Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Fincantieri full year 2023 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Folgiero, Chief Executive Officer and Managing Director. Please go ahead, sir.
Good morning, ladies and gentlemen. Thank you for joining us, and welcome to Fincantieri's full year 2023 financial results conference call. First of all, let me say that in the first year of our new business plan, we achieved excellent results, for which I would like to thank all the people at Fincantieri who have demonstrated their commitment to success by contributing day after day to the growth of the company. We have exceeded all the targets we provided in May, thanks to strong tailwinds in all of our businesses. We achieved a solid top-line growth with revenues exceeding EUR 7.6 billion in 2023, ahead of our full-year target. We delivered a significant increase in profitability with an EBITDA margin at 5.2%, with 20 basis points improved over our guidance.
Our net debt improved significantly compared to 2022, leading to a leverage ratio at 5.6-5.7, with the leveraging path well ahead of business plan target of 7.75. Thanks to a sound financial discipline, the solid business performance of shipbuilding, naval defense, and cruise, as well as a strong rebound in the offshore and specialized vessel business, which drove EBITDA and EBIT growth, we were able to achieve an adjusted net result almost at break-even, which is two years ahead of our business plan target. Our improved working capital dynamics enabled us to generate a positive net cash flow of EUR 201 million, delivering a strong turnaround versus a negative cash flow in 2022. In 2023, orders stood at EUR 6.6 billion, up 24% compared to EUR 5.3 billion in 2022, supported by a strong contribution from defense and offshore, which marked an acceleration in December.
Moving on to page six, let me walk you through our year-on-year growth. We achieved a solid top-line growth with revenues up 2.8% compared to 2022 and exceeding EUR 7.6 billion in 2023. We also delivered a significant increase in profitability, with EBITDA growing by 80% year-on-year, approaching EUR 400 million. Our net financial position, negative by EUR 2.271 million, improved significantly by 10.3% compared to 2022. Lastly, we delivered 26 ships during the year despite a challenging industrial scenario. As we speak, we have 85 ships in portfolio, with deliveries up to 2030 and a robust backlog of EUR 23.1 billion. Let's now move to the next slide for our guidance for 2024. On page seven, we have highlighted our targets for 2024, which represent a confirmation of our business plan for top-line and marginality, but represent a significant acceleration of the deleveraging path.
For 2024, we expect revenues at approximately EUR 8 billion, up by 4.5% year-on-year, and EBITDA margin of about 6%, steadily increasing as per the plan, and a net financial position to EBITDA ratio of 5.5-6.5. Let's now move to the next slides for a more granular view of our business. Our business performance has been consistently positive throughout the year, and our unique competitive positioning across all business segments, our long history of industrial excellence, the top-notch competitiveness of our people, put Fincantieri in the best position to seize market opportunities. During the year, the group's shipyard ran at full speed, with 26 vessels delivered from 12 shipyards. As for the cruise segment, the performance has been underpinned by the rebound of the cruise industry long-term growth path, sustaining new orders and unlocking new opportunities to lead the digital and green transition.
Over the year, we signed contracts for three new ships, including two new hydrogen-powered ships for MSC, ready by 2028, reflecting the growing vitality of the cruise sector. These offers offer us another strategic opportunity to lead the digital and green transition in the shipbuilding industry. In 2023, we delivered six ships, and it's worth mentioning that we started 2024 with delivery of Sun Princess, the first in the Princess Cruises Sphere class, which, at about 178,000 gross tons, is the largest ship ever built in Italy, as well as the first LNG liquefied natural gas cruise ship ever built by Fincantieri. Moving to the next slide, we can observe on page five that also the naval business made a significant contribution to the new orders over the year, mainly driven by the increasing focus on defense spending.
In 2023, we signed contracts for six new vessels, and given the current geopolitical scenario, demand is expected to grow. Among the new orders, it is worth mentioning the third submarine of the U212 Near Future Submarine Program, where we are both design authority and prime contractor. The submarine is a unique strategic and industrial asset, combining shipbuilding at its highest standard with the underwater domain, a crucial sector going forward. We delivered five vessels, of which one for the Italian Navy, one for the U.S. Navy, and three for international clients, demonstrating our competitive global reach and recognized capabilities worldwide. Moving to offshore. In the offshore segment, we are market leader in terms of order book for the construction of SOVs and CSOVs.
The order intake for 2023 has been strongly supported by offshore, with a total of 14 new orders, out of which three new cable-laying vessels were ordered in December alone, when the segment reported a significant acceleration. In 2023, we demonstrated that we are able to offer increasingly innovative solutions, and we have the capabilities to expand our customer base also in the Far East, thanks to the international leadership achieved in cable-laying vessels, as proven by the order for a hybrid power cable-laying and construction vessel in Japan for Toyo Construction. Out of the 26 deliveries we finalized in 2023, 15 are for the offshore sector, including five marine robotic vessels for Ocean Infinity , five SOVs for three different clients, two coastguard vessels for the Norwegian Coast Guard, two stern trawlers, and one cable-laying vessel. Just a few comments on our order book on slide 12.
As you can see, we have a full slate of deliveries scheduled for the medium to long term, up to 2030, offering a very good visibility on our top line. Cruise accounts for 23 vessels in portfolio, defense accounts for 32 units, and the fast-moving offshore business accounts for 30 charter vessels, for a total of 85 ships in backlog. In offshore, it is worth mentioning that as of December 2023, the global SOV fleet amounted to 40 vessels, and the order book to 52 vessels, with Fincantieri accounting for approximately one-third of the market. Overall, we delivered a very solid commercial performance in all businesses, and we see further significant opportunities ahead of us. Now, I will end the call over to Giuseppe, who will discuss our financial results. Please, Giuseppe.
Yes. Good morning, everyone. We now move to slide 14, and with some more comments on the order intake, which was very strong, with the book-to-bill ratio at almost one. Please note the solid order intake on shipbuilding, which we saw the acquisition of three new cruise vessels, two ships for MSC and also a ferry, and the second vessel for Four Seasons Y achts. We also have inflows in the defense business with the third submarine for the Italian Navy, three new OPVs for the Italian Navy as well, the continuation of the Constellation Program for the U.S. Navy, and an SOV to be done in the United States. What came out very, very strong is the order intake in the offshore business that more than doubled compared to the previous year at EUR 1.8 billion, and this accounts for roughly 27% of the total order intake for the whole group.
This brings us to a total backlog on page 15 that covers roughly 4.5x the revenues of 2023 and stands at EUR 34.8 billion. As of December 2023, backlog stays at EUR 23.1 billion and a soft backlog of almost EUR 12 billion. We confirm our delivery plan up to 2030 with 85 ships in portfolio, of which 23 ships for cruise, 32 for the defense business, and 30 for the offshore business. Total of 26 ships delivered in 2023 from 12 different shipyards. Moving on to revenues on page 16, revenues stand at EUR 7.6 billion, up 2.8% compared to last year. The overall increase is mainly driven by the strong recovery in the offshore and special vessels business, in which revenues were up 42.5%, and the growth of the equipment systems and infrastructure business, improving by 20%.
Shipbuilding accounts for over 70% of group revenues, and it's led by the contribution of cruise, almost more than 48%, and the defense business for almost 25%. Of course, going back to the offshore business, growth reflects Fincantieri's positioning as a leading player in the offshore wind sector, as well as the increase in demand for cable-laying vessels. We signed three new contracts, as mentioned before, at the end of the year, with a very important acceleration in orders recorded in December, notably. Plus, we have the contribution of the production activities carried out in our remaining yards, now part of this segment. In the equipment systems and infrastructure segment, we recorded a 20% increase, and this is due to the pickup in the activity of the infrastructure business, mainly the development of the order for the construction of the Miami terminal for MSC, expected to be completed in 2024.
Let's comment EBITDA on page 17. EUR 397 million, up 80% year-on-year, which is a remarkable result compared to the EUR 221 million recorded in 2022, with a margin of 5.2%. Last year, we were at 3%, and we are roughly 20 basis points above the guidance. Shipbuilding stands at EUR 367 million, with a margin of 6%, and this confirms the improving trend in the segment. This segment not only performed better than previous year but also exceeded our estimates, and these results were achieved despite the very difficult production environment and the very high number of deliveries that we carried out this year, deliveries of ships that were engineered and of which the construction has started during COVID. So this is truly a remarkable result for us.
Offshore amounts to EUR 52 million, and this more than doubles the results of the previous year, with an EBITDA margin of 4.9%, and this falls fully in line with the margin recovery path of Vard, which became profitable as a company in 2023. Equipment systems and infrastructure stands at EUR 24 million, improving, of course, significantly when compared to fiscal year 2022. In 2022, in the summer, I remind you that we performed a thorough strategic and cost review of all the projects in this business, specifically in the infrastructure business, and now you see the results. We were able to stabilize the margin in this business. Moving on to page 18.
Of course, I have to note, and this is a very good result from our perspective, that we reached almost break-even on an adjusted net result basis, and this result is well ahead of our expectations and our business plan. Of course, net result still has the burden of the asbestos claims, but we confirm with these results our solid path to recovery. Moving on, on page 19, net debt of EUR 2.2 billion, and the ratio between net debt and EBITDA has halved with respect to year-end 2022, and net financial position, of course, on an absolute value, improved significantly compared to last year. We generated EUR 201 million of net cash.
Of course, net financial position is still affected by some deferrals granted to clients after the COVID-19 pandemic, and as of December 2023, the group has in place non-current financial receivables granted to clients for roughly EUR 630 million. Of course, we expect these financial receivables to turn into cash sooner rather than later, this giving us further upside on the deleveraging path. Working capital stands negative at EUR 316 million, in line with the delivery schedule and higher cash inflows recorded in the year. As I said before, the leveraging is well ahead and with a further potential upside. As you can see in slide 20, of course, we note that our debt levels are solid in the sense that we do not have any significant debt maturities until 2027. All the maturity wall for 2024 has already been refinanced in advance last year.
We have no covenants, and as with the interest rates, our hedge ratio is roughly at 80%. So net debt levels under control and, let me say, a healthy net financial position. Now I will hand the call back to Pierroberto.
Thank you, Giuseppe. Turning to market trends in the cruise industry on slide 22. During the summer, the cruise sector recorded passenger volumes above pre-COVID levels, with passengers expected to grow 5.5% annually, confirming the rebound of the cruise industry long-term growth path, with the resumptions of orders for the luxury segment. This trend, in combination with the rising interest in green and increasingly technological products, is the key driver for the recovery of new cruise ships' demand. There is a gap between supply and demand of vessels expected starting from 2027, which we expect will lead to a revamp of new orders from 2024. We are best positioned to seize further opportunities from the near comeback and the green transition of the whole cruise market.
We are not just fully aligned with the emission reduction roadmap for cruise industry, but we set the target of a zero-emission ship import in 2035. Optimizing efficiency, innovation, and development of new technologies and collaboration across shareholders are the key enablers to reach this goal. As for the naval, global defense spending is expected to further accelerate in the upcoming years, with policy impacting the industrial defense sector and demand for all naval classes and the larger fleet with more advanced technological requirements. In this business, we are second to none in the construction of high-tech surface vessels like frigates and corvettes.
Within this positive scenario, in February 2024, the group signed a term sheet for the creation of a joint venture with EDGE, one of the world's leading advanced technology and defense groups, to capitalize on global shipbuilding opportunities with a focus on the manufacturing of a broad range of sophisticated naval assets in the United Arab Emirates. Turning to offshore, despite high inflation and rising interest rates' impact on costs and the timing of wind farm investments, the underlying drivers supporting long-term growth are confirmed, especially for the floating sector. As pointed out before, we are strongly positioned in this business, being the market leader in the construction of service operation vessels and commissioning service operation vessels, in terms of order book, accounting for approximately one-third of the market.
With an unprecedented political support for green transition, favorable market growth scenario, and renewed activity in oil and gas, the offshore wind activity is expected to accelerate from 2028, with further investment in next-generation units characterized by high efficiency level, flexibility, and increasingly lower environmental impact. We confirm our relentless commitment to sustainability in the sector, and our performance is already well recognized at the international level. In terms of sustainable finance, during the first semester, Fincantieri has signed agreements with a number of banks in order to promote awareness and improve ESG profile of its Italian suppliers. As a result, suppliers with better ESG performance will be able to benefit from a better rating, accessing more advantageous financing terms. In October, the group signed a five-year tenor, EUR 800 million sustainability-linked financing, 70% asset guaranteed, linked to the achievement of KPIs set in the 2023-2027 sustainability plan.
As you can see from page 25, we received the Top Employers Italy 2024 certification from the Top Employers Institute, and all ratings have been confirmed in early 2024, with Sustainalytics also including Fincantieri in its list of top-rated ESG companies. Let's now move to new strategic initiatives characterizing the year-ending and on which we will be further focused in the years to come, starting from 2024. Within the domains we are involved in, the underwater, with its wide and complex set of activities, players, and technologies, is becoming increasingly important due to the presence of critical infrastructure, resources, and assets. Underwater is evolving from a mere defense submarine-centric business to an environment of multiple devices, vehicles, technologies for both defense and civil application. This is the playground where we are committed to take the lead.
We cannot ignore the current geopolitical scenario, where underwater is gaining traction due to the critical role of subsea infrastructure. Particularly in the Mediterranean, where intelligence, surveillance, defense, and deterrence activities take place, the underwater domain constitutes a strategically important area. Although the increased interest by EU states to overcome the fragmentation of the European defense industry while fostering companies' cooperation, we do not foresee European consolidation in the short term. As for Italy, our country is characterized by fragmented underwater capabilities across few big players and a network of small-medium enterprises with a clear need to consolidate competencies. The main goal is to strengthen research and innovation for the subsea domain, targeting its security and fostering industrial and economic opportunities. That's why, in 2023, Fincantieri accelerated its journey to strengthen its positioning in the underwater space, acting as an aggregator and catalyst in both civil and defense fields.
We are laying the foundation in the underwater domain, in which we are committed to increasingly lead our national industry. We are ready to take advantage of the underwater sector opportunities, leveraging our consolidated expertise to orchestrate the vision to be in the strategic underwater domain and unlock its value potential. This represents a further untapped business opportunity which is not reflected in our current plan and will provide an important upside going forward. The participation in the National Underwater Dimension Pole project places the group at the core of the underwater ecosystem development programs, with extremely promising business opportunities, also due to Fincantieri's unique ability to drive effective integration between defense and civil domains. The group also signed a memorandum of understanding with Leonardo to define initiatives related to the submarine critical infrastructure protection systems.
Concerning the civil domain, Fincantieri signed an MOU with WSENSE, a deep-tech company specializing in underwater monitoring and communication systems, and finalized a strategic agreement for the acquisition of Remazel, a global leader specialized in the design and supply of highly customized and complex topside equipment, which will be consolidated during the first quarter of 2024. Let's turn now to slide 31 with our concluding remarks on this first year of our business plan. We got off a strong start in 2023, delivering a strong top line together with an increase in profitability and a significant leveraging with a leverage ratio at 5.7-1.5 in fiscal year 2022 and net debt at EUR 2.271 million. We also generated positive operating cash flow of EUR 637 million and a positive net cash of EUR 201 million, mainly driven by improved working capital dynamics.
We have a unique business model and a competitive position. The backlog is solid, and the commercial pipeline is strong in all businesses. To further build upon the excellent results we achieved in 2023, we can rely on untapped value from defense business opportunities in the fast-growing offshore wind market, also thanks to the successful revamp of Vard, increasing margin from cruise segment and proven expertise to take the lead in the underwater domain and unlock its value potential. We launched higher-priority strategic initiatives to reach the 2023-2027 business plan targets, to evolve the operational system supporting our people and the supply chain in line with the needs of production activity while managing operational risks in order to support the competitiveness and the long-term value creation. Execution is key, and we are fully committed to reach the targets set in our business plan.
We are now open to take your questions.
Thank you. This is the Chorus Call Conference. Operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. That's star and one. The first question is from Alessandro Pozzi, Mediobanca. Please go ahead.
Good morning, and thank you for taking my questions. I think one of the key highlights of 2023 was also, of course, higher margins, but also I think the order intake was strong as well. Can you give us an outlook for order intake in 2024, especially in defense, given it's going to be a strong pillar for your future growth, and maybe talk about potential opportunities that you see in the export market? You just signed an MOU with EDGE, but also an MOU with Egypt for manufacturing of navy ships in Egypt. And I remember the press article back a couple of years ago mentioned a much bigger deal between Italy and Egypt, which involved a number of frigates as well as jet fighters as well. My second question is on the net debt.
Maybe can you give us a bit more color on the reduction of the working capital and especially advanced payments and the big reduction in trade payables? I guess maybe you received a lot of naval orders, so that's probably why you received the advanced payments. But any color on that would be really appreciated. Thank you very much.
Thank you very much for your question. First of all, on which are the hot spots in terms of possible order intake in the defense business? Let me say that we would like truly to put the flag on two geographies. Which are the two geographies in which we strongly believe that the market will boom? The two geographies being the Middle East and Southeast Asia. You know that for geopolitical reasons, there are a number of "new navies" that want to increase the defense capacity in the naval domain.
With respect to Abu Dhabi and the Middle East in general, I think the agreement we signed is absolutely phenomenal because we are creating a place, a vehicle, an entity in which will be channeled the growth of the Abu Dhabi Navy as well as the growth of the navies that are in the geopolitical block of Abu Dhabi, which are basically the fast-growing naval defense assets demand. So first of all, that specific joint venture will gain pace and traction, and we strongly believe that in 2024, credibly, all this could materialize into order intake. On top of it, the rest of the Middle East is very, I would say, active. Saudi has created a very strong regional policy for the industrial defense to develop, and we are joining those initiatives with maximum entrepreneurship and focus. And then Egypt, you mentioned. The second theater is the Southeast Asia theater.
We enjoy a long-lasting relationship with Indonesia. Indonesia is a market that is the natural place to be when you want to be in Southeast Asia because it's a very big country made of more than 250 million people, 17,000 islands. It's in front of China, and it's a country driven by its roots in the Muslim geopolitical block. So it's so clear that that country is definitely another very key, important target. So let me say, all in all, those are the initiatives in which we are very focused: the Middle East and Southeast Asia. Moving to net debt, we gave a guidance that is improved vis-à-vis the guidance we disclosed during the Capital Market Day because we wanted the market to get along with you, sorry, to get along with us, on this acceleration in the leveraging process.
We strongly believe that during 2024, again, getting along with the order intake, with other possible positive developments, we will be, I would say, more precise and even more aggressive in that respect. So we are very, very happy with how we are managing the working capital. We are very, very happy with the response and with the responsiveness of the organization with respect to the actions that we are undertaking according to the new business plan. We want to go step by step in this acceleration, keeping the market informed accordingly.
Thank you. Maybe a bit more color on the advanced payments and the trade payables, the change year-on-year?
Good morning, Alessandro. Giuseppe speaking here. I mean, if your question refers to what we obtained in 2023, yes, indeed, the improvements above guidance came mainly from, of course, the improvements of net working capital dynamics, mostly on, let me say, on the receivables side, and mostly thanks to the very strong pickup in order acquisition in the offshore business and notably in what we did and what we achieved in the month of December. All in all, given the very strong traction in this market, we are seeing clients that are so interested in acquiring ships that are available to face payment terms that finally are in our favor, so to say. So this is one of the drivers of the improvement.
Of course, let me put stress once again on the very strong change in focus, of course, starting from the top management, but the cascading that we did throughout the whole organization of the importance of financial discipline. And this message and this strategy has already reaped very strong, very strong effects and has already paid out a dividend, so to say. That's it. And of course, as Mr. Folgiero said before, although we have a year 2024 that requires financing with respect to our delivery plan, notably in the cruise business, we are optimistic on keeping under control our debt levels, and we are striving to further improve and to seek for further upsides in debt levels. Okay?
Thank you. I don't know if I can squeeze in a third final one on the threats we've seen in the last few days, potential interest from Fincantieri in acquiring WASS from Leonardo. I'm sure there's not a lot you can say, but I was wondering, is that the type of potential acquisition or synergies that you can see to expand the business in the underwater domain?
Thank you for the question, but we would like to stick to the public disclosure we made in our press release a couple of days ago, which basically is that we are open to evaluate all the strategic options we have in front, either for organic and inorganic growth, which are in the direction of the technology development and underwater, which are definitely the two targets we are aiming at. Obviously, these kinds of possible transactions and strategies will have to be associated with a correspondent financial strategy. And again, any financial strategy will be evaluated, any option will be evaluated, and we will keep the market updated in a disciplined way as usual.
Understood. I will send them back. Thank you very much.
Thank you. Thank you.
The next question is from Monica Bosio in Intesa Sanpaolo. Please go ahead.
Good morning. Good morning, everyone. First of all, thanks for clarifying Fincantieri's position on the future development and the options in the underwater segment. I have four questions. The first one is on the deferrals to the clients. In the third quarter, the group had to account for a big deferral. Should we expect further deferrals going forward, and if yes, in the same magnitude of the one accounted in the third quarter? My second question is on the cruise business. Between 2024 and 2025, the company has to deliver 10 cruise ships. Can you please remind me if there are prototypes amongst these 10 ships? The last question is on the expected reverse factoring. In 2023, the factoring decreased. I'm just wondering if you can give us a rough indication on 2024 and on the financial charges. Thank you very much.
Well, let me just touch base on the first point. Then I will rather give the floor to Giuseppe. On the first point, the answer is no. But let me comment more on the deferral. Consider that the deferral, it's a financial credit that is maturing interest. So consider it as a big upside in our net financial position dynamic for the way forward. So obviously, we gave full disclosure on the nature of that item, which, again, is exceptional as exceptional was the financial situation of our clients during COVID. So it is not part of our business model to give postponements. We are the other way around. We are concentrated and focused on squeezing the working capital rather than enlarging it. So be reassured and rest reassured that this is not the business model we have in mind for the future.
Consider that deferral, as you call it, that postponement as a big opportunity for us to accelerate even more our leveraging process. Giuseppe, what do you want to?
Well.
The other questions.
On the other questions on the cruise business, 10 cruise ships, out of which four prototypes. On reverse factoring, we do expect an increase of reverse factoring. We closed EUR 400 million roughly this year. It could be something in the range between EUR 600 million and EUR 700 million, but it really depends on the volumes that we do with suppliers that are enrolled in the reverse factoring agreements. On financial charges, we expect them to be between 2.5% and 3% of revenues. That's it.
Okay. Thank you very much. Just to follow up on the prototypes, four prototypes, can you just give us an indication of the timeline for the deliveries of these prototypes? I'm just asking this because prototypes carry a higher execution risk. That it's not the case for you, but they are more risky.
Oh, we can follow up this question with the investor relations, but I mean, the first big prototype that comes to my mind is TUI Cruises towards the end of this year. We already delivered one big prototype in January, the Sun Princess, which was, I would say, a successful delivery. And for the others, let's follow up with IR, okay? Again, again, I would like to stress exactly this. So we just delivered the biggest ship ever built in Italy with the biggest complexity in the engine room. So yes, I take your point. The biorhythm of the risk of this industry is the biorhythm of the prototypes. But let me say that we managed already, being two months ago, a level of complexity that is much higher than the level of complexity that is embedded in the additional prototypes to be delivered.
We are not worried about that.
Got it. Thank you very much. Thank you.
I hope you're not.
The next question is from Gabriele Gambarova, Banca Akros. Please go ahead.
Yes. Thank you for taking my questions. Good morning. The first one is on the debt guidance. If my math is right, the expected net financial position should be around EUR 2.6 billion and EUR 3.1 billion by the end of this year. I was wondering, first, if you are factoring any kind of advance payment from possible new contracts. We saw the soft backlog is very, very strong. And second, if this delta between EUR 2.6 billion and EUR 3.1 billion can deal with this aspect of deferrals, if the loan is paid, it is EUR 2.6 billion; if not, it's EUR 3.1 billion. So any column on this would be useful. The second question is on the Constellation program. You have been very evocative on this side. We know it's a fixed-price contract. We know that there are some delays, even because of COVID.
We know that the Navy would like to accelerate the deliveries, and so on and so forth. So any news on this front, on the front of efficiency improvement, timing, capacity would be useful too. And the last one is on offshore because you have basically support vessels and cable-laying vessels. I was impressed by the good, let's say, contribution in terms of cash flow you had in Q4. I was wondering if, under the financial standpoint, there is any difference between, let's say, the payment terms for supply vessels and cable-laying vessels. Thank you.
On the net financial position, I was trying, in the previous question, to give you some colors, to give you some hints. So we gave a guidance that is improved vis-à-vis the guidance we made public along with the business plan we presented last spring. So we wanted to give a sign that the guidance would be improved and that the acceleration is faster and that the leveraging is faster. So that is the underlying reasoning on the guidance. As I told you before, we are very committed, obviously, to do better, and our commitment will translate into facts during 2024. So there are a number of developments that we expect in the short term that could lead us to do better than this. This is not the encashment of the deferral. So the deferral is not considered in this dynamic, which is part of your question.
Again, whatever is happening in that respect, again, it's an upside of the upside, in a sense. Obviously, the developments I was hinting to are developments due to commercial development, for sure, and other working capital dynamics on which we are gaining pace and traction. So obviously, any good development in the naval business, as you know, knowing our business, any good development, any good commercial development in the naval business is taking with it an improvement in the working capital. So I don't know if I made myself clearer, I would say, but we want to do better, and we are seriously in the position to do better. But since our business is made of milestones, it's not made of good intentions. It's made of big contract to be signed, big facts to be achieved. We don't want to oversell. We don't like to oversell.
Those numbers are solid numbers. We will deliver with solidity exactly because this is the way we manage the future. As soon as we have facts, we will be more than happy to inform the market of an incremental additional acceleration of the leverage.
Thank you.
On the Constellation-class, you know very well that shipbuilding is the priority of the U.S. This is the era of naval capacity. The United States has a target in terms of ships, number of ships is part of their industrial policy, but most importantly, defense policy. So there is a lot of focus on the program. Fincantieri is sparing no resources in this respect. We are constantly reinforcing our management team, seconded in Marinette, in the region of Great Lakes. Those efforts are translating into increase of productivity given the constraints of the availability of workforce in the U.S. So let me say we constantly push hard, doing everything that is in our sphere of control, i.e., the management and the know-how and the expertise. We are doing our utmost also, I would say, strengthening the infrastructure and the shipyards with dedicated investments.
I was there something like two months ago, two months and a half ago, to inaugurate a new blasting facility, which is very environmentally friendly, by the way. So that shipyard is absolutely the most modern and the most effective we have all over the world. The people we are seconding is the most expert. So we are injecting in U.S., I would say, the best available technologies and the world-class expertise of Fincantieri being the biggest shipbuilder in the world if you take off, take away China and Korea. But there is the constraint of the availability of the workforce. So the true capacity of a shipyard is the combination of world-class infrastructure, world-class expertise and management, and the availability of blue collars in that specific region.
The Navy, the U.S. Navy, is supporting us in any possible way in order to increase the availability of workforce and the productivity of the workforce with dedicated instruments. We are constantly monitoring these efforts because we know that we have a big potential and a big upside in that shipyard, in that relationship. So all this is very qualitative. I don't want to give you I'm not in the position to give you any quantitative extra information, but we are working hard, and we are positive. On the offshore, your question is if there are any kind of difference comparing the terms and condition of the cable layers and terms and condition of SOVs. I would say no. I would say no. Obviously, it depends from the counterparty.
I would say that we are very happy with how we are dealing with the working capital conditions of the new contracts. We believe that frequently, we were able to create the right understanding on the side of our clients. What I mean is that the client has to appreciate that pushing working capital on me is not the most effective and efficient way to allocate financial risks in terms of cost of money and cost of capital. And since the cost of capital, at the end of the day, is in the recipe of cost, of the estimation of costs I'm giving to my clients, all in all, it's a win-win situation, a situation whereby I don't incur this cost of capital through working capital excessive efforts. A new client, you have a better price.
So all in all, this kind of deal is increasingly clear and important, in particular in the era of expensive cost of capital. So I don't know if I made myself clear, but what I want to say, it's a reciprocal interest to put the hands into the oldish terms and condition and find new kind of agreements. And I have to say that in the offshore business, counterparties are agile and smart enough to understand these dynamics.
Okay, Pierroberto Folgiero, thank you very much. Very, very interesting and very clear too.
Thank you. Thank you.
The next question is from Emanuele Gallazzi, Equita. Please go ahead.
Yes. Good morning, everybody. Thank you for taking my questions. I have three questions. The first one is on the offshore business. Given the acceleration of orders with the book-to-bill above 1.5 in 2023, the stronger top line, and even the positive indication you gave on the market, I would like to understand if you see room to do better than the targets of your business plan for the offshore. You are guiding for a 6.5% EBITDA margin at the end of your plan. Are your expectations still there? The second one is on the shipbuilding. The profitability in 2023 was ahead of your expectation. Can you just elaborate a little bit more on these? And looking at 2024, can you give us a sense on what do you expect on raw material cost evolution, just to understand potential upside on your targets?
The last one, a very quick one, is on CapEx. In 2023, the CapEx were lower than expected. Do you still see CapEx in 2024 at around EUR 250 million? Thank you.
Well, let me start from the last question. Yes, in the sense that we believe that our program to modernize shipyards is so important for our business plan targets. So I made no secret that I strongly believe that there is a lot of operational excellence potential in our shipyards if we increase the level of entrepreneurship and managerial courage in the modernization of shipyards. So, for example, we consider our competitors, the shipyards in the east, in the Far East. So we have to be very long-term minded in this business. And to be long-term minded, you have to envisage the shipyard of the future. So I don't believe that it's a long-term strategy to cut CapEx in a business that has to get into a long-term minded, I would say, industrial strategy. That's the last of your questions I would like to clearly answer.
Starting from the beginning, on the offshore business, your question is whether we expect higher than guided, higher than guidance in terms of margin. I would say that in our original business plan, our objective was to recreate the production volumes of the historical performance of Vard. So we inherited the company with something like EUR 700 million in 2022 in terms of revenues. Today, it's EUR 1 billion. In our business plan, we want to go EUR 1.5 billion. Obviously, the shipyard business, it's a business of, I would say, critical mass because when you achieve critical mass, you optimize your fixed cost on a larger base of revenues. So for sure, in our business, it's a matter of going full swing in the exploitation of fixed costs, being the shipyard a fixed cost.
So we made our, let me say, the business plan is told as a business plan that is, first of all, targeting the full occupation and the full throughput capacity in order to enable this kind of, I would say, extra basis points on the EBITDA due to the optimization and maximization of the fixed cost critical mass. Second factor to drive margin is the market demand. So on the one hand, is my competitiveness that is driven by how much I totally go in saturation of my shipyards. But the other component is driven by the market, I would say, supply and demand kind of dynamics on prices. So also, in this respect, we believe that the market is going better than expected. So also, the bargaining power of Vard being a market leader could increase higher than expected in the future, in particular on very complicated ships.
So we are very happy that we are not only strong on traditional clients in cable layers, but also stepping in the Far East market, Japan, for example, because it means that we can somehow detect market opportunities all over the world that are able to recognize the technology premium and the quality premium that is attached to our most complicated specialized vessels, that is, the cable layer. So our 2027 numbers are higher than what you see in terms of percentage EBITDA, EBITDA margin. We believe that we could do remarkably better. But you know why? Because if I look at the margins of Vard during the prosperous times of offshore oil and gas, they did, I would say, comfortably two digits kind of margins.
If you want my angle, we have an upside in Vard, which is driven by a different assumption, which is an assumption whereby not only I re-achieve the volumes of the oil and gas times, but we re-achieve also the marginality of the oil and gas price. So this kind of second type of assumption is not embedded in our expectation, and it constitutes for sure an upside in our offshore business for the way forward.
Thank you. And on the shipbuilding business?
On the shipbuilding business, your question is what is driving the increasing marginality, if I remember well. At the end of the day, we are managing risks very well. Today, this year, we delivered 26 ships. 26 ships are 26, I would say, super achievements, with respect to which we are super enthusiastic. So every delivery, it's a kind of it's a kind of masterpiece, okay? So every time you deliver a ship, you have your contingencies and risks allocated to the ship, and you wait until the end to release this prudent accrual. So at the end of the day, the fact that our margins are robust is the first testament that our execution capacity and delivery capacity are robust. So this is, as usual, the first, I would say, drive of margins higher than expected.
Then there is another component, which is something we will focus more and more, which is the business of services. In our shipbuilding, we have two business models. The vast majority, the traditional business model is the business model of construction, but we have also the business model of giving services on our fleet. This is something we do always with the naval business, with the navies. And as you can imagine, the risks-rewards of the service business has nothing to do with the risks-rewards of the construction business. Obviously, this is associated with different volumes. So in absolute terms, what it matters is the volumes in terms of revenues and size of contracts. But let me say that the more we increase the mix vis-à-vis EBITDA from construction and EBITDA of services, the more we improve this mix, the more there is a kick-in in terms of percentage marginality.
So let me say that we are very focused on strengthening the service business, first of all, in defense. We are working hard in this respect in Qatar, where we delivered a fleet made of seven very complicated ships. Now it's time for us, in the next months, to transform these very beautiful ship fleets, sorry, of ships in Doha, in Qatar, into a service agreement to manage that large fleet. This is exactly what we did recently, signed and did in Egypt. We delivered the two frigates, and then we signed a long-term, valuable service agreement contract that gives you visibility on revenues because they are, by definition, very long-term contracts and gives you visibility on margin, which are obviously double-digit in the service business. So let me say, without giving you super explicit and precise number details, let me give you the two concepts.
So, release of contingency when you deliver to the mix of service vis-à-vis construction EBITDA. As you know from our business plan, we are pushing a lot also the life cycle products also in the cruise sector, which is something we like. The cruise sector, the service business is more driven by refitting, which is not specifically service, but it's a different kind of business with lower volumes and higher margins. And this is a business we would like to pursue more and more. We believe that the refitting business will be extensively demanded in the future. Why? Because the traditional fleet starts to be oldish in terms of look and feel for customers because our ships built, say, 25 years ago. So there is a demand for refitting driven by the, I would say, setup of the accommodation. But the second most important motivation for refitting is the engine room.
Starting from 2024, shipowners are paying white certificates, ETS, EUR per tonne of CO2 emitted. So they have a tangible, avoidable cost, which could translate into investment in refitting of the engine room. The refitting of the engine room, for us, it's a fantastic opportunity to sell also digital products. So we spend 2023 preparing ourselves with those digital products that we can propose to clients whenever they stop the ship for a refitting opportunity. Again, once we sell our digital suite of products to our client in the shipping business, we create the, I would say, the precedent. We create the hook for a life cycle business with our clients.
So as you know, in our business plan, we are envisaging this total cost of ownership kind of value proposition whereby our know-how translating into technological know-how, we create the base for a Fincantieri ship that is not only preferable to another ship for the quality, for the Italian touch, for the competitiveness, but also is preferable because it triggers optimized OpEx during the life of the ship. We want the client to perceive also these advantages we are triggering, to perceive those advantages when choosing Fincantieri as a constructor. So sorry for the long answer, but I want to give you the big job we are doing behind the scenes.
Thank you very much for the answers.
The next question is from Giuseppe Grimaldi, BNP Paribas. Please go ahead.
Good morning, everybody, and thanks for your presentation. Brief one. It's on offshore. I know that you touched upon the business. Just to say, given the strong momentum that we're seeing in the business, shall we expect book-to-bill to remain comfortably above one also into next year? And the second one is on the payment terms. In general, you clarified that the situation seems to be better in the offshore. Do you think there is room to expand this sort of more benign working capital condition also in the cruise? Thanks a lot.
But on the book-to-bill, again, let me give you, first of all, some rationales. This is the era of investment in shipbuilding, in ships. So the last issue of Fincantieri will be to have revenues or to have backlog. So we are overwhelmed by requests from our clients. There is and there will be shortage of capacity. So the issue here is not to generate revenues, sorry to be blunt, but is to make money out of it and, most importantly, make cash out of it. So Fincantieri, it's a very powerful brand. It's the name when it comes to shipbuilding. We have to become the name when it comes to cash generation. So I don't want to look too greedy or too aggressive, but this is, to me, the subtitle of the book. So don't be worried of book-to-bill.
Get along with us on the increase in profitability and cash generation. So this is the journey we are envisaging together. So I don't know on the other questions, Giuseppe, which were the other questions?
Capital. It should be.
That's what I was going to put. If we can somehow replicate the benign, as you said, conditions of the shipowner in the offshore to the rest of the market. Let me say, in the defense business, it's already like that. So in the defense, the other beauty of the defense business is that it's a business in which you don't anticipate your money. So you don't work with your money, but you work with the money of the client, which means that the working capital is negative and which means that, in particular, in the export business, you have the kick-in of the advance payment. So on the defense business, needless to say, that is not part of your question, I suppose. Moving to the cruise business. In the cruise business, the answer is no.
The answer is no because, as I like to say, the market is accustomed since Cristoforo Colombo times to procure that the ships are paid 80% at the delivery, full stop. So we should have asked Cristoforo Colombo why he accepted those conditions. But what I can tell you after 18 months in my tenure is that it's difficult to unlock that gate. What we can do is to be very disciplined on the 20%, very disciplined on the 20%, and very disciplined in the working capital management. So difficult to imagine that we are changing and then you know. And then you know, the rest of the shipyards are I wouldn't say since Cristoforo Colombo time because we started in Italy, but they have their own Cristoforo Colombo that forces them in France and in Germany to be so asymmetric in terms of market condition.
So that's why, in our business plan, we are particularly fond of pushing on defense and pushing on, as much as possible, our extra energies in businesses in which the cash generation is so evident. And that's why we want to be selective in the cruise business because, thanks to God, in the cruise business, there will be a lot of demand, and we can be very disciplined at the moment of selecting opportunities and managing negotiations, but not to the extent that we can achieve non-Cristoforo Colombo payment terms.
Got it. Very, very clear. Thanks a lot for the clarification.
Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.
Thank you very much, gentlemen, for your questions and allocating time to us. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your phone.