Fincantieri — Investor Presentation 2018

Mar 28, 2018

Business Plan 2018-2022

Safe Harbor Statement

This Presentation contains certain forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes," "expects," "predicts," "intends," "projects," "plans," "estimates," "aims," "foresees," "anticipates," "targets," and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources, are solely opinions and forecasts reflecting current views with respect to future events and plans, estimates, projections and expectations which are uncertain and subject to risks. Market data used in this Presentation not attributed to a specific source are estimates of the Company and have not been independently verified. These statements are based on certain assumptions that, although reasonable at this time, may prove to be erroneous. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. If certain risks and uncertainties materialize, or if certain underlying assumptions prove incorrect, Fincantieri may not be able to achieve its financial targets and strategic objectives. A multitude of factors which are in some cases beyond the Company's control can cause actual events to differ significantly from any anticipated development. Forward-looking statements contained in this Presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No one undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Market data used in this Presentation not attributed to a specific source are estimates of the Company and have not been independently verified. Forward-looking statements speak only as of the date of this Presentation and are subject to change without notice. No representations or warranties, express or implied, are given as to the achievement or reasonableness of, and no reliance should be placed on, any forward-looking statements, including (but not limited to) any projections, estimates, forecasts or targets contained herein.

Fincantieri does not undertake to provide any additional information or to remedy any omissions in or from this Presentation. Fincantieri does not intend, and does not assume any obligation, to update industry information or forward-looking statements set forth in this Presentation. This presentation does not constitute a recommendation regarding the securities of the Company.

Declaration of the Manager responsible for preparing financial reports

Pursuant to art. 154-BIS, par. 2, of the Unified Financial Act of February 24, 1998, the executive in charge of preparing the corporate accounting documents at Fincantieri, Carlo Gainelli, declares that the accounting information contained herein correspond to document results, books and accounting records.

Table of Contents

Section 1	Market overview and strategic developments
Section 2	Short and medium term financial targets

The story so far…

	What we said…	…what we did…	….what we will achieve
Cruise	• Backlog de-risking • Synergies with Vard: integration of Tulcea shipyards	• Delivered 5 prototypes on time in 2016 - 2017 • Tonnage delivered to Italian yards from Tulcea doubled from 2016 to 2017	• Only 3 prototype ships to be delivered in 2018-2022 • Continuing operational integration of Romanian shipyards with Italian yards and further coordination in procurement strategy
Naval	• Entry into new markets in Naval segment	• Acquired Qatari Navy contract • Bid for highly strategic and visible programs	• Leveraging established known how and reputation through development of well proven products and new concepts • Identified opportunities: Australia, US FFG(X)
Offshore	• Diversification of VARD	• Over 90% of orders acquired in 2017 not related to core Offshore	• Consolidating acquired know-how to exploit opportunities in Offshore • Expansion into luxury cruise and military segments
Equipment, Systems and Services	• Insourcing of high value added activities • Expansion of after sales services	• Consolidated Cabins and Integrated Systems businesses • Newly acquired Naval contracts include sizable after sales services	• Developing Equipment, Systems and Services business to fully transform Fincantieri into a "one stop shop" for its clients • From Cabins to complete Accommodation

...and continuing successfully on a profitable growth path

Key pillars of the 2018-2022 Business Plan

Long term visibility Backlog supported by positive underlying momentum, particularly in the cruise segment

New horizons and markets Expansion into new geographical areas and development of after-sales services

Innovation

Proven capability to develop cutting edge designs and technological solutions to meet clients' evolving needs

Streamlined production

Continued focus on seamless execution through streamlining of processes and production

Section 1

Market overview and strategic developments

Shipbuilding - Cruise: growing market

Dynamics of cruise ships market

Historical trends (2013-2017)

• Starting from 2014, significant recovery in demand, with record orders in the last two years (49 units) and consequent increase of workload and shipyards production visibility
• − Demand recovery in "traditional markets"
• − Entering new markets with great potential (e.g. China and Australia)
• − New players / new brands (e.g. Virgin Cruises, Costa Asia)

Forecast (2018-2022)

• Production capacity already filled through 2022 with ships currently in backlog or close to finalization
• Steady growth in demand for lower berths, going beyond 2022, thanks to growing number of cruise passengers

Source: Total Tourists: World Tourism Organization, UNWTO – Tourism Highlights, 2017 Total cruise Tourist: Fincantieri estimates

Dynamics of global tourism and cruise passengers

Shipbuilding - Cruise: strategy and action plan

Description

Revenue growth	• Deployment of vast backlog over 90% of cruise revenues spanning the Plan's horizon covered by existing contracts and/or MOAs − • Acquisition of new clients and expansion into new geographical areas
Positive market momentum	• Confirmed positive trend in lower berth pricing Substantial uptick in the latter part of the plan period − • Demand for ships over 140,000 GRT spurs increase of project size and contract values • Expansion in niche market spaces (luxury-exploration and ice class cruise ships)
Favorable backlog composition	• Leverage on the commercial efforts of previous years and on a proven track record of consistent execution and timely delivery • New prototypes lay the base for future order acquisitions (on average a prototype generates 4 sister ships)
Production/ engineering	• De-risking prototype construction by relying on consolidated know-how in both engineering and project management • Further focus on production efficiencies • Continuing implementation of: Operational integration of Tulcea shipyard with the Italian yards in order to build complex sections of cruise ships − Coordinated procurement strategy to exploit low cost production platform advantages −
Capex and Human Resources	• Capital investments in Italy and Romania to further optimize construction yards and project development capabilities • Hiring of additional, highly specialized workforce to better execute backlog deployment

Shipbuilding - Naval: market opportunities

Fincantieri's accessible markets(1)

• The value of high-likelihood programs(2), with expected allocation date in the 2018-2022 period, amounts to approx. €52 billion
• In the 2018-2022 period these programs should generate a commitment to expenditures approaching € 9.2 billion
• 9 countries make for 74% of the orders: USA, Australia, Brazil, Saudi Arabia, Singapore, Poland, Thailand, Egypt, Philippines.
• The main programs expected to be assigned in 2018-2022 include:
• − Australia: SEA 5000 Future Frigates
• − USA: LCS and FFG (X) Future Frigates
• − Canada(6): Frigates
• − Brazil: FSGHM CV03 (Tamandaré), OPV NPa 500-BR
• − Saudi Arabia: Multi-Mission Surface combatant frigates
• − Singapore: Corvette, LPD
• − Poland: Corvette, AOR Supply
• − Romania(6): Corvette
• − Thailand: Frigates, OPV
• − Egypt: Frigates
• − Philippines: Frigates, OPV

Programs value, expenditure and number of units

configuration, Country situation, availability of defense budgets, etc.

• (4) Including patrol vessels and corvettes
• (5) The program related to the construction of Frigates for the Canadian Navy is valued only in terms of the potential revenue for Fincantieri (6) Not included in the analysis 9

Description Programs value and expenditure

Source: IHS Jane's – January 2018, Fincantieri analysis

⁽¹⁾ Excluding submarines, minehunters and programs of self-sufficient / non accessible countries (2) High likelihood programs are considered to be those with a probability of actual deployment greater than or equal to 75%, based on the evaluation of a series of elements such as the definition of the ship

⁽³⁾ Including aircraft carriers, destroyers and frigates

Shipbuilding - Naval: commercial strategy

Description

Consolidation and development of existing programs

• Italy: continuing execution of Italian Navy's fleet renewal program 9 vessels in backlog (7 Multipurpose Offshore Patrol units, 1 Logistic Support Ship, 1 − Multipurpose amphibious unit), with first delivery in 2019 options for 3 vessels (Multipurpose Offshore Patrol units) − Deliveries of remaining FREMM vessels (4 units) − • US: completion of current backlog of LCS program 9 vessels in backlog − 1 option − Awarded budget for design phase of FFG(X) − • Qatar: execution of contract with the construction of 7 vessels 4 corvettes, 1 amphibious vessel (LPD - Landing Platform Dock), 2 patrol vessels − (OPV - Offshore Patrol Vessel), with first delivery in 2021

Other programs

• Australia • US FFG(X) • Italian Navy (submarines – 3 rd batch)

Leveraging established know-how and reputation to access new markets through the development of both well proven products and new concepts

Shipbuilding: quantifying main drivers of growth and increasing profitability

Naval revenues/ Shipbuilding revenues

• The relative contribution is influenced by the strong uptick in cruise volumes

Offshore: market overview

Description

Offshore Oil&Gas: forecast

• Exploration & Production Expenditure is expected to reach a minimum in 2018, then slowly return to growth
• Negative outlook for PSV and AHTS demand due to oversupply following oil price fall and significant postponements of drilling projects
• VARD uses a tender driven approach to establish itself in other market segments of the offshore business

Focus on new business opportunities

• Small FPSO: Requires partnerships with producers of topside or FPSO operators
• Gas (LNG): increase in future demand, also thanks to new environmental rules. The market for smaller FLNG and LNG carriers will likely ramp up. VARD to leverage on existing patent (Brevik containment system) for small LNG vessels
• Offshore wind: expected installed capacity in 2022 at 46,4 GW (2018-2022 CAGR at 15%)
• Norwegian coastal ferries: sector characterized by old fleet
• Aquaculture & fisheries: sustained market growth with increasing complexity related to higher technological and industrial contents
• Specialized vessels: old fleet of cable layer and pipe layer. New market for mining vessels

E&P Expenditure

New business opportunity

Small FPSO Gas Offshore wind

Norwegian coastal ferries

Acquaculture & fisheries

Specialized vessels

Offshore: strategy and action plan

Description
Revenue growth	• Tender driven approach in the Offshore market, where first signs of recovery are becoming visible • Furthering diversification efforts in expedition cruises, fishery/aquaculture and select opportunities in the military segment, in countries where VARD already operates directly (Brazil, Norway)
Production footprint	• Finalizing Tulcea's cruise ship building capabilities segments of large cruise vessels to be transported to Italian yards − autonomous production of smaller scale ships − • Production specialization in Norwegian yards • Rightsizing and refitting of Vard Promar in order to seize local market opportunities and potential military tenders
Improvement of cost position and operating efficiency	• Continued focus on rightsizing of operations with improvements to increase efficiency and quality − Strengthening of procurement efficiency − Increasing of the scope of work in Romania to lower the average cost base −

Equipment, Systems and Services: strategy

Description

accommodation

Continuous growth of traditional businesses

• Development of large backlog already acquired • Strong focus on expanding non-captive markets (in both System & Components, and After Sales) • Enhancing After Sales services to include full lifecycle management for military vessels, − as well as extending offering to the cruise clients in established high value areas (e.g. Fincantieri Services USA) − • Potential expansion into new geographical areas

Insourcing of other high value added businesses: from cabins to complete

• Leveraging internalization of Cabins business to bolster product offering in other high value-adding segments, such as: Public areas −

over the plan period, Marine Interiors will provide a total of 160,000 sq. meters of public areas, on 18 ships, representing 27% of total public areas to be installed (in 2017 it provided 15,400 sq. meters, on 3 ships, representing 13% of installed public areas)

Developing Equipment, Systems and Services business to fully transform Fincantieri into a "one stop shop" for its clients

Section 2

Short and medium term financial targets

Short and medium term financial targets

(1) Net income before extraordinary and non-recurring items

Short and medium term financial targets – key take away messages

2018 Guidance	• Revenues expected to increase between 3% and 6% driven by the progress of cruise construction volumes, also supported by the increasing workload of Romanian yards • EBITDA margin around 7.5% thanks to the increased contribution of profitable cruise projects and naval programs • Net debt increasing vs. 2017 due to the continued growth of cruise construction volumes
2020 Objectives	• Revenues estimated to grow in a range of 18% to 20% vs. 2018 supported by the continuing increase in volumes in cruise, the effects of the diversification actions implemented by VARD, as well as the stronger contribution of naval both in Italy and abroad • EBITDA margin around 8.0% thanks to the consolidated recovery of cruise profitability and the increasing effects of the economies of scale • Operating cash flow starting to kick-in driven by the stabilization of volumes in cruise and the contribution from naval projects with net debt expected to decrease vs. previous years
2022 Objectives	• Revenues estimated to grow in a range between 17% and 21% vs. 2020 thanks to the expansion of volumes across all the segments, especially outside Italy • A sound profitability in the cruise sector, the continuing contribution from naval, the recovered performance of VARD and the effects of the economies of scale across the whole Group are expected to push EBITDA margin up to 8.0%-9.0% in 2022, leading to a structural increase in performance • Net debt substantially reduced (essentially zero excluding construction loans) thanks to a stronger operating cash flow and the gradual completion of the investment plan pursued over the plan period
• • •	Revenues growth: up to approx. 50% by 2022 EBITDA growth: up to approx. 100% by 2022 Increasing reliance on self-financing from operational cash flow to reduce net debt substantially and fund an investment plan tailored to support an expanding business

Q&A