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Maire Tecnimont announces its H1 2020 Consolidated Financial Results

29.07.2020 - 14:18

•    Revenues: €1,216.0 million; EBITDA: €73.3 million, with a steady marginality at 6%.
•    Adjusted Net Financial Position improved by €84.3 million and Net Working Capital improved by €54.0 million in the Second Quarter
•    Increase in Backlog to €6.7 billion, thanks to €1.8 billion order intake
•    Commercial Pipeline at €52 billion (doubled vs. 2014)
•    Developments in Green Chemistry business continue, also thanks to technological partnership agreements 

Milan, 29 July 2020 – Maire Tecnimont S.p.A.’s Board of Directors today has reviewed and approved the Half Year Financial Report as at 30 June 2020, which reports a Net Income of €18.9 million. The H1 results are impacted by the effects of the Covid-19 pandemic in the main geographical areas where the Group operates. The comparison with H1 2019 results reported in the table below, therefore, is not completely representative.   
 

  
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The Covid-19 Phenomenon
The explosion of the emergency triggered by the Covid-19 pandemic has presented major business and financial challenges worldwide. The general level of uncertainty and consequent dramatic and widespread drop in demand for services has driven many of the sector’s leading players to considerably review their future investment plans. 
In response to the threat from the current pandemic, the Maire Tecnimont Group has taken the necessary steps to implement preventative measures - ahead of time with regard to the safety standards established by the various countries in which it operates – in order to: 
-    Ensure adequate levels of safety for its own personnel and that of its customers, suppliers and subcontractors at the various production sites; 
-    Allow the operational continuity while minimizing the impact on ongoing projects, in compliance with the legal provisions of the various host countries; 
-    Continue a dialogue with its customers in order to pursue the award of those projects that are expected to be carried out despite the current situation, in light of the financial and strategic assessments of the customers.
Despite these difficulties worldwide, the Group’s flexible organizational model, the digitization of its processes and the advanced collaboration with both partners and customers have made it possible to minimize the impact on operational activities. Commercial activities have also continued, which made it possible to be awarded new contracts worth €1.8 billion, also thanks to the Group's ability to work remotely.
The activities in  certain ongoing projects in the construction phase, from March have started to be impacted from the effects of the pandemic and the stringent measures put in place by Governments to prevent the spread of the Covid19 pandemic have sometimes led to a slowdown in the activities, and, in some limited cases, to site closures, with related reduction of production volumes in particular during the second quarter, as explained in detail below.

The changes reported refer to H1 2020 versus H1 2019, unless otherwise stated.

Consolidated Financial Results as at 30 June 2020

Maire Tecnimont Group Revenues were €1,216.0 million, down 27.7%. Volumes still reflect in H1 2020 the non-linear progress of projects in the backlog, and their performance over time, depending upon the scheduling of the individual activities. As previously highlighted, starting from the second half of 2019 volumes reflect both the final stage of some  EPC projects awarded over the past years, not yet compensated by new acquisitions, and the type of contracts that were recently acquired, mainly Engineering, Procurement, Construction Management and Commissioning services, that, due to their nature, generate lower volumes.
As already stated, First Half Revenues are also impacted by the slowdown in certain geographies, especially since the second half of March, following the decisions taken by various Governments in order to contain the Covid-19 pandemic.

Business Profit was €113.3 million, and resulted in a Business Margin of 9.3%, up versus 8.7%. 

G&A costs were €36.1 million, down 1.6%, following the start of the implementation of the cost saving initiatives launched in response to the current situation, whose impact will be more relevant in the coming months. Savings achieved in H1 have more than compensated for the increasing cost due to the strengthening of the organization in certain geographies, as well as at NextChem subsidiary.   
EBITDA was €73.3 million, down 31.5%, due to lower volumes, and a consequent higher impact of fixed costs. The margin was 6.0%, slightly down from 6.4%, but unchanged from the First Quarter 2020.

Amortization, Depreciation, Write-downs and Provisions were €23.8 million, substantially unchanged.

EBIT was €49.5 million, down 40.3%. Margin was 4.1% vs. 4.9%.

Net Financial Charges were €22.0 million, increasing by €16 million. This change is mainly due to a temporary negative net valuation of certain derivative contracts for €9.8 million vs. a positive value of €2.8 million, leading to a negative change of €12.6 million. This valuation was mainly negatively impacted both by an unfavorable exchange rate performance of the Russian Ruble and the US Dollar versus the Euro, caused by the pandemic’s impact on the FX markets.

Pre-tax Income was €27.6 million, down 64.2%. The tax provision was €8.7 million. 

The effective tax rate was approximately 31.5%, substantially unchanged over the last few Quarters, taking into account the various jurisdictions where Group operations have been carried out.

Net Income was €18.9 million, down 64.4%. mainly due to lower volumes and a temporary negative net valuation of certain derivative contracts, as stated above. If the temporary impact of the valuation of outstanding derivatives contracts were excluded from the net income, the net income for H1 2020 would have been €25.6 million and €51.1 million for H1 2019, with a delta of 49.9%.

Net Debt (net of the above-mentioned values in the table footnote) at June 30, 2020 was €260.6 million, down compared to a Net Cash of €78.9 million at 31 December 2019, but improving by €84.3 million in the Second Quarter.

The decrease in the First Quarter was mainly due to the change in the Net Working Capital related to certain EPC projects, which have been characterized by significant payments for equipment and construction activities. These payments have not been compensated by expected cash receipts due to the spread of Covid-19, which has caused some clients to postpone their scheduled payments and defer the approval process of certain milestones due to their inability to carry out their normal work remotely. This also impacted certain settlement activities under negotiation. 

The improvement in the Second Quarter, and in particular during the month of June, shows the start of a progressive normalization of working capital thanks also to advance payments of recently acquired contracts.
Lastly, at 30 June 2020, the Net Financial Position has also been negatively impacted by a €40.2 million mark-to-market valuation of the derivative contracts, mainly due to exchange rates for the Euro vs. the US Dollar and the Russian Ruble, and by cash taxes of €14.1 million.

Consolidated Shareholders’ Equity was €440.9 million, down €8.0 million vs. December 31, 2019, despite the positive Net Result for the period of €18.9 million. This decrease was driven by a negative change of the derivatives’ Cash Flow Hedge reserve related to the negative mark to market of the derivatives hedging the projects’ flows, net of an €11.0 million tax effect, and by a €15.8 million negative amount related to the translation of the financial statements reported in a foreign currency. 

Performance by Business Unit

Hydrocarbons BU
Revenues were €1,193.5 million, down 26.1%, due to the same reasons commented above.
Business Profit was €113.9 million, down 19,6%, mainly due to the lower volumes in the First Half. Business Margin was 9.5%, up 70bps reflecting the change in the mix of projects carried out in H1 2020. EBITDA was €74.6 million, with a substantially unchanged margin of 6.3%.

Green Energy BU 
Revenues were €22.6 million, down 66.5%, due to the completion of projects in the renewable energy sector, not yet replaced by new acquisitions, and also due to the final phase of a project in the hospital sector, which was disposed of during the second quarter. At the same time, our subsidiary NextChem, active in the Circular Economy and the Energy Transition, recorded a slight increase in its activities and during the second quarter has further accelerated its technological progress thanks to partnerships signed with ENI and more recently, with LanzaTech. Business Profit was negative €0.6 million, down by €5.5 million, mainly due to lower volumes and higher commercial costs. EBITDA was negative €1.3 million, down by €3.2 million, after taking into account G&A costs.

Order Intake and Backlog

Thanks to €1,768.3 million of new orders generated in H1 2020, the Group’s Backlog at June 30, 2020 was €6,703.0 million.

In particular, the main projects awarded to the Group include the following:

•    an EPC contract from Gemlik Gubre, part of Yildirim Holding, for the implementation of a new Urea and Urea Ammonium Nitrate solution plant in Gemlik, Turkey, for approximately €200 million;
•    new contracts for a total amount of approximately €220 million in the core business, mainly in Europe, including an EPCC contract signed with Total for the construction of a new Hydrotreatment unit to be realized in the Donges’ refinery in France;
•    new awards by top-notch clients including Borealis and Lukoil for feasibility, FEED and detailed engineering services, for about USD10 million;
•    an Engineering Procurement and Site Services contract with Amur GCC LLC, for the petrochemical development of the Amur Gas Chemical Complex (AGCC) in the Amur region in Russia, for about €1.2 billion (in consortium);
•    an EPC contract in Algeria with Groupement Bir Seba for the expansion of an existing oil central processing facility in the Touggourt area northeast of Hassi Messaoud, for about USD400 million.

Subsequent Events
•    On 8 July 2020, Maire Tecnimont S.p.A. announced the signature of a €365 million financing 80%-backed by SACE's “Italy Guarantee”. The financing will be used by Maire Tecnimont and its main operating companies in Italy to guarantee, along with other instruments already available to the Group, the necessary financial flexibility to be able to acquire new projects and also to normalize working capital levels. 
•    On 23 July 2020, NextChem S.p.A. and US-based carbon recycling company, LanzaTech, Inc signed an agreement to promote circular ethanol production. On the basis of this agreement, NextChem will license on an exclusive basis this technology in Italy and in some foreign markets

Outlook

At present, in view of the already described developments of Covid-19 and the consequences that it may have on the global general economy, the Group is continuing to assess the possible financial and economic impacts over the upcoming quarters of 2020. This assessment takes into account that such emergency could reasonably slowdown and conclude in the coming months, considering the measures aimed at restarting the economies already implemented by the Governments and Central Banks of the countries affected by the virus, and those in the process of being defined in other countries where the Group is present but where the situation is still developing.
 
Despite the uncertainty over the impacts of Covid-19 and the consequences for the oil price and its derivatives, the market has seen continued investment in the downstream segment, with a particular focus on infrastructure for the transformation of oil and gas into petrochemical products, and the revamping of existing refining units in order to adapt the type and quality of the end products to the changed market demands, strongly influenced by recent environmental regulations and expected to be taken in the near future. Confirmation of this forecast is supported by a strong commercial pipeline.

As at 30 June, 2020 the Group continues to maintain a high backlog, and, thanks also to the contracts already signed with international Clients since the beginning of the year, business continuity is taking place, and production volumes are expected to increase compared to the First Half, with margins in line with this type of contracts and with what has already been achieved.

To proactively respond to the current Covid-19 situation, management has launched several initiatives which will generate a reduction in costs, whose results will be felt in the coming months. Some of these initiatives represent a structural change in the traditional way of providing top-quality services. In addition to boosting the Group’s competitiveness, these savings, together with the settlement of negotiations under way with clients, could contribute to a progressive normalization of the net working capital with a related improvement in the financial position.

It is expected that the complexities of 2020 will be faced in a structured and competitive manner thanks to a global and diversified reach and the technological infrastructure that the Group has had in place for some time, whose benefits have been extensively demonstrated in this period of major crisis.

In this context, a resumption of activities in the various projects is also expected, in line with the scheduling that is increasingly being shared with Clients, as well as the commercial activities in the various geographical areas where the Group has identified target projects.


As required to all issuers from the Supervisory Authorities, it is specified that the Group and Maire Tecnimont S.p.A. consider it appropriate to use the Going-Concern assumption for the preparation of the Condensed Consolidated First Half Financial Statements at 30 June 2020, also following the assessment of the impacts of the Covid-19 emergency.
 


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Webcast Conference Call

The H1 2020 Financial Results will be presented today at 5:30pm CEST during an audio-webcast conference call held by the top management.  
The conference call may be followed as a webcast by connecting to the website (www.mairetecnimont.com) and clicking on the “H1 2020 Financial Results” banner on the Home Page or through the following url:
  
https://87399.choruscall.eu/links/mairetecnimont200729.html

Alternatively, you may participate in the conference call by calling one of the following numbers: 

Italy: +39 02 805-8811
UK: +44 121 281-8003
USA: +1 718 705-8794

The presentation given by the top management will be available at the start of the conference call in the “Investors/Results and Presentations/Financial Results” section of Maire Tecnimont’s website
(https://www.mairetecnimont.com/en/investors/results-and-presentations/financial-results). The presentation shall also be made available on the 1info storage mechanism (www.1info.it).


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Dario Michelangeli, as Executive for Financial Reporting, declares - in accordance with paragraph 2, Article 154-bis of Legislative Decree No. 58/1998 (“Consolidated Finance Act”) - that the accounting information included in this press release corresponds to the underlying accounting records.

The Half Year Financial Report as at 30 June 2020 will be available to the public at the registered office in Rome, at the operative office in Milan, on the Company’s website www.mairetecnimont.com (in the “Investors/Results and Presentations/Financial Results” section, and on the authorized storage device “1info” (www.1info.it), according to the timing allowed by law.

This press release, and the “Outlook” section in particular, contains forecasts. The declarations are based on current estimates and projections of the Group concerning future events and, by their nature, are subject to risk and uncertainty. Actual results may differ significantly than the estimates made in such declarations due to a wide range of factors, including the continued volatility and further decline of the capital and finance markets, raw material price changes, altered economic conditions and growth trends and other changes in business conditions, in addition to other factors, the majority of which outside the control of the Group.

Maire Tecnimont S.p.A.
Maire Tecnimont S.p.A., a company listed on the Milan Stock Exchange, is at the head of an international industrial group leader in the transformation of natural resources (plant engineering in downstream oil & gas, with technological and execution competences). Through its subsidiary NextChem it operates in the field of green chemistry and the technologies to support the energy transition. Maire Tecnimont Group operates in about 45 countries, numbering around 50 operative companies and a workforce of approximately 6,300 employees, along with approximately 3,000 professionals in the electro-instrumental division. For more information: www.mairetecnimont.com.


Media Relations
Carlo Nicolais, Tommaso Verani,
Tel +39 02 6313-7603 
mediarelations@mairetecnimont.it       

Investor Relations
Riccardo Guglielmetti
Tel +39 02 6313-7823
investor-relations@mairetecnimont.it


Click here to download the Consolidated as well as Maire Tecnimont S.p.A.'s Income Statement, Balance Sheet and Cash Flow Statement