Financial press releases

COVID-19 Update

• No order cancellations and consistent progress in production, rescheduled following production downtime of Italian operations occurred in the first half of this year
• Cruise industry – “No Sail Order” lifted in the United States, no suspension of operations in Italy. Leading cruise operators are currently planning a gradual resumption
• Two cruise ships delivered from the Group’s Italian shipyards amid the emergency – “Enchanted Princess”, the 100^th cruise ship delivered by Fincantieri and built for Princess Cruises, a Carnival Corporation brand, and “Silver Moon”, for Silversea Cruises, a Royal Caribbean Group brand – and one expedition cruise vessel, built in Norway by Vard for Ponant
• Effective measures to curb the spread of the virus have allowed a prompt detection of COVID-19 cases – tested positive are now under 3%:

-          Body temperature measurement through thermoscanning

-          Staggered entrances and social distancing

-          Work-from-home policy (available for 48% of the functions/positions)

-          Daily supply of PPE in all Group’s sites

• Employees satisfaction for the commitment shown by the Company to face the emergency: 91%[1]
• Production ramp up still deeply affected by the implementation of the new safety measures
• Sound funding capacity with liquidity and credit lines to support the current situation and its foreseeable developments in the medium term, also thanks to thenew loan, granted by a pool of banks and guaranteed by SACE, whose value amounts to  euro 1.15 billion 
• Q3 2020 revenues (euro 1,165 million), EBITDA (euro 81 million) and margins (7.0%) show a recovery in production activities broadly in line with pre COVID-19 performance

Consolidated 9M 2020 results

• Revenues at euro 3,534 million (euro 4,217 million at September 30, 2019),down by 16.2%, negatively affected by the lower production value led by COVID-19 outbreak: production hours -19% compared to the ones originally planned (3.1 million of production hours of which 2.7 million hours related to 2020 first half) and euro 945 million loss in revenues
• EBITDA, at euro 200 million, impacted by the downturn in production volumes of the Group’s Italian sites (euro 306 million at September 30, 2019) with an EBITDA margin of 5.7%, up from 5.0% of the first half of the year (7.3% at September 30, 2019). The postponement of production programs led to an EBITDA shortage of approximately euro 71 million
• COVID-19 related expenses, at euro 149 million, are accounted in the extraordinary expenses and are mainly attributable to a lower operating leverage led by the downturn of production volumes during operations downtime and gradual ramp up, as well as to expenses for ensuring staff health and safety
• Total backlog[2] at euro 36.8 billion, almost 6.3 times 2019 revenues,with an order intake of euro 1.9 billion: backlog at euro 26.9 billion (euro 28.4 billion at September, 2019) with 88 units to be delivered up to 2027, and soft backlog at euro 9.9 billion (euro 3.9 billion at September 30, 2019)
• Net Debt[3] at euro 1,425 million (euro 736 million at December 31, 2019), affected by the postponement of cruise ships deliveries and of part of expected installments. Such rescheduling, resulting in a working capital absorption, falls within of the Group’s strategy to preserve the sizable backlog, as well as to strengthen the relationship with its clients, now engaged in improving the efficiency of their fleets also through new ships, fully compliant with new environmental, health and safety standards. The effects on net debt of these measures along with the rescheduling of deliveries - led by the production slowdown - is approximately euro 600 million, as expected. This gap will be bridged in the next few years, through the delivery of the ships in backlog.
• Delivered 14 units from 9 different shipyards, of which 5 cruises, 2 naval vessels, and 3 fisheries
• Fincantieri Marinette Marine prime contractor in the FFG(X)[4] program for the first-in-class guided missile for the US Navy, and options for 9 additional units. FMM has also been shortlisted for the design and engineering of LUSV[5], future large-size unmanned surface vessels
• European tender for the supply of a EO/IR[6] seeker emulator for the assessment of the Defense countermeasures systems effectiveness awarded to INSIS (renamed Fincantieri NexTech). The subsidiary signed a multi-year agreement with Autostrade Tech and IBM for the implementation, sale, and joint maintenance of an innovative system for the monitoring and safeness on highway infrastructures
• Marine Interiors will supply Shanghai Waigaoqiao Shipbuilding Co. Ltd (SWS) with 2,800 cabins for the cruise ship under construction, for which the JV CSSC, a joint venture between Fincantieri China and CSSC Cruise Technology Development Co. Ltd, is licensing the technological platform and a series of technical services
• JV Naviris: second contract signed with OCCAR[7] for a feasibility study on the mid-life upgrade (MLU) of four Horizon frigates (two units for the Italian Navy, and two for the French Navy)

Other key events                                                               

• Safe Air: Fincantieri, in close collaboration with the ICGEB[8] virology lab, has developed an new air sanitation system, "Safe Air", which will significantly improve air quality and purity on cruise ships
• Vard signed an agreement for the engineering and construction of an additional innovative fishery unit for Luntos Co. Ltd. The first unit was ordered back in 2019
• Infrastructures: San Giorgio bridge in Genoa, was inaugurated on August 3, 2020 at the presence of both the Italian President Sergio Mattarella and the Italian Prime Minister Giuseppe Conte. With reference to the partnership agreement established for the “Dall’Ara” stadium and anti-stadium project, the municipality of Bologna (IT) declared it as matter of public interest
• Zeus keel laying: the experimental zero-emission vessel, in construction in Castellammare di Stabia shipyard (NA), will be equipped with a 130 kW fuel cell system, and a battery-system guaranteeing navigation for 8 hours at a speed of 7.5 knots
• Fincantieri’s commitment to innovation celebrated with the MIKE[9] award, won within the Global Companies cluster, for the company’s forward-looking strategy and its sustainable business approach

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Rome, November 12, 2020- 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, 2020[10].

Giuseppe Bono, Fincantieri's Chief Executive Officer, stated: “Results at September 30 mirror the adversities, faced by the world economy and by Fincantieri as well, of one of the most challenging periods in history. The mere numerical comparison with the same period last year should not be considered relevant, with 2020 being a truly unprecedented year. Moving past the results, I want to highlight our ability to look forward, securing stability and work for the next years for our shareholders and stakeholders. The cruise industry is gradually recovering, as it should be, and that validates our strategy that has allowed us to preserve our backlog, keeping production visibility up to 2027/2028. As for the naval business, in addition to the recent prestigious order for the US Navy, we are currently negotiating with different countries to export FREMM frigates. Besides, we are also reaching pivotal milestones in innovative business areas with remarkable prospects, namely in infrastructures and within the context of cutting-edge products and services.

Bono concluded “In the meantime, we implemented strict measures to safeguard our workers, the real asset of our Group, applying several protocols that contained infections within our sites. Furthermore, I must acknowledge the commitment embraced by the entire staff, working enthusiastically to cope with this challenging situation meanwhile ensuring a thriving future for the Group.”

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FINANCIAL INFORMATION

Revenues in the first nine months of 2020 were at euro 3,534 million, down by 16.2% compared to the same period last year. The performance was considerably affected by COVID-19 outbreak, mainly during the first semester. To respond to the health emergency, the Group has deemed necessary to suspend all activities in the Group's Italian plants and shipyards to protect its resources, ahead of the Government’s emergency regulations, and to gradually resume them only after all the strict safety protocols had been implemented. Fincantieri revised then its production program following deliveries rescheduling. Such dynamics, mainly related to the Shipbuilding segment, resulted both in a loss of 3.1 million production hours, in comparison to the amount originally planned – of which 2.7 million attributable to the first semester only – and in lower revenues for euro 945 million (euro 790 million concerning the first half of the year). The production value downturn was also partly attributable to the negative impact (euro 42 million) of the conversion to Euro of foreign subsidiaries revenues, originally recorded in Norwegian Krone. It is note worth to mention that 85% of total revenues comes from foreign clients (81% at September 30, 2019).

Group EBITDA at September 30, 2020 stood at euro 200 million (euro 306 million at September 30, 2019), with an EBITDA margin of 5.7%, up from 5.0% first semester margin (7.3% at September 30, 2019). The shortfall in EBITDA of about euro 71 million (of which 6 million concerning Q3) is attributable to the aforementioned facts. Such a shortage in EBITDA is attributable to the Shipbuilding segment for euro 51 million (euro 48 million attributable to the first semester only) and to the Equipment, Systems and Services segment for euro 20 million (euro 17 million for the first semester only). The latter was also negatively impacted by the different combination of products and services delivered during the period. Offshore and Specialized Vessels’ EBITDA was largely at breakeven as a result of the reorganization plan launched in 2019.

Shipbuilding

Revenues in the Shipbuilding segment at September 30, 2020 were equal to euro 3,104 million, down by 17.8% when compared to the first nine months of 2019. 

The slowdown of production for the period resulted in lower revenues for euro 820 million, of which euro 644 million for the Cruise segment and euro 176 million for the Naval segment. The above came as a consequence of the Italian operations downtime, the production plan reconfiguration and the gradual ramp up, affected by the implementation of the new safety protocols (-3.1 million production hours – compared to the total hours originally planned – in particular 2.7 million attributable exclusively to the first semester).

Production value in the cruise shipbuilding, down by 15.7%[11] compared to the same period last year, accounted for 57% of the Group’s revenues (58% at September 30, 2019) while the naval vessels business area, which recorded a 22.7% fall in revenues, accounted for 21% of the Group’s revenues (23% at September 30, 2019).

EBITDA of the segment at September 30, 2020 amounted to euro 191 million (euro 327 million at September 30, 2019), with an EBITDA margin of 6.2%, up from the first semester 5.7% (8.7% at September 30, 2019). The slowdown of the Italian cruise and naval shipbuilding projects affected the segment profitability, leading to a lower EBITDA contribution of about euro 51 million (euro 48 million concerning the only first semester). It is also worth to mention that Vard Cruise is substantially at break-even as a result of the reorganization plan launched in 2019 that also included a review of the estimated costs at completion in backlog.

Offshore and Specialized Vessels

Offshore and Specialized Vessels revenues at September 30, 2020 stood at euro 271 million, in line with the same period of 2019 despite the negative impact of changes in the Euro/Norwegian Krone exchange rate (euro 19 million), due to the conversion of Norwegian subsidiaries financial statements. The strategic decisions taken to countervail the impacts of production slowdown, due to the pandemic outbreak, allowed the segment to preserve its production plan.

EBITDA of the segment at September 30, 2020 was at break-even (negative for euro 48 million at September 30, 2019) as a result of the reorganization plan, launched by the Group’s management in 2019, including as well a review of the estimated costs at completion of the projects in backlog.

Equipment, Systems and Services

Revenues of the Equipment, Systems and Services segment, at euro 591 million, are consistent with the growth trend marking an increase of 1.6% when compared to the first nine months of last year, notwithstanding the  operations shutdown in Italy leading to a revenues postponement of approximately euro 201 million. The performance is the result of the Group’s diversification strategy in infrastructures, IT (electronics and cyber-security), cruise ship complete accommodation, and systems, components and after-sales services.

EBITDA of the segment at September 30, 2020 amounted to euro 37 million (euro 55 million at September 30, 2019), with an EBITDA margin of 6.3% (9.5% at September 30, 2019). Profitability reduction reflects the postponement of production programs, resulting in a lower EBITDA contribution of euro 20 million (euro 17 million attributable to 2020 first half), in addition to the different combination of products and services delivered during the period – compared to the ones offered in the first nine months last year.

BALANCE SHEET INFORMATION

Net fixed capital was at euro 1,878 million (euro 1,905 million at December 31, 2019), down by euro 27 million. Net working capital was positive at euro 366 million (negative at euro 125 million at December 31, 2019). The main variations include i) the increase in Inventories and advances (euro 77 million), mainly due to the production slowdown, ii) the increase in Trade receivables (euro 376 million), due to the invoicing of the last installment of a cruise ship to be delivered in quarter four and of few installments due for the Qatari program and iii) the decrease in Trade payables (euro 260 million), mainly due to the lower production volumes of the period.

Construction loans, dedicated credit instruments used for the exclusive financing of the project they are referred to, amounted to euro 1,008 million, with an increase of euro 197 million compared to December 31, 2019. Of these, euro 800 million were related to the Parent Company and euro 208 million to the subsidiary VARD.

Net financial position reported a net debt balance of euro 1,425 million (euro736 million in net debt at December 31, 2019). The change is consistent with the working capital cycle typical of the cruise shipbuilding business, intensified by the rescheduling of two deliveries in quarter four, and by the partial cash-in of expected trade receivables. The deferrals granted to the clients fall within the Group’s strategy to preserve the sizable backlog, as well as to further strengthen the relationship with ship owners, now committed to improve the efficiency of their fleets also through new ships, fully compliant with the demanding environmental, health and safety standards in force. The increase in funding requirements was only partially offset by the lower production volumes led by the Italian operations downtime.

OTHER INDICATORS

DELIVERIES  

The planned deliveries mirror the agreements finalized to date with our clients, and take into account an expected full resumption of production activities and a consistent availability of our supplier network.

BUSINESS OUTLOOK

The Group's activities to date are running regularly although they continue to suffer from the implementation of the new safety protocols that have allowed a timely identification of COVID-19 cases, which affected approximately 3% of the people employed in the Group's Italian sites, thus limiting its spread. By agreement with local authorities, the Company is currently performing selective screening tests (antigen/molecular tests) for COVID-19 in several of its Italian production sites. The tests are aimed at detecting asymptomatic COVID-19 cases among direct and indirect personnel. Group’s operations, conducted in a context of high uncertainty, may however be impacted by the developments of COVID-19 outbreak, whose relapses are, as of today, not foreseeable.

In the Cruise business area, it should be noted that, after having delivered the 100^th cruise ship, “Enchanted Princess”, on September 30, and the cruise ship “Silver Moon” at the end of October, the Company will be engaged in the delivery of the 6^th cruise ship, “Costa Firenze”, meeting its commitments for 2020. In the Naval business area, the programs for the Qatari Ministry of Defense and for the renewal of the Italian Navy fleet are ongoing, aiming to recover the slowdowns caused by the lockdown and by the phased resumption of the production activities. Operations at foreign shipyards have not been interrupted, consistently with local governments’ guidelines on COVID-19, although there have been moderate delays affecting the ongoing projects.

The Group has a sound funding capacity through liquidity and credit lines, enough to support Fincantieri from the current situation and its foreseeable  developments in the medium term, also thanks to thenew loan, granted by a pool of national and international banks, whose value amounts to euro 1.15 billion. The loan, with a maturity of four years, two of which of pre-amortization, is guaranteed by SACE pursuant to the Law Decree no. 23 of April 8, 2020 (“Liquidity Decree”).

The cruise industry has long shown its remarkable resilience. After more than 7 months, on October 30, 2020, in the United States, the CDC[12] lifted the “No Sail Order”, releasing simultaneously a “Framework for Conditional Sailing”[13] according to which the resumption of passenger operations is subject to the implementation of tight new health and safety protocols. As for the Italian market, no suspension is currently required by the regulation, but rather the adoption of specific new guidelines. CLIA[14] members have nevertheless agreed to extend the voluntary suspension of all cruise activities until December 31, 2020. This additional time will be used to implement the new safety protocols to safeguard the health of passengers and crew members, as well as to plan a safe, gradual ramp up of cruise operations.

As anticipated with 2020 first half results, on the medium-long run, the Group will be involved in developing the considerable workload acquired while converting the remarkable soft backlog into confirmed orders. Backlog preservation, pursued through a consolidated relationship with its clients, and the Group’s ability to meet the challenges of global markets through its diversification strategy, both suggest that the Group will resume the growth, profitability and margins embedded in the current backlog. With reference to the diversification strategy, it should be noted that the Group has strengthened its position in the infrastructures sector through new acquisitions and new important partnerships, such as the recent multi-year agreement signed among Fincantieri NexTech, Autostrade Tech, a company of Autostrade per l’Italia Group (Aspi), and IBM. This agreement entails the implementation, sale, and joint maintenance of an innovative system for the monitoring and safeness on highway infrastructures, which will come into operation on Aspi infrastructure network by the end of this month.

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The Manager Responsible for Preparing Financial Reports, Felice Bonavolontà, declares, pursuant to paragraph 2 of article 154-bis of Italian Legislative Decree no. 58 dated February 24, 1998, that the information contained in this press release corresponds to the underlying documentary and accounting books and records.

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For the significant events occurring during the period and after the reporting period, please refer to the press releases available on the Company's website (www.fincantieri.com)

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This press release is available to the public at the Company's registered office and on its website (www.fincantieri.com) under "Investor Relations – Financial Statements" and on the centralized storage of regulated information denominated eMarket STORAGE, available at the website www.emarketstorage.com.

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DISCLAIMER

Forecast data and information must be regarded as forward-looking statements and therefore, not being based on simple historical facts, contain, by their nature, an element of risk and uncertainty because they also depend on the occurrence of future events and developments outside the Company's control. Actual results could therefore be materially different from those expressed in forward-looking statements. Forward-looking statements refer to the information available at the date of their publication; Fincantieri S.p.A. reserves the right to communicate any changes in its forward-looking data and information within the time and in the manner required by law.

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The financial results for the first nine months of 2020 will be presented to the financial community during a conference call scheduled for Friday, November 13, 2020 at 9:00 CET.   

To take part in the conference call, it is necessary to choose one of the alternatives below

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Alternatively, please dial-in the following numbers:

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Hong Kong +852 58080984 then press *0

The slide presentation will be available 10 minutes before the start of the conference in the Investor Relations section of the website www.fincantieri.com.

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Fincantieri is one of the world’s largest shipbuilding groups and number one for diversification and innovation. It is leader in cruise ship design and construction and a reference player in all high-tech shipbuilding industry sectors, from naval to offshore vessels, from high-complexity special vessels and ferries to mega yachts, as well as in ship repairs and conversions, production of systems and mechanical and electrical components equipment, cruise ship interiors solutions, electronic systems and software, infrastructures and maritime constructions as well as after-sales services. With over 230 years of history and more than 7,000 vessels built, Fincantieri has always kept its management offices, as well as all the engineering and production skills, in Italy.

With over 9,500 employees in Italy and a supplier network that employs nearly 50,000 people, Fincantieri has enhanced a fragmented production capacity over several shipyards into strength, acquiring the widest portfolio of clients and products in the cruise segment. To hold its own in relation to competition and assert itself at global level, Fincantieri has broadened its product portfolio becoming world leader in the sectors in which it operates.

The Group has today 18 operating shipyards in 4 continents, nearly 20,000 employees and is the leading Western shipbuilder. It has among its clients the world’s major cruise operators, the Italian and the US Navy, in addition to several foreign navies, and it is partner of some of the main European defense companies within supranational programs. Fincantieri’s business is widely diversified by end markets, geographical exposure and by client base, with revenue mainly generated from cruise ship, naval and offshore and specialized vessel construction. Compared with less diversified players, such diversification allows it to mitigate the effects of any fluctuations in demand on the end markets served.

www.fincantieri.com

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ALTERNATIVE PERFORMANCE MEASURES

Fincantieri's management reviews the performance of the Group and its business segments also using certain nonGAAP measures not defined under IFRS. In particular, EBITDA is used as the main earnings indicator, as it enables the Group's underlying profitability to be assessed, by eliminating the impact of volatility associated with non-recurring items or extraordinary items outside the ordinary course of business.

 As required by Consob Communication no. 0092543 of December 3, 2015 which implements the ESMA Guidelines on Alternative Performance Measures (document no. ESMA/2015/1415), the components of each of these measures are described below:

• EBITDA: this is equal to earnings before taxes, before finance income and costs, before income and expenses from investments and before depreciation, amortization and impairment, as reported in the financial statements, adjusted to exclude the following items:

-          provisions for costs and legal expenses associated with lawsuits brought by employees for asbestos-related damages;

-          charges connected to the impacts of COVID-19 outbreak;

-          costs relating to reorganization plans and non-recurring other personnel costs;

-          other expenses or income outside the ordinary course of business due to particularly significant non-recurring events.

• EBITDA margin: EBITDA expressed as a percentage of Revenue and income.
• Net fixed capital: this reports the fixed assets used in the business and includes the following items: Intangible assets, Rights of use, Property, plant and equipment, Investments and Other non-current assets (including the fair value of derivatives classified in non-current Financial assets and non-current Financial liabilities) net of Employee benefits.
• Net working capital: this is equal to capital employed in ordinary operations, which includes Inventories and advances, Construction contracts and client advances, Construction loans, Trade receivables, Trade payables, Provisions for risks and charges, and Other current assets and liabilities (including Income tax assets, Income tax liabilities, Deferred tax assets and Deferred tax liabilities, as well as the fair value of derivatives classified in current Financial assets and current Financial liabilities)
• The Net financial position monitored by management includes:

-          Net current cash/(debt): cash and cash equivalents, held-for-trading securities, current financial receivables, current bank debt (excluding construction loans), current portion of long-term loans and credit facilities, other current financial liabilities;

-          Net non-current cash/(debt): non-current financial receivables, non-current bank debt, bonds, other non-current financial liabilities.

For a more detailed description of the alternative performance measures, please refer to the specific note within the Fincantieri Group's report on operations forming part of the Group Annual Report 2019 and to the First-Half Year Report 2020.