Weak quarterly results and mixed 2022 guidance overshadowed a new business plan from Saipem on Thursday, sending shares in the Italian energy services group down more than 8%.
In his first strategy plan, Chief Executive Francesco Caio said Saipem expected to start growing again next year as its offshore business and drilling bounce back from the pandemic, with core earnings returning to pre-COVID levels in 2023.
But the 2022-25 targets were outweighed for some traders by more concerning news nearer term.
"There is low visibility on 2022 which should be the 'transition year'," a Milan-based trader said, adding the market was also disappointed by the 2022 net debt forecast of 2.2 billion euros ($2.6 billion), higher than a consensus forecast of 1.6 billion euros, according to a Refinitiv SmartEstimate.
Saipem's shares were the biggest fallers on Italy's blue-chip index in mid-morning trade.
Demand for oil and the company's products tumbled in the global downturn triggered by the pandemic, which prompted oil majors to slash investments and defer projects to conserve cash.
Saipem, a market leader in subsea engineering and construction, has been looking to develop new lines of business to meet clients' increasing focus on green technologies, including offshore wind, carbon capture and hydrogen. But some analysts have expressed concern such businesses do not command the same margins as its oil and gas engineering operations.
To help boost growth, Saipem said separately on Thursday it had signed a commercial agreement with oilfield service provider TechnipFMC for specific subsea umbilicals, risers and flowlines (SURF) projects.
Under the 2022-25 plan, Caio pledged cumulative investments of about 1.5 billion euros to support a business model centered on a dual strategy: helping traditional customers implement their decarbonization strategies; and the construction of modular, standardized, and scalable systems as well as the provision of technologically and digitally advanced services.
The plan forecasts average annual revenue growth of 15% until 2025 and net financial debt of less than 1 billion euros by then.
However, expected operational performance growth in 2022 will be offset by cash absorption "due to the dynamics of working capital and by the capex," the company said.
In the three months to the end of September, Saipem made an adjusted loss before interest, taxes, depreciation and amortization of 25 million euros, hit by higher costs for offshore wind activities.
It forecast adjusted core earnings for the second half of the year as a whole, with expected revenues of 4.5 billion euros.
To implement the new plan, which sees an initial 100 million euros reduction in its cost base in 2022, Saipem will adopt a new organizational model divided into four business areas.
($1 = 0.8622 euros)
(Reporting by Maria Pia Quaglia Editing by Lincoln Feast and Mark Potter)