Saipem Keeps Suffering, Writes Down Net Current and Capital Assets for €929 million

After releasing its first half 2015 results on Tuesday, Italy’s Saipem took another blow on Wednesday. Its stocks suffered a decline around 5% after the results reported total write-downs of €929 million of net current and capital assets, and a plan to reposition the company towards higher value core business segments.

The real problem has to do with the new contracts that plunged from €13,132 million in the first half of 2014 to €3,500 million. As a result the adjusted EBIT was negative (-€579 million) and the net profit for the first two quarters fell to - 920 million euros. 

“Results for the second quarter of 2015 reflect a market that has greatly deteriorated. The further steep fall in the oil price has resulted in a major disruption, which is not likely to be reversed in the short-to-medium term and has resulted in Clients taking an increasingly rigid approach in the operational and commercial management of contracts” Stefano Cao, Saipem CEO, commented in the note released on Tuesday. 

The ENI’s subsidiary is proceeding with a rationalisation process that is expected to generate cumulative savings of €1.3 billion between 2015 and 2017. 

On Wednesday, at 16:26, the share price was 7.72€, down 5.28%. It then rebounded to 7.91€, with a 3% loss at 17:13. 

Indeed, some positive news came on Wednesday too. Saipem and two South Korean companies - SK Engineering and Hyundai Engineering & Construction - reportedly won a $1.5 billion contract to build a marine export terminal for Kuwait National Petroleum Company (KNPC).

Earlier this month, Saipem received notification of the termination for convenience of the South Stream BV contract.