domestic labor market is not always able to satisfy the needs of production, either in terms of numbers or skills. The effective management of the Group's business is also linked to the ability to attract talent, and to retain such talent within the Group.
The inadequacy of the domestic labor market to meet the Group's needs, the inability to acquire the necessary skills and the failure to transfer specific knowledge, particularly in the technical sphere, could have negative effects on product quality.
The Human Resources Department constantly monitors the labor market and maintains frequent contact with universities, vocational schools and training institutes. The Group also makes a significant investment in training its staff, not only in technical-specialist and managerialrelational skills, but also regarding safety and quality. Lastly, specific training activities are planned to ensure that key management positions are covered in the event of staff changes.
The Fincantieri Group must abide by the rules, regulations and laws in force in the countries where it operates. Any breaches of such rules and regulations could result in civil, administrative or criminal sanctions, along with an obligation to do all that is necessary to conform with such regulations, the costs and liability for which could have a negative impact on the Group's business and results. The Group's activities must also comply with regulations governing the environment and health and safety at work.
Any changes in safety or environmental standards, as well as the occurrence of exceptional or unforeseen events could cause the Fincantieri Group to incur extraordinary costs relating to the environment or health and safety at work.
The Group promotes compliance with all rules, regulations and laws that apply to it and implements and updates suitable prevention control systems for mitigating the risks associated with breach of such rules, regulations and laws. In particular, the Parent Company has fully implemented the provisions of Italian Legislative Decree 81/2008 - "Implementation of art. 1 of Law no. 123 dated 3 August 2007, concerning health and safety at work" (known as the "Health and Safety at Work Act"). Fincantieri has adopted suitable organizational models for preventing breach of these regulations, and sees that such models are reviewed and updated on an ongoing basis. The commitment to pursue and promote principles of environmental sustainability has been reaffirmed in the Parent Company's Environmental Policy document, which binds the Group to uphold regulatory compliance and to monitor working activities to ensure effective observance of the rules and regulations. The subsidiary VARD devotes great attention to minimizing the impact of its activities on the environment, with significant actions in terms of resources allocated, policies and procedures to improve its environmental performance. Fincantieri and VARD have started to implement and operate an Environmental Management System at their sites with a view to obtaining certification under UNI EN ISO 14001:2004. Furthermore, in order to prevent and manage the risk of occurrence of unlawful acts, the Parent Company has adopted an organizational, management and control model under Italian Legislative Decree 231 of 8 June 2001.
Working in the defense and security sector, the Group is exposed to the risk that the evolving tendency in this sector could lead in the near future to restrictions on the currently permitted exceptions to competition law, with consequent limitations on the direct award of business, for the purpose of ensuring greater competition in this particular market.
Possible limitations on the direct award of business could prevent the Group from being awarded work through negotiated procedures, without any prior publication of a public tender notice.
The Group is monitoring the possible evolution of national and Community legislation that could open up the possibility of competing in the defense and security sector including in other countries.
The Group's business could be adversely affected by any disruption of the computer system or network or by illegal attempts to gain unauthorized access or by breaches of its data security system, including coordinated attacks by groups of hackers.
Computer system failures, loss or corruption of data, including as a result of external attacks, inappropriate IT solutions for the needs of the business, or updates to IT solutions not in line with user needs, could affect the Group's operations by causing errors in the execution of operations, inefficiencies and procedural delays and other disruptions.
The Group believes that it has taken all necessary steps to minimize these risks, by adopting best practice solutions of governance and by continuously monitoring the management of its IT infrastructure and applications.
The Group is exposed to economic and transaction exchange rate risks on sales and purchase contracts denominated in a currency other than the functional one and on the associated assets and liabilities. In addition, translation risk can arise when preparing the consolidated financial statements, through translation of the income statements and balance sheets of consolidated companies that prepare their financial statements in a functional currency other than the Euro (mainly NOK, USD and BRL).
The absence of adequate currency risk management could erode profit margins, particularly if currencies in which shipbuilding contracts are denominated were to depreciate, or if the currencies in which procurement contracts are denominated were to appreciate.
Fincantieri has a policy of managing economic and transaction financial risks that defines instruments, responsibilities and reporting procedures, establishing what can be used and the authorization levels required in different situations.
The Group does not take out any hedges against the currency risk relating to translation of financial statements of subsidiaries that use functional currencies other than the Euro (translation risk).
Some of the loan agreements entered into by the Group require it to comply with conditions, commitments and constraints of a financial and legal nature (such as the occurrence of events of default, even potential ones, cross-default clauses and covenants), non-observance of which could lead to early repayment of the loans.
In the event of early repayment and if the ability to access credit was limited, including because of its financial performance, the Group could be forced to delay raising capital or to seek financial resources under more onerous terms and conditions, with negative effects on its results of operations and financial condition.
The Group constantly monitors both the circumstances that could adversely affects its results of operations and financial condition and its current and future capital and financial structure in order to verify compliance with the above conditions and covenants. In addition, the Group can prevent the activation of cross-default clauses by promptly providing additional guarantees to the banks.
fincantieri /// half-year financial report at 30 june 2015 40 / 41
Fincantieri's management reviews the performance of the Group and its business segments using certain non-GAAP measures not defined under IFRS. In particular, EBITDA is used as the main earnings indicator, as it enables the Group's underlying profitability to be assessed, by eliminating the impact of volatility associated with non-recurring items or extraordinary items outside the ordinary course of business.
As required by Recommendation no. 05-178b of the Committee of European Securities Regulators, the components of each of these measures are described below:
| 30.06.2015 | 30.06.2014 | |||
|---|---|---|---|---|
| (Euro/million) | Amounts in IFRS statement |
Amounts in reclassified statement |
Amounts in IFRS statement |
Amounts in reclassified statement |
| A – Revenue | 2,220 | 1,983 | ||
| Operating revenue | 2,179 | 1,962 | ||
| Other revenue and income | 41 | 21 | ||
| B - Materials, services and other costs | (1,636) | (1,425) | ||
| Materials, services and other costs | (1,640) | (1,427) | ||
| Recl. to I – Extraordinary and non-recurring income and expenses | 4 | 2 | ||
| C - Personnel costs | (459) | (406) | ||
| Personnel costs | (462) | (414) | ||
| Recl. to I – Extraordinary and non-recurring income and expenses | 3 | 8 | ||
| D - Provisions and impairment | 3 | (10) | ||
| Provisions and impairment | (6) | (21) | ||
| Recl. to I – Extraordinary and non-recurring income and expenses | 9 | 11 | ||
| E - Depreciation and amortization | (54) | (49) | ||
| Depreciation and amortization | (54) | (49) | ||
| F – Finance income and (costs) | (62) | (28) | ||
| Finance income and costs | (62) | (28) | ||
| G - Income/(expense) from investments | 1 | |||
| Income/(expense) from investments | 1 | |||
| H - Income taxes | (19) | (18) | ||
| Income taxes | (15) | (12) | ||
| Recl. to L – Tax effect of extraordinary and non-recurring income and expenses | (4) | (6) | ||
| I - Extraordinary and non-recurring income and expenses | (16) | (21) | ||
| Recl. from B - Materials, services and other costs | (4) | (2) | ||
| Recl. from C - Personnel costs | (3) | (8) | ||
| Recl. from D - Provisions and impairment | (9) | (11) | ||
| L- Tax effect of extraordinary and non-recurring income and expenses | 4 | 6 | ||
| Recl. from H – Income taxes | 4 | 6 | ||
| Profit/(loss) for the period | (19) | 33 |
| 30.06.2015 | 31.12.2014 | ||||
|---|---|---|---|---|---|
| Amounts in IFRS |
Amounts in reclassified |
Amounts in IFRS |
Amounts in reclassified |
||
| (Euro/million) | statement | statement | statement | statement | |
| A) | Intangible assets | 533 | 508 | ||
| Intangible assets | 533 | 508 | |||
| B) | Property, plant and equipment | 977 | 959 | ||
| Property, plant and equipment | 977 | 959 | |||
| C) | Investments | 69 | 60 | ||
| Investments | 69 | 60 | |||
| D) | Other non-current assets and liabilities | (36) | (48) | ||
| Derivative assets | 6 | 1 | |||
| Other non-current assets | 12 | 15 | |||
| Other liabilities | (47) | (46) | |||
| Derivative liabilities | (7) | (18) | |||
| E) | Employee benefits | (58) | (62) | ||
| Employee benefits | (58) | (62) | |||
| F) | Inventories and advances | 461 | 388 | ||
| Inventories and advances | 461 | 388 | |||
| G) | Construction contracts and advances from customers | 1,566 | 1,112 | ||
| Construction contracts - assets | 1,943 | 1,649 | |||
| Construction contracts – liabilities and advances from customers | (377) | (537) | |||
| H) | Construction loans | (868) | (847) | ||
| Construction loans | (868) | (847) | |||
| I) | Trade receivables | 432 | 610 | ||
| Trade receivables and other current assets | 742 | 975 | |||
| Recl. to N) Other assets | (310) | (365) | |||
| L) | Trade payables | (1,017) | (1,047) | ||
| Trade payables and other current liabilities | (1,239) | (1,277) | |||
| Recl. to N) Other liabilities | 222 | 230 | |||
| M) | Provisions for risks and charges | (111) | (129) | ||
| Provisions for risks and charges | (111) | (129) | |||
| N) | Other current assets and liabilities | (164) | (18) | ||
| Deferred tax assets | 131 | 141 | |||
| Income tax assets | 57 | 55 | |||
| Derivative assets | 24 | 47 | |||
| Recl. from I) Other current assets | 310 | 365 | |||
| Deferred tax liabilities | (84) | (84) | |||
| Income tax liabilities | (13) | (25) | |||
| Derivative liabilities and option fair value | (367) | (287) | |||
| Recl. from L) Other current liabilities | (222) | (230) | |||
| NET INVESTED CAPITAL | 1,784 | 1.486 | |||
| O) | Equity | 1,564 | 1,530 | ||
| P) | Net financial position | 220 | (44) | ||
| SOURCES OF FUNDING | 1,784 | 1.486 | |||
| Q) | Net (assets)/liabilities held for sale |
| page | |
|---|---|
| 48 | Consolidated statement of financial position |
| 49 | Consolidated statement of comprehensive income |
| 50 | Consolidated statement of changes in equity |
| 51 | Consolidated statement of cash flows |
| (Euro/000) | Note | 30.06.2015 | of which related parties Note 28 |
31.12.2014 | of which related parties Note 28 |
|---|---|---|---|---|---|
| ASSETS | |||||
| NON-CURRENT ASSETS | |||||
| Intangible assets | 5 | 532,734 | 508,643 | ||
| Property, plant and equipment | 6 | 977,606 | 958,517 | ||
| Investments accounted for using the equity method | 7 | 60,847 | 52,796 | ||
| Other investments | 7 | 8,005 | 7,683 | ||
| Financial assets | 8 | 135,823 | 7,449 | 124,480 | 7,147 |
| Other assets | 9 | 11,788 | 568 | 14,705 | 972 |
| Deferred tax assets | 10 | 130,832 | 140,914 | ||
| Total non-current assets | 1,857,635 | 1,807,738 | |||
| CURRENT ASSETS | |||||
| Inventories and advances | 11 | 461,219 | 2,032 | 388,467 | 842 |
| Construction contracts – assets | 12 | 1,931,880 | 1,649,278 | ||
| Trade receivables and other current assets | 13 | 742,223 | 73,422 | 975,051 | 104,992 |
| Income tax assets | 14 | 57,175 | 54,532 | ||
| Financial assets | 15 | 88,809 | 1,448 | 136,693 | 1,396 |
| Cash and cash equivalents | 16 | 405,958 | 552,285 | ||
| Total current assets | 3,687,264 | 3,756,306 | |||
| TOTAL ASSETS | 5,544,899 | 5,564,044 | |||
| EQUITY AND LIABILITIES | |||||
| EQUITY | 17 | ||||
| Equity attributable to owners of the parent | |||||
| Share capital | 862,981 | 862,981 | |||
| Reserves and retained earnings | 488,164 | 447,036 | |||
| Total Equity attributable to owners of the parent | 1,351,145 | 1,310,017 | |||
| Non-controlling interests | 212,647 | 219,875 | |||
| Total Equity | 1,563,792 | 1,529,892 | |||
| NON-CURRENT LIABILITIES | |||||
| Provisions for risks and charges | 18 | 97,257 | 108,621 | ||
| Employee benefits | 19 | 58,092 | 62,141 | ||
| Financial liabilities | 20 | 630,787 | 9,224 | 652,918 | 17,625 |
| Other liabilities | 21 | 46,313 | 45,506 | ||
| Deferred tax liabilities | 10 | 84,350 | 84,277 | ||
| Total non-current liabilities | 916,799 | 953,463 | |||
| CURRENT LIABILITIES | |||||
| Provisions for risks and charges | 18 | 14,428 | 19,864 | ||
| Construction contracts – liabilities | 12 | 366,218 | 536,601 | ||
| Trade payables and other current liabilities | 22 | 1,238,982 | 12,972 | 1,277,425 | 14,981 |
| Income tax liabilities | 13,216 | 25,178 | |||
| Financial liabilities | 23 | 1,431,464 | 14,609 | 1,221,621 | 1,762 |
| Total current liabilities | 3,064,308 | 3,080,689 | |||
| TOTAL EQUITY AND LIABILITIES | 5,544,899 | 5,564,044 |
| (Euro/000) | Note | 30.06.2015 | of which related parties Note 28 |
30.06.2014 | of which related parties Note 28 |
|---|---|---|---|---|---|
| Operating revenue | 24 | 2,179,221 | 210,228 | 1,961,596 | 161,168 |
| Other revenue and income | 24 | 40,835 | 781 | 21,217 | 1,427 |
| Materials, services and other costs of which non-recurring |
25 28 |
(1,640,082) (3,923) |
(15,158) | (1,426,889) (1,717) |
(4,964) |
| Personnel costs of which non-recurring |
25 28 |
(461,463) (2,790) |
(413,474) (7,756) |
||
| Depreciation and amortization | 25 | (54,001) | (48,630) | ||
| Provisions and impairment of which non-recurring |
25 28 |
(6,048) (8,959) |
(21,377) (11,041) |
||
| Finance income | 26 | 25,370 | 161 | 9,049 | 196 |
| Finance costs | 26 | (87,423) | (396) | (37,041) | (2,190) |
| Income/(expense) from investments | (404) | (342) | |||
| Share of profit/(loss) of investments accounted for using the equity method |
781 | 1,051 | |||
| Income taxes | 27 | (15,737) | (12,587) | ||
| PROFIT/(LOSS) FOR THE PERIOD (A) | (18,951) | 32,573 | |||
| Attributable to owners of the parent | 12,489 | 23,255 | |||
| Attributable to non-controlling interests | (31,440) | 9,318 | |||
| Basic/diluted earnings/(loss) per share (Euro) | 28 | 0.00738 | 0.01872 | ||
| Other comprehensive income/(losses), net of tax (OCI) | |||||
| Gains/(losses) from remeasurement of employee defined benefit plans |
17 - 19 | 2,709 | (758) | ||
| Total gains/(losses) that will not be reclassified to profit or loss, net of tax attributable to non-controlling interests |
17 | 2,709 | (758) | ||
| Effective portion of gains/(losses) on cash flow hedging instruments |
17 | (5,716) | 156 | ||
| Gains/(losses) arising from changes in OCI of investments accounted for using the equity method |
|||||
| Gains/(losses) arising from fair value measurement of available-for-sale securities and bonds |
|||||
| Exchange gains/(losses) arising on translation of foreign subsidiaries' financial statements |
17 | 53,970 | 8,323 | ||
| Total gains/(losses) that may be subsequently reclassified to profit or loss, net of tax |
17 | 48,254 | 8,479 | ||
| attributable to non-controlling interests | 22,328 | 2,865 | |||
| Total other comprehensive income/(losses), net of tax (B) attributable to non-controlling interests |
17 | 50,963 22,328 |
7,721 2,865 |
||
| TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD (A) + (B) |
32,012 | 40,294 | |||
| Attributable to owners of the parent | 41,124 | 28,111 | |||
| Attributable to non-controlling interests | (9,112) | 12,183 |
| (Euro/000) | Note | Share capital |
Reserves and retained earnings |
Equity attributable to owners of the parent |
Equity attributable to non controlling interests |
Total |
|---|---|---|---|---|---|---|
| 01.01.2014 | 17 | 633,481 | 334,860 | 968,341 | 242,225 | 1,210,566 |
| Business combinations | ||||||
| Acquisition of non-controlling interests | (1,642) | (1,642) | (2,258) | (3,900) | ||
| Dividend distribution | (10,000) | (10,000) | (10,000) | |||
| Other changes/roundings | (11) | (11) | (11) | |||
| Total transactions with owners | (11,653) | (11,653) | (2,258) | (13,911) | ||
| Profit/(Loss) for the period | 23,255 | 23,255 | 9,318 | 32,573 | ||
| OCI for the period | 4,856 | 4,856 | 2,865 | 7,721 | ||
| Total comprehensive income for the period |
28,111 | 28,111 | 12,183 | 40,294 | ||
| 30.06.2014 | 17 | 633,481 | 351,318 | 984,799 | 252,150 | 1,236,949 |
| 01.01.2015 | 17 | 862,981 | 447,036 | 1,310,017 | 219,875 | 1,529,892 |
| Business combinations | 1,893 | 1,893 | ||||
| Share capital increase | ||||||
| Acquisition of non-controlling interests | ||||||
| Other changes/roundings | 4 | 4 | (9) | (5) | ||
| Total transactions with owners | 4 | 4 | 1,884 | 1,888 | ||
| Profit/(Loss) for the period | 12,489 | 12,489 | (31,440) | (18,951) | ||
| OCI for the period | 28,635 | 28,635 | 22,328 | 50,963 | ||
| Total comprehensive income for the period |
41,124 | 41,124 | (9,112) | 32,012 | ||
| 30.06.2015 | 17 | 862,981 | 488,164 | 1,351,145 | 212,647 | 1,563,792 |
| (Euro/000) | Note | 30.06.2015 | 30.06.2014 |
|---|---|---|---|
| NET CASH FLOWS FROM OPERATING ACTIVITIES - of which related parties |
29 | (163,248) 28,755 |
19,008 (48,094) |
| Investments in: - intangible assets |
(12,005) | (14,216) | |
| - property, plant and equipment | (55,670) | (52,895) | |
| - equity investments | (6,350) | (2,619) | |
| - business combinations, net of cash acquired | (5,234) | ||
| Disposals of: - intangible assets |
102 | ||
| - property, plant and equipment | 91 | ||
| - equity investments | 7 | ||
| Acquisition of non-controlling interests | (3,900) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | (79,066) | (73,623) | |
| Change in non-current loans: - disbursements |
134,270 | 17,083 | |
| - repayments | (82,163) | (17,158) | |
| Change in non-current financial receivables: - disbursements |
(7,769) | (2,226) | |
| - repayments | 2,441 | 11,754 | |
| Change in current bank loans and credit facilities | (19,067) | 60,146 | |
| Change in other financial liabilities/receivables | 57,055 | 65,074 | |
| Change in receivables for held-for-trading financial instruments | (5) | ||
| Change in payables for held-for-trading financial instruments | 1,327 | 82 | |
| CASH FLOWS FROM FINANCING ACTIVITIES - of which related parties |
86,094 4,092 |
134,750 73,885 |
|
| NET CASH FLOWS FOR THE PERIOD | (156,220) | 80,135 | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 552,285 | 384,506 | |
| Effect of exchange rate changes on cash and cash equivalents | 9,893 | 7,206 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 405,958 | 471,847 |
| page | |
|---|---|
| 54 | Note 1 - Form, contents and other general information |
| 56 | Note 2 - Scope and basis of consolidation |
| 57 | Note 3 - accounting standards |
| 57 | Note 4 - Critical accounting estimates and assumptions |
| 57 | Note 5 - Intangible assets |
| 58 | Note 6 - Property, plant and equipment |
| 59 | Note 7 -I accounted for using the equity method and other investments |
| 60 | Note 8 - Non-current financial assets |
| 60 | Note 9 - Other non-current assets |
| 61 | Note 10 - Deferred tax assets and liabilities |
| 61 | Note 11 - Inventories and advances |
| 62 | Note 12 - Construction contracts – net assets and liabilities |
| 63 | Note 13 - Trade receivables and other current assets |
| 64 | Note 14 - Income tax assets |
| 64 | Note 15 - Current financial assets |
| 65 | Note 16 - Cash and cash equivalents |
| 65 | Note 17 - Equity |
| 67 | Note 18 - Provisions for risks and charges |
| 68 | Note 19 - Employee benefits |
| 68 | Note 20 - Non-current financial liabilities |
| 69 | Note 21 - Other non-current liabilities |
| 70 | Note 22 - Trade payables and other current liabilities |
| 70 | Note 23 - Current financial liabilities |
| 71 | Note 24 - Revenue and income |
| 71 | Note 25 - Operating costs |
| 73 | Note 26 - Finance income and costs |
| 73 | Note 27 - Income taxes |
| 74 | Note 28 - Other information |
| 82 | Note 29 - Cash flows from operating activities |
| 83 | Note 30 - Segment information |
| 85 | Note 31 - Events after 30 June 2015 |
FINCANTIERI S.p.A. (hereinafter "Fincantieri", the "Company" or the "Parent Company" and, together with its subsidiaries, the "Group" or the "Fincantieri Group") is a public limited company with its registered office in Via Genova no. 1, Trieste (Italy), and listed on the Italian Stock Exchange. The Group is one of the world's top players in the shipbuilding industry and one of the most diversified globally, offering design and construction services for high value-added products such as cruise ships, naval vessels, ferries, mega-yachts, offshore vessels, and marine systems and equipment.
As at 30 June 2015, 72.5% of the Company's share capital of euro 862,980,725.70 was held by Fintecna S.p.A.; the remainder of share capital was spread between a number of private investors, none of whom held significant interests of 2% or above. It should be noted that 100% of the share capital of Fintecna S.p.A. is owned by Cassa Depositi e Prestiti S.p.A. (hereinafter also referred to as "CDP"), 80.1% of whose share capital is in turn owned by Italy's Ministry of Economy and Finance.
In 2007 Fincantieri took up the option permitted by Italian Legislative Decree 38 dated 28 February 2005, governing the exercise of the options contained in article 5 of European Regulation no.1606/2002 concerning international accounting standards.
Therefore, starting from the year ended 31 December 2007, the consolidated financial statements of the Fincantieri Group have been prepared in compliance with IFRS, meaning all the International Financial Reporting Standards, all the International Accounting Standards ("IAS"), and all the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") previously known as the Standing Interpretations Committee ("SIC"), which, at the reporting date of the consolidated financial statements, have been endorsed by the European Union in accordance with the procedure laid down in Regulation (EC) no. 1606/2002 of the European Parliament and European Council dated 19 July 2002.
The condensed consolidated interim financial statements as at and for the six months ended 30 June 2015 (the "Condensed Consolidated Interim Financial Statements"), were approved by the Company's Board of Directors on 21 July 2015.
PricewaterhouseCoopers S.p.A., the firm appointed to perform the statutory audit of the separate financial statements of the Parent Company and its main subsidiaries, has performed a limited review of the Condensed Consolidated Interim Financial Statements.
The Half-Year Financial Report of the Fincantieri Group as at 30 June 2015 has been prepared in accordance with the provisions of art. 154-ter par. 2 of Italian Legislative Decree no. 58/98 (known as the "Consolidated Law on Finance") and subsequent amendments and additions.
The Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. IAS 34 allows the preparation of financial statements in a "condensed" format, in which the minimum level of disclosure is less than that required by the IFRSs, as long as the reporting entity has previously published a complete set of financial statements prepared in accordance with IFRS. Since the contents of the Condensed Consolidated Interim Financial Statements are presented in a condensed format, they must be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2014, prepared in accordance with IFRS (the "2014 Consolidated Financial Statements").
With regard to the main financial risks to which the Group is exposed - credit risk, liquidity risk and market risk (in particular currency, interest rate and commodity price risk) - the management of these financial risks is the responsibility of the Parent Company which decides, in close collaboration with its operating units, whether and how to hedge these risks. There have been no significant changes in the major financial risks faced compared with those described in the 2014 Consolidated Financial Statements which should be consulted for more details. The following table shows the financial assets and liabilities that are measured at fair value at 30 June 2015 and 31 December 2014 according to their level in the fair value hierarchy:
| 30.06.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Assets | ||||||
| Available-for-sale financial assets | ||||||
| Equity instruments | 6,895 | 5,750 | 952 | |||
| Debt instruments | ||||||
| Hedging derivatives | 29,350 | 48,248 | ||||
| Held-for-trading derivatives | ||||||
| Total assets | 29,350 | 6,895 | 53,998 | 952 | ||
| Liabilities | ||||||
| Financial liabilities at fair value through profit or loss |
16,981 | 15,649 | ||||
| Hedging derivatives | 341,168 | 276,797 | ||||
| Held-for-trading derivatives | 14,865 | 13,538 | ||||
| Total liabilities | 356,033 | 16,981 | 290,335 | 15,649 |
The Group presents its statement of financial position using a "non-current/current" distinction, its statement of comprehensive income using a classification based on the nature of expenses, and its statement of cash flows using the indirect method.
As previously stated, the scope and basis of consolidation adopted for the preparation of the Condensed Consolidated Interim Financial Statements are in line with those used to prepare the 2014 Consolidated Financial Statements, except as reported in Note 3.
In addition to the incorporation of Vard Contracting AS, the following changes in the scope of consolidation took place during the first half of 2015:
No significant transactions or unusual events took place during the first half of 2015 or of 2014, except as reported in the Condensed Consolidated Interim Financial Statements as at and for the six months ended 30 June 2015. It is also noted that the Group's business is not subject to seasonal trends.
The exchange rates used to translate the financial statements of Group companies with a "functional currency" other than the Euro are as follows:
| 30.06.2015 | 31.12.2014 | 30.06.2014 | ||||
|---|---|---|---|---|---|---|
| Average rate | Closing rate | Average rate | Closing rate | Average rate | Closing rate | |
| US Dollar (USD) | 1.1158 | 1.1189 | 1.3285 | 1.2141 | 1.3726 | 1.3607 |
| UAE Dirham (AED) | 4.0967 | 4.1075 | 4.8796 | 4.4594 | 5.0415 | 4.9978 |
| Brazilian Real (BRL) | 3.3102 | 3.4699 | 3.1211 | 3.2207 | 3.1723 | 3.0315 |
| Norwegian Krone (NOK) | 8.6483 | 8.7910 | 8.3544 | 9.0420 | 8.2890 | 8.1425 |
| Indian Rupee (INR) | 70.1244 | 71.1873 | 81.0406 | 76.7190 | 83.7098 | 80.4020 |
| Romanian Leu (RON) | 4.4479 | 4.4725 | 4.4437 | 4.4828 | 4.4787 | 4.4030 |
The Group has not adopted early any accounting standards and interpretations whose application is not mandatory from 1 January 2015.
A full description of the use of accounting estimates can be found in the Consolidated Financial Statements at 31 December 2014.
Certain valuation processes, particularly the more complex ones, such as the determination of any impairment of non-current assets, are generally carried out in full only when preparing the annual financial statements when all the necessary information is available, except when there are indicators of impairment that require the immediate assessment of any impairment losses.
| (Euro/000) | Goodwill | Customer relationships |
Develop ment costs |
Industrial patents and intellectual property rights |
Concessions, licenses, trademarks and similar rights |
Other intangibles |
Intangibles in progress and ad vances to suppliers |
Total |
|---|---|---|---|---|---|---|---|---|
| - cost | 265,197 | 199,317 | 40,912 | 87,115 | 16,920 | 11,782 | 25,890 | 647,133 |
| - accumulated amortization and impairment losses |
(42,256) | (8,924) | (81,319) | (1,087) | (4,904) | (138,490) | ||
| Net carrying amount at 01.01.2015 |
265,197 | 157,061 | 31,988 | 5,796 | 15,833 | 6,878 | 25,890 | 508,643 |
| Movements - business combinations |
3,414 | 4,972 | 8,386 | |||||
| - additions | 1,770 | 294 | 71 | 591 | 9,279 | 12,005 | ||
| - net disposals | (102) | (102) | ||||||
| - reclassifications/ other changes |
12,955 | 322 | 21 | (13,298) | ||||
| - amortization | (8,942) | (2,815) | (1,581) | (112) | (749) | (14,199) | ||
| - impairment losses | ||||||||
| - exchange rate differences |
11,194 | 5,412 | 20 | (81) | 1,297 | 159 | 18,001 | |
| Closing net carrying amount |
279,805 | 153,531 | 43,816 | 9,722 | 17,110 | 6,879 | 21,871 | 532,734 |
| - cost | 279,805 | 206,444 | 55,588 | 92,592 | 18,387 | 12,736 | 21,871 | 687,423 |
| - accumulated amortization and impairment losses |
(52,913) | (11,772) | (82,870) | (1,277) | (5,857) | (154,689) | ||
| Net carrying amount at 30.06.2015 |
279,805 | 153,531 | 43,816 | 9,722 | 17,110 | 6,879 | 21,871 | 532,734 |
Movements in this line item are as follows:
Goodwill amounts to euro 279,805 thousand at 30 June 2015, of which euro 71 million allocated to the FMG Group cash-generating unit (CGU) within the Shipbuilding operating segment, and euro 209 million to the VARD Group CGU within the Offshore operating segment. The increase of euro 3,414 thousand is due to the VARD Group's acquisition during the six-month period of ICD Software AS, described in more detail in Note 2. This acquisition has also involved the addition of euro 4,972 thousand to "Industrial patents and intellectual property rights". The purchase price allocation process is still in progress.
"Concession, licenses, trademarks and similar rights" include euro 16,534 thousand for trademarks with indefinite useful lives, reflecting the expectation for their use.
Following indicators of impairment, in accordance with the provisions of IAS 36, the Group has verified that the conditions exist as at 30 June 2015 to confirm the value of goodwill, the trademark with an indefinite useful life and other intangible assets recognized as a result of business combinations.
Additions in the first half of 2015 amounted to euro 12,005 thousand (euro 14,216 thousand at 30 June 2014), of which euro 8,930 thousand (euro 10,159 thousand at 30 June 2014), for continued work not only on projects to develop new technologies for products made obsolete by the introduction of new regulations but also on the large number of new cruise ship prototypes in the order book. The rest of the expenditure relates to the development of information systems to support the Group's business.
| (Euro/000) - cost |
Land and buildings 555,607 |
Leased buildings 2,676 |
Industrial plant, machinery and equipment 1,121,377 |
Assets under concession 177,368 |
Extraordinary maintenance on leased assets 25,760 |
Other assets 154,418 |
Assets under construction and advances to suppliers 91,942 |
Total 2,129,148 |
|---|---|---|---|---|---|---|---|---|
| - accumulated depreciation and impairment losses |
(182,628) | (1,881) | (746,106) | (118,993) | (20,063) | (100,960) | (1,170,631) | |
| Net carrying amount at 01.01.2015 |
372,979 | 795 | 375,271 | 58,375 | 5,697 | 53,458 | 91,942 | 958,517 |
| Movements - business combinations |
233 | 233 | ||||||
| - additions | 3,852 | 9,334 | 58 | 7 | 695 | 41,724 | 55,670 | |
| - net disposals | (399) | (71) | (11) | (13) | (494) | |||
| - reclassifications/ other changes |
(982) | 2,461 | 60 | 154 | 385 | (2,077) | 1 | |
| - depreciation | (7,498) | (194) | (27,243) | (1,740) | (557) | (2,570) | (39,802) | |
| - impairment losses | (28) | (549) | (577) | |||||
| - exchange rate differences |
3,544 | 70 | 440 | 2 | 249 | (247) | 4,058 | |
| Closing net carrying amount |
371,468 | 671 | 359,876 | 56,753 | 5,303 | 52,206 | 131,329 | 977,606 |
| - cost | 563,823 | 2,904 | 1,132,178 | 177,485 | 25,953 | 155,574 | 131,329 | 2,189,246 |
| - accumulated depreciation and impairment losses |
(192,355) | (2,233) | (772,302) | (120,732) | (20,650) | (103,368) | (1,211,640) | |
| Net carrying amount at 30.06.2015 |
371,468 | 671 | 359,876 | 56,753 | 5,303 | 52,206 | 131,329 | 977,606 |
Capital expenditure additions of euro 55,670 thousand in the first half of 2015 mainly relate to the continuation of projects started in 2014 at the Marghera yard in Italy and the Marinette and Sturgeon Bay yards in the United States, to the start of work on modernizing hull-building technology and logistical support at the Sestri and Monfalcone yards in Italy, to the final stages of construction of the Vard Promar yard in Brazil, and to technology upgrade projects at the yards in Romania and Vietnam. Capital expenditure additions in the first half of 2014 amounted to euro 52,582 thousand and mainly related to the construction of new infrastructure and technological upgrades to improve production efficiency through greater process automation and to improve safety conditions and environmental respect within the production sites; this expenditure was mostly concentrated on the shipyards in Monfalcone, to modernize hull-building technologies, and Marghera, to build new infrastructure and logistical support areas for the outfitting docks, and on the Vard Promar and Vard Romania shipyards.
| (Euro/000) | Associates | Joint ventures |
Total investments accounted for using the equity method |
Other companies carried at cost |
Other companies carried at fair value |
Total other investments |
Total |
|---|---|---|---|---|---|---|---|
| 01.01.2015 | 36,133 | 16,663 | 52,796 | 981 | 6,702 | 7,683 | 60,479 |
| Business combinations | |||||||
| Additions | 1,232 | 4,987 | 6,219 | 131 | 131 | 6,350 | |
| Revaluations/ (Impairment losses) |
480 | 300 | 780 | 780 | |||
| Disposals | |||||||
| Capital paid into investments |
|||||||
| Dividends from investments accounted for using the equity method |
|||||||
| Reclassifications/ Other |
|||||||
| Exchange rate differences |
1,052 | 1,052 | 191 | 191 | 1,243 | ||
| 30.06.2015 | 38,897 | 21,950 | 60,847 | 1,112 | 6,893 | 8,005 | 68,852 |
These are analyzed as follows:
With regard to investments in joint ventures, reference should be made to Note 2 concerning the acquisition by FINCANTIERI S.p.A. in May 2015 of a joint interest in the Camper & Nicholsons International group, a global leader in all luxury yachting activities.
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Grants financed by BIIS | 30,675 | 34,110 |
| Derivative assets | 5,802 | 504 |
| Other non-current financial receivables | 91,744 | 82,719 |
| Non-current financial receivables from investee companies |
7,602 | 7,147 |
| NON-CURRENT FINANCIAL ASSETS | 135,823 | 124,480 |
"Derivative assets" represent the reporting-date fair value of derivatives with a maturity of more than 12 months (Level 2).
Other non-current assets are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Other receivables from investee companies | 568 | 972 |
| Government grants receivable | 1,856 | 2,011 |
| Other receivables | 9,364 | 11,722 |
| OTHER NON-CURRENT ASSETS | 11,788 | 14,705 |
Other non-current assets are all stated net of the related provision for impairment.
The following table presents the amount of and movements in the provision for impairment of other non-current receivables:
| (Euro/000) | Provision for impairment of other receivables |
|---|---|
| Total at 01.01.2015 | 16,656 |
| Utilizations | |
| Increases/(Releases) | (530) |
| Total at 30.06.2015 | 16,126 |
Movements in deferred tax assets are analyzed as follows:
| (Euro/000) | Total |
|---|---|
| 01.01.2015 | 140,914 |
| Business combinations | (730) |
| Through profit or loss | (12,743) |
| Through equity | 1,623 |
| Impairment losses | |
| Through other comprehensive income | |
| Other changes | (20) |
| Exchange rate differences | 1,788 |
| 30.06.2015 | 130,832 |
Deferred tax assets have been recognized on items for which the tax is likely to be recovered against forecast future taxable income of Group companies. The recognition of deferred tax is also supported by participation in the tax consolidation with CDP commencing in 2013. Movements in deferred tax liabilities are analyzed as follows:
| (Euro/000) | Total |
|---|---|
| 01.01.2015 | 84,277 |
| Business combinations | |
| Through profit or loss | (4,000) |
| Through equity | (441) |
| Impairment losses | |
| Through other comprehensive income | |
| Other changes | |
| Exchange rate differences | 4,514 |
| 30.06.2015 | 84,350 |
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Raw materials and consumables | 207,606 | 178,137 |
| Work in progress and semi-finished goods | 38,194 | 12,972 |
| Finished products | 7,706 | 6,191 |
| Total inventories | 253,506 | 197,300 |
| Advances to suppliers | 207,713 | 191,167 |
| TOTAL INVENTORIES AND ADVANCES | 461,219 | 388,467 |
Inventories and advances are stated net of relevant provisions for impairment. The following table presents the amount of and movements in such provisions for impairment:
| (Euro/000) | Provision for impairment - raw materials |
Provision for impairment – finished products |
|---|---|---|
| 01.01.2015 | 13,842 | 2,660 |
| Increases | 827 | |
| Utilizations | (261) | (1) |
| Releases | (107) | |
| Exchange rate differences | 19 | 72 |
| 30.06.2015 | 14,320 | 2,731 |
"Construction contracts - net assets" are analyzed as follows:
| 30.06.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Construction contracts – gross |
Invoices issued and provision for future losses |
Construction contracts - net assets |
Construction contracts – gross |
Invoices issued and provision for future losses |
Construction contracts - net assets |
| Shipbuilding contracts | 5,169,152 | 3,260,727 | 1,908,425 | 3,459,144 | 1,819,107 | 1,640,037 |
| Other contracts for third parties |
36,553 | 13,098 | 23,455 | 19,755 | 10,514 | 9,241 |
| Total | 5,205,705 | 3,273,825 | 1,931,880 | 3,478,899 | 1,829,621 | 1,649,278 |
"Construction contracts – net liabilities" are analyzed as follows:
| 30.06.2015 | ||||||
|---|---|---|---|---|---|---|
| (Euro/000) | Construction contracts – gross |
Invoices issued and provision for future losses |
Construction contracts - net liabilities |
Construction contracts – gross |
Invoices issued and provision for future losses |
Construction contracts - net liabilities |
| Shipbuilding contracts | 3,931,616 | 4,275,518 | 343,902 | 4,819,305 | 5,318,735 | 499,430 |
| Other contracts for third parties |
128,895 | 133,034 | 4,139 | 154,843 | 164,038 | 9,195 |
| Advances from customers |
18,177 | 18,177 | 27,976 | 27,976 | ||
| Total | 4,060,511 | 4,426,729 | 366,218 | 4,974,148 | 5,510,749 | 536,601 |
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Trade receivables | 432,225 | 610,140 |
| Receivables from controlling companies (tax consolidation) | 2,082 | 23,443 |
| Government grants receivable | 14,725 | 14,111 |
| Other sundry receivables | 102,476 | 90,831 |
| Indirect tax receivables | 25,940 | 42,639 |
| Firm commitments | 138,911 | 157,802 |
| Accrued income | 25,269 | 35,750 |
| Prepayments | 595 | 335 |
| TOTAL TRADE RECEIVABLES AND OTHER CURRENT ASSETS | 742,223 | 975,051 |
The above receivables are shown net of provisions for the impairment of receivables. These provisions relate to receivables that are no longer considered fully recoverable, including those involving legal action and judicial and out-of-court proceedings in cases of debtor default. A provision for interest charged on past due trade receivables has been recognized in a "Provision for past due interest".
The amount of and movements in the total provisions for impairment of receivables are as follows:
| (Euro/000) | Provision for impairment of receivables |
|---|---|
| 01.01.2015 | 40,963 |
| Business combinations | |
| Utilizations | (3,252) |
| Increases/(Releases) | 878 |
| Exchange rate differences | |
| Through other comprehensive income | 210 |
| 30.06.2015 | 38,799 |
"Firm commitments" reflect the fair value of hedged items in fair value hedges used by the Group to hedge currency risk arising on construction contracts in currencies other than the functional currency.
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Receivables for Italian corporate income taxation (IRES) | 49,838 | 46,825 |
| Receivables for Italian regional tax on productive activities (IRAP) | 2,516 | 2,318 |
| Foreign tax receivables | 4,821 | 5,389 |
| TOTAL INCOME TAX ASSETS | 57,175 | 54,532 |
The amount and movements in the provision for impairment of income tax assets are as follows:
| (Euro/000) | Provision for impairment of income tax assets |
|---|---|
| Total at 1.1.2015 | 4,342 |
| Increases/(Releases) | (2,300) |
| Other changes | |
| Total at 30.06.2015 | 2,042 |
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Derivative assets | 23,548 | 47,744 |
| Other receivables | 57,270 | 79,419 |
| Government grants financed by BIIS | 6,805 | 6,680 |
| Accrued interest income | 1,186 | 2,426 |
| Prepaid interest and other financial expense | 424 | |
| TOTAL CURRENT FINANCIAL ASSETS | 88,809 | 136,693 |
"Derivative assets" represent the reporting-date fair value of derivatives with a maturity of less than 12 months. The fair value of derivative financial instruments has been calculated considering market parameters and using widely accepted measurement techniques (Level 2). "Other receivables" include interest-bearing financial receivables, the reduction in which mainly reflects amounts collected during the six-month period.
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Bank and postal deposits | 405,840 | 552,178 |
| Cash on hand | 118 | 107 |
| TOTAL CASH AND CASH EQUIVALENTS | 405,958 | 552,285 |
Almost all of the period-end cash and cash equivalents refers to the balance on current accounts held with a number of banks.
The composition of equity is analyzed in the following table:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Attributable to owners of the parent | ||
| Share capital | 862,981 | 862,981 |
| Share premium reserve | 110,499 | 110,499 |
| Legal reserve | 33,392 | 31,516 |
| Cash flow hedge reserve | (5,910) | (194) |
| Available-for-sale fair value reserve | (226) | (226) |
| Currency translation reserve | (49,755) | (81,401) |
| Other reserves and retained earnings | 387,675 | 319,907 |
| Profit/(loss) for the period | 12,489 | 66,935 |
| 1,351,145 | 1,310,017 | |
| Attributable to non-controlling interests | ||
| Capital and reserves | 256,605 | 267,953 |
| Available-for-sale fair value reserve | (180) | (180) |
| Currency translation reserve | (12,338) | (36,243) |
| Profit/(loss) for the period | (31,440) | (11,655) |
| 212,647 | 219,875 | |
| TOTAL EQUITY | 1,563,792 | 1,529,892 |
The share capital of FINCANTIERI S.p.A. amounts to euro 862,980,726, fully paid-in, divided into 1,692,119,070 ordinary shares with no par value.
The application period for the allocation of bonus shares to entitled shareholders commenced on 4 July 2015, as indicated at the paragraph 5.2.3.4 of the Initial Italian Public Offering Prospectus for the listing of its ordinary shares on the Electronic Stock Market (MTA), organized and managed by Borsa Italiana S.p.A.
The bonus shares will be made available by the Selling Shareholder Fintecna S.p.A. and will be reserved to subscribers who were allotted Shares under the Italian Public Offering, and have held full and continuous ownership of such shares for twelve months from the Settlement Date (i.e. from 3 July 2014), provided that the shares have remained deposited with a Bookrunner or other authorized intermediaries participating in the centralized management system of Monte Titoli S.p.A
This reserve has been recorded as a result of the capital increase accompanying the Company's listing on the Italian Electronic Stock Market on 3 July 2014. Listing costs of euro 11,072 thousand (net of tax effects) referring to the capital increase have been accounted for as a deduction from the share premium reserve, in compliance with IAS 32.
The cash flow hedge reserve reports the change in the effective portion of derivative hedging instruments measured at fair value.
The currency translation reserve reflects exchange differences arising from the translation into Euro of financial statements of foreign operations prepared in currencies other than the Euro.
These mainly comprise: i) surplus earnings after making allocations to the legal reserve and distributions in the form of shareholder dividends; ii) actuarial gains and losses on employee benefit plans.
The change compared with 31 December 2014 is mostly due to comprehensive income for the period attributable to non-controlling interests. The remainder of euro 1,893 thousand reflects an increase in non-controlling interests following the VARD Group's acquisition of ICD Software AS during the period, as better described in Note 2.
The amount of other comprehensive income/losses, presented in the statement of comprehensive income, is as follows:
| 30.06.2015 | 30.06.2014 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Gross amount |
Tax (expense)/ benefit |
Net amount |
Gross amount |
Tax (expense)/ benefit |
Net amount |
| Effective portion of profits/(losses) on cash flow hedging instruments |
(8,366) | 2,650 | (5,716) | 215 | (59) | 156 |
| Gains/(losses) from remeasurement of employee defined benefit plans |
3,737 | (1,028) | 2,709 | (1,046) | 288 | (758) |
| Gains/(losses) arising from changes in OCI of investments accounted for using the equity method |
||||||
| Gains/(losses) arising on translation of financial statements of foreign operations |
53,529 | 441 | 53,970 | 8,352 | (29) | 8,323 |
| Total other comprehensive income/ (losses) |
48,900 | 2,063 | 50,963 | 7,521 | 200 | 7,721 |
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Effective portion of profits/(losses) arising in period on cash flow hedging instruments | (8,614) | (248) |
| Effective portion of profits/(losses) on cash flow hedging instruments reclassified to profit or loss | 248 | 1,048 |
| Effective portion of profits/(losses) on cash flow hedging instruments | (8,366) | 800 |
| Tax effect for other components of comprehensive income | 2,650 | (234) |
| TOTAL OTHER COMPREHENSIVE INCOME/(LOSSES), NET OF TAX | (5,716) | 566 |
| (Euro/000) | Litigation | Product warranty |
Agent indemnity benefit |
Business reorganization |
Other risks and charges |
Total |
|---|---|---|---|---|---|---|
| Non-current portion | 41,726 | 40,357 | 111 | 26,427 | 108,621 | |
| Current portion | 1,106 | 14,937 | 3,821 | 19,864 | ||
| 01.01.2015 | 42,832 | 55,294 | 111 | - | 30,248 | 128,485 |
| Business combinations | ||||||
| Other movements | 23 | 23 | ||||
| Increases | 8,957 | 11,508 | 742 | 21,207 | ||
| Utilizations | (11,059) | (12,553) | (61) | (23,673) | ||
| Releases | (14,237) | (1,417) | (15,654) | |||
| Exchange rate differences | 40 | 711 | 546 | 1,297 | ||
| 30.06.2015 | 40,770 | 40,723 | 111 | - | 30,081 | 111,685 |
| Non-current portion | 39,632 | 30,843 | 111 | 26,671 | 97,257 | |
| Current portion | 1,138 | 9,880 | 3,410 | 14,428 |
These are analyzed as follows:
The main component of the "Litigation" provision relates to precautionary provisions for claims brought by employees, authorities or third parties for damages arising from asbestos exposure. The remainder of the litigation provision relates to lawsuits with employees and suppliers and to other legal proceedings.
The "Product warranty" provision relates to the estimated cost of carrying out work under contractual guarantee after vessel delivery. The warranty period normally lasts for 1 or 2 years after delivery, but in some cases it may be longer.
The provision for "Other risks and charges" includes euro 9,131 thousand for environmental cleanup costs, while the remainder relates to various kinds of disputes, mostly of a contractual, technical or fiscal nature, which might be settled at the Group's expense either in or out of court.
Movements in this line item are as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Opening balance | 62,220 | 60,486 |
| Business combinations | ||
| Interest cost | 465 | 1,925 |
| Actuarial (gains)/losses | (3,737) | 7,717 |
| Utilizations for benefits and advances paid | (1,656) | (7,677) |
| Staff transfers and other movements | 882 | (222) |
| Exchange rate differences | 4 | (9) |
| Closing balance | 58,178 | 62,220 |
| Plan assets | (86) | (79) |
| Closing balance | 58,092 | 62,141 |
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Bond | 297,216 | 296,835 |
| Bank loans and credit facilities - non-current portion | 294,548 | 290,364 |
| Loans from BIIS - non-current portion | 30,675 | 34,110 |
| Liabilities to other lenders | 963 | 1,040 |
| Finance lease obligations | 130 | 310 |
| Financial liabilities for the acquisition of equity investments | - | 11,770 |
| Derivative liabilities | 7,255 | 18,489 |
| TOTAL NON-CURRENT FINANCIAL LIABILITIES | 630,787 | 652,918 |
"Derivative liabilities" represent the reporting-date fair value of derivatives with a maturity of more than 12 months (Level 2).
"Financial liabilities for the acquisition of equity investments", which reflect the fair value (Level 3) of a put option held by the minority shareholders of Fincantieri USA under which they have the option to sell their shareholding to Fincantieri at a fixed price, have been reclassified to current financial liabilities at 30 June 2015.
With reference to "Bank loans and credit facilities - non-current portion", during the first half of 2015, the Parent Company repaid in advance two loans of euro 30 million each, originally due to mature in March 2017, and at the same time it obtained a new loan for euro 65 million repayable in a single installment in May 2017.
In addition, during the second quarter the Parent Company obtained two more medium/ long-term loans, one for Euro 35 million, repayable in 7 semi-annual installments starting from December 2015 until final maturity in December 2018, and the other for Euro 25 million, repayable in 6 semi-annual installments from December 2016 to June 2019, both intended for the early repayment of an existing medium/long-term loan during the first few days of the second half of the year.
These operations are part of a broader strategy to bring the Group's cost of debt into line with the current favorable market conditions.
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Capital grants | 29,067 | 28,282 |
| Other liabilities | 17,246 | 17,224 |
| TOTAL OTHER NON-CURRENT LIABILITIES | 46,313 | 45,506 |
"Capital grants" mainly comprise deferred income associated with grants for property, plant and equipment and innovation grants which will be released to income in future years to match the related depreciation/amortization of these assets.
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Payables to suppliers | 1,016,962 | 1,046,825 |
| Social security payables | 37,615 | 29,574 |
| Other payables for deferred employee remuneration | 76,149 | 65,004 |
| Other payables | 73,402 | 79,269 |
| Indirect tax payables | 15,239 | 20,494 |
| Firm commitments | 12,294 | 27,397 |
| Accrued expenses | 6,894 | 8,838 |
| Deferred income | 427 | 24 |
| TOTAL TRADE PAYABLES AND OTHER CURRENT LIABILITIES | 1,238,982 | 1,277,425 |
"Social security payables" include amounts due to INPS (the Italian social security authorities) for employer and employee contributions on June's wages and salaries and contributions on end-ofperiod wage adjustments. This balance also includes the 2015 premium due to INAIL, Italy's provider of national insurance against occupational injury and illness, which is being paid in instalments. "Other payables" include employee income tax withholdings payable to tax authorities, sundry payables for insurance premiums and insurance claims, advances received against research grants, amounts payable to employee supplementary pension funds and various liabilities for disputes in the process of being financially settled.
"Firm commitments" reflect the fair value of hedged items in fair value hedges used by the Group to hedge currency risk arising on construction contracts in currencies other than the functional currency.
These are analyzed as follows:
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Bank loans and credit facilities - current portion | 102,819 | 44,707 |
| Loans from BIIS - current portion | 6,805 | 6,680 |
| Bank loans and credit facilities - Construction loans | 868,012 | 847,454 |
| Liabilities to other lenders - current portion | 25,537 | 290 |
| Bank credit facilities repayable on demand | 41,784 | 31,962 |
| Financial liabilities for the acquisition of equity investments | 11,770 | |
| Payables to joint ventures | 742 | 337 |
| Finance lease obligations - current portion | 380 | 337 |
| Fair value of options on equity investments | 16,981 | 15,649 |
| Derivative liabilities | 348,778 | 271,846 |
| Accrued interest expense | 7,856 | 2,359 |
| TOTAL CURRENT FINANCIAL LIABILITIES | 1,431,464 | 1,221,621 |
"Bank loans and credit facilities - current portion" include medium/long-term debt classified in non-current financial liabilities at 31 December 2014 and scheduled for early repayment during the second half of 2015.
On 29 June 2015, the Parent Company finalized a construction loan with a leading international bank, capped at euro 150 million, for the purpose of financing cruise ship construction. This loan had not been drawn down at 30 June 2015 and so "Bank loans and credit facilities - Construction loans" at this date refer exclusively to construction loans drawn down by the VARD Group.
"Financial liabilities for the acquisition of equity investments" have been reclassified from noncurrent financial liabilities (see Note 20).
"Fair value of options on equity investments" (Level 3) relates to the option held by minority shareholders of the Fincantieri Marine Group, exercisable from 1 January 2014. This amount has remained unchanged during the period except for exchange rate differences.
The fair value of derivative financial instruments has been calculated considering market parameters and using widely accepted measurement techniques (Level 2).
| These are analyzed as follows: |
|---|
| (Euro/000) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Operating revenue | 2,179,221 | 1,961,596 |
| Other revenue and income | ||
| Gains on disposal | 22 | 484 |
| Sundry revenue and income | 36,777 | 15,784 |
| Government grants | 4,036 | 4,949 |
| Total other revenue and income | 40,835 | 21,217 |
| TOTAL REVENUE AND INCOME | 2,220,056 | 1,982,813 |
Operating revenue includes the effects of the Change in construction contacts amounting to euro 738 million in the first half of 2015 (euro 1,318 million in the first half of 2014).
| (Euro/000) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Raw materials and consumables | (1,069,480) | (1,025,843) |
| Services | (514,346) | (365,930) |
| Leases and rentals | (22,035) | (18,891) |
| Change in inventories of raw materials and consumables | 22,676 | (5,768) |
| Change in work in progress | 79 | 420 |
| Change in inventories of finished products | 3,832 | 1,000 |
| Other operating costs | (66,028) | (22,260) |
| Total materials, services and other costs | (1,645,302) | (1,437,272) |
| Capitalization of internal costs | 5,220 | 10,383 |
| TOTAL OPERATING COSTS | (1,640,082) | (1,426,889) |
| (Euro/000) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Personnel costs: | ||
| - wages and salaries | (335,541) | (296,320) |
| - social security | (98,512) | (93,887) |
| - costs for defined contribution plans | (17,031) | (15,642) |
| - other personnel costs | (12,449) | (9,933) |
| Personnel costs capitalized in fixed assets | 2,070 | 2,308 |
| Total personnel costs | (461,463) | (413,474) |
"Personnel costs" represent the total cost incurred for employees, including wages and salaries, employer social security contributions, gifts and travel allowances.
The Fincantieri Group had 21,553 employees at 30 June 2015, broken down as follows:
| (number) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Employees at period end: | ||
| Total at period end | 21,553 | 21,080 |
| - of whom in Italy | 7,780 | 7,737 |
| - of whom in Parent Company | 7,377 | 7,431 |
| - of whom in VARD | 11,495 | 11,207 |
| Average number of employees | 21,718 | 20,797 |
| - of whom in Italy | 7,699 | 7,688 |
| - of whom in Parent Company | 7,303 | 7,383 |
| - of whom in VARD | 11,799 | 11,040 |
| (Euro/000) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Depreciation and amortization: | ||
| - amortization of intangible assets | (14,199) | (11,421) |
| - depreciation of property, plant and equipment | (39,802) | (37,209) |
| Total depreciation and amortization | (54,001) | (48,630) |
| Provisions and impairment: | ||
| - other write-downs | ||
| - impairment of receivables | (465) | (1,803) |
| - increases in provisions for risks and charges | (20,775) | (22,236) |
| - other impairment losses | (577) | (33) |
| - release of provisions and impairment reversals | 15,769 | 2,695 |
| Total provisions and impairment | (6,048) | (21,377) |
A breakdown of "Depreciation and amortization" expense is provided in Notes 5 and 6. Details of "Provisions and impairment" can be found in Notes 9,13 and 18.
| (Euro/000) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| FINANCE INCOME | ||
| Interest and other income from financial assets | 1,576 | 2,182 |
| Income from derivative financial instruments | 281 | |
| Bank interest and fees and other income | 2,920 | 3,362 |
| Foreign exchange gains | 20,874 | 3,224 |
| Total finance income | 25,370 | 9,049 |
| FINANCE COSTS | ||
| Interest and fees charged by related parties | (396) | (1,191) |
| Expenses from derivative financial instruments | (6,541) | (27) |
| Interest on employee benefit plans | (434) | (829) |
| Interest and fees on bonds | (5,960) | (5,944) |
| Interest and fees on construction loans | (18,383) | (9,095) |
| Bank interest and fees and other expense | (15,055) | (14,288) |
| Foreign exchange losses | (40,654) | (5,667) |
| Total finance costs | (87,423) | (37,041) |
| TOTAL FINANCE INCOME AND COSTS | (62,053) | (27,992) |
These are analyzed as follows:
"Finance income" includes euro 703 thousand (euro 826 thousand in the first half of 2014) in interest formally paid by the Italian State to the Parent Company, but effectively paid to Banca Infrastrutture Innovazione e Sviluppo (with an equal amount recognized as finance expense), under the structure in place to disburse government grants.
"Foreign exchange gains and losses" include net unrealized losses (without a corresponding monetary impact) mainly on certain currency balances recorded by VARD Group subsidiaries.
Income taxes have been calculated on the basis of the result for the period. Deferred income taxes are analyzed in Note 10.
The consolidated net financial position as monitored by the Group is presented below.
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| A. Cash | 118 | 107 |
| B. Other cash equivalents | 405,840 | 552,178 |
| C. Held-for-trading securities | ||
| D. Cash and cash equivalents (A)+(B)+(C) | 405,958 | 552,285 |
| E. Current financial receivables - of which related parties |
58,456 1,448 |
82,269 1,396 |
| F. Current bank debt | (41,784) | (31,962) |
| G. Current portion of non-current debt - of which related parties |
(110,680) (2,097) |
(47,071) (1,425) |
| H. Other current financial liabilities - of which related parties |
(38,424) (12,512) |
(959) (337) |
| I. Current debt (F)+(G)+(H) | (190,888) | (79,992) |
| J. Net current debt (D)+(E)+(I) | 273,526 | 554,562 |
| K. Non-current financial receivables | 99,346 | 89,866 |
| - of which related parties | 7,449 | 7,147 |
| L. Non-current bank debt - of which related parties |
(294,548) (9,224) |
(290,364) (5,855) |
| M. Bond | (297,216) | (296,835) |
| N. Other non-current financial liabilities - of which related parties |
(1,093) - |
(13,120) (11,770) |
| O. Non-current debt (L)+(M)+(N) | (592,857) | (600,319) |
| P. Net non-current debt (K)+(O) | (493,511) | (510,453) |
| Q. Net financial position (J)+(P) | (219,985) | 44,109 |
For the purposes of complying with Consob Communication no. DEM/6064293/2006, the following table reconciles the above net financial position with the disclosure recommended by the European Securities and Markets Authority (ESMA).
| (Euro/000) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Net financial position | (219,985) | 44,109 |
| Non-current financial receivables | (99,346) | (89,866) |
| Construction loans | (868,012) | (847,454) |
| Net financial position as per ESMA recommendation | (1,187,343) | (893,211) |
As required by CONSOB Resolution no. 15519 of 27 July 2006, the following table summarizes the income and expenses arising from non-recurring events or transactions that have been recorded in profit or loss in the first half of 2015 and of 2014; these amounts, presented before tax effects, have been classified in the following line items:
| (Euro/000) | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|
| Description | Income statement line | ||
| Costs associated with the "Extraordinary Wage Guarantee Fund" |
Personnel costs | 1,939 | 6,435 |
| Costs relating to reorganization plans | Materials, services and other costs |
2,951 | 463 |
| Personnel costs | 851 | 1,321 | |
| Provisions for costs and legal expenses associated with asbestos-related |
Materials, services and other costs |
969 | 929 |
| lawsuits | Provisions and impairment | 8,959 | 11,041 |
| Other non-recurring income and expenses |
Materials, services and other costs |
3 | 325 |
| Total extraordinary and non recurring income and expenses |
15,672 | 20,514 |
Extraordinary and non-recurring income and expenses are presented before tax effects of euro 3,860 thousand at 30 June 2015 (euro 5,640 thousand at 30 June 2014).
In accordance with the disclosures required by Consob Communication no. DEM/6064293 dated 28 July 2006, it is reported that no atypical and/or unusual transactions were carried out during the first half of 2015.
Intragroup transactions, transactions with Fintecna and its subsidiaries, with Cassa Depositi e Prestiti and its subsidiaries, with companies controlled by Italy's Ministry of Economy and Finance, and with other related parties in general, do not qualify as either atypical or unusual, since they fall within the normal course of business of the Fincantieri Group and are conducted on an arm's length basis. The statement of comprehensive income disclosures for the six months ended 30 June 2014 have been restated to include transactions with companies controlled by Italy's Ministry of Economy and Finance.
The figures for related party transactions and balances are reported in the following tables:
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
30.06.2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Euro/000) | Non-current financial assets |
Current financial assets |
Advances ( *) |
Trade receivables and other current assets |
Trade receivables and other non-current assets |
Non-current financial liabilities |
Current financial liabilities |
Trade payables and other current liabilities |
|||
| FINTECNA S.p.A. | 244 | ||||||||||
| CASSA DEPOSITI E PRESTITI S.p.A. | 2,082 | (9,224) | (2,097) | (60) | |||||||
| TOTAL CONTROLLING COMPANIES | 2,326 | (9,224) | (2,097) | (60) | |||||||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 44,673 | (742) | (2,294) | ||||||||
| ETIHAD SHIP BUILDING LLC | 7,060 | (342) | |||||||||
| TOTAL JOINT VENTURES | 51,733 | (742) | (2,636) | ||||||||
| BRIDGE EIENDOM AS | 489 | ||||||||||
| REM SUPPLY AS | 607 | 13 | |||||||||
| OLYMPIC GREEN ENERGY KS | 1,393 | ||||||||||
| DOF ICEMAN AS | 6,353 | ||||||||||
| BREVIK TECHNOLOGY AS | 42 | ||||||||||
| CSS DESIGN | 568 | ||||||||||
| CASTOR DRILLING SOLUTION AS | |||||||||||
| TOTAL ASSOCIATES | 7,449 | 1,448 | 568 | ||||||||
| CDP IMMOBILIARE S.r.l.** | 3,250 | ||||||||||
| TIRRENIA DI NAVIGAZIONE S.p.A. | 10,760 | ||||||||||
| SIMEST S.p.A. | (11,770) | (116) | |||||||||
| SACE S.p.A. | |||||||||||
| PENSION FUND FOR SENIOR MANAGERS OF FINCANTIERI S.p.A. |
(1,597) | ||||||||||
| COMETA NATIONAL PENSION FUND |
(1,743) | ||||||||||
| OTHER | (28) | ||||||||||
| TOTAL CDP GROUP | 14,010 | (11,770) | (3,484) | ||||||||
| HORIZON SAS | 1,928 | ||||||||||
| FINMECCANICA GROUP | 2,032 | 1,998 | (5,627) | ||||||||
| ENI GROUP | 1,023 | (1,165) | |||||||||
| ENEL GROUP | 404 | ||||||||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
|||||||||||
| TOTAL OTHER RELATED PARTIES | 2,032 | 5,353 | (6,792) | ||||||||
| TOTAL RELATED PARTIES | 7,449 | 1,448 | 2,032 | 73,422 | 568 | (9,224) | (14,609) | (12,972) | |||
| TOTAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
135,823 | 88,809 | 207,713 | 742,223 | 11,788 | (630,787) | (1,431,464) | (1,238,982) | |||
| % on consolidated statement of financial position |
5% | 2% | 1% | 10% | 5% | 1% | 1% | 1% |
*) "Advances" are classified in "Inventories and advances", as detailed in Note 11.
**) Formerly Fintecna Immobiliare S.r.l.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
31.12.2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Non-current financial |
Current financial |
Trade receivables and other |
Trade receivables and other non-current |
Non-current financial |
Current financial |
Trade payables and other current |
||||
| (Euro/000) FINTECNA S.p.A. |
assets | assets | Advances ( *) |
current assets 244 |
assets | liabilities | liabilities | liabilities | ||
| CASSA DEPOSITI E PRESTITI S.p.A. | 23,489 | (5,855) | (1,425) | (27) | ||||||
| TOTAL CONTROLLING COMPANIES |
23,733 | (5,855) | (1,425) | (27) | ||||||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 53,684 | (337) | (3,597) | |||||||
| ETIHAD SHIP BUILDING LLC | 7,331 | (610) | ||||||||
| TOTAL JOINT VENTURES | 61,015 | (337) | (4,207) | |||||||
| BRIDGE EIENDOM AS | 476 | |||||||||
| REM SUPPLY AS | 590 | |||||||||
| OLYMPIC GREEN ENERGY KS | 1,356 | |||||||||
| DOF ICEMAN AS | 5,852 | |||||||||
| BREVIK TECHNOLOGY AS | 40 | |||||||||
| CSS DESIGN | 972 | |||||||||
| CASTOR DRILLING SOLUTION AS | 116 | |||||||||
| TOTAL ASSOCIATES | 7,034 | 1,396 | 972 | |||||||
| CDP IMMOBILIARE S.r.l.( **) |
3,250 | |||||||||
| TIRRENIA DI NAVIGAZIONE S.p.A. | 10,760 | |||||||||
| SIMEST S.p.A. | (11,770) | (467) | ||||||||
| SACE S.p.A. | (257) | |||||||||
| PENSION FUND FOR SENIOR MANAGERS OF FINCANTIERI S.p.A. |
(999) | |||||||||
| COMETA NATIONAL PENSION FUND |
(2,848) | |||||||||
| PECOL S.r.l.( ***) |
40 | (830) | ||||||||
| BOAT S.p.A.( ***) |
(550) | |||||||||
| OTHER | 113 | (75) | ||||||||
| TOTAL CDP GROUP | 113 | 40 | 14,010 | (11,770) | (6,026) | |||||
| HORIZON SAS | 1,928 | (1) | ||||||||
| FINMECCANICA GROUP | 802 | 1,852 | (4,065) | |||||||
| ENI GROUP | 2,454 | (655) | ||||||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
6 | |||||||||
| TOTAL OTHER RELATED PARTIES |
802 | 6,234 | (4,721) | |||||||
| TOTAL RELATED PARTIES | 7,147 | 1,396 | 842 | 104,992 | 972 | (17,625) | (1,762) | (14,981) | ||
| TOTAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
124,480 | 136,693 | 191,167 | 975,051 | 14,705 | (652,918) | (1,221,621) | (1,277,425) | ||
| % on consolidated statement of financial position |
6% | 1% | 0% | 11% | 7% | 3% | 0% | 1% |
(*) "Advances" are classified in "Inventories and advances", as detailed in Note 11.
(**) Formerly Fintecna Immobiliare S.r.l.
(***) From the present report no longer treated as related parties.
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
30.06.2015 | ||||
|---|---|---|---|---|---|
| (Euro/000) | Operating revenue | Other revenue and income |
Materials, services and other costs |
Finance income | Finance costs |
| FINTECNA S.p.A. | |||||
| CASSA DEPOSITI E PRESTITI S.p.A. | (57) | (25) | |||
| TOTAL CONTROLLING COMPANIES | (57) | (25) | |||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 208,812 | 442 | (2) | (9) | |
| ETIHAD SHIP BUILDING LLC | 797 | 291 | (688) | ||
| TOTAL JOINT VENTURES | 209,609 | 733 | (690) | (9) | |
| BREVIK TECHNOLOGY AS | 1 | ||||
| REM SUPPLY AS | 20 | ||||
| OLYMPIC GREEN ENERGY KS | 32 | ||||
| DOF ICEMAN AS | 108 | ||||
| TOTAL ASSOCIATES | 161 | ||||
| TIRRENIA DI NAVIGAZIONE S.p.A. | |||||
| SIMEST S.p.A. | (345) | ||||
| SACE S.p.A. | (147) | ||||
| SACE BT S.p.A. | (215) | ||||
| PENSION FUND FOR SENIOR MANAGERS OF FINCANTIERI S.p.A. |
(1,931) | ||||
| COMETA NATIONAL PENSION FUND | (3,254) | ||||
| FONDO STRATEGICO ITALIANO S.p.A. | 9 | ||||
| OTHER | (49) | ||||
| TOTAL CDP GROUP | 9 | (5,579) | (362) | ||
| HORIZON SAS | |||||
| FINMECCANICA GROUP | 164 | 2 | (6,470) | ||
| ENI GROUP | 124 | 37 | (2,362) | ||
| ENEL GROUP | 331 | ||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
|||||
| TOTAL OTHER RELATED PARTIES | 619 | 39 | (8,832) | ||
| TOTAL RELATED PARTIES | 210,228 | 781 | (15,158) | 161 | (396) |
| TOTAL CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
2,179,221 | 40,835 | (1,640,082) | 25,370 | (87,423) |
| % on consolidated statement of comprehensive income |
10% | 2% | 1% | 1% | 0% |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
30.06.2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Euro/000) | Operating revenue | Other revenue and income |
Materials, services and other costs |
Finance income | Finance costs | |||||
| FINTECNA S.p.A. | (132) | |||||||||
| CASSA DEPOSITI E PRESTITI S.p.A. | (22) | |||||||||
| TOTAL CONTROLLING COMPANIES | (154) | |||||||||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 161,096 | 732 | (72) | (1,059) | ||||||
| ETIHAD SHIP BUILDING LLC | 13 | 675 | (320) | |||||||
| TOTAL JOINT VENTURES | 161,109 | 1,407 | (392) | (1,059) | ||||||
| BREVIK TECHNOLOGY AS | ||||||||||
| ISLAND OFFSHORE LNG AS | 22 | |||||||||
| REM SUPPLY AS | 27 | |||||||||
| OLYMPIC GREEN ENERGY KS | 36 | |||||||||
| DOF ICEMAN AS | 111 | |||||||||
| TOTAL ASSOCIATES | 196 | |||||||||
| TIRRENIA DI NAVIGAZIONE S.p.A. | 19 | |||||||||
| SIMEST S.p.A. | (348) | |||||||||
| SACE S.p.A. | (402) | |||||||||
| SACE BT S.p.A. | (575) | |||||||||
| PENSION FUND FOR SENIOR MANAGERS OF FINCANTIERI S.p.A. |
(1,053) | |||||||||
| COMETA NATIONAL PENSION FUND | (2,713) | |||||||||
| OTHER | (44) | |||||||||
| TOTAL CDP GROUP | 19 | (4,158) | (977) | |||||||
| HORIZON SAS | 20 | |||||||||
| FINMECCANICA GROUP | 40 | (120) | ||||||||
| ENI GROUP | (283) | |||||||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
(11) | |||||||||
| TOTAL OTHER RELATED PARTIES | 40 | 20 | (414) | |||||||
| TOTAL RELATED PARTIES | 161,168 | 1,427 | (4,964) | 196 | (2,190) | |||||
| TOTAL CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
1,961,596 | 21,217 | (1,426,889) | 9,049 | (37,041) | |||||
| % on consolidated statement of comprehensive income |
8% | 7% | 0% | 2% | 6% |
Among the transactions falling under art. 13, par. 3 (c) of the Consob Regulations concerning related party transactions, it is reported that during the first half of 2015 FINCANTIERI S.p.A. signed four Indemnity and Guarantee Agreements with SACE S.p.A. to cover the breach of obligations under export credit insurance policies with a total maximum payout of euro 1,764 million.
FINCANTIERI S.p.A. has also entered into an Indemnity and Guarantee Agreement and two Exporter Indemnity Agreements with SACE S.p.A. and SIMEST S.p.A. as standard operations of less importance.
Cassa Depositi e Prestiti S.p.A. has also granted two loans to the Ministry of Infrastructure and Transport, with interest payable by the State, in respect of our supply of two patrol boats to this Ministry.
It is reported that the increase in financial liabilities with Cassa Depositi e Prestiti S.p.A. is due to the receipt of euro 4,752 thousand for the second tranche of the subsidized loan relating to the "Superpanamax" technological innovation project.
During the first half of 2015, Directors, Statutory Auditors, General Managers and other Key Management Personnel were paid a total of euro 3,861 thousand in remuneration, of which euro 2,420 thousand classified in personnel costs and euro 1,441 thousand in the cost of services.
The basic assumptions for calculating basic and diluted Earnings/(Loss) Per Share are as follows:
| Basic/Diluted Earnings/(Loss) Per Share | 30.06.2015 | 30.06.2014 | |
|---|---|---|---|
| Profit/(loss) attributable to owners of the parent | Euro/000 | 12,489 | 23,255 |
| Weighted average number of shares outstanding | Number | 1,692,119,070 | 1,242,119,070 |
| Basic/Diluted Earnings/(Loss) Per Share | Euro | 0.00738 | 0.01872 |
Diluted earnings per share are the same as basic earnings per share since no dilution will arise from the free shares allotted at the time of the IPO because these will be provided by the shareholder Fintecna S.p.A. (see Note 17).
The following is an update on the status of litigation described in the Notes to the 2014 Consolidated Financial Statements:
With reference to the "Iraq" dispute, described in detail in the Notes to the Consolidated Financial Statements at 31 December 2014, the resumption of contact, including through the Italian Embassy in Baghdad, has resulted in a series of meetings in Baghdad (from 24 to 29 May 2015), organized with the purpose of definitive signature of the two operating agreements - namely the Refurbishment Contract and Combat System Contract - already negotiated in July 2014 and in execution of the Settlement Agreement defining the terms for ending the dispute. Although the Iraqi Government has confirmed its intention of signing the operating contracts in completion of this deal, it has requested and received from Fincantieri an extension to the existing agreements to overcome the current stalemate mainly arising from the internal political situation. The prudent approach already adopted therefore remains confirmed.
As regards the "Serene" dispute, it is reported that in late March 2015, as part of a separate ruling (elicited by the shipowner), the arbitration tribunal expressed an opinion on the costs of the proceedings, finding that these should be borne by Fincantieri, for an amount that is still under review by the High Court in London. In view of the incidental nature of this ruling to the arbitration award, the favorable opinion expressed by Fincantieri's outside legal counsel as to the positive outcome to this dispute is considered to extend to this matter as well. In addition, in June 2015, the Court of Appeal in Trieste "recognized" the validity of arbitration awards in Italy. Fincantieri, in July 2015, has lodged its opposition to this decision with the same Court of Appeal in order to have the awards confirmed as contrary to domestic and international public order, as well as to enforce the revocation of the awards themselves for procedural fraud. At the same time, Fincantieri has validly filed a verification action with the specialized industrial property division of the Court of Venice, aimed at confirming that the shipowner is not the owner of any intellectual property rights (determining a latent constraint on Fincantieri's freedom to do business); the shipowner has failed to appear before this court within the required term, with the resulting lapse in time limits provided in law. The favorable opinion expressed by our lawyers about the lawsuits filed remains confirmed.
As regards the "Yuzwa" dispute, talks relating to the two Fincantieri exclusion requests for lack of jurisdiction have been postponed as a result of the plaintiff's request to conduct jurisdictional discovery by obtaining additional documentation on Fincantieri's links with the states of California and Florida and with other parties. Fincantieri has opposed this request, rejecting its relevance and necessity. The Florida and California courts issued rulings in Fincantieri's favor on 20 April and 24 April 2015 respectively. Proceedings are continuing to ascertain jurisdiction.
With reference to the dispute for the recovery of the "Neuman Esser" receivable, the publication of the arbitration award, originally due in mid-November 2014, should occur by the end of August 2015.
In March 2015, we received a fifth distribution of around euro 530 thousand from the special administration of Micoperi S.p.A. The receivable has been prudently written down in full; additional, future receipts cannot be ruled out.
With reference to the criminal prosecutions brought under Italian Legislative Decree 231/2001 in the Court of Gorizia, described in detail in the Notes to the 2014 Consolidated Financial Statements, it is reported as follows:
The following is an update on the situation described in the Notes to the 2014 Consolidated Financial Statements:
The application for the income of the subsidiary Vard Holdings Ltd, resident in Singapore, to be exempted from the tax transparency rules applying to foreign controlled companies has been rejected; this decision is being contested.
A tax audit of fiscal year 2011, conducted in 2014, has mostly been completed. Some matters are still pending, with no conclusions yet reached in their regard. Corresponding provisions have been recognized for the currently quantifiable risks.
A tax audit of fiscal year 2012 has been completed with only minor matters arising, all of which already agreed.
With reference to the assessment notified to the subsidiary Vard Niterói S.A. (Brazil) at the end of an audit initiated in 2012, concerning the deduction of costs for goods and services purchased abroad, the subsidiary has presented an appeal to the second-instance administrative commission against the ruling by the first-instance administrative commission which had rejected the appeal.
| (Euro/000) | 30.06.2015 | 30.06.2014 |
|---|---|---|
| Profit/(loss) for the period | (18,951) | 32,573 |
| Depreciation and amortization | 54,001 | 48,630 |
| (Gains)/losses from disposal of property, plant and machinery | 403 | (458) |
| (Revaluation)/impairment of intangible assets and equity investments | (204) | (1,018) |
| Increases/(releases) of provisions for risks and charges | 5,553 | 20,833 |
| Capitalized interest expense | ||
| Interest on employee benefits | 465 | 892 |
| Interest income | (4,496) | (5,544) |
| Interest expense | 39,794 | 30,518 |
| Income taxes | 15,737 | 12,587 |
| Unrealized foreign exchange losses | 15,334 | |
| Gross cash flows from operating activities | 107,636 | 139,013 |
| CHANGES IN WORKING CAPITAL | ||
| - inventories | (67,292) | (71,908) |
| - construction contracts | (331,802) | 59,224 |
| - trade receivables | 182,485 | (76,488) |
| - other current assets and liabilities | 47,131 | (8,545) |
| - other non-current assets and liabilities | 3,619 | (511) |
| - advances from customers | (11,503) | (41,160) |
| - trade payables | (43,744) | 79,105 |
| Cash flows from working capital | (113,470) | 78,730 |
| Dividends received | ||
| Dividends paid | ||
| Interest income received | 5,380 | 5,752 |
| Interest expense paid | (32,255) | (25,497) |
| Income taxes paid | 1,526 | (15,183) |
| Utilization of provisions for risks and charges and for employee benefits | (24,429) | (24,794) |
| NET CASH FLOWS FROM OPERATING ACTIVITIES | (163,248) | 19,008 |
| - of which related parties | 28,755 | (48,094) |
Management has identified the following operating segments which reflect the model used to manage and control the business sectors in which the Group operates:
The Shipbuilding operating segment is engaged in the design and construction of cruise ships, ferries, naval defense vessels and mega-yachts, as well as in ship repair and conversion activities. Production is carried out at the Group's Italian shipyards and, in the case of vessels intended for the American market, at its American shipyards.
The Offshore operating segment is engaged in the design and construction of support vessels for the oil & gas exploration and production market, including the provision of services and production of electronic systems, power and automation solutions, pipe systems, electrical installations and accommodation for such support vessels. Fincantieri operates in this market primarily through the VARD Group.
The Equipment, Systems and Services operating segment is engaged in the manufacture of mechanical products and the provision of after-sales services for ships delivered.
Other activities primarily refer to the cost of activities by corporate headquarters, which are not allocated to other operating segments.
The Group evaluates the performance of its operating segments and the allocation of financial resources on the basis of revenue and EBITDA, defined as Profit/(loss) for the period adjusted for the following items: (i) Income taxes, (ii) Share of profit/(loss) of investments accounted for using the equity method, (iii) Income/(expense) from investments, (iv) Finance costs, (v) Finance income, (vi) Depreciation and amortization, (vii) costs associated with the "Extraordinary Wage Guarantee Fund", (viii) costs relating to reorganization plans, (ix) provisions for costs and legal expenses associated with lawsuits brought by employees for asbestos-related damages, and (x) other expenses or income outside the ordinary course of business arising from non-recurring events.
The results of the operating segments at 30 June 2015 and 30 June 2014 are reported in the following pages:
| 30.06.2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Euro/000) | Shipbuilding | Offshore | Equipment, Systems and Services |
Other Activities |
Group | |||
| Segment revenue | 1,554,965 | 625,566 | 95,090 | 579 | 2,276,200 | |||
| Intersegment elimination | (16,781) | (7,454) | (31,469) | (440) | (56,144) | |||
| Revenue ( *) |
1,538,184 | 618,112 | 63,621 | 139 | 2,220,056 | |||
| EBITDA | 103,305 | 28,865 | 11,356 | (15,391) | 128,135 | |||
| EBITDA margin | 6.6% | 4.6% | 11.9% | 5.8% | ||||
| Depreciation and amortization | (54,001) | |||||||
| Finance income | 25,370 | |||||||
| Finance costs | (87,423) | |||||||
| Income/(expense) from investments | (404) | |||||||
| Share of profit/(loss) of investments accounted for using the equity method |
781 | |||||||
| Income taxes | (15,737) | |||||||
| Extraordinary and non-recurring income and expenses | (15,672) | |||||||
| Profit/(loss) for the period | (18,951) |
Revenue: Sum of "Operating revenue" and "Other revenue and income" reported in the consolidated statement of comprehensive income.
*)
Details of "Extraordinary and non-recurring income and expenses" (gross of the tax effect of euro 3,860 thousand) can be found in the relevant table in Note 28.
| 30.06.2014 | |||||
|---|---|---|---|---|---|
| (Euro/000) | Shipbuilding | Offshore | Equipment, Systems and Services |
Other Activities |
Group |
| Segment revenue | 1,239,835 | 681,451 | 85,697 | 2,006,983 | |
| Intersegment elimination | (2,965) | (21,205) | (24,170) | ||
| Revenue ( *) |
1,236,870 | 681,451 | 64,492 | 1,982,813 | |
| EBITDA | 79,931 | 65,740 | 8,794 | (12,878) | 141,587 |
| EBITDA margin | 6.4% | 9.6% | 10.3% | 7.1% | |
| Depreciation and amortization | (48,630) | ||||
| Finance income | 9,049 | ||||
| Finance costs | (37,041) | ||||
| Income/(expense) from investments | (341) | ||||
| Share of profit/(loss) of investments accounted for using the equity method |
1,050 | ||||
| Income taxes | (12,587) | ||||
| Extraordinary and non-recurring income and expenses | (20,514) | ||||
| Profit/(loss) for the period | 32,573 |
*) Revenue: Sum of "Operating revenue" and "Other revenue and income" reported in the consolidated statement of comprehensive income.
Details of "Extraordinary and non-recurring income and expenses" (gross of the tax effect of euro 5,640 thousand) can be found in the relevant table in Note 28.
The following table shows a breakdown of Property, plant and equipment in Italy and other countries:
| (Euro/million) | 30.06.2015 | 31.12.2014 |
|---|---|---|
| Italy | 577 | 566 |
| Other countries | 400 | 393 |
| Total Property, plant and equipment | 977 | 959 |
(Euro/million) 30.06.2015 30.06.2014 Revenue and income % Revenue and income % Italy 350 16% 370 19% Other countries 1,870 84% 1,613 81% Total Revenue and income 2,220 1,983
The following table shows a breakdown of revenue and income between Italy and other countries, according to customer country of residence:
The following table shows those customers whose revenue (defined as revenue plus change in inventories) accounted for more than 10% of the Group's Revenue and income in each reporting period:
| (Euro/million) | 30.06.2015 | 30.06.2014 | |||
|---|---|---|---|---|---|
| Revenue and income |
% | Revenue and income |
% | ||
| Customer 1 | 445 | 20% | 463 | 23% | |
| Customer 2 | 233 | 10% | 227 | 11% | |
| Total Revenue and income | 2,220 | 1,983 |
On 1 July 2015, Fincantieri announced that the order for a new ultra-luxury cruise ship secured in the first half of 2014 is for the client Silversea Cruises. The unit will be named "Silver Muse" and is due for delivery in April 2017.
In order to secure its presence in the Chinese market, during the month of July Fincantieri has established a Shanghai-based subsidiary in China, under the name of Fincantieri (Shanghai) Trading Co. Ltd. Forming part of Fincantieri's international expansion strategy, the aim is to capture the important business opportunities offered by the Chinese market in several sectors, such as cruise ships, repairs and conversions, offshore and marine systems and equipment.
On 3 July 2015, Fincantieri was awarded a contract with the Bangladesh Coast Guard (BCG) for the supply of four Italian Navy "Minerva" class corvettes to be upgraded and converted into Offshore Patrol Vessels (OPV) and for the provision of the related integrated logistics support services. These vessels, which will be decommissioned by the Italian Navy and replaced by new ones under the fleet renewal program, have been remised by the Italian Navy through a reselling contract executed by the Central Unit of Naval Armament (NAVARM) and Fincantieri.
On 4 July 2015, in the presence of the Minister of Justice, Andrea Orlando, the Fincantieri shipyard in Muggiano (La Spezia) hosted the launching ceremony for the "Romeo Romei" submarine, the last of the four U212A "Todaro" class sister vessels ordered from Fincantieri by the Central Unit of Naval Armament (NAVARM) for the Italian Navy.
On 21 July 2015, Vard Holdings Limited (55.63% controlled by Fincantieri) announced the incorporation of Vard Electro Italy Srl, an Italian-registered company 100% owned by Vard Electro AS. The main business of the new subsidiary will be to deliver turn-key electrical solutions to other parts of the Fincantieri Group.
| Principal activity | Registered office |
Share capital | (%) interest held | % con solidated by Group |
||
|---|---|---|---|---|---|---|
| Subsidiaries consolidated line-by-line | ||||||
| BACINI DI PALERMO S.p.A. Dry-dock management |
Palermo (Italy) |
EUR | 1,032,000.00 | 100.00 | Fincantieri S.p.A | 100.00 |
| CENTRO PER GLI STUDI DI TECNICA NAVALE CETENA S.p.A. Ship research and experimentation |
Genoa (Italy) |
EUR | 1,000,000.00 | 71.10 15.00 |
Fincantieri S.p.A. Seaf S.p.A. |
86.10 |
| FINCANTIERI OIL & GAS S.p.A. Holding company |
Trieste (Italy) |
EUR | 21,000,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI HOLDING B.V. Holding company for foreign investments |
Amsterdam (Netherlands) |
EUR | 9,529,384.54 | 100.00 Fincantieri S.p.A. | 100.00 | |
| FINCANTIERI MARINE SYSTEMS NORTH AMERICA Inc. Sale and after-sale services relating to mechanical products |
Delaware Corporation based in Chesapeake (VI - USA) |
USD | 501,000.00 | 100.00 Fincantieri Holding B.V. |
100.00 | |
| FMSNA YK | Sasebo SHI – Nagasaky-ken (Japan) |
JPY | 3,000,000.00 | 100.00 | Fincantieri Marine Systems North America Inc. |
100.00 |
| GESTIONE BACINI LA SPEZIA S.p.A. Dry-dock management |
Muggiano (La Spezia) (Italy) |
EUR | 260,000.00 | 99.89 Fincantieri S.p.A. | 99.89 | |
| ISOTTA FRASCHINI MOTORI S.p.A. Design, construction, sale and after-sale services relating to fast medium-duty diesel engines |
Bari (Italy) |
EUR | 3,300,000.00 | 100.00 Fincantieri S.p.A. | 100.00 | |
| SOCIETÀ PER L'ESERCIZIO DI ATTIVITÀ FINANZIARIE SEAF S.p.A. Financial support for Group companies |
Trieste (Italy) |
EUR | 6,032,000.00 | 100.00 Fincantieri S.p.A. | 100.00 | |
| DELFI S.r.l. Technical and logistics engineering |
Follo (La Spezia) (Italy) |
EUR | 400,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| SEASTEMA S.p.A. Design and development of integrated automation systems |
Genoa (Italy) |
EUR | 300,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI USA Inc. Holding company |
Delaware Corporation based in Wilmington (DE - USA) |
USD | 1,029.75 | 86.02 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI MARINE GROUP HOLDINGS Inc. Holding company |
Delaware Corporation based in Green Bay (WI - USA) |
USD | 1,027.97 | 87.44 | Fincantieri USA Inc. | 87.44 |
| FINCANTIERI MARINE GROUP LLC. Ship building and repair |
Nevada LLC based in Marinette (WI – USA) |
USD | 1,000.00 | 100.00 | Fincantieri Marine Group Holdings Inc. |
87.44 |
| Principal activity | Registered office |
Share capital (%) interest held |
% con solidated by Group |
|||
|---|---|---|---|---|---|---|
| MARINETTE MARINE CORPORATION Ship building and repair |
Wisconsin (WI – USA) |
USD | 400,000.00 | 100.00 | Fincantieri Marine Group LLC. |
87.44 |
| ACE MARINE LLC. Building of small aluminum ships |
Wisconsin (WI – USA) |
USD | 1,000.00 | 100.00 | Fincantieri Marine Group LLC. |
87.44 |
| FINCANTIERI DO BRASIL PARTICIPAÇÕES SA Holding company |
Brazil | BRL | 1,310,000.00 | 80.00 20.00 |
Fincantieri S.p.A. Fincantieri Holding B.V. |
100.00 |
| FINCANTIERI INDIA Pte. Ltd. | India | INR | 10,500,000.00 | 99.00 1.00 |
Fincantieri Holding B.V. Fincantieri S.p.A. |
100.00 |
| MARINE INTERIORS S.p.A. Ship interiors |
Trieste (Italy) |
EUR | 5,120,000.00 | 100.00 | Seaf S.p.A. | 100.00 |
| FINCANTIERI SI S.p.A.* Electric, electronic and electromechanical industrial solutions |
Trieste (Italy) |
EUR | 500,000.00 | 100.00 | Seaf S.p.A. | 100.00 |
| VARD HOLDINGS Ltd. Holding company |
Singapore | SGD | 932,200,000.00 | 55.63 | Fincantieri Oil & Gas S.p.A. | 55.63 |
| VARD GROUP AS Shipbuilding |
Norway | NOK | 100,000.00 | 100.00 | Vard Holdings Ltd. | 55.63 |
| VARD ELECTRO AS Electrical / automation installation |
Norway | NOK | 1,000,000.00 | 100.00 | Vard Group AS | 55.63 |
| VARD RO HOLDING S.r.l. Holding company |
Romania | RON | 82,573,830.00 | 100.00 | Vard Group AS | 55.63 |
| VARD NITERÓI SA Shipbuilding |
Brazil | BRL | 219,383,790.00 | 99.99 0.01 |
Vard Group AS Vard Electro Brazil (Instalaçoes Eletricas) Ltda. |
55.63 |
| VARD PROMAR SA Shipbuilding |
Brazil | BRL | 57,600,000.00 | 50.50 | Vard Group AS | 28.09 |
| ESTALEIRO QUISSAMÃ Ltda. Project development |
Brazil | BRL | 400,000.00 | 50.50 | Vard Group AS | 28.09 |
| VARD SINGAPORE Pte. Ltd. Holding company |
Singapore | USD | 6,000,000.00 | 100.00 | Vard Group AS | 55.63 |
| VARD DESIGN AS Design and engineering |
Norway | NOK | 4,000,000.00 | 100.00 | Vard Group AS | 55.63 |
| VARD ACCOMMODATION AS Accommodation installation |
Norway | NOK | 500,000.00 | 100.00 | Vard Group AS | 55.63 |
| VARD PIPING AS Pipe installation |
Norway | NOK | 100,000.00 | 100.00 | Vard Group AS | 55.63 |
| VARD BREVIK HOLDING AS Holding company |
Norway | NOK | 5,810,000.00 | 100.00 | Vard Group AS | 55.63 |
| SEAONICS AS Offshore handling systems |
Norway | NOK | 20,000,000.00 | 5.00 | Vard Group AS | 28.37 |
| SEAONICS POLSKA SP. Z O.O. Engineering services |
Poland | PLN | 50,000.00 | 100.00 | Seaonics AS | 28.37 |
| AAKRE EIGENDOM AS Real estate |
Norway | NOK | 100,000.00 | 100.00 | Vard Group AS | 55.63 |
| Principal activity | Registered office |
Share capital | (%) interest held | % con solidated by Group |
||
|---|---|---|---|---|---|---|
| VARD DESIGN LIBURNA Ltd. Design and engineering |
Croatia | HRK | 20,000.00 | 51.00 | Vard Design AS | 28.37 |
| VARD ELECTRO TULCLEA S.r.l. Electrical installation |
Romania | RON | 4,149,525.00 | 99.96 Vard Electro AS | 55.61 | |
| VARD ELECTRO BRAZIL (INSTALAÇÕES ELETRICAS) LTDA. Electrical installation |
Brazil | BRL | 3,000,000.00 | 99.00 1.00 |
Vard Electro AS Vard Group AS |
55.63 |
| VARD ELECTRO BRAILA S.r.l. Electrical installation |
Romania | RON | 45,000.00 | 100.00 | Vard Electro AS | 55.63 |
| VARD ELECTRICAL INSTALLATION AND ENGINEERING (INDIA) Pte. Ltd. Electrical installation |
India | INR | 7,000,000.00 | 99.00 1.00 |
Vard Electro AS Vard Electro Tulcea S.r.l. |
55.63 |
| VARD TULCEA SA Shipbuilding |
Romania | RON | 151,606,459.00 | 99.99 | Vard RO Holding S.r.l. | 55.32 |
| VARD BRAILA SA Shipbuilding |
Romania | RON | 165,862,177.50 | 94.12 5.88 |
Vard RO Holding S.r.l. Vard Group AS |
55.63 |
| VARD ENGINEERING CONSTANTA S.r.l. Engineering |
Romania | RON | 1,408,000.00 | 70.00 30.00 |
Vard RO Holding S.r.l. Vard Braila S.A. |
55.63 |
| VARD VUNG TAU Ltd. Shipbuilding |
Vietnam | USD | 8,000,000.00 | 100.00 | Vard Singapore Pte. Ltd. | 55.63 |
| VARD ACCOMMODATION TULCEA S.r.l. Accommodation installation |
Romania | RON | 436,000.00 | 99.77 0.23 |
Vard Accommodation AS Vard Electro Tulcea S.r.l. |
55.63 |
| MULTIFAG AS Onshore industrial services and installation |
Norway | NOK | 20,000,000.00 | 100.00 | Vard Brevik Holding AS | 55.63 |
| VARD ENGINEERING BREVIK AS Design and engineering |
Norway | NOK | 105,000.00 | 70.00 | Vard Brevik Holding AS | 38.94 |
| VARD OFFSHORE BREVIK AS Offshore industrial services and installation |
Norway | NOK | 100,000.00 | 100.00 | Vard Brevik Holding AS | 55.63 |
| VARD SHIP REPAIR BRAILA SA Ship repair |
Romania | RON | 7,798,340.00 | 68.58 31.42 |
Vard Braila SA Vard Brevik Holding AS |
55.63 |
| BREVIK ELEKTRO AS Onshore Electrical installation |
Norway | NOK | 100,000.00 | 100.00 | Multifag AS | 55.63 |
| VARD MARINE INC. Ship design and marine engineering |
Canada | CAD | 12,783,700.00 | 100.00 | Vard Group AS | 55.63 |
| VARD MARINE US INC. Ship design and marine engineering |
Texas (TX – USA) |
USD | 10,000.00 | 100.00 | Vard Marine Inc. | 55.63 |
| VARD ENGINEERING GDANSK Sp. Z.o.o. Offshore design and engineering |
Poland | PLN | 50,000.00 | 100.00 | Vard Engineering Brevik AS |
38.94 |
| VARD CONTRACTING AS Various shipbuilding services |
Norway | NOK | 3,000,000.00 | 100.00 | Vard Group AS | 55.63 |
| ICD SOFTWARE AS Automation and control system software |
Norway | NOK | 419,500.00 | 100.00 | Seaonics AS | 28.37 |
| ICD POLSKA sp. z o.o. Automation and control system software |
Poland | PLN | 50,000.00 | 100.00 | ICD Software AS | 28.37 |
| ICD INDUSTRIES ESTONIA OÜ Automation and control system software |
Estonia | EUR | 2,700.00 | 100.00 | ICD Software AS | 28.37 |
| SIA ICD INDUSTRIES LATVIA Automation and control system software |
Latvia | EUR | 33,164.00 | 100.00 | ICD Software AS | 28.37 |
| COMPANY NAME | Registered | % con solidated |
||||
|---|---|---|---|---|---|---|
| Principal activity | office | Share capital | (%) interest held | by Group | ||
| FASTER IMAGING AS Software house |
Norway | NOK | 500,000.00 | 100.00 | ICD Software AS | 28.37 |
| INDUSTRIAL CONTROL DESIGN AS Automation and control system software |
Norway | NOK | 30,000.00 | 100.00 | ICD Software AS | 28.37 |
| Joint ventures consolidated using the equity method |
||||||
|---|---|---|---|---|---|---|
| ORIZZONTE SISTEMI NAVALI S.p.A. Management of contracts to supply large naval vessels |
Genoa (Italy) |
EUR | 20,000,000.00 | 51.00 | Fincantieri S.p.A. | 51.00 |
| ETIHAD SHIP BUILDING LLC. Design, production and sale of civilian and naval ships |
Arab Emirates | AED | 2,500,000.00 | 35.00 | Fincantieri S.p.A. | 35.00 |
| CAMPER & NICHOLSON INTERNATIONAL SA Luxury yachting broker Various services relating to luxury yachts |
Luxembourg | EUR | 940,850.00 | 17.63 | Fincantieri S.p.A. | 17.63 |
| Associates consolidated using the equity method |
||||||
|---|---|---|---|---|---|---|
| CASTOR DRILLING SOLUTION AS Offshore drilling technology |
Norway | NOK | 196,082.00 | 34.00 | Seaonics AS | 9.65 |
| OLYMPIC CHALLENGER KS Shipowner |
Norway | NOK | 84,000,000.00 | 35.00 | Vard Group AS | 19.47 |
| BRIDGE EIENDOM AS Real estate |
Norway | NOK | 3,100,000.00 | 50.00 | Vard Brevik Holding AS | 27.82 |
| BREVIK TECHNOLOGY AS Holding of technology licenses and patents |
Norway | NOK | 45,000.00 | 34.00 | Vard Brevik Holding AS | 18.91 |
| MOKSTER SUPPLY AS Shipowner |
Norway | NOK | 13,295,000.00 | 40.00 | Vard Group AS | 22.25 |
| MOKSTER SUPPLY KS Shipowner |
Norway | NOK | 120,000,000.00 | 36.00 | Vard Group AS | 20.03 |
| REM SUPPLY AS Shipowner |
Norway | NOK | 305,000,000.00 | 26.66 | Vard Group AS | 14.83 |
| OLYMPIC GREEN ENERGY KS Shipowner |
Norway | NOK | 125,000,000.00 | 30.00 | Vard Group AS | 16.69 |
| DOF ICEMAN AS Shipowner |
Norway | NOK | 23,600,000.00 | 50.00 | Vard Group AS | 27.82 |
| TAKLIFT AS Floating cranes |
Norway | NOK | 2,450,000.00 | 25.47 Vard Brevik Holding AS | 14.17 | |
| DAMECO AS Maintenance services |
Norway | NOK | 606,000.00 | 34.00 | Vard Offshore Brevik AS | 18.91 |
| CSS DESIGN LIMITED Design and engineering |
GB/Isle of Man | GBP | 100,000.00 | 31.00 | Vard Marine Inc. | 17.25 |
management representation on the condensed consolidated half-year financial statements pursuant to art. 81-ter of consob regulation 11971 dated 14 may 1999 and subsequent amendments and additions
of the administrative and accounting processes for the preparation of the condensed consolidated half-year financial statements at 30 June 2015, during the first half of 2015.
With reference to the Vard Group, an audit plan is in the process of being approved which, like last year, includes tests on the controls over the financial reporting process and involving a wider scope regarding processes and subsidiaries than in the previous year.
21 July 2015
Chief executive officer Giuseppe Bono
Manager responsible for preparing financial reports Carlo Gainelli
independent auditors' report on the review of the condensed consolidated interim financial statements as at and for the six months ended 30 june 2015
To the Shareholders of Fincantieri SpA
We have reviewed the accompanying consolidated condensed interim financial statements of Fincantieri SpA and its subsidiaries (the Fincantieri Group) as of 30 June 2015, comprising the consolidated statement of financial position, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and related notes. The directors of Fincantieri SpA are responsible for the preparation of the consolidated condensed interim financial statements in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these consolidated condensed interim financial statements based on our review.
We conducted our work in accordance with the criteria for a review recommended by Consob in Resolution No. 10867 of 31 July 1997. A review of consolidated condensed interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than a fullscope audit conducted in accordance with International Standards on Auditing (ISA Italia) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated condensed interim financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the consolidated condensed interim financial statements of the Fincantieri Group as of 30 June 2015 are not prepared, in all material respects, in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union.
Trieste, 24 July 2015
PricewaterhouseCoopers SpA Signed by
Alessandro Mazzetti (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
Parent Company Registered office Via Genova no. 1, 34121 Trieste, Italy Tel: +39 040 3193111 Fax: +39 040 3192305 www.fincantieri.com Share capital Euro 862,980,725.70 Trieste Company Registry and Tax No. 00397130584 VAT No. 00629440322
graphic design & photocomposition Sintesi/HUB Trieste
fincantieri.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.