Wednesday, February 21

Saipem flags cash need as pandemic setbacks trigger profit warning

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MILAN — Italian energy services group Saipem is talking to investors about a possible funding package, the group said on Monday after warning it will take a heavy loss for 2021, triggering a halt in its shares to prevent a stinging sell-off.

Saipem has struggled to regain traction after global lockdowns caused by COVID-19 throttled demand for oil and gas, prompting oil majors to slash investment and defer projects.

Its attempts to pivot into green technologies, including offshore wind, carbon capture and hydrogen, have been hobbled by delays in critical supplies.

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Saipem shares were indicated to open down by a fifth, triggering an automatic suspension. At 0904 GMT they were indicated down 26%.

The company said in a statement it was in talks with main shareholders Eni and state lender Cassa Depositi e Prestiti to test their support for “an appropriate financing package.”

Saipem said it expected to post a loss of more than one-third of the company’s equity in 2021, which activates a provision under Italian law obliging the group to call a shareholder meeting to agree measures to reduce the losses.

The group said it was talking to banks over the potential impact of losses on loans. When losses are more than one third of capital, banks can ask for repayment to be speeded up.

Eni and CDP said on Monday they were “carefully monitoring” the situation and would carry out assessments.

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“Investors will question whether fresh new equity capital will be required to maintain the company’s financial footing, and the potential dilutive impact on the company’s shareholder value,” Italian broker Mediobanca Securities said.

A market leader in subsea exploration and construction, Saipem has been looking to develop new lines of business to meet an increasing client focus on green technologies, but analysts are concerned those could offer lower margins than its traditional oil and gas engineering services.

Saipem said it had pulled guidance given by new management last October, saying it expected adjusted core earnings for the second half of 2021 to be down by around 1 billion euros ($1.12 billion) compared with a previous positive forecast.

That mainly reflected problems with onshore exploration and construction projects and offshore wind farms due to delays in critical supplies.

Group revenues for the same period are seen at 3.5 billion euros, down from a previous 4.5 billion euros estimate, Saipem said ahead of the scheduled results release on Feb. 24. ($1 = 0.8958 euros) ($1 = 0.8946 euros) (Reporting by Agnieszka Flak and Stephen Jewkes, additional reporting by Stefano Bernabei; Editing by Kim Coghill and Tomasz Janowski)