THE BOD APPROVES 9M 2017 RESULTS: INCREASING REVENUES AND EBITDA, TOTAL BACKLOG AT EURO 25.3 BILLION
09 November 2017
- Results in line with the Business Plan 2016-2020 targets: revenues at September 30, 2017 up 10.7% compared to the same period of 2016, EBITDA margin at 6.5%, up 14% from the 5.7% margin of the first nine months of 2016
- Total backlog[1]at over euro 25 billion, covering approximately 6 years of work if compared to 2016 revenues: backlog as at September 30, 2017 was euro 20.3 billion (euro 19.0 billion as at September 30, 2016) with 97 ships in the order book; the soft backlog at the same date was approximately euro 5.0 billion (approximately euro 2.8 billion as at September 30, 2016)
- Further commercial developments in cruise business: conversion into order from MoA of one cruise ship for Princess Cruise brand, finalizing of an order with Silversea for one cruise ship, signing of a MoA with Carnival for one cruise ship for the luxury brand Cunard, for a total of 14 cruise ships (including options) acquired in 2017. In addition, Fincantieri signed a contract for the lengthening of Silver Spirit, for Silversea Cruises, which reiterates the Company's ability to manage for high-complexity projects in a high-tech sector
- Good operating performance confirmed with four additional units delivered in the quarter, for a total of nine ships delivered in 2017, of which four cruise ships ("Viking Sky", "Majestic Princess", "Silver Muse" and “Viking Sun”), three naval vessels (the sixth FREMM and submarine “Romeo Romei” for Italian Navy, LCS 9 for US Navy) and two ATB units (Articulated Tug and Barge) for the transport of goods in the chemical/petroleum sector, at the Sturgeon Bay yard. Consolidated the actions aimed at improving profitability
- Cooperation agreement reached between Italian and French governments which will lead to the creation of a global leader in civil and military shipbuilding
* * *
Rome, November 9, 2017- The Board of Directors of FINCANTIERI S.p.A. ("Fincantieri" or the "Company"), chaired by Giampiero Massolo, has examined and approved the interim financial information at September 30, 2017[2].
During the Board meeting Giuseppe Bono, Fincantieri's Chief Executive Officer, said: “The excellent commercial, managerial and economic results of the first nine months of 2017 further consolidate Fincantieri’s leadership and allow us to confirm, to date, the expected results for 2017, in line with the Business Plan.
With regards to strategic development, the recent announcement by the Italian and French Governments of an agreement aimed at the creation of a wide ranging alliance in the naval sector is certainly a milestone for our company. This agreement is the first step in the creation of a world leader, destined to become a reference point in the naval defense sector, thanks to its technological know-how and product portfolio, the world’s foremost cruise ship builder and one of the top players in other high-value segments, such as offshore, energy, as well as marine equipment, systems and services.
The expected integration will create a well-balanced group, capable of weathering the cyclicality of the sectors it operates in. Uniting the technical know-how will allow us to express innovative engineering capabilities and thus provide our clients with top class products and solutions, as well as equipping us with the competences necessary to best face the changes of a constantly evolving global scenario, also through the diversification of our business portfolio.”
ECONOMIC DATA
31.12.2016 |
(euro/million) |
30.09.2017 |
30.09.2016 |
4,429 |
Revenue |
3,575 |
3,230 |
267 |
EBITDA |
233 |
185 |
6.0% |
EBITDA margin |
6.5% |
5.7% |
Shipbuilding
31.12. 2016 |
(euro/million) |
30.09.2017 |
30.09.2016 (***) |
3,246 |
Revenue(*) |
2.779 |
2,333 |
2,078 |
Cruise ships |
1.958 |
1,486 |
1,156 |
Naval vessels |
812 |
839 |
12 |
Other activities |
9 |
8 |
185 |
EBITDA (*) |
184 |
121 |
5.7% |
EBITDA margin (*) (**) |
6.6% |
5.2% |
|
(*)Before eliminations between operating segments (**) Ratio between segment EBITDA and Revenue and income (***) The comparative figures at 30.09.2016 have been restated following redefinition of the operating segments |
|
The third quarter of 2017 saw an accelerated revenue accretion, with an increase of about 19% compared to the same period of the last year, resulting in the line with full year expectations.
The year-on-year growth is mainly attributable to the increase in the volumes of the cruise ships business due to the larger size of the vessels under construction (with cruise ship revenues now accounting for approximately 51% of the Group's revenues before consolidation adjustments).
Shipbuilding margins confirm the positive trend started in 2016, reporting further improvements due to the construction of more profitable cruise ships and to the streamlining of production and design processes.
Offshore
31.12.2016 |
(euro/million) |
30.09.2017 |
30.09.2016 |
960 |
Revenue(*) |
666 |
723 |
51 |
EBITDA (*) |
33 |
37 |
5.3% |
EBITDA margin (*) (**) |
4.9% |
5.1% |
|
(*) Before eliminations between operating segments (**) Ratio between segment EBITDA and Revenue and income |
|
|
The decline in revenues of approximately 8% compared with the first nine months of 2016 is due to the reduction in production volumes at VARD's European and Brazilian shipyards, partly offset by the positive impact of changes in the Norwegian krone/Euro exchange rate (euro 10 million).
The overall segment’s performance has not yet fully benefited from the business diversification initiatives implemented over the previous years in response to the crisis in the Oil&Gas sector.
Equipment, Systems and Services
31.12.2016 |
(euro/million) |
30.09.2017 |
30.09.2016 (***) |
495 |
Revenue(*) |
367 |
360 |
62 |
EBITDA (*) |
40 |
49 |
12.5% |
EBITDA margin (*) (**) |
11.0% |
13.5% |
|
(*) Before eliminations between operating segments (**) Ratio between segment EBITDA and Revenue and income (***)The comparative figures at 30.09.2016 have been restated following redefinition of the operating segments |
|
The revenues of the Equipment, Systems and Services segment were slightly above those of the corresponding period of 2016 despite the lower contribution from ship conversion activities which, in the first nine months of 2016, benefited from the positive effects of the “Renaissance” program for MSC, completed during 2016.
The margin decline is due to a change in the mix of products and services sold in the period compared to the first nine months of the previous year.
FINANCIAL DATA
30.09.2016 |
(euro/million) |
30.09.2017 |
31.12.2016 |
1,577 |
Net fixed capital |
1,723 |
1,590 |
557 |
Inventories and advances |
814 |
590 |
1,445 |
Construction contracts and client advances |
1,136 |
604 |
(833) |
Construction loans |
(868) |
(678) |
424 |
Trade receivables |
598 |
1,123 |
(1,227) |
Trade payables |
(1,526) |
(1,307) |
(105) |
Provisions for risks and charges |
(134) |
(126) |
61 |
Other current assets and liabilities |
51 |
59 |
322 |
Net working capital |
71 |
265 |
- |
Net assets classified as held for sale |
- |
1 |
1,274 |
Equity |
1,293 |
1,241 |
625 |
Net financial position |
501 |
615 |
Net fixed capital increased as a result of capital expenditure on Intangible assets for euro 35 million (of which euro 19 million for development projects), and on Property, plant and equipment for euro 76 million, - largely offset by euro 88 million in amortization and depreciation for the period - as well as the positive change of euro 163 million in Other non-current assets and liabilities, mainly related to the positive effect of the fair value measurement of currency derivatives. Furthermore, the translation of foreign currency balances of the foreign subsidiaries contributed negatively for euro 54 million.
The main changes affecting Net working capital were: (i) an increase in Inventories, Construction contracts and client advances as well as in Trade payables, primarily due to the growth in cruise ship production volumes; (ii) a reduction in Trade receivables, after collecting final payments for the cruise ships delivered in the period.
It should be noted that the stake in VARD Group has risen from 55.63% at December 31, 2016 to 79.26% at September 30, 2017. The average carrying value of the VARD shares went down from SGD 1.22 at December 31, 2016 to SGD 0.93 at September 30, 2017. This transaction has caused Equity attributable to the Group to increase by euro 27 million and non-controlling interests in equity to decrease by euro 71 million.
Net financial position, which excludes construction loans, was negative for euro 501 million (euro 615 million in net debt at December 31, 2016). Most of the Group's debt is dedicated to finance current assets associated with cruise ship construction and is therefore directly connected with the financing of net working capital. On the other hand, net fixed capital is financed through equity and other long-term sources of funding. The change in Net financial position is mainly due to financial flows typical of the cruise ship business, characterized on one hand by significant growth of volumes and on the other hand by the cash-in of final payments for the cruise ships delivered in the period.
Construction loans, specially dedicated credit instruments used for the exclusive financing of the order to which they are referred, amounted to euro 868 million at September 30, 2017; of these, euro 615 millionwere related tothe subsidiary VARD and euro 253 million to the Parent Company.
OTHER INDICATORS
(euro/million) |
Order intake |
Backlog |
Capital expenditure |
|||
|
30.09.2017 |
30.09.2016 (*) |
30.09.2017 |
30.09.2016 (*) |
30.09.2017 |
30.09.2016 (*) |
Shipbuilding |
4,848 |
5,133 |
18,572 |
17,022 |
58 |
116 |
Offshore |
486 |
1,084 |
1,300 |
1,501 |
28 |
19 |
Equipment, Systems and Services |
465 |
538 |
1,227 |
1,151 |
7 |
4 |
Consolidation adjustments/Other activities |
(314) |
(447) |
(800) |
(697) |
18 |
13 |
Total |
5,485 |
6,308 |
20,299 |
18,977 |
111 |
152 |
(*) The comparative figures at 30.09.2016 have been restated following redefinition of the operating segments
DELIVERIES
(number) |
30.09.17 completed |
2017 |
2018 |
2019 |
2020 |
2021 |
Beyond |
Cruise ships |
4 |
5 |
5 |
4 |
5 |
2 |
6 |
Naval >40 m. |
5 |
9 |
5 |
4 |
4 |
4 |
12 |
Offshore |
7 |
14 |
28 |
6 |
|
|
|
BUSINESS OUTLOOK
Full year 2017 results are expected to be consistent with the Business Plan targets. In the last quarter of 2017, Shipbuilding and Equipment, Systems and Services revenues will further increase compared with the first nine months of the year .
Regarding the Shipbuilding segment, in the fourth quarter of 2017, the Company expects the delivery of the first prototype for MSC (the largest ship ever built in Italy), the full-swing production for the Italian Navy's fleet renewal program and the full swing of design activities for the Qatari Ministry of Defense contract.
The Oil&Gas industry remains in deep crisis, although there is some visibility on the first signs of a recovery in E&P investments . As such, VARD is continuing with the implementation of the business diversification actions already started, as well as focusing on the products with greatest potential in its reference markets .
In the last quarter of 2017, the Equipment, Systems and Services segment is expected to confirm the positive results achieved in the first nine months, also thanks to the deployment of the backlog associated with the Italian Navy's fleet renewal program and with the Qatari contract. Commercial and organizational actions will be implemented to ensure stronger foothold and development of the after sales business in the cruise ship segment and in the most important geographical areas.