Earnings Call: Q3 2022

Nov 8, 2022

Good morning. This is the Chorus Call conference operator. Welcome and thank you for joining the Thinkantieri 9 Months 20 22 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Paljero, Chief Executive Officer and Managing Director. Please go ahead, sir. Good morning, ladies and gentlemen. Thank you for joining us and welcome to the Cantieri 9 months 2022 financial results conference call. This set of results shows revenues up by 17 percent to €5,300,000,000 in line with expectations and with the development of the backlog. We recorded positive performances across all segments, in particular, the Offshore and Specialized Vessels business increased by 86% year on year. This progression streamlines a potential window of opportunity that the wind offshore market may offer in the upcoming years for Fincal Tieri. EBITDA stands at €172,000,000 with the margin of 3.2%, impacted by first half lower marginality and the persistence of macroeconomic and geopolitical instability. Net of the 1st semester one offs, the EBITDA margin would have landed at almost 7%. In the 1st 9 months of the year, we delivered 12 ships from 8 different shipyards, highlighting how we are keeping the production pace in operations. On top of this, order intake came at €3,300,000,000 well above last year figures, up by 41%, thanks to a revamp in cruise vessels demand. Let me remind you that in the Q3, we signed 3 different agreements with 3 different ship owners. I will come back to it in a moment. Moreover, since the first half of the year, net debt improved by over €200,000,000 consistently with what we consistently with what we anticipated and committed to in the last conference call and in line with production volumes, capital expenditure and the delivery schedule. Lucepe will give you further details together with the main financial and operating performances of the period later on. Let's now move to Slide 7 for some business updates. In the 1st 9 months of the year, we witnessed a sound business operating performance. Along with the positive resumption in cruise orders, and I will do a deep dive in a few seconds, in the Q3, we delivered 2 ships for a total of 4 in the 1st 9 months of the year, namely and chronologically speaking, 1 for Princess Cruises, 2 for Viking and 1 for Norwegian. On the latter, the Norwegian Prima, first of the 6 new generation Prima class. It is based on a prototype project to enhance flexibility, ensuring an elevated customer experience and to set a technological benchmark with a specific attention on energy savings, emission reduction and high performances. On Naval, we are continuing to develop programs for our main clients, the Italian Navy, the Cataly Ministry of Defense and the U. S. Navy. In 2022, we have already delivered the 1st and the 2nd PPA, multipurpose offshore patrol ship from our Italian naval shipyards. The program for the Qatari Ministry of Defense is also continuing at full speed with 3 deliveries in the period, including 2 OPV, Offshore Patrol Vessels and 1 Corvette. Moreover, earlier this year, the U. S. Navy exercised the option to build the 3rd Constellation Class guided missile free gate for a value exceeding $500,000,000 On top of this, in mid October, we signed with Naviris, Davenport Group and Navantia a preliminary consortium agreement for the development of the modular and multirole patrol Corvette to maximize synergies, long term efficiencies and cooperation among European shipbuilding and industrials while avoiding duplication in defense spending. The European Patrol Corvette will be a smart, innovative, affordable and flexible vessel designed to meet a wide range of future missions in a continuously evolving global context. The positive business operating performance sets the stone for forthcoming opportunities in our core business. Back to cruise order intake, during the Q3, we have signed major cruise agreements with 3 ship owners. The turning point now is the high performance and future proof quality of the products we are developing and building, green, innovative, flexible, forward looking solutions that promptly anticipate the regulatory requirements. We continue to consolidate our relationship with long lasting clients while exploring opportunities with newcomers' luxury brands. We strengthened the long lasting partnership with Viking with 4 additional cruise ships, 2 are orders and 2 are options to be delivered by 2028 and designed for hydrogen fuel cells propulsion and equipped with the most modern safety systems. Secondly, the memorandum of understanding with MSC, which envisages the construction of 2 additional hydrogen powered cruise ships for the new luxury niche brand Explorer Journeys. 4 cruise ships out of 6 will now be equipped with liquefied natural gas engines, which today is the cleanest marine fuel available and it can contribute to the cut CO2 emissions by up to 25% compared with standard marine fuels. Hydrogen fuel will power a 6 megawatt fuel cell produce emission free power for the hotel operation and allow the vessels to run on 0 emissions import with engines turned off. Finally, we build a ship for a new client in the sector, 4 Seasons, which is entering the cruise industry for the first time with an ultra luxury vessel offering ultimate privacy and spaciousness in all unshaled residential settings. During the 1st 9 months of the year, we delivered 12 vessels from 8 shipyards, highlighting the global outreach of our We recorded €3,300,000,000 in new orders with a book to bill ratio at 0.6, up compared to the 0.4 in the first half of the year. Let me underline our execution and the capacity to closely stick to the delivery schedule as agreed with the ship owners are key strengths of our business across all segments and that outlines the distinctiveness of our franchise. Looking at the medium long term, we confirm our visibility up to 2029, both in cruise and naval. As for the offshore segment, given the fast moving sector, we are confident it would upvote a potential upside also driven by energy transition. The backlog coverage ensures more than 5 years of work compared to 20 21 revenues, confirming the operational reliability of our business. Now, I will hand it over to Giuseppe who will discuss our financial results. Please, Giuseppe. Good morning, everybody. We move on to Page 11, where we can see how the order intake came in at almost €3,300,000,000 That is more than double what we did in the first half of the year. Of course, with a very positive contribution from the shipbuilding segment, thanks to the order acquired that were mentioned before by Pierre Robert. And we also had a year on year increase of over 40% in offshore. This order intake brings the total backlog at approximately €34,500,000,000 with up total backlog including the soft backlog, of course, with a backlog of €24,000,000,000 And not only we had positive signals in cruise orders, but as Pierre Roberto underlined earlier, we're now taking orders for next generation and innovative and greener vessels in a niche sector, the luxury sector of the cruise business, also for newcomer brands that are expanding their operation into cruise. As with Page 12, revenues were group revenues were up 17.2% year over year with €5,300,000,000 and this is thanks to positive contribution across all segments. With a particular raise recorded in the offshore year over year, we grew in the offshore and specialized vessels of over 86% compared to the same period of 2021. And this results confirms the successful repositioning strategy towards more promising markets like the offshore wind industry. Also shipbuilding grew by 9.1%, thanks to higher production volumes in the group Italian shipyards. And within shipbuilding, cruise accounts for 50% of the total revenues whilst the defense vessel revenues came in at 22% of total revenues. The positive result is also attributable to efficiencies of the engineering and production processes launched in the past years. Of course, now our revenues, as you know, are supported by the Cataly Ministry of Defense Program and the Italian Navy Construction activities. Also in Equipment Systems and Services, we had revenue growth of about 25%, and this was driven by operations in the mechanics and complete accommodation businesses. Finally, 80% of the revenues were generated from international clients, and this confirms the vocation towards experts that our company has, our group has. Some comments on EBITDA on Page 13. We ended up the 3rd quarter at €172,000,000 of EBITDA with an EBITDA margin at 3.2%. And this, of course, has been impacted the 9 months, of course, have been impacted by the lower marginality in infrastructure and shipbuilding, mainly due to the nonrecurring items that we have already reported in the 1st semester. And of course, we are still experiencing increase in and this is focused in the U. S, increase in raw material prices and labor market shortages within our U. S. Operations. In offshore, EBITDA margin increased compared to 9 months of 2021, and this is again due to the good revenue growth and the effective repositioning strategy towards the offshore wind sector. On Page 14, the improvement in net financial position compared to first half of twenty twenty two is, of course, consistent with the delivery schedule. We do expect stable net debt levels towards the end of the year. Of course, this is still affected by the payment extension strategy granted to clients, partly affected, and this amounts at €132,000,000 as of September 30. Net working capital is positive, roughly €1,000,000,000 and main changes are related to the increase in construction contracts and client advances the work in progress. This is due to the delay in the delivery mentioned in the first half result, which we will most likely deliver at the end of November. We also had a slight increase in trade payables, thanks to the production volumes registered in the period. We have also spent €183,000,000 to support further efficiencies and to address the new production scenarios and this is to scale up Italian and U. S. Shipyards. As with the market outlook and the expectations for the end of the year, I leave the word to Pierre Robert. Thank you, Giuseppe. Now let's take a look at the markets in which we operate with our core businesses. Starting from cruise, at the end of the summer, 94% of the global fleet was back in operation, also thanks to major cruise lines dropping vaccination and pre boarding COVID-nineteen rules. An important point to stress is that in the past few months, we observed a significant value differential between cruises and land based of vacation, shifting further towards cruising. As a result, lately, few hotel brands expanded their business and entered in the cruise sector, as well demonstrated by the recent 3rd quarter's orders. Indeed, the industry is seeing booking trends back to 2019 levels for some companies at higher net yields, with passenger volumes expected to recover and surpass pre pandemic levels by the end of 2023. Another crucial part of the outlook is driven by sustainability and innovation with IMO setting quite stringent requirements. In 2027, 29 ships will use LNG as primary fuel, but this is just a halfway step. As a matter of fact, ship owners are even more interested in green new propulsion systems, in particular, hydrogen powered, 0 emission solutions for a fully decarbonized cruise inflow. Over 200 ships equipped with short side power connectivity, a technological edge and less impactful functionality are also expected in operation by 2028. These are quite promising signals for a near comeback of the whole cruise market. As for the naval, global defense spending in 2021 was over $2,000,000,000,000 And given the current geopolitical scenario, it is expected to accelerate in the upcoming years. Needless to say, we are ready to catch further opportunities, given our leading competitive position in surface vessels such as frigates and corvettes and the wide client base. With this regard, we are continuing to collaborate with partners both in Italy and abroad. In this context, let me mention again the preliminary consortium agreement that we have recently signed with Naviris, Navantia and Naval Group to develop together the European Patrol Corvette that will factor in the expertise and excellence of the European industry. Turning to offshore, as of today, worldwide wind farms are delivering a nominal power of around 55 gigawatt, accounting for nearly 7% of the total wind capacity in 2021, with the industry set to reach a total global capacity of 2.71 gigawatt by end 2,030 and more than 400 gigawatt in 2,035. Closing offshore is also growing and is set to reach 18 gigawatts by 2,030 and over 60 gigawatts by 2,035. To give you an idea of the potential capacity in 2021, only 121 megawatt of floating wind was installed globally, over 75% in Europe. In addition, the pace and breadth of investments into renewables including wind offshore as part of the new energy transition might trigger and further demand of vessels. Let me once again remind you that our subsidiary VAR currently is the market leader for the production of service operation vessels and for client diversification. We are reaping the benefits of the turnaround strategy implemented few years ago that will position us to size opportunities in the sector also taking into account that the global fleet of SOVs soon will double and expect it to reach 128 100 and 54 units by 2,035. As concluding remarks, assuming no further deterioration of current macroeconomic scenario for year end, we expect revenues higher than 2021 and second half margins better than the one recorded in the 1st semester. The net financial position to slightly improve led by the cruise deliveries during the Q4 of the year, although this is still affected by the need to finance the production activity of cruise ships to be delivered in first half twenty twenty three. We are now thoroughly evaluating strategic guidance and actions to reposition and strengthen the Group's business portfolio. We are fully committed and relentlessly enhance our products and operations with a particular focus on the core business, namely cruise, naval and offshore. We leverage upon the entrepreneurial approach and managerial challenge and will concentrate our attention on those projects that highlight an effective and material balance between value creation, risk adversity and cost discipline. Leaping the green and technology transition is the name of the game to ensure our medium long term growth. The development of increasingly innovative, sustainable and integrated digital products such as green propulsion system is key to anticipate the future needs. The new strategic direction will contribute to reduce the group risk profile to the best position to drive through the market challenges. The solid leadership we gained throughout the years, the well recognized excellence of our products, the expertise of our people and our forerunner role in the digital and green transition are trademarks to consolidate even further our business distinctiveness in the international shipbuilding industry. With that being said, let's move to the Q and A session. Josep and I stand ready to answer any questions you may have. Operator, go ahead. Thank you. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Matteo Bonizoni with Kepler. Please go ahead, sir. Yes. Thank you and good morning. The first question is as regards to the profitability EBITDA, which we should expect for 2022. So you have costed EUR 172,000,000 in the 9 months. The consensus for the full year looking at what data provider is between EUR 330,000,000 EUR 350,000,000. You have said that in Q4, more or less, you are expecting revenues in line with Q4 last year, so flat year on year. What margin should we expect in Q4? And in particular, should we expect a reversal of write off of the €62,000,000 charge for the delayed cruise ship, which you have booked in the first half of the year? Second question is, we know that it's still early for 2023, but more or less, should we expect next year a return of the EBITDA margin around 7%, which was a sort of normal margin for you for several years? And are you targeting a deleverage for the next year? Can you elaborate on that? 3rd and last question is on your strategy to reinforce your know how and footprint in digitalization and energy transition. Is this strategy going to require significant CapEx in the next year? Thanks. Let me start from the end, and then I will ask the support of Josef for the initial questions. You are somehow you want us to give guidance on long term EBITDA percentage margin and our ideas on deleveraging, and not necessarily long term because you are asking about 2023 EBITDA margin. Let me say that our aim is to absolutely go back to the 7% EBITDA margin. Our idea is not only to get back to 7% EBITDA margin, but also to be more and more solid and focused in that direction in order also to deal possibly better. So let me say 7% for us is absolutely a target. On deleveraging, we are in these days elaborating the new industrial plan. And the name of the game of the new industrial plan is absolutely deleveraging and de risking. There are now other, I would say, titles of the book. How to do the deleveraging? As you know, the net financial position we have today is the consequence of a number of, I would say, exceptional postponements of payments from clients. And first of all, the beginning of the deleveraging will be driven by the normalization of these phenomena. I wouldn't give you the numbers today because I would spoil the value of the industrial plan, But I want you at least to acknowledge that we have, I would say, ambitions, understandable ambitions either in term of EBITDA target and in term of deleveraging. And again, in order to do it, we will focus on core business in term of products and the financial discipline in term of processes. But I would like Josep to step in for the initial questions you made. Yes. On expectations for the end of the year, I reiterate the message that we gave in our press release. Overall profitability in the second half of the year will be better than what we had in the first half of the year. That's a very plain statement, if you wish, if you may. But we expect the improvement of profitability to continue also in the Q4, let me put it this way. And as with the expectations on 2023, I believe Pierre Roberto has given you the answer. Maybe Pierre Roberto, there was a question from Matteo on the strategy, on digital strategy and whether it entails. Very good, very good, very good. The digital strategy is for sure a kind of position that it need in the short term is a way to attach extra distinctiveness to our product. I strongly believe that Fincantieri large ships and complicated ships are considered a kind of benchmark in terms of management of complexity. I believe that our future proof strategy is to keep remaining the leaders in the integration of the additional systems and equipment and layers that are to be more and more integrated on top of the platform we already have. So the digital is, first of all, a source of distinctiveness in the short term. In the medium and long term, the digital is the way to evolve the business model from being a supplier of CapEx. So from being a supplier of a vessel as an investment, we would like to move from a supplier of CapEx to a supplier of CapEx and OpEx. So to get into distinctiveness that is driven by a total cost of ownership, I. E, CapEx plus OpEx that are distinctive vis a vis the competition. So I believe that being a leader and pioneer in the digital shift is a way to add a kind of star to the brand of Fincantieri in the short term, while in the medium and long term, it's a way to compete not in being reckless at the moment of preparing and calculating the estimating the price, the lump sum price for the ship, but to procure the Fincatieri ship is not only at the right CapEx, but it's also either in the OpEx for our ship owners so that the NPV of the Fincatieri ship is the sum of the CapEx in TZERO and the OpEx in the lifecycle of the owner. You know my point? So that's that's the way. You are asking about the capital we want to invest in this respect. I believe we have already a lot of solutions in place. So I believe that the step number 0 is to procure that this, I would say, distributed set of solutions already, I would say, put together and validated all over the group are concentrated into a unified offer, a unified offering. And this offering today is ready to be marketable because today the market is demanding it. So the market is increasingly demanding for digital ship kind of services. Needless to mention, the possibility to measure, I would say, precisely emissions on a ship and smashing emissions on a ship. But needless to mention also all we can do in term of energy management on a ship. So please acknowledge that on a large cruise ship, the power generation is in the region of 60 megawatts, six-zero. Can you imagine with a base like that, with available technology we have, how we can procure that this cost is optimized using sensors that today are not used, using IoT that today is not sufficiently, I would say, leveraged using data management on a ship. So adding to the traditional automation system on a ship, a layer of additional, I would say, IoT and data management layers. We have extensive experience in this respect because we are doing it for the military business, which is another synergy I want the market to appreciate more and more. So at the moment of proposing something to our, I would say, esteemed cruise sector clients, we can put together ideas that are already there in the military business. So sensors in the military business are already there. So I believe in this new, I would say, era of the digital ship, Fincantieri is most and best positioned to procure the digitalization of the ship is not something for newspapers, but kicks in as through industrial innovation. The next question is from Emmanuel Galassi with Equita. Please go ahead. Yes, good morning everybody. Two questions from my side. The first one is on the shipbuilding division, which reported a low margin at around 5% in the Q3. If you can just comment on it. In the press release, you mentioned some U. S. Headwinds. Just can you quantify the impact of these elements? And then on the consortium for the European Corvette, can you elaborate more on the opportunity of this agreement and the potential timetable and if you see other similar opportunity in the Naval segment? Thank you. Again, let me start for the second and then I will ask the support of Giuseppe for the rest. On EPC, on European Padua Corvettes and in general on the naval business, let me say that the world is the Mediterranean first and the world in general, namely the Asia Pacific region, are increasingly demanding 2 kind of products. 1 are the anti zone surface vessels, which basically are our frigates that are associated with the sonar system, in this sense, are anti zone. So the name of the game will be to have, I would say, well armed and very efficient surface vessels, ready and capable to monitor submarines, first of all, in the Mediterranean and then in the Asia Pacific region. Let me say that if this is the macro trends of the next several years, again, Fincantieri naval expertise is unique because probably we are the best in frigates, in anti zone frigates. And we are, I would say, along with Germans, the only one capable to deliver submarines, modern submarines. So in a world that would be submarines and anti zone surface vessels, I believe we have a lot to say. First of all, in the Mediterranean. Why in the Mediterranean? Because U. S. Submarines understandably will move more and more from Mediterranean to Asia Pacific. And whoever has relationship with U. S. Establishment will appreciate that Taiwan is the next big concern. So Italy and Europe in general will have to take care of what is called the southern side of the enlarged Mediterranean. And Europe and Italy in particular will have to take care of it, somehow filling the gap that the focus of U. S. To Southeast will increasingly generate. So this is the name of the game. European Padre Corvettes. European Padre Corvettes is a fantastic example of being ready for European defense spending. You know a lot of money will be allocated again in the next several years because we are entering a new era in which the defense is no more something to be done for the sake of it, but defense will be done for, I would say, react to a new geopolitical order that is very uncertain. So in this new era, European Pador Corvette program is a perfect example of being already set up to spend European defense money. In order there will be specific regulations in order for this European money to be spent. And this specific regulation will depend on alignment of more nations on the same requirements, I. E. Europe wants nations to get along in setting requirements, but 2, Europe wants nations also to get along in term of industries. So according to this new regulation, in order to be eligible for European defense money, it has to be more than 1, at least 3 nations aligning requirements and at least 3 industries participating to the program. So let me say that Naviris is already there. So Fincantieri is probably one of the few existing platform along with Naval and along with Navantia that can, I would say, embody in the short term this new vision? But this is in term of readiness. I don't want to I don't think you need more color on EPC, but EPC will start with engineering of this new model Corvette. Money is being allocated on this engineering project. You know that engineering means that you are breaking the ice and you will progressively then start to envisage the procurement of long lead items and then finally and eventually the construction. So the fact that we are breaking the ice with the engineering, it's a further testament of what I was anticipating before with respect to Neliris. But Josep, help me with the other questions, please. Well, as we said in the press release, yes, we are experiencing as with the Q3 margin in shipbuilding, we are experiencing some increased costs in raw materials and short existing labor in the United States. As well written and well known, inflation in the States is eating hard. And therefore, we had some cost increases. That's it. Of course, we will see how things develop in the future, and we expect to, let me say, offset these cost increases. But it's exactly what we've written in the press release. Okay. Thank you very much. You're welcome. The next question is from Monica Davos with Intesa Sanpaolo. Please go ahead. Good morning, everyone. I hope you can hear me. I have some questions. The first is in the offshore segment and the opportunities in the field of the floating wind farms. Maybe it's too early to ask. But anyhow, would you see possible for Bard the achievement of a mid high field margin already from 2023? Or should we wait a bit longer to see profitable margin for VAR? I remember that you told us that in the future, VAR has the opportunity to come back to a double digit margin in line with the historical level? And the second question is for the equipment system and services. I'm not asking about infrastructure. Let's put it in another way. Can you tell us what is the size and the profitability of all those activities which have nothing to do with infrastructures? The third question is for housekeeping. Can you give us a rough indication of the expected CapEx by year end? Do you still confirm the €300,000,000 CapEx that the group indicated in occasion of H1 conference call? And very sorry if I insist, the group aims to have a 7% margins. I did not understand if this target is really achievable in 2023 or it's just a, let's say, 2 years target. Thank you very much. Thank you for your very interesting question. On the Offshore segment, let me say that in a sense 2023 it's a kind of moment of the truth. What I mean? I mean in the wind offshore, there is a largely expected positive microtrend that to me in 2023 need to become visible. So it is clear to everybody that the future is there. But in 2023, we would like to start appreciating the magnitude of this macro trend. Let me be even more precise. There are 2 sub let me say, sub macro trends. 1 is in the direction of fixed wind farms, offshore wind farms, and the other one is the floating offshore wind farms. On the fixed, I think the trend is there and it's a matter of gaining momentum. And this is what I would expect for 2023. Let me also say that VAR, Cincantieri VAR is already expressing, I would say, large, but even a dominant market share in supply offshore vessels connected with the fixed offshore wind farms. 2023 will be also the year in which we will start a new macro trend to be visible being the floating ones, the floating wind farms, which will be longer term, which will be, I would say, more for the following years, but will be there. Floating, it's a world in which, let me say, the what I call it, the Archimede law is more and more important. And it's a business in which we could associate the what we have in term of competencies in the wind farm fixed with our expertise in whatever is floating. And the size will be even bigger. So the other characteristic of the floating is that it will be in term of single investment higher ticket. So that's why 2030 will be a very important year because probably we will experience this acceleration in the fixed and this kind of bringing the ice in the floating. Moving on your second question, so marginality of VARD and double digit getting back to oil and gas previous ones, come on, it's direct function of this 2023 acceleration. So, the more in 2023 we will see this new macro 10 materializing, the more the expectation to get back to a part strong performance will follow. So that's why let's look at 2023 carefully in this respect. Moving to our non infrastructure business included in our non shipbuilding business. Obviously, there you have a lot of captive market because you have a lot of marine interiors business, I. E. Our vertical integration in the cabins and in whatever is related with cabins, but also public areas, but also let me say whatever is outfitting of our platform. Another big trunk has to do with all the, I would say, electromechanical jobs that we deliver in our ships, but we learned also to deliver for 3rd parties. So the second part of this non infrastructure business included in that basket of businesses is related to electromechanical. So the more we have a workload, the more they were captive, The more we have to the more we have already delivered that component on a ship, the more they work out. And when they work outside, they are very disciplined. So let me say they are accustomed to do electromechanical works for 3rd parties with good discipline. So maybe Giuseppe, you can help us in giving more color. But all in all, that is the 2nd component. The 3rd component has to do with what we call Fincantieri Next Tech, which is the company that was created in order to get into a little bit more into the electronics of the naval business along with other technologies. There, the business is not that big, but it's interesting because it's providing us with those new technologies I was mentioning before. For example, in the simulation systems, in the combat management systems associated with the ship management systems. So let me say, whatever our automation systems, So, those are the main areas. So those are the main areas. And I believe in the next tech domain, we will do a lot. We will focus a lot in whatever is instrumental to our new vision of being, as I told, expert in the digital ship. And we will focus more and more on that and less on other kind of technologies that are not instrumental to the ship core business. Lucepe, can you give us a little bit more of color? Yes. On profitability, given what Gerroberto said, the equipment systems and services without the infrastructure business is indeed, let me say, high single digits area at this point in time, okay? Okay. Thank you, Salvatori. I can't hear you well. You can't hear me well? Okay. I'll repeat that. I have the mic in front of me. This new mic doesn't work properly. Well, I said the profitability in the equipment systems and services segment ex infrastructure is in the high single digits area currently, okay? I believe you also saw CapEx. We confirm the around CHF 300,000,000 CapEx for the year. We've done we have done $183,000,000 for the first time months. We confirm the target at this point in time. And what else? On Offshore, I believe we have answered That's it, I guess. The next The next question is from Alessandro Pozzi with Mediobanca. I have a few questions. The first one is on the cruise segment. And I was wondering if you can give us more color on where you think the negotiating power rates now at this point of the cycle because we are coming off a few quarters with very little orders. Now the cycle has started again. And usually, when you are in this situation, the clients tend to have more negotiating power when it comes to the commercial discussions around vessels. However, we also know that the shipbuilding is very consolidated and not maybe many opportunities where the client can go to have the basically the cruise ship build. So I was wondering basically if you can give us more color on the margins embedded in the new orders and whether maybe they are consistent with the margins that you have booked maybe before COVID? The second question is on Greece. I believe you signed an MoU a few weeks ago. Maybe can you give us your thoughts about naval opportunities in Greece? And final question is an update on the deferral that you're supposed to receive from clients or payment deferral? Thank you. The question is about negotiations and margins. I believe that needless to say that this is a tough market. So whoever is not approaching this business being very well trained and very well equipped. So whoever is touching this business without having the right muscles for sure is not easy and I would say comfortable. But having said that, so having said that this is a business for very experienced, a very, I would say, reliable and fully fledged and fully equipped kind of player. Let me say that Fincantieri worked a lot on increasing the productivity of shipyards. And the reason why I'm touching base on the investments in productivity, it is because the only way to be competitive is not to fight, is not to try to be aggressive with your clients, but the only way is to get impeccably into the deliver, into the delivery. So the more your shipyards are productive, the more you invest in your shipyards, the more you can approach the delivery with the organization and with the tools in order to be impeccable. Because if you're not impeccable, for sure, your clients will not be indulgent. And if they're not indulgent, your margin will not be comfortable. So that's the issue here. So the reason why I'm answering this way is because I have I had the possibility to look into these shipyards. I had the possibility to appreciate how much we have invested in our shipyards. And I had also the possibility to get with our world class clients around our shipyards and hearing from them in term of appreciation for the modernization of our shipyard. So let me say, this is the only way to protect your margin. So if you don't invest in your shipyard, you will end up having tough clients in front and issues in your execution. It's never finished, so the modernization of client is never enough. Mino and Falcone, we did a lot. Now we are replicating it in the other shipyards. We will do more and more it also in the Naval shipyards as well. So this is our strategy. Modernization means change of cranes, change of equipment and whatever is the other, I would say, important tools for the productivity, but also changing the process. So working more onshore, working more before the ship is out of the shipyard. So there are a lot of reengineering in the process on top of investing in equipment. And then there is a third lever that is the digitalization of the ship. So I believe we are also pioneering a lot of, I would say, digital instruments, starting from the engineering of the ship, kind of 4 dimension, 4 d kind of tools in order to anticipate construction interfaces and typical pitfalls and typical pain points at the moment of getting into the construction phase. So I believe that the combination of the modernization already associated with our shipyard plus the progressive adoption of digital solution will protect our margin more and more and will procure that we are very, very effective with our clients. Then obviously, we will have to cope with the increase in the raw materials. Needless to say, that the margins are also made of external costs. First of all, let's manage impact albeit internal costs in order to deliver. Moving to the visibility on the NAVA. Yes, for basically, the orders can support a margin of 7% that you expect maybe going forward? Sorry, I didn't catch you. Yes. So basically, the new orders from crews should support at least a 7% EBITDA margin that might This is obviously the rule and this is the golden rule, needless to say. Then hopefully, there are prototypes and then there are repeated shapes. So needless to say that we are here to do better than that. On your second question on the deferrals, as I said before, €132,000,000 of deferrals still are impacting our net debt levels. Plus, as I said, there is the deferral on the delivery that was originally planned in the first well, actually, it was planned in the Q3 end of July, but it has been postponed to the Q4. And of course, you will see this effect being offset at the end of the year when the ship will be delivered. Thank you. I think there was a question on Greece as well. On Greece as well? Yes. Paul, can you take it on this? Yes. So I was moving to the visibility on naval opportunities. We made no secret that we are in advanced negotiation with the client for their investment in naval vessels in Greece. We are in competition with Naval, which is probably the only, I would say, competitor that can match to the possible extent our product offering in that respect. There is a lot of geopolitical, I would say, matters around, as you know better than me. So the outcome will depend also a lot on how the Italian system will support something like that, a contract like that. But in term of, I would say, positioning, in term of appreciation of our offer, in term of willingness to buy Fincantieri naval vessels, I think we are very well positioned. So the last mile in an institutional business as this business is, but the last mile is driven by geopolitics. Then obviously, in the naval business, as I clearly said before, there is a lot to do with the Italian Navy. Italian Navy is a very sophisticated client, very reliable client, is the client with whom we put together and validate our products and the collaboration with them is absolutely strong and the Italian Navy is in a sense a kind of international pattern of Fincatieri at the moment of proposing our products far from home. So they are clients for Italy, but they are also kind of system partners in order to promote it all over the world. So but even for the Italian need and requirement, as you may have appreciated from the newspapers, there are a lot of discussions going on that could materialize even in the short term. The next question is from Giuseppe Grimaldi with BNP Paribas. Please go ahead. Good morning, everybody. I have a few questions. The first one relates to the crews. We saw a nice improvement in the order intake into the quarter. You mentioned new operators joining the queue, occupancy ratio improving. So my question is, what shall we expect in terms of order intake into the incoming quarters? On this, I will add just another follow-up on the negotiation that you're having with clients. Do you plan to include in the foot further contracts the some automatic just price adjusting mechanism in order to mirror the change in raw materials that may take place into the execution of the contract? And the last one is on financial. I guess you have faced some non recurring items in your EBITDA into the 1st 9 months. My question is if you can quantify them and also if you can give us some granularity on these cost items? Thank you. Thank you. On cruise and on the recovery of the industry, which is ongoing right now, and all the operators, the fleets are almost fully operating, roughly 95% of the vessels in business were in business as of the end of September. What notably what is good is the signals that come from the 2023 reservations and ticket sales, because 2023 is at the level of 2019, if not better for some operators. So the recovery is solid. Notwithstanding this, the cruise owners have to repair their balance sheet because they have incurred 1,000,000,000 of emergency debt, let's call it this way. Therefore, they are somehow more selective when it comes to CapEx. By no means, we expect to see the booming years preceding COVID, I refer to 2017 to 2019, which we had record levels of new orders. So by no means, we forecast that. But there are a few leads, commercial leads going on, and we the conversations with clients is always ongoing for two reasons. First reason is that because we are building their ships in our yards and in interactive with them with in the context of the projects we have undergoing, of course, discussions are also concentrated into new ideas because new ideas because there are two trends which are visible in the order intake we realized in the Q3, decarbonization, so greener ships and regulatory trends related to decarbonization and also the growth in the Luxury segment. All the ships that we have signed and agreed upon in the Q3 are with different colors, of course, within the space of the upper premiumluxury segments. And you see Viking, you see MSC and you see a new entrant for Seasons Yachts. So a very known well known brand in the hotelier market, making its entrance in the new space with a very specific offer. So it's really too early to establish a correlation between the recovery of the market and a quantity, a volume of new orders coming in the short to longer term future. But the fundamentals of the business are back on track. Again, there is a need to be very cautious with CapEx on the side of the owners. But being the fundamentals of the business fundamentals very good, this can spur a new resumption, I would say, of orders that, by no means, will be close to the trend we saw in the past 3 years before COVID. That's it. On the possibility of introducing a price adjustment mechanism, I don't think it's a case of reality. What I can tell you is that any new order that comes in right now is factors in very conservative cost assumptions on raw materials and also on other items that are, let me say, subject to price increase have been subject to price increase at this point in time. On the one off items, I believe we have talked about in the 1st semester, we need roughly SEK 200,000,000,000 of write offs or one off items, not write offs, it's not proper, as the 1st semester of this year. Thank you. The next question is from Gabriela Gambarova with Bank Acros. Please go ahead. Yes, good morning. Thanks for taking my questions. The first one is on Indonesia. There was this announcement in June 2021. So I was wondering if the talks are still ongoing, if you made some progress on this front, any news, any color would be interesting. The second is on Bard. I was wondering if you see any I mean, I understand that, perfectly understand that the offshore wind opportunity. I was wondering if you can perceive any opportunity even on the oil and gas, the old oil and gas segment because it seems that the CapEx there are recovering somehow. And the last one is on this write down you made the $62,000,000 write down you made in the Q2 in connection with the delay of the delivery of 1 ship. I was wondering if there are, let's say, the premises to maybe be reverse this write down positive in Q4? Thank you. On Indonesia, the discussions will be developed gradually depending on the budget allocation and depending on the, I would say, implementation of the program, depending on the Ministry of Defense and Indonesian government developments. So obviously, in our business, investments are very large. And so in order for investment decision to be finalized, there are a lot of political economical steps to be completed. So let me say that the process is being slow. The contract is there because it's in our soft backlog. But in order to be translated into a hard backlog, we need these steps to be finalized and it's up to the local government to do it. So let me say that we are following it from here. So we are pushing that, but we don't see developments in the very short term. We are positioned. The fact that Leonardo signed some contracts on certain different businesses, smaller and different businesses, it's a sign that the Indonesian spending on defense is moving forward, is touching up. But in order for a large contract to be finalized, there are certain internal steps that need to be developed. On VARD, yes, you're right, it's not all about wind farms, supply offshore vessels. There is the possibility that oil and gas would pick up again. The Norwegian cluster, the Northern European cluster, it's very rich of oil and gas reservoirs. So it makes sense. But let me touch base on also other kind of ships in which VAR is proving to be very strong, which is the cable layers business. Again, this is the era of electrification and the era of electrification calls for investment also in electric cables. And cable layers are very valuable either in term of value of the ship, but also in term of value of the rentals. So it's a market that is developing and it's a market in which VART is very focused. So you made you did well in touching base on alternative business of VART on top of wind farms. 1 is oil and gas, yes, But please consider also the cable layers on top of fishery vessels, which is, I would say, a tradition in that part of the world. Gabriel, on your third question, the EUR 62,000,000 write down, we expect to reverse it if and when we will deliver the ship. We'll see what happens. I'd like to take a prudent stance there, but of course, we will do whatever the accounting principles allows us, allow us to do, as always. The next question The next question is from Michele Baldelli with Viente Paribas. Please go ahead. Hi, good morning to everybody. Just a follow-up on a previous question. Concerning the costs that are not included in the EBITDA like the asbestos claims, can you give us an update of how many claims, can you give us an update of how many costs were not included in your EBITDA, please? If I understood well, the question is what's not included in the EBITDA as a cost right now? The only thing we do not include in the EBITDA is the asbestos, the provisions for asbestos claims at this point in time. During COVID, we did report below EBITDA the cost the COVID the so called COVID related cost, but we have no more of that at this point in time. Therefore, the only line item, the only cost that is reported below EBITDA is the cost for asbestos claims. Okay. So this is the underlying we've H1 like €15,000,000 €14,000,000 €15,000,000 per quarter? On asbestos claims, you mean? Yes, roughly in that range, yes. Okay, perfect. Thank you very much. You're welcome. Gentlemen, there are no more questions registered at this time. Thank you. Thank you very much for attending and let's continue next time. Thank you. Goodbye. Bye bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.