Earnings Release • Apr 28, 2015
Earnings Release
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Interim Report at March 31, 2015 Approved by the Board of Directors on April 27, 2015
San Donato Milanese, April 27, 2015 - The Board of Directors of Saipem S.p.A. today approved Saipem Group's Interim Report as at March 31, 2015 (not subject to audit).
Umberto Vergine, Saipem CEO, commented:
"During the first quarter of 2015, despite the negative market environment caused by lower oil prices, Saipem continued its recovery process and its operating results confirm an improving trend.
The strategy put in place over the past years is based on the strength of the drilling business, on the effort to complete legacy and loss making projects as well as possible, and on ensuring a positive contribution from new projects awarded in the context of a more solid and disciplined commercial policy.
Largely as a result of the projects awarded in 2014, Saipem can count on a strong and diverse backlog in excess of €21 billion which highlights the trust that the company has been afforded by its clients, and which provides it with a strong market position in the context of a significant downturn.
Saipem's recovery process is yet to be completed. At the same time, new challenges have arisen in the sector, in particular slowing client capex as a result of the current oil-price environment. However I am confident that Saipem has created a solid basis to enable it to complete its recovery process and return to historic levels of profitability."
| (million euro) | ||||
|---|---|---|---|---|
| Q1 2014 |
Q4 2014 |
Q1 2015 |
Q1 2015 vs Q1 2014 (%) |
|
| Revenues | 2,891 | 3,398 | 3,020 | 4.5 |
| EBITDA | 303 | 220 | 351 | 15.8 |
| Operating profit | 127 | (388) | 159 | 25.2 |
| Adjusted operating profit | 127 | 22 | 159 | 25.2 |
| Net profit | 61 | (442) | 77 | 26.2 |
| Adjusted net profit | 61 | (32) | 77 | 26.2 |
| Cash flow (Net profit + Depreciation and amortisation) |
237 | 166 | 269 | 13.5 |
| Investments | 204 | 219 | 150 | (26.5) |
| New contracts | 3,900 | 2,983 | 2,399 | (38.5) |
Revenues and associated profit levels, particularly in the Engineering and Construction sector, and, to a lesser extent, in the Drilling sector, are not consistent over time, as they are influenced not only by market performance but also by climatic conditions and individual project schedules. Consequently, the results from any one particular fiscal period can vary significantly, thereby precluding a direct comparison with the same period in other fiscal years or extrapolation of figures from a single quarter to the entire year.
The Company continued its recovery process during the first quarter of 2015, achieving a solid operating result, despite the challenging market conditions affecting oil companies' spending plans.
Revenues amounted to €3 billion, an increase of 4.5% on the first quarter of 2014. This was driven primarily by improvements in E&C Offshore and the Drilling segment, which were supported by good offshore fleet utilization and the appreciation of the USD. Meanwhile, E&C onshore business revenues declined as a result of the progressive completion of legacy projects, and in line with our selective approach.
EBIT for the quarter was €159 million, 25% higher than in the first quarter of 2014. The improvement in profitability was driven by the E&C business, which showed a lower overall impact from legacy projects and a positive initial contribution from newly awarded contracts, which will ramp up over the coming quarters. In addition, the Company also saw a steady contribution from Drilling, where it is currently seeing a limited impact of daily rate reductions on our ongoing commitments.
Capital expenditure in the first quarter of 2015 amounted to €150 million (€204 million in the first quarter of 2014) and included:
€52 million in the Offshore Engineering & Construction sector, relating mainly to the maintenance and upgrade of the existing asset base;
€14 million in the Onshore Engineering & Construction sector, relating to the purchase of equipment and the maintenance of existing assets;
€52 million in the Offshore Drilling sector, mainly relating to class reinstatement works for the jack-ups Perro Negro 2 and Perro Negro 8, in addition to the maintenance and upgrade of the existing assets;
€32 million in the Onshore Drilling sector, relating to the maintenance of the existing asset base.
Net financial debt at March 31, 2015 amounted to €5,193 million, €769 million higher than at the end of 2014 but €417 million lower than in the first quarter of 2014. Before the negative cash impact of €381 million relating to FX hedging derivatives, net debt reached €4.8 billion, approximately €800 million lower year on year.
The negative FX impact comes from the settlement of derivatives contracts which hedge the longterm dollar exposure of megaprojects. In accordance with the Company's hedging policy, dollar exposure is neutralized through rolling derivatives which are normally cash-settled within 12 months. These derivative contracts therefore mature earlier than hedged project cash flows, but over the life of the project, all cash impacts are neutralized. The Q1 impact of €381 million will be fully recovered over the life of the underlying projects, as cashflows will benefit from the stronger dollar.
Backlog: During the first quarter of 2015, Saipem was awarded contracts amounting to €2,399 million (€3,900 million in the first quarter of 2014), reflective of the slower industry investment scenario. Saipem's backlog at March 31, 2015 stood at €21,526 million (€11,532 million in Offshore E&C, €6,201 million in Onshore E&C and €3,793 million in Drilling), of which €7,440 million is due to be realised in 2015.
In April 2015, Saipem successfully extended the TAD contract by two years and rescheduled the Scarabeo 6 contract for workover drilling services up to the end of 2015.
Progress achieved in the first quarter underpins our expectations for a solid performance in 2015, despite the outlook for the oil price remaining weak, which could impact how Saipem's clients approach operational and commercial issues on ongoing projects. As such, Saipem confirms the outlook provided at the full year results on February 16, 2015.
The Company expects to achieve revenues of between €12 billion and €13 billion. This range reflects the uncertainties related to the South Stream contract, as the Client is still to provide indications as to the future of this project. EBIT is forecast at between €500 million and €700 million, while net profit is expected to be between €200 million and €300 million. Investments will amount to €650 million, slightly lower than previous long-term indications, adopting measures to improve efficiency and curb net debt.
Finally, our net debt objective continues to be the achievement of a level below €4 billion, excluding the impact of exchange rate fluctuations. Based on the current prevailing forex rates, we expect the cash impact of hedging derivatives to impact net debt by approximately €500 million at year end.
This press release should be read jointly with the condensed interim consolidated financial statements at June 30, 2014 and the statutory and consolidated financial statements of Saipem S.p.A. at December 31, 2014, which are already available on the Company's website (www.saipem.com) under the section "Investor Relations – Financial Information."
***
Saipem's Chief Financial and Compliance Officer, Mr Alberto Chiarini, in his capacity as manager responsible for the preparation of the Company's financial reports, certifies, pursuant to art. 154-bis paragraph 2 of Legislative Decree no. 58/1998, that accounting data corresponds to the Company's documents and accounting books and entries.
By their nature, "forward-looking statements" are subject to risk and uncertainty since they are dependent upon circumstances which should or are considered likely to occur in the future and are outside of the Company's control. These include, but are not limited to: monetary exchange and interest rate fluctuations, commodity price volatility, credit and liquidity risks, HSE risks, the levels of capital expenditure in the oil and gas industry and other sectors, political instability in areas where the Group operates, actions by competitors, success of commercial transactions, risks associated with the execution of projects (including ongoing investment projects), in addition to changes in stakeholders' expectations and other changes affecting business conditions. Actual results could therefore differ materially from the forward-looking statements. The Financial Reports contain in-depth analyses of some of the aforementioned risks. Forward-looking statements are to be considered in the context of the date of their release.
A conference call and webcast will be hosted by CEO Umberto Vergine today at 5.30pm CEST (4.30pm BST, 11.30am EDT, 8.30am PDT). It can be followed on Saipem's website www.saipem.com by clicking on the webcast banner on the home page, or through the following URL: http://edge.media-server.com/m/p/kn8wfp2m.
During the conference call and webcast, a presentation will be given, which will be available for download from the webcast window and from the 'Investor Relations / Financial Information' section on the www.saipem.com website, around 15 minutes before the scheduled start time. This presentation will be also available for download from the authorised storage device "Nis Storage" at and Borsa Italiana S.p.A (www.borsaitaliana.it).
Saipem operates in the Engineering & Construction and Drilling businesses, with a strong bias towards oil & gas-related activities in remote areas and deep-waters. Saipem is a leader in the provision of engineering, procurement, project management and construction services with distinctive capabilities in the design and execution of large-scale offshore and onshore projects, and technological competences such as gas monetization and heavy oil exploitation.
Website: www.saipem.com Switchboard: +39-025201 Shareholder Information Saipem S.p.A., Via Martiri di Cefalonia, 67 - 20097 San Donato Milanese (MI), Italy
Institutional relations and communication: Tel.: +39-02520.34088 E-mail: [email protected]
Relations with institutional investors and financial analysts: Tel.: +39-02520.34653 Fax: +39-02520.54295 E-mail: [email protected]
Media relations: iCorporate Tel.: +39 02 4678752 Cell.: +39 366 9134595 E-mail: [email protected]
Finsbury Tel.:+44 (0)20 7251 3801 [email protected]
| Q1 | Q4 | Q1 | (million euro) Q1 2015 vs |
|
|---|---|---|---|---|
| 2014 | 2014 | 2015 | Q1 2014 (%) |
|
| Revenues | 1,505 | 1,996 | 1,751 | 16.3 |
| Expenses | (1,379) | (1,779) | (1,603) | 16.2 |
| Depreciation and amortization | (66) | (235) | (79) | 19.7 |
| Operating profit | 60 | (18) | 69 | 15.0 |
| Asset devaluation | – | 160 | – | – |
| Adjusted operating profit | 60 | 142 | 69 | 15.0 |
| EBITDA % | 8.4 | 10.9 | 8.5 | |
| EBIT % | 4.0 | 7.1 | 3.9 | |
| New contracts | 2,711 | 749 | 2,122 |
The backlog at March 31, 2015 stood at €11,532 million, of which €4,886 million is due to be realised in 2015.
| (million euro) | |||
|---|---|---|---|
| Q1 2014 |
Q4 2014 |
Q1 2015 |
Q1 2015 vs Q1 2014 (%) |
| (18.9) | |||
| (19.7) | |||
| – | |||
| (29) | (246) | (18) | (37.9) |
| -3.1 | -27.5 | -2.4 | |
| 973 | 1,872 | 256 | |
| 935 (954) (10) -2.0 |
894 (1,130) (10) -26.4 |
758 (766) (10) -1.1 |
The backlog at March 31, 2015 stood at €6,201 million, of which €1,483 million is due to be realised in 2015.
| (million euro) | ||||
|---|---|---|---|---|
| Q1 2014 |
Q4 2014 |
Q1 2015 |
Q1 2015 vs Q1 2014 (%) |
|
| Revenues | 284 | 314 | 308 | 8.5 |
| Expenses | (142) | (142) | (163) | 14.8 |
| Depreciation and amortization | (63) | (323) | (59) | (6.3) |
| Operating profit | 79 | (151) | 86 | 8.9 |
| Asset devaluation | – | 250 | – | – |
| Adjusted operating profit | 79 | 99 | 86 | 8.9 |
| EBITDA % | 50.0 | 54.8 | 47.1 | |
| EBIT % | 27.8 | 31.5 | 27.9 | |
| New contracts | 81 | 178 | 9 |
The backlog at March 31, 2015 stood at €2,621 million, of which €681 million is due to be realised in 2015.
| Q1 2015 | ||||
|---|---|---|---|---|
| Vessel | Under contract | Idle | Idle | |
| (days) | (days) | |||
| Semi-submersible rig Scarabeo 3 | 53 | 37 (b+c) |
128 (a+b+c) |
|
| Semi-submersible rig Scarabeo 4 | 90 | – | – | |
| Semi-submersible rig Scarabeo 5 | 90 | – | – | |
| Semi-submersible rig Scarabeo 6 | 83 | 7 (b) |
23 (a+b) |
|
| Semi-submersible rig Scarabeo 7 | 90 | – | – | |
| Semi-submersible rig Scarabeo 8 | 90 | – | – | |
| Semi-submersible rig Scarabeo 9 | 90 | – | – | |
| Drillship Saipem 10000 | 87 | 3 (a) |
122 (a) |
|
| Drillship Saipem 12000 | 90 | – | 92 (a) |
|
| Jack-up Perro Negro 2 | 21 | 69 (a) |
69 (a) |
|
| Jack-up Perro Negro 3 | 90 | – | – | |
| Jack-up Perro Negro 4 | 80 | 10 (a) |
10 (a) |
|
| Jack-up Perro Negro 5 | 90 | – | 122 (a) |
|
| Jack-up Perro Negro 7 | 90 | – | – | |
| Jack-up Perro Negro 8 | – | 90 (a) |
166 (a) |
|
| Tender Assisted Drilling Barge | 81 | 9 (a) |
15 (a) |
|
| Ocean Spur | 90 | – | – |
Vessel utilisation in the first quarter of 2015 and the maintenance schedule for 2015 are as follows:
(a) = the vessel underwent/shall undergo class reinstatement works and/or preparation works for a new contract.
(b) = the vessel underwent maintenance works to address technical problems.
(c) = the vessel was not under contract.
| (million euro) | ||||
|---|---|---|---|---|
| Q1 2014 |
Q4 2014 |
Q1 2015 |
Q1 2015 vs Q1 2014 (%) |
|
| Revenues | 167 | 194 | 203 | 21.6 |
| Expenses | (113) | (127) | (137) | 21.2 |
| Depreciation and amortization | (37) | (40) | (44) | 18.9 |
| Operating profit | 17 | 27 | 22 | 29.4 |
| EBITDA % EBIT % |
32.3 10.2 |
34.5 13.9 |
32.5 10.8 |
|
| New contracts | 135 | 184 | 12 |
The backlog at March 31, 2015 stood at €1,172 million, of which €390 million is due to be realised in 2015.
Average utilization of assets in the first quarter of 2015 stood at 96.2% (95.7% in the first quarter of 2014). At March 31, 2015, the Company owned 100 rigs, located as follows: 28 in Saudi Arabia, 28 in Venezuela, 19 in Peru, six in Colombia, four in Bolivia, four in Ecuador, four in Kazakhstan, two in Italy, one in Chile, one in Congo, one in Mauritania, one in Tunisia and one in Turkmenistan. Additionally, five third-party rigs were deployed in Peru, one third-party rig in Congo and one in Chile.
Attachments:
Reclassified consolidated balance sheet, consolidated income statements reclassified by nature and function of expenses and reclassified statement of cash flow.
| (million euro) | ||
|---|---|---|
| December 31, 2014 | March 31, 2015 | |
| Net tangible fixed assets | 7,601 | 7,719 |
| Net intangible fixed assets | 760 8,361 |
759 8,478 |
| - Engineering & Construction: Offshore |
3,666 | 3,680 |
| - Engineering & Construction: Onshore |
590 | 603 |
| - Drilling: Offshore |
3,034 | 3,045 |
| - Drilling: Onshore |
1,071 | 1,150 |
| Financial investments | 112 | 125 |
| Non-current assets | 8,473 | 8,603 |
| Net current assets | 297 | 960 |
| Employee termination indemnities | (237) | (242) |
| Assets (Liabilities) available for disposal | 69 | – |
| CAPITAL EMPLOYED | 8,602 | 9,321 |
| Shareholders' equity | 4,137 | 4,077 |
| Minority interest in net equity | 41 | 51 |
| Net debt | 4,424 | 5,193 |
| COVER | 8,602 | 9,321 |
| Leverage (net debt/shareholders' equity) | 1.06 | 1.26 |
| SHARES ISSUED AND OUTSTANDING |
441,410,900 | 441,410,900 |
| (million euro) | |||
|---|---|---|---|
| Q4 | Q1 | ||
| 2014 | 2014 | 2015 | |
| 3,398 | Operating revenues | 2,891 | 3,020 |
| 2 | Other revenues and income | 2 | – |
| (2,564) | Purchases, services and other costs | (2,021) | (2,047) |
| (616) | Payroll and related costs | (569) | (622) |
| 220 | GROSS OPERATING RESULT | 303 | 351 |
| (608) | Amortization, depreciation and write-downs | (176) | (192) |
| (388) | OPERATING RESULT | 127 | 159 |
| (37) | Financial expenses | (49) | (52) |
| (6) | Income from investments | 12 | 24 |
| (431) | INCOME BEFORE INCOME TAXES | 90 | 131 |
| (19) | Income taxes | (29) | (43) |
| (450) | INCOME BEFORE MINORITY INTEREST | 61 | 88 |
| 8 | Minority interest | – | (11) |
| (442) | NET RESULT | 61 | 77 |
| 166 | CASH FLOW (Net result + Depreciation and amortization) |
237 | 269 |
| (million euro) | |||
|---|---|---|---|
| Q4 | Q1 | ||
| 2014 | 2014 | 2015 | |
| 3,398 | Operating revenues | 2,891 | 3,020 |
| (3,664) | Production costs | (2,645) | (2,726) |
| (23) | Idle costs | (32) | (43) |
| (38) | Selling expenses | (34) | (32) |
| (3) | Research and development costs | (2) | (4) |
| (6) | Other operating income (expenses), net | (4) | (5) |
| (336) | CONTRIBUTION FROM OPERATIONS | 174 | 210 |
| (52) | General and administrative expenses | (47) | (51) |
| (388) | OPERATING PROFIT | 127 | 159 |
| (37) | Financial expenses | (49) | (52) |
| (6) | Income from investments | 12 | 24 |
| (431) | INCOME BEFORE INCOME TAXES | 90 | 131 |
| (19) | Income taxes | (29) | (43) |
| (450) | INCOME BEFORE MINORITY INTEREST | 61 | 88 |
| 8 | Minority interest | – | (11) |
| (442) | NET PROFIT | 61 | 77 |
| 166 | CASH FLOW (Net Profit + Depreciation and amortization) |
237 | 269 |
| (million euro) | |||
|---|---|---|---|
| Q4 | Q1 | ||
| 2014 | 2014 | 2015 | |
| (442) | Net profit | 61 | 77 |
| (8) | Minority interest | – | 11 |
| Adjustments to reconcile cash generated from operating income before changes in working capital: |
|||
| 632 | Depreciation, amortization and other non-monetary items | 169 | 134 |
| 782 | Variation in working capital relating to operations | (834) | (816) |
| 964 | Net cash flow from operations | (604) | (594) |
| (219) | Investments in tangible and intangible fixed assets | (204) | (150) |
| (5) | Investments and purchase of consolidated subsidiaries and businesses | – | – |
| 7 | Disposals | 7 | 97 |
| 747 | Free cash flow | (801) | (647) |
| – | Buy back of treasury shares/Exercise of stock options | – | – |
| (1) | Cash flow from share capital and reserves | (44) | (2) |
| (40) | Effect of exchange rate differences on net debt and other changes | (5) | (120) |
| 706 | Change in net debt | (850) | (769) |
| 5,130 | Net debt at beginning of period | 4,760 | 4,424 |
| 4,424 | Net debt at end of period | 5,610 | 5,193 |
Headquarters: San Donato Milanese (Milan) - Italy Via Martiri di Cefalonia, 67 Branches: Cortemaggiore (Piacenza) - Italy Via Enrico Mattei, 20
saipem Società per Azioni Capital Stock O441,410,900 fully paid Tax identification number and Milan Companies' Register No. 00825790157
Saipem is a subsidiary of Eni SpA
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