February 26, 2020 / 12:12 PM / a month ago

UPDATE 1-Saipem reinstates dividend as forecasts higher sales

(Recasts, adds management quotes, shares)

MILAN, Feb 26 (Reuters) - Italian oil services group Saipem said on Wednesday it expected higher sales this year after it beat its 2019 targets and announced a dividend for the first time in seven years.

But it warned that concerns over the impact of the coronavirus outbreak and political uncertainty in certain parts of the world could weigh on the weak signs of recovery the industry was seeing, holding back investments by oil majors.

The group, jointly controlled by oil major Eni and state lender Cassa Depositi e Prestiti, said revenues this year would be around 10 billion euros ($11 billion), up from the 9.1 billion euros reported last year. The order backlog had reached a record high of around 25 billion euros, it said.

“Thanks to the record backlog of orders, we have exceptional visibility for the next 2-3 years,” Chief Executive Stefano Cao said in a conference call with analysts.

Cao said there were contract opportunities in exploration and construction (E&C) round the world of around 20 billion euros.

“The order book last year was great and it’s clear there are more opportunities this year,” said Mediobanca oil analyst Alessandro Pozzi.

Saipem, a market leader in subsea exploration and construction, is looking to develop new lines of business to meet an increasing client focus on green technologies.

Cao, who said around 60% of the company’s backlog was non-oil related, has reshaped the group since he took over in 2015, shifting the agenda to low-carbon solutions including floating wind power farms, liquefied natural gas (LNG) and hydrogen projects.

Net profit last year came in at 12 million euros compared with a net loss of 472 million the previous year hurt by restructuring costs.

The turnaround encouraged the company to propose a dividend of 0.01 euros per share, which would be the first since the one it paid in 2013.

“It’s not a proxy for future payments and it is essential that shareholder remuneration be sustainable,” Cao said.

Cao, a former manager at Italian oil major Eni, said consolidation in the sector made a lot of sense after years of stagnation and changes underway due to the energy transition.

Saipem is currently looking for partners to help it develop its drilling business. There has been press speculation the company could tie up with others in the industry, such as Subsea 7.

“Five years ago Saipem was a target for acquisition, now we’re looking for targets to grow,” Cao said.

At 1140 GMT Saipem shares were up 3.6%.

$1 = 0.9201 euros Reporting by Stephen Jewkes, editing by Louise Heavens and Mark Potter

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