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Saipem struggling in H1, despite Q2 offshore contract wins

In May, shareholders at the Milan-based oil and gas contractor voted to use capital reserves to cover a staggering $593m loss in 2017

Saipem has faced significant financial headwinds over the past year
Saipem has faced significant financial headwinds over the past year

Saipem has slipped further into the red in the first half of 2018, despite significant contracts won by the oil and gas contractor’s offshore engineering and construction business in this year's second quarter.

Adjusted operating profit, a healthier reflection of corporate health than net income, in the group’s offshore engineering and construction (E&C) business stood at $122.8m (€105m) in Q2 this year – a 17.3% drop on the same period last year ($148.5m (€127m)).

These declines helped push H1 2018 adjusted profits in this segment down 15% compared to the first six months of 2017, when the figure stood at $219.8m (€188m). This was despite the total number of new contracts in Saipem’s offshore E&C business standing at 1,573 in the first six months of this year – a modest rise on H1 2017’s 1,345 figure.

In its first half statement on Wednesday, Saipem noted one of the “most significant” contracts awarded to the group’s offshore E&C business in Q2 2018 was that on behalf of Al Khafji Joint Operations (KJO) in the Arabian Gulf, comprising engineering, construction, offshore installation and commission of a new crude transmission line.

The group’s onshore E&C business fared a little better with adjusted operating profits standing at $18.7m (€16m) in the second quarter of this year – somewhat of a marked change compared to a $32.7m (€28m) loss experienced by this segment in Q2 last year.

READ: Saipem to pay off $593m loss with cash reserves

This has been a struggling year for the Milan-based Saipem. In May, its shareholders voted to use capital reserves to cover a huge financial hole using capital and retained earnings.

Three months earlier the contractor announced in February a contract valued at $750m (OMR288.7m) for Duqm Refinery project in Oman. Speaking at the time, the group said the refinery, once completed, will have a capacity of around 230,000 barrels a day.

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Construction Week - Issue 754
Nov 23, 2019