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    Saipem Cautiously Welcomes Upturn


Some big final investment decisions lifted Saipem into profitable territory but volatility remains a threat.

by: William Powell

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Saipem Cautiously Welcomes Upturn

A series of final investment decisions "significantly contributed to the high level of contract awards" and lifted Italian engineering giant Saipem into the black for the first half of the year, it said July 25. It made a "limited" profit of €14mn ($15.3mn), a strong improvement compared to the first half of 2018, when it recorded a loss of €323mn.

Revenues were up, at €4.519bn, from €3.798bn in H1 2018, while its operating profit was €262mn, reversing a H1 2018 loss of €74mn.

It won contracts worth €9.5bn as of June 30, 2019, and net debt is down, allowing Saipem to cut 2019 guidance to below €800mn, around €200mn less than the original guidance.

CEO Stefano Cao expressed satisfaction with “the positive results recorded in the first half of 2019 despite a scenario that does not yet show clear signs of recovery." 

He said the results stemmed from "the profound organisational and management transformation and from our firm strategic stance to anticipate the energy transition," with solutions that respected the environment and had small carbon footprints.

He said that the Mozambique LNG contract was the biggest in its history. "This is a success, which will also offer important opportunities to our supply chain," he said. An FID for that was announced mid-June but the $8bn engineering, procurement and construction contract, of which $6bn is Saipem's, was announced July 5.

High volatility in the price of oil and the ongoing low level of spending by the oil companies will probably continue in the second half of 2019, he said.

The order backlog at the end of June allows the management to forecast revenues for 2019 of around €9bn, with an adjusted pre-tax margin in excess of 10%. Capital expenditure is forecast at around €500mn.

In April the company formally closed its dispute with Gazprom over the aborted South Stream project, but that payment had been booked in 2018. Another contract however, awarded in Brazil some years ago, is being scrutinised for possible illegalities.