July 29, 2020 / 10:36 AM / 15 days ago

UPDATE 1-Saipem paints uncertain outlook after Q2 loss on writedowns

(Recasts, adds CEO, broker comments)

By Stephen Jewkes

MILAN, July 29 (Reuters) - Italian energy services group Saipem struck a sombre note for the year after missing forecasts in the second quarter as writedowns pushed it to a net loss of 616 million euros.

The company, a market leader in subsea engineering and construction, said the industry still faced headwinds from the ongoing COVID-19 health emergency and uncertain demand for oil and gas.

Its shares were down 11.5% by 0935 GMT.

“The second quarter saw the worst impact and so that implies an amount of recovery in the second half... but the situation remains very complex,” CEO Stefano Cao said.

In April the group pulled its 2020 outlook, saying the pandemic could trigger a sharp fall in demand and delay projects.

On Wednesday it said its order backlog would allow it to maintain volumes similar to the first half, while efficiency measures and lower investments would keep its adjusted core earnings margin close to 10%.

But it warned the outlook did not factor further and possible tangible business deterioration should COVID-19 worsen.

“The outlook suggests consensus downgrades,” broker Jefferies said in a note.

Global lockdowns throttled demand for oil and gas, prompting oil majors to slash investment and defer projects to conserve cash.

Cao said clients so far were delaying but not cancelling projects. He said he expected project activity in the industry to return to more normal levels next year.

The group’s order backlog reached a record high of around 26 billion euros ($30.5 billion) but new contracts in the first half of the year totalled 4.837 billion euros compared to 9.537 billion euros in the first half of 2019.

Asked about acquisitions, Cao said history showed there were always M&A opportunities after crises. “This is our frame of mind”.

Saipem, controlled by state lender CDP and oil major Eni , has been looking to develop new lines of business to boost order books, including renewable energy projects. ($1 = 0.8517 euros) (Reporting by Stephen Jewkes, editing by Kirsten Donovan)

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