Fincantieri Triples First Half 2013 Operating Results

Strong Growth Thanks to Acquisition of VARD

By MarEx 2013-07-23 11:35:00

The Board of Directors of Fincantieri met today, July 23, 2013 to examine the Group's performance in the first half of 2013:

On 23 January, Fincantieri completed the acquisition of a controlling interest (50.75%) in STX OSV (now renamed Vard), and raised its stake to 55.63% after the completion of the mandatory tender offer made under the rules of the Singapore Stock Exchange. Vard is the world leader in the construction of support vessels for oil and gas extraction and production. The acquisition is part of the strategy to diversify and internationalize the Group’s operations toward businesses and geographical areas with higher growth and profitability prospects. This acquisition doubles the Group's size to some euro 4 billion in annual revenues and approximately 20,000 employees, in 21 shipyards located in 3 different continents, and allows the Group to positionitself as leader in all the high value-added and high-potential segments of the shipbuilding industry.

The first half of 2013 reports an EBIT of euro 101 million (euro 34 million at 30.06.2012), an EBITDA of euro 137 million (euro 68 million at 30.06.2012) and revenues of euro 1,934 million (euro 1,233 million at 30.06.2012). These positive operating results have been obtained in a market environment that remains challenging despite some initial signs of recovery, and have benefited from the first-time consolidation of the Vard group effective from 23 January 2013.

The strength of the Group's capital and financial structure is confirmed by the Net financial position (excluding the Vard group's construction loans) reporting a cash surplus of euro 183 million and the Shareholders’ Equity (excluding minorities) of euro 959 million, of which euro 326 million in reserves. The financial statements also include euro 161 million in provisions adequate to cover specific risks and potential charges.

Capital expenditures in the period, of euro 103 million, mainly relate to projects aiming at enhancing the production efficiency and improve safety and environmental standards at the Group's Italian yards, and to the continuation of programs to increase production capacity at foreign yards, particularly those in the US and the new one in Brazil.

On the commercial side, a total of euro 1,843 million in new orders were secured during the first half of the year, confirming the Group's leadership in its different market sectors. In particular, in the cruise segment, the Group signed a contract with Carnival Group for the construction of two cruise ships, for the Holland America Line brand and the Carnival Cruise Lines brand. In the offshore segment, the subsidiary Vard has acquired 6 new contracts for the construction of support vessels serving the offshore oil and gas extraction and production industry. With reference to the naval defence segment, Fincantieri Marine Group, the US subsidiary, has secured an order to build 2 more LCS (Littoral Combat Ships) for the US Navy (part of a contract for 10 ships signed at the end of 2010), as well as an order for 4 small patrol boats for the US Coast Guard. As far as Italy is concerned, it is hoped that the FREMM program will be completed with the award of contracts for the last 4 ships. No new programs have been started by the Italian Navy since 2005 and this obviously raises concerns about the stability of the construction activities at the Italian yards serving the defence segment.

As of 30 June 2013, the Fincantieri Group’s order portfolio amounted to euro 10,889 million. The related order backlog of euro 6,829 million, although significant , will still be insufficient to saturate the production capacity at the Group's Italian shipyards. The Company therefore plans to carry on using the Extraordinary Wage Guarantee Fund for temporary lay-offs at Italian shipyards where there is insufficient workload.

During the period the Group parent Fincantieri continued to carry out the Reorganization Plan, under the national agreement signed at the end of 2011 with the Ministry of Labour and the majority of trade unions. An agreement was signed on 10 July 2013 with the Italian Government and with all the trade unions for an extension of the utilization of the Extraordinary Wage Guarantee Fund until August 2014. In addition, important contracts were signed during the reporting period with all the local trade unions for the yards in Castellammare di Stabia, Sestri Ponente and Ancona, aimed at ensuring the necessary flexibility of working practices (e.g. multi-period working hours) in accordance to the current market conditions.

Among the significant events occurred after the half-year close, it is reported that on 10 July Fincantieri and Regent Seven Seas Cruises signed a contract for the construction of a super-luxury cruise ship, for delivery in 2016, while on 16 July Fincantieri signed a contract with the French cruise operator Compagnie du Ponant for the construction of a small super-luxury cruise ship, for delivery in spring 2015.

Giuseppe Bono, Fincantieri’s Chief Executive Officer, has commented: "There are reasons to be reasonably optimistic about the future, especially if the Fincantieri system and the national system will achieve a unity of purposes focusing on sectors that stimulate exports and employment and attract major foreign investments in Italy."

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