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Saipem's 9M 2018 loss widens despite major Saudi Aramco contract

The Italian EPC contractor reported a loss of $409m for the first nine months of this year

Saipem's share price has declined significantly since its 2014 glory days.
Saipem's share price has declined significantly since its 2014 glory days.

Italian engineering contractor Saipem slipped further into the red after a net loss of $409m for the first nine months (9M) of 2018, despite winning a “significant” contract in Saudi Arabia. 

The net loss for the engineering, procurement, and construction (EPC) firm, which is active across the GCC, marks a sharp drop compared to the $65m loss reported during 9M 2017.

While continued losses may concern investors, the business said it had enjoyed a good operational performance in the offshore engineering and construction space.

READ: Financial chief of Italian contractor Saipem to depart in October

The company won $800m-worth of contracts in July 2018, one of which was a procurement and construction contract awarded by Saudi Aramco for its South Gas Compression Plant Pipelines project. The scheme is for the Haradh gas plant located in the east of the country.

Saipem's scope on the development includes building a 700km network of various-diametre pipelines, flowlines, trunklines, and transmission lines for Saudi Arabia's state-owned oil firm. 

The company also won new work in Iraq, Mexico, Nigeria, and Serbia. However, this was not enough to overturn mounting losses that came despite contract wins worth $7bn in the first nine months of 2018. 

READ: Saipem struggling in H1, despite Q2 offshore contract wins

The loss has been attributed to write-downs of certain assets and litigations, as well as costs related to the reorganisation of company expenses. 

However, with contract wins on the rise, a stable backlog, and strong offshore construction performance, Stefano Cao, chief executive officer of Saipem, said the market offered “signs of a turnaround”. 

“In what is still a complex context, the first nine months of 2018 revealed a good operational and managerial performance, in particular in offshore engineering and construction, and drilling,” he said.

Cao suggested that “solid” Q3 contract awards would continue into the fourth quarter of the year.

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Construction Week - Issue 745
Jun 30, 2019