Oilfield services group Saipem (SPM.MI) has concluded a review of key projects and backlog following a surprise profit warning last month.
In January the Milan-headquartered company issued a profit warning and said its accounts for 2021 were expected to show a loss of more than one-third of the company’s equity.
Saipem blamed rising supply chain costs and poor project margins in offshore wind and onshore construction.
Reports later alleged that its woes were connected to a huge loss on a contract to supply foundations for the EDF-led Neart na Gaoithe offshore wind project on the east coast of Scotland.
At the time, Saipem declined to comment on the reports.
Today the group said it had reviewed a total of 22 projects, representing around 80% of its total consolidated backlog as of September 30, 2021, or around 88% of backlog for its engineering and construction unit.
It said this review “has not shown any additional impact” from its initial statement in January.
However, it reaffirmed it would take a €1 billion (£840 million) hit as a result of increased difficulties on “certain specific offshore wind and onshore E&C projects” that emerged during the review.
Saipem is reportedly late in delivering steel jackets for 54 wind turbines, exacerbating delays at the EDF project, people familiar with the matter said earlier this month, and its losses could exceed the value of its €550m (£460m) contract.
In October, the company also noted the impact of stalled progress at a Mozambican liquefied natural gas (LNG) project led by TotalEnergies. Work was halted in early 2021 after a group linked to Islamic State attacked a nearby town.
Without these “negative impacts”, Saipem said it would have seen positive EBITDA in the fourth quarter, of some €120m (£100m).
Following the backlog review, Saipem’s board has revised its 2022-25 strategic plans, with a particular focus on the “growing trends” in the offshore E&C and offshore drilling markets.
It said it would now target a €150m (£125m) reduction in structural costs, and would opt for “increased selectivity” in acquisition of onshore E&C work, prioritising LNG and gas projects, as well as repositioning towards “low-risk offshore wind” work over 2022-23.
Meanwhile, the company said discussions over a financing package were continuing with shareholders Eni and CDP Industria, and with its banking partners.
The updated plans and finance package will be proposed for approval by the board on March 15 2022, followed by a market presentation on March 16.