Fincantieri — Investor Presentation 2017

Mar 28, 2018

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.

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FY 2017 Key Messages

• Results in line with Business Plan 2016-2020 targets
• Record-high revenues, exceeding € 5 billion (+13% vs FY 2016), EBITDA at € 341 million (+28% vs FY 2016), Adjusted Net Profit(1) of € 91 million (+52% vs FY 2016) and Profit for the year at € 53 million (279% vs FY 2016)
• Order intake at € 8.6 billion (+31% vs FY 2016), reconfirming the commercial effectiveness of the Group and the positive market environment. The important order for the new client Norwegian Cruise Line and the order for two new Seaside EVO cruise ships by MSC highlight the ability to attract new and retain existing clients
• Total backlog(2) in excess of € 26 billion, covering ~ 5 years of work if compared to revenues:
• − backlog at € 22 billion (+21%) with a portfolio of 106 units
• − soft backlog(3) at € 4.1 billion
• Sound operational performance in shipbuilding with 12 units delivered, of which 5 cruise ships (including MSC "Seaside", the first prototype unit for MSC Cruises)
• Net Debt at € 314 million (vs € 615 million in FY 2016)
• Signed a share purchase agreement for the acquisition of 50 % of the share capital of STX France
• Announced the delisting proposal for VARD
• Proposed Dividend payment of € 0.01 per share

(1) Net result before extraordinary and non recurring items

(2) Sum of backlog and soft backlog

⁽³⁾ Soft backlog which represents the value of existing contract options and letters of intent as well as contracts in advanced negotiation, none of which yet reflected in the order backlog

FY 2017 main orders (1/2)

Orders acquired in Q4

	Vessel		Client	Delivery
Shipbuilding		4 cruise ships	Norwegian Cruise Line	2022-2025
		1 cruise ship	Holland America Line (Carnival Corporation)	2021
		1 cruise ship (sixth "Royal Princess" class vessel)	Princess Cruises (Carnival Corporation)	2022
		1 cruise ship	Silversea Cruises	2020
		2 cruise ships	Viking Ocean Cruises	2021-2022
		2 cruise ships	MSC Cruises	2021-2023
		Littoral Combat Ship "Freedom" (LCS 27)	US Navy	2020

FY 2017 main orders (2/2)

Orders acquired in Q4

	Vessel	Client	Delivery
Offshore	1 krill fishing vessel	Aker BioMarine	2018
	1 live fish transportation vessel	Fjordlaks Aqua	2018
	1 research expedition vessel	Rosellinis Four-10 (wholly-owned by the industrialist Kjell Inge Røkke)	2020
	1 expedition cruise vessel	Coral Expeditions	2019
	2 Offshore Fish Farming Operation Platforms	Cermaq	2018
	7 Stern Trawlers	Bergur-Huginn, Utgerdarfelag Akureyringa, Gjögur, Skinney-Thinganes	2019
	1 Luxury Polar Expedition Cruise Vessel	Ponant	2021

FY 2017 main deliveries (1/2)

Deliveries in Q4

	Vessel		Client	Delivery
Shipbuilding		Cruise ship "Viking Sky"	Viking Ocean Cruises	Ancona
		Cruise ship "Majestic Princess"	Princess Cruises (Carnival Corporation)	Monfalcone
		Cruise ship "Silver Muse"	Silversea Cruises	Sestri Ponente
		FREMM "Rizzo"	Italian Navy	Muggiano
		Submarine "Romeo Romei"	Italian Navy	Muggiano
		Cruise ship "Viking Sun"	Viking Ocean Cruises	Ancona
		Littoral Combat Ship "Little Rock" (LCS 9)	US Navy	Marinette
		Cruise ship "MSC Seaside"	MSC	Monfalcone

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FY 2017 main deliveries (2/2)

Deliveries in Q4

	Vessel		Client	Delivery
		OSCV "Skandi Buzios"	Techdof	Vard Søviknes
		OSCV "Far Superior"	Farstad	Vard Vung Tau
		OSCV "Skandi Vinland"	DOF	Vard Langsten
Offshore		2 Module Carrier Vessels	Kazmortransflot	Vard Braila
		6 Module Carrier Vessels	Topaz Energy and Marine	Vard Vung Tau Vard Tulcea
		1 LPG Carrier "Gilberto Freyre"	Transpetro	Vard Promar
		OSCV "Kreuz Challenger"	Kreuz Subsea	Vard Søviknes

Order intake and backlog – by segment

(1) Sum of backlog and soft backlog

(2) Soft backlog represents the value of existing contract options and letters of intent as well as contracts in advanced negotiation, none of which yet reflected in the order backlog

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Backlog deployment – by segment and end market

(1) Articulated Tug Barge (ATB) is an articulated unit consisting of a barge and a tug, thus being counted as two vessels in one unit

(2) Ships with length > 40 m

(3) Offshore business generally has shorter production times and, as a consequence, shorter backlog and quicker order turnaround than Cruise and Naval

Revenues – by segment and end market

Breakdown by segment and end market(1)

(1) Breakdown calculated on total revenues before eliminations

Comments

• Shipbuilding
• − Growth of revenues in cruise, reaching 49% of Group's total
• − Progress of Italian Navy's fleet renewal program and full swing of design activities for the Qatari Ministry of Defense contract
• Offshore
• − Slight reduction of production volumes due to the downturn of production in Norway and Brazil and negative effect of NOK/EUR exchange rate (€ 3 mln)
• − Partially offset by growth of volume in Vietnam and Romania shipyards
• Equipment, Systems and Services
• − The increase in revenues is mainly due to the higher volume of cabins and public areas installation and to the growth in volume of after sales activities, driven by workload for the Italian Navy

EBITDA(1) by segment

• EBITDA margin at 6.8%, vs 6.0% in FY 2016
• Shipbuilding
• − Improved performance in cruise thanks to the enhancement of production and design processes, progress of more profitable projects and of the naval programs
• Offshore
• − Positive impact of diversification strategy albeit the Oil&Gas crisis and consequent decline in volumes in Norway and Brazil
• Equipment, Systems & Services
• − Decrease due to a change in the mix of products and services sold compared to 2016

(1) EBITDA is a Non-GAAP Financial Measure. The Company defines EBITDA as profit/(loss) for the period before (i) income taxes, (ii) share of profit/(loss) from equity investments, (iii) income/expense from investments, (iv) finance costs, (v) finance income, (vi) depreciation and amortization, (vii) extraordinary wages guarantee fund – Cassa Integrazione Guadagni Straordinaria, (viii) expenses for corporate restructuring, (ix) accruals to provision and cost of legal services for asbestos claims, (x) other non recurring items

Net result

Adjusted Net result (1,2) Comments

€ mln	FY 2016	FY 2017
A Adjusted Net result (1)	60	91
Attributable to owners of the parent	66	95
B Extraordinary and non recurring items gross of tax effect	(59)	(49)
C Tax effect on extraordinary and non recurring items	13	11
A + B + C Net result	14	53

• The adjusted result reflects:
• − Improvement of operating performance and margin
• − Increased financial charges at € 88 mln (vs € 76 mln in FY 2016), due to the increase of unrealized foreign exchange losses for € 17 mln and albeit the reduction of finance expenses on construction loans for € 10 mln
• Extraordinary and non recurring items gross of tax effect at € 49 mln including: provision for litigation (€ 45 mln), of which € 39 mln for asbestos claims, and costs for VARD restructuring measures (€ 4 mln)

(1) Net result before extraordinary and non recurring items

(2) Excluding extraordinary and non recurring items net of tax effect

Capital expenditures

Comments

• Tangible capex mainly aimed at supporting the development of production volumes:
• − introduction of new sandblasting and painting systems at the Monfalcone yard
• − reorganization of operational areas
• − technological upgrading
• − improvement of safety and environmental conditions in all production sites
• Intangible capex are related to the development of new on-board technologies for cruise ships, of which euro 31 million for R&D costs and euro 24 million related to IT developments

Net working capital(1)

Breakdown by main components Comments

€ mln	FY 2016	(120) FY 2017	• Net working capital decrease to € (120) mln from € 265 mln in FY 2016
Inventories and advances to suppliers	590	835	− Increase of € 245 mln in Inventories and advances to suppliers in the
Work in progress net of advances from customers	604	648	naval business − Increase of € 44 mln in Work in
Trade receivables	1,123	909	progress and € 441 mln in Trade payables mainly due to the growth of production volumes in the cruise and
Other current assets and liabilities	59 (678)	1 (624)	naval businesses − Decrease of € 214 mln in Trade
Construction loans Trade payables	(1,307)	(1,748)	receivables mainly due to the cash-in of final payments for the cruise ships delivered during the year
Provisions for risks & charges	(126)	(141)	• Construction loans at € 624 mln (down € 54 mln vs FY 2016) of which € 574 mln related to VARD and € 50 mln related to
Net working capital	265	(120)	Fincantieri

(1) Construction loans are committed working capital financing facilities, treated as part of Net working capital, not in Net financial position, as they are not general purpose loans and can be a source of financing only in connection with ship contracts

• mln from € 265 mln in FY 2016
• − Increase of € 245 mln in Inventories and advances to suppliers in the naval business
• − Increase of € 44 mln in Work in progress and € 441 mln in Trade payables mainly due to the growth of production volumes in the cruise and naval businesses
• − Decrease of € 214 mln in Trade receivables mainly due to the cash-in of final payments for the cruise ships delivered during the year
• Construction loans at € 624 mln (down € 54 mln vs FY 2016) of which € 574 mln related to VARD and € 50 mln related to Fincantieri

Net financial position(1)

• Net debt at the end of FY 2017 at € 314 mln (€ 615 mln in FY 2016)
• ‒ Thanks also to the cash-in of the final installments for delivered cruise ships and the advance payments received on new cruise and naval contracts

(1) Net financial position does not account for construction loans as they are not general purpose loans and can be a source of financing only in connection with ship contracts

Investor Relations contacts

Investor Relations Team

Cristiano Pasanisi – VP Group Treasury, Corporate Finance & Investor Relations +39 040 319 2375 cristiano.pasanisi@fincantieri.it

Matteo David Masi – Head of Investor Relations +39 040 319 2334 matteodavid.masi@fincantieri.it

Alberta Michelazzi +39 040 319 2497 alberta.michelazzi@fincantieri.it

Institutional Investors

investor.relations@fincantieri.it

Individual Shareholders

azionisti.individuali@fincantieri.it

www.fincantieri.com

Q&A

Appendix

FY 2017 results by segment

Shipbuilding

Offshore

Equipment, Systems and Services

Shipbuilding

• Revenues: € 3,883 mln, up 19.6 % vs FY 2016
• − Growth of revenues in cruise, reaching 49% of Group's total
• − Progress of Italian Navy's fleet renewal program and full swing of design activities for the Qatari Ministry of Defense contract

• EBITDA

• − Improved performance in cruise thanks to the enhancement of production and design processes, progress of more profitable projects and of the naval programs
• Capex: € 90 mln
• Orders: Order intake at € 7,526 mln vs € 5,191 mln in FY 2016
• − Cruise ships: 4 for NCL, 2 for Carnival, 1 for Silversea Cruises, 2 for Viking, 2 for MSC
• − 1 Littoral Combat Ship for US Navy
• Backlog: € 20,238 mln vs € 16,372 mln in FY 2016
• Deliveries: 12 ships
• − "Viking Sky" and "Viking Sun" for Viking Ocean Cruises
• − "Majestic Princess" for Princess Cruises
• − "Silver Muse" for Silversea Cruises
• − "Seaside" for MSC Cruises
• − FREMM "Rizzo" and submarine "Romeo Romei" for Italian Navy
• − "Little Rock" (LCS 9) for US Navy
• − 4 ATB units for Kirby Corporation and Plains Towing LLC

Offshore

Revenues		Comments
€ mln 960	943	• Revenues: € 943 mln, down 1.8% vs FY 2016 − Slight reduction of production volumes due to the downturn of production in Norway and Brazil and negative effect of NOK/EUR exchange rate (€ 3 mln) − Partially offset by growth of volume in Vietnam and Romania shipyards
FY 2016 EBITDA	FY 2017	• EBITDA: € 42 mln, with margin at 4.4% − Positive impact of diversification strategy albeit the Oil&Gas crisis and consequent decline in volumes in Norway and Brazil
€ mln 5.3% 51 FY 2016 Capex	4.4% 42 % of Revenues FY 2017	• Capex: € 37 mln • Orders: Order intake at € 888 mln vs € 1,138 mln in FY 2016 − 10 fishing vessels for different clients − 2 Car-and-Passenger Ferries for Torghattan Nord − 2 Expedition cruise units (for Coral Expedition and Ponant) − 1 Research Expedition Vessel for Rosellinis Four-10
€ mln 31 3.2%	3.9% 37	− 5 other vessels • Backlog: € 1,418 mln vs € 1,361 mln in FY 2016 • Deliveries: 13 vessels − 4 OSCV: "Skandi Buzios" and "Skandi Vinland" for Techdof, "Far Superior" for Farstad, "Kreuz Challenger" for Kreuz Subsea
FY 2016	% of Revenues FY 2017	− 8 MCV (2 for Kazmortransflot and 6 for Topaz Energy and Marine) − 1 LPG carrier for Transpetro

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Equipment, Systems and Services

	Comments
558	• Revenues: € 558 mln, up 12.7% vs FY 2016 − The increase in revenues is mainly due to the higher volume of cabins and public areas installation and to the growth in volume of after sales activities, driven by workload for the Italian Navy
FY 2017	• EBITDA: € 64 mln (up 3.2% vs FY 2016) with margin at 11.5% − Decrease due to a change in the mix of products and services sold compared to 2016
11.5% 64	• Orders: € 573 mln vs € 664 mln in FY 2016 • Backlog: € 1,186 mln vs € 1,155 mln in FY 2016
FY 2017 % of Revenues
9 1.6% FY 2017
	% of Revenues

Profit & Loss and Cash flow statement

Profit & Loss statement (€ mln)	FY 2016	FY 2017
Revenues	4,429	5,020
Materials, services and other costs	(3,291)	(3,742)
Personnel costs	(846)	(909)
Provisions(1)	(25)	(28)
EBITDA	267	341
Depreciation, amortization and impairment	(110)	(120)
EBIT	157	221
Finance income / (expense)(2)	(66)	(83)
Income / (expense) from investments	(10)	(5)
Income taxes(3)	(21)	(42)
Adjusted Net result(4)	60	91
Attributable to owners of the parent	66	95
Extraordinary and non recurring items(5)	(59)	(49)
Tax effect on extraordinary and non recurring items	13	11
Net result for the period	14	53
Attributable to owners of the parent	25	57

Cash flow statement (€ mln)	FY 2016	FY 2017
Beginning cash balance	260	220
Cash flow from operating activities	73	532
Cash flow from investing activities	(237)	(168)
Cash flow from financing activities	115	(299)
Net cash flow for the period	(49)	65
Exchange rate differences on beginning cash balance	9	(11)
Ending cash balance	220	274

(1) The line "Provisions and impairment" has been modified in "Provisions" and includes provisions and reversal for risks and writedowns. It excludes impairment of Intangible assets and Property, plant and equipment, which is included in "Depreciation, amortization and impairment" (previously "Depreciation and amortization"). This change had no effect on the comparative information.

(2) Includes interest expense on construction loans for €34 mln in FY 2016 and € 24 mln in FY 2017

(3) Excluding tax effect on extraordinary and non recurring items

(4) Net results before extraordinary and non recurring items

(5) Extraordinary and non recurring items gross of tax effect

Balance sheet

Balance sheet (€ mln)	FY 2016	FY 2017
Intangible assets	595	582
Property, plant and equipment	1,064	1,045
Investments	58	53
Other non-current assets and liabilities	(69)	122
Employee benefits	(58)	(59)
Net fixed assets	1,590	1,743
Inventories and advances	590	835
Construction contracts and advances from customers	604	648
Construction loans	(678)	(624)
Trade receivables	1,123	909
Trade payables	(1,307)	(1,748)
Provisions for risks and charges	(126)	(141)
Other current assets and liabilities	59	1
Net working capital	265	(120)
Assets held for sale including related liabilities	1	-
Net invested capital	1,856	1,623
Equity attributable to Group	1,086	1.237
Non-controlling interests in equity	155	72
Equity	1,241	1,309
Cash and cash equivalents	(220)	(274)
Current financial receivables	(33)	(35)
Non-current financial receivables	(115)	(123)
Short term financial liabilities	453	482
Long term financial liabilities	530	264
Net debt / (Net cash)	615	314
Sources of financing	1,856	1,623