Italy’s Saipem is facing a huge loss this year as the company struggles to adjust to the energy transition and increased project costs during the pandemic. The Milan-headquartered engineering and fabrication giant startled investors this week with a profit warning that triggered a major selloff in the company’s shares, which suffered a heavy correction, slipping to their lowest since 1992.
Saipem said its statutory financial statements for 2021 are expected to close with losses of over one-third of the company’s equity, which would trigger the application of Article 2446 of the Italian Civil Code. In a release, the company said that the occurrence of such conditions may, following the expiry of the contractual terms and in the absence of a specific waiver from the banks, give rise to the right of the banks to accelerate the repayment of certain outstanding loans.
As a result, the contractor is said to be working on a capital increase of €1bn ($1.13bn) to €1.5bn ($1.7bn) and a debt restructuring, with preliminary talks initiated with banks to preempt the potential consequences on loan agreements. The move has also been brought forward to the controlling shareholders, Eni and CDP Industria, to ascertain their willingness to support an adequate financial maneuver.
Compared with its previous outlook, Saipem said earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the second half of 2021 were down by about €1bn, while consolidated revenues shrank from €4.5bn to €3.5bn. The reduction has been attributed to onshore projects and recent further difficulties in the offshore wind due to the persistence of the pandemic and the current and prospective increase in the cost of raw materials and logistics.
Saipem’s chief executive officer, Francesco Caio, appointed in May last year, is under pressure from investors, but no final decision has been taken on his future, according to Bloomberg. At the end of Q3 2021, the company had net debt of around €1.4bn, liquidity of €2bn, and an unused revolving credit line of €1bn. Local media reports a merger with compatriot engineering firm Maire Tecnimont could be back on the discussion table after initial plans were scrapped several years ago.