Fincantieri S.p.A. (FCT) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Fincantieri Full Year 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Bono, Chief Executive Officer. Please go ahead, sir.

Good morning, ladies and gentlemen. Thank you for joining us, and welcome to Fincantieri financial results for the full year 2021 conference call. Let me start by saying that I'm very proud that even during a year that's still affected by the pandemic and the increase of raw material prices, we significantly achieved excellent results. In such a difficult times, we did react with great determination and overcame challenges that effect the [ food ] sector in particular as you know our clients in the Greece business. In this, we managed to serve our orders and operations while keeping our work culture safe. In 2021, we reached a record high EBITDA at EUR 495 million with a margin of 7.4%, exceeding the guidance for this year. In terms of the revenue flow, we grew 28.3%, [ year solid results ] improving across our segments if you compared to the pre-pandemic results. Bottom line in 2021, we recorded an adjusted net profit at EUR 92 million versus the negative EUR 42 million recorded last year. And the net result at EUR 22 million compared to the negative EUR 245 million in 2020. This shows the [indiscernible] and determination of this company to react [indiscernible] to profitability during a low and [indiscernible] year and [ grow out ] strategy and second, to reestablish [indiscernible]. We are best-in-class in execution. We delivered the promised [indiscernible]. We did preserve our backlog under the production program, despite COVID-19. We are seeing the progress of our investment program, creating default production efficiencies and the cost automization. Once again our strategy proved to be successful. Our performance is robust, our solutions are innovative and tailormade. Our client base is extremely loyal and in some sectors, we are within such range. Our business is sustainable to crate long-term value for our stakeholders. Those are elements essential to maintain our leadership in the sector to be competitive in the current global economic scenario. We had a technological platform with a global footprint. We characterize our own unique engine, set our [ rise in ] competitive loans lasting experience in complex projects. Our project [ mainly ] with skills and our system integration and capabilities to create the synergies across the company business [indiscernible] from virtual know-how [indiscernible] opportunities. I am also pleased through our effort in ESG and have been internationally recognized confirming our full commitment to a sustainable business, the foundation for long-term growth asset. I'm personally proud with [indiscernible] and the determination, strength of [indiscernible] of our people. Our [indiscernible] also all together make Fincantieri an even stronger global leader. We think global, but we are local. Let me hand over to Fabio Gallia for the business review. Over to you. Thank you.

Thank you, Giuseppe. Good morning to everybody. At Page 6, you have an executive summary of the main numbers regarding '21 results. As has been said with our CEO, these are very robust set of numbers in an unprecedented difficult environment, with revenues going above EUR 6,600 million, with EBITDA growth, which is almost 60% and reaching almost EUR 0.5 billion, maintaining a very solid and sustainable backlog. And very importantly, notwithstanding what happened to raw materials and other constraints we had to face, we met the guidance in a year ago. I would also mention beyond the numbers you can find here that almost 90% of our revenue comes from international clients, while almost 80% of the production is being performed made locally in Italy. That really gives you the sense of a global leadership by an Italian manufacturing company. There has been a record volumes in production, more than 16 million hours in our yards. That's also thanks to the economy of scales reached the investment which has been done over the years and the reaction of the reactivity by our colleagues allowed us to maintain and significantly improve profitability. And that has been done, notwithstanding the environment you know well. We've been also able to preserve the backlog while also capturing new orders with a different mix, but we go to that before than afterwards. It's also important to highlight that we've been delivering 19 ships in the last 12 months, and that has been done in 12 different yards from 3 different continents, which tells you about the global reach of Fincantieri. Operating cash flow has been positive and has been supported by our CapEx plan and the investments, which will be commented later on, will also tell you that we are building and improving our competitive advantage versus our competitors. So this is basically the sense of Page 6. If we go to Page 7, there is a helicopter view of major events quarter-by-quarter. I won't go through any information, but you can see that this company is really large and is engaged in several different businesses and has been delivering in each of these segments. In the shipbuilding, you can see the important European project for a European Patrol Corvette, the order from Indonesian Ministry of Defense. And very importantly, U.S. Navy confirmed exercise in the second option for the SFG new class frigates. MSC Seashore represents the largest ship ever built in Italy and the first corvette for the Qatari Ministry of Defense has been delivered just like the second Logistic Support Ship or LSS for the Italian Navy. In the offshore and specialized vessels, no new orders have been, I would say, captured by anybody in the oil and gas. On the other hand, we've been able to transform Vard and make it a leader -- a global leader in SOV business, which relates to the maintaining manufacturing and maintaining offshore wind farms. In terms of ESS, the other division of ESS the important landmark project of PortMiami for cruise terminal for MSC. And we've also been finalizing IDS acquisition, which is a small but a very important company for the technology it embodies. And on ESG and partnership, we can find here on Page 7, what has been already announced. And it's also important to note that we're very active also in sustainable finance has been testified by the first trade finance credit line for the manufacturing of green cable layer and the first sustainability-linked construction loans. Page 8, an update on ESG. As you can see, numbers speak for themselves. So on renewable electricity, we more than doubled the percentage of electricity done by renewable sources. Carbon intensity measures as tons of CO2 over revenues has [ reduced ] by half, while continuing to commit our capital in R&D, an important factor to keep and improve our competitive position. Safety is still at the very heart of what we do, while on the general distribution on our Board, you can see that it's being represented in a very balanced way. We continue also to invest in talent had in people. That has been somehow endorsed by the most important rating agencies and other institutions, which basically awarded us. We are the ones of the most important highest ratings, and that is true for CDP or V.E. We're also committed, as we promised the new rating agencies like S&P Global and Sustainalytics and being for us kind of the view, the ranging has been really, really high, and we're very proud for that. Some awards also being said as far as our attractiveness on the labor market. On health and safety, which is really important that is coming from U.S. authority. While also sustainability Green Star awarded us when one of the most important and best run company with that respect. If we flip to Page 10, deliveries and orders, you can see by just the numbers but we highlight how diversified our client base and our ability to be competitive in different segments of our sectors by far exceeding results of our competition. And even when we look at orders, clearly the mix, as I said before, has been changing because pandemic really hit the cruise sector, but we are being able to compensate with the Naval business and with the offshore. In terms of backlog at Page 11, you can see that it's well balanced and diversified, we shipped 29 vessels in portfolio in the cruise portfolio, 36 in naval and 26 in offshore and specialized vessels. This graph, this diversification and we will get to that also softer backlog allows Fincantieri to count on a long-term visibility on a diversification and even new sources of the emerging growth in our business. Now I'll hand it over to Giuseppe Dado, our CFO.

Good morning, ladies and gentlemen. We move now to Page 13, and let's comment a little deeper in the financial results. As with the order intake and backlog, we managed to preserve our backlog despite the challenges faced in the last 2 years by [indiscernible] most of all by our clients in the cruise sector. In 2021, order intake came in at EUR 3.3 billion, with a positive impact from offshore and specialized vessels and ESS business, notwithstanding the fact that the cruise sector is still characterized by all stances. New orders in shipbuilding amount to more than EUR 1.8 billion and this was mostly thanks to the contribution of the Naval business, where our U.S. operations were awarded with the second frigate for the U.S. Navy. And also in the equipment systems and services, the order intake almost doubled compared to last year, thanks to the order mentioned before also when Mr. Gallia for the cruise terminal in Miami. The total backlog is approximately at EUR 35.5 billion, including EUR 9.7 billion of soft backlog, thanks to the recent achievements in the defense business and the agreement, of course, with the Indonesian Navy. This ensures a long-term visibility and gives us the opportunity to shape the medium-term investment plan to create the production efficiencies that you have seen ripping down to the results of this year. As with revenues on Page 14, up 28.3%. So perfectly within the range, the guidance range that we gave at the beginning of the year. And the performance was driven by exceptionally high production volumes. We exceeded the mark of 16 million production hours in our shipyards. And this came despite higher safety protocols in place to manage the COVID-19 impact. Revenues were at roughly EUR 6.7 billion, excluding pass-through activities. And in the shipbuilding segment, the contribution of the segment was 27.1% in growth, basically offsetting all the revenues that we lost in 2020. And the Naval business increased by 36.3%, whilst the Cruise business roughly 26%. The Cruise revenue still accounts for 52% of the total revenues, and we recorded a slightly higher rate of defense business, up to 23% compared to 21% of the previous year. The Offshore and Specialized vessels, revenues increased by almost 24% compared to 2020. And this shows the recovery of the volumes that we lost in the first part of the year. This result confirms the successful repositioning strategy towards more promising segments like the offshore wind, in which we expect still further growth. On the Equipment Systems and Services, we grew almost 28%, and this is mainly driven by the operations in support of Cruise and Naval vessels. As Mr. Gallia mentioned before, 87% of the revenues were generated from international clients with a 79% share of production in Italy. Let's move on to the Page 15, where we comment EBITDA. EUR 495 million, up 55% compared to pre-pandemic levels compared to 2019 and 57% compared to last year. And this came from both higher production volumes, so higher operating leverage and, of course, enhanced margins. And this is despite the effect of increasing commodity prices that we were able to offset most notably in the Shipbuilding segment. The EBITDA margin improved from 6.1% in fiscal year 2020 to 7.4%, and this is a higher than the guidance of around 7% EBITDA that we provided for year-end. And this very positive performance is mainly driven by the Shipbuilding segment, up EUR 194 million with an EBITDA margin of 8.3%. And this came, thanks to the higher revenues in the Defense business, but mostly came from the very positive performance that we have in the Cruise production in the year 2020. Again, despite the difficult work environment that the pandemic has created. EBITDA in offshore was positive for EUR 10 million, and we will be starting to reap the benefits of the turnaround strategy implemented back in 2019. And this came as the fruit of the repositioning of our -- in the wind offshore business. ESS EBITDA was down EUR 25 million. And this is due to lower margin in the Infrastructure segment, whereas of yet, we were not able to offset the increase in commodity prices in the projects. What I just commented, it's clearly pictured in Page 16, where you can appreciate the very high contribution of the -- to the EBITDA improvement by the Shipbuilding segment, both for the operating leverage and the higher operating margins. The high operating margins did not come by chance, of course. This is thanks to the execution of a very, very robust backlog in terms of marginality thanks to the benefits that we are reaping from the new investments that we did in the past years. Thanks to the changes in the engineering and production process that we implemented in the past year, thanks to all the things that we talked about in -- really in the past 3 years. We move on to Page 17 on the net results. We are back to profit at EUR 22 million, thanks to what I -- what we described before and notwithstanding a very high burden in extraordinary items. Still very high asbestos litigation related costs at EUR 55 million in this particular line item, we believe that we saw EUR 50 million -- roughly EUR 50 million also in 2020 and we're starting to see a peak here. We do expect the amount of claims to go down in the next few years, although we still maintain a conservative stance. And we also had EUR 30 million of COVID-19-related extraordinary items. Another item we do not expect for the year 2022. On CapEx, EUR 358 million, up 10% with respect to 2020 at 5.4% of group revenues. Basically, investments we're still scaling up our production capacity, notably in the U.S. for the execution of the new frigate class program for the U.S. Navy. We're going to start to cut still of the first frigate during 2022. So production is going to start this year. And this is both to scale up production and to keep compressing lead times and improve efficiency notably in our main cruise business yards of Marghera and Monfalcone. And you see in the results of how this investment plan is paying off. So as a matter of fact, EUR 163 million came -- of CapEx came as capacity increased, EUR 92 million were for safety and maintenance, EUR 52 million for efficiency improvements and EUR 31 million for the IT infrastructure. On Page 19, the net working capital, net financial position. We closed with a negative net working capital of EUR 670 million, and this is mainly due to the very substantial delivery program that we conducted and did successfully in the year 2021. We lowered also the construction loan level at roughly EUR 1 billion, and net debt was EUR 159 million. In this net debt levels, we are slightly better than the guidance that we gave. And both the decrease in net working capital and net debt levels, one mirroring the other is mainly due, again, to the delivery of 8 cruise vessels, and this delivery program came with 1 more ship than expected because we did -- we were able to deliver 1 ship in advance before the closing of the year. And originally, this ship was scheduled for delivery in 2022. Of course, net debt levels are still affected by the strategy of deferrals granted to clients, which at the end of 2021 amounted roughly EUR 200 million. And again, regarding our debt structure, we are basically immune from any dramatic shifts in interest rates and our debt structure does not have any covenants. So it's pretty flexible at this stage. Now I give the floor back to Mr. Gallia for the outlook for next year -- for this year for 2022 of course.

Thank you, Giuseppe. If you go to Page 21, we can have a focus on our core businesses, cruise and naval. As you might be aware, basically, almost full capacity will be reached this summer seasons, and this information are also publicly because most of our clients are listed and have reported a number of useful informations open, accessible to everybody. Interestingly, booking trends for '22 and '23 are back to '19 levels with higher prices. And passenger volumes are expected to recover and surpass '19 level in next year in '23 with a target of 30 million passengers, which are expected to grow 26 million to 34 million. I think this is important, but clearly is confirmed by the evolution of the external environment because we believe that the resumption in orders will be possible early next year. Clearly, one of the major theme across any industries including cruise is reaching net carbon neutrality by 2050. Our association and even operators and owners associations are forecasting few numbers, 26 LNG power cruise ships and almost 180 cruise ships will have, respectively, energy powers, which means a less impactful kind of function and shoreside power connectivity, clearly, that has a requisite the installment and working infrastructures, which means also now the major themes, which will see Fincantieri group involved with other different businesses. On naval, you know that this conflict has been a game changer the industry, not just for a few countries. We already made public announcements for the rest. Europe is working on a strategic context. And we believe that this might also accelerate certain trends and certain dialogues has been going on in the last few years. I think that there will be changes. I would just mention that assuming that increasing portion of those investments will go to the sea, that means to the naval business, we have to also highlight the fact that we are leaders in some of the vessels which are characterized by highest growth rate like frigates, like corvettes and submarines areas and the [indiscernible] with a diversified client base even geographically in outperforming sectors. Next page, 22, and this is the last page of this presentation. We elaborate a little bit about the '22 company outlook. You all know the current uncertainties, which relates to our health situations and also to geopolitical with the reverberations on supply chain, raw materials, energy, which are affecting the likes of not just the company but every fellow citizens. I think there are a few things we might say there, first of all, assuming that there will be no further relevant deterioration in these 2 major variables, geopolitical and health, we do believe that the long-term growth and profitability is insured by a diversified client base, backlog and positive contribution from all the different business lines. Some revenue growth is expected to increase exceeding '21 levels. And let me point out the fact that we have very, very high visibility on what is going to be the revenue base. As you know, that is basically almost guaranteed by the existing orders. Marginality, which means margins, EBITDA margins, will be maintained notwithstanding what's going on, on commodities and energy. And it's importantly on the CapEx, let me just add a few comments on what you said before, I mean, investments clearly drain cash, but the improvement in these results and even in margins and being allowed, also thanks to the investment cycles -- cycle, which has been characterize our life. That means increasing our capacity production capacity, increasing efficiency, working and installing new technologies, safety and we're working also for the environment. An investment cycle, which is ahead one like the one which is almost behind our shoulders is something which is about to build and strengthen the competitiveness of Fincantieri in the next 5 to 10 years. And that has been already true and visible in these numbers, particularly if you compare it with the conditions of our competition. Net debt is expected to stay more or less in line with the 2020 levels. And we believe that there is a well-proven capacity to face in an unforeseen event, so that when looking at in the future, I think Fincantieri is exposed to a very interesting growth vectors. One is tourism can be cyclical to be impacted by some extraordinary items. But tourism is outperforming GDP growth and cruise is expected to outperform the trend of the relevant sector. Defense, and we are leader in sectors, which means vessels which are outperforming the growth of the sector. Renewables, even assuming that there will be no other investments in oil and gas, we are becoming the world leader also again in this renewable sectors. Technology, and even -- which is prevailing more and more the life of any citizen clearly [ under confidence ]. And we get some specific technology competencies and skills which is, I would say, the consequence of what we do in our core business. So that proves that the strategy is the right one and we will be continuing to capitalize on the company core strengths, first of all, our values and our people. [ In fact ] that we are a global leader in a competitive in a competitive environment but Fincantieri managed to strengthen its position as a global leader. Also thanks to operations, technology, the international footprint, the diversified client base and the capacity to integrate and manage difficult, complex projects. So whatever the environment, we strongly believe that Fincantieri can outperform competition and capture opportunities which might turn up after these unexpected events. I would stop here, and we'll leave the floor to you for questions.

[Operator Instructions] The first question is from Monica Bosio of Intesa Sanpaolo.

I have a few ones. The first one is, can you please give us more highlights on the moving parts in the group's margins in 2022? So I mean that, do you expect that the pricing increases might still offset the rise in raw mat and the energy cost or the maintenance of the profitability will be possible mainly thanks to a higher contribution from the naval business? And more in general, are there in place some intersection mechanism at the company level and how do you manage the purchase of raw materials? I know that there are a lot of questions on this side, I'm sorry, but I have to ask. And the second question is on the Equipment, Systems & Services division. Now it's quite big, EUR 1.4 billion in revenues. Can you give us some -- any breakdown in the revenues and the flavor on the impact of raw materials in 2022?

Giuseppe, speaking. On your first question, on 2022, the margin levels despite we live in very uncertain moments. We'll still -- the drivers to margin will be the same we saw in 2021. And let me list them again, higher contribution from naval. Still -- we still expect a growth in revenues in the Cruise business. This is due to the execution of our order portfolio. We do have 7 deliveries both in 2022 and 2023. Somehow these deliveries are -- numbers are the same, but the average size of the ships is higher. Therefore, we do expect growth in revenues in the cruise business and these revenues have very good margins because these revenues relate to ships we acquired in the booming years of 2016, '17, '18 and '19, okay? As with the commodity price inflation, the numbers we saw in 2021 and that the numbers that we will see in 2022 factor in commodity prices at current market levels, okay? We are able -- we were able to offset price increases and in certain items, these price increases came at 50% from what we had in our projects budgets. But again, we said it several times, the budgets of the projects were -- of the projects that we are executing right now were very robust and very conservative. And this conservative approach you see it in the numbers is paying off, okay? That is why notwithstanding the fact that we are not giving, let me say, a clear quantitative guidance we do expect to continue the growth, both in revenues and EBITDA margin levels. On ESS, on Equipment, Systems & Services, yes, it's a very diversified set of businesses. We do want to give more disclosure, but we still think that it's early. Yes, we did experience lower margins, notably in the infrastructure business because in the infrastructure business is a newly acquired business. Because we were not able to offset commodity price increases, we do expect a recovery in the margins in 2022. That's all I can say at this point in time.

The next question is from Alessandro Pozzi of Mediobanca.

Congratulations for the good set of results. The first question I have is on the order intake. The order intake has been coming down for the last couple of years for the reason we all know about. And I was wondering how we should think about the order intake going forward? Is 2021 a tough year? And also, you've gone a long way in diversifying the business, and we've seen that the benefit in the ESS. So I was wondering what segment are you most excited about in the short term when we look at potential new opportunities in the order intake? Also defense is likely to be a big element as well. And I was wondering, are we seeing -- are you seeing signs that the defense budget could translate into a higher order intake for Fincantieri in the short term?

Thank you, Alessandro for the question. Cruise, we briefly mentioned before, a dialogue with our major clients has always been basically going on and that has been accelerated over the last few months. But clearly, the uncertainty is also provoked by Omicron and now by the conflict clearly is making our clients, I would say, I'm not saying careful, but clearly thinking a lot about new investments. But we know that order intake would resume. It's more a matter of time. We've been very conservative in our assumption for our projections for '22 and also for the years to come. As I said, we are conservative because we don't know when this kind of exceptional environment will end. But we know, as I said before, that we are in a [ war ], which in normal conditions will have more and more people traveling. And more and more people will choose cruising as a preferred option that has been clear and evident in the last 15 to 20 years and that trend has accelerated. It's also considered now according to a survey as one of the safest way to spend your time with your family and that is accelerating also beyond the traditional cruise markets like U.S., Australia and Europe. And if you look forward, we're also well positioned should something positive happen also in one of the most populous country in the world. So we are positive. I would also mention that one of the key features in selecting the partners will be the robustness of the company, and we are a solid company and effectiveness and the competitiveness of the proposal and the attention to the new propulsion systems, which can be available in years to come. Again, being a global leader, maybe I said it another time in the past, allows us to [indiscernible] the condition to receive the first call by any providers when technology is concerned. As a matter of fact, we're working, we're partnering with some of these suppliers in order to be the first one to provide innovative solutions, which respect environment and allows our clients to also have the selling proposition. On Naval, I have not much to add to what we said before. You know what our -- what used to be the growth rate expected for the sectors with Asia outperforming Europe, which was expected to outperform U.S. Now this is a game changer -- there's a game changer, unfortunately, with what happened in Ukraine. You're seeing all the declaration by the different states around the world, and there will be we believe a few dynamics. And it's important that you are ready for when something will happen. We do believe it will. And by providing competitive solutions in terms of performance, with proven experience and track record, new technologies, new way also to help the dialogue with the respective defense and that we believe it's I think -- it's a sector which we are very, very well positioned. Not just in Europe but more in around the world and not to mention our very strategically important position in U.S. Oil and gas, as you know, basically have operated in the last 10 years. VARD has been able to reinvent itself in building vessels for installment and maintenance and other services in the wind farms. If you look at the growth rate expected for installment of floating not just floating, but offshore wind farms, it's an important one, one of the highest and most attractive area to invest in. We are there, and we're there. And I would also mention with a global leadership position in SOV, service operation vessels. And we -- also thanks to a very flexible and competitive industrial footprint. Also thanks to our presence in Vietnam, where they have skills and a competitive cost to build these vessels. And we are also exposed to aquaculture to trollers and that is what we see. We might expect that something will also change on the energy side. And when we look at those trends, and there will be changes for sure. We are in the position to deliver a number of products and services and with, I would say, global references. Therefore, we believe that we are well positioned to capture also some. Think about electronics, I think about hydrogen, psychology and other business. Before I have been elaborating a little bit further, but we believe that this year, it would still be a kind of transition period, which is hard to make a prediction when these things, the situation will end or how, when and how, but we do strongly believe, as we said before, that -- I think as our CEO said that we are -- whatever the environment, we will be able to outperform competition and do our best for our stakeholders.

Okay. So overall, still a transition year potentially with a stronger pickup, let's say, from 2023, I would say, in terms of order intake that would be -- I don't know what it might take. Okay.

Alessandro, Giuseppe Dado speaking. If I may add a few numbers. According to the Cruise Lines International Association and plotting the long-term growth in the cruise business, there's going to be capacity -- a demand capacity gap, a demand offer gap by 2026. And that is comparing the number of passengers with the number of lower berths available in the market. Consider that Carnival as scraped roughly 22 vessels from their fleet in the past 2 years, profiting, let me say, taking the chance from the pandemic. And as the CFO of Carnival declared, they have a 10% more efficient fleet. So they're going to have a more environmentally friendly and efficient fleet and also the secular growth of the passengers, as we said before, seems intact. So according to the projections, there's going to be a demand supply gap by 2026. And that brings us to think that maybe from 2023, there's going to be a resumption of order. Right now, though, it's prudent to take a very conservative stance here.

Okay. That's very helpful. I also had a second question, sorry. On the net debt, I was wondering if you can give us a bit more color on the profile of the net debt throughout the year but also any guidance on construction loans at year-end. And also, what sort of CapEx you're assuming for 2022? We know that CapEx has gone up because of capacity increases, as you mentioned, and efficiency programs. I was wondering whether that is normalizing or I think 2022 is going to be another -- still another year of heavy CapEx for the group?

On net debt, we -- as I said before, we still expect we still have some growth to perform in cruise. In 2022, we will -- our revenues will be higher than the cash receipts. And that means we have to -- we'll have an increase also in work in progress, which will not be built. And therefore, we do expect to -- that is why we are giving a guidance that we do expect net debt levels, including construction loans that are more similar to 2020 levels than to 2021 levels. Although this forecast is again, as usual, prudent as we are not factoring in any advances coming in from the effectiveness of major defense contracts.

Like Indonesia, for example.

Like Indonesia, for example. On CapEx, we still have to complete our production capacity increase in the United States and we have the tails of the investment program in Italy. Therefore, CapEx levels will be roughly similar to the levels that we had in 2021.

The next question is from Matteo Bonizzoni of Kepler.

I have just a follow-up question as regards the Indonesian contract. You announced the contract almost -- let's say, almost 1 year ago in the sense around 9 months ago. Where we are in terms of the finishing of this contract? What are the potential harbors or in any case, what's needed to have the closing of this contract? And is it reasonable to think -- you did not specify also a contract value. Can you just confirm that the contract could be worth slightly more than EUR 4 billion with advanced payment in the region of 10%?

We confirm the numbers. The indications of the numbers that we gave, the teams of Fincantieri and the Indonesian Navy are working on the finalization of the contract. We do expect the contract to become effective by year-end, by the end of 2022, although, again, we're not factoring in any advantages coming in.

The next question is from Emanuele Gallazzi of Equita.

I just have one follow-up on the Naval segment. Can you just share your view on the role of Fincantieri in the potential consolidation of the naval segment in Europe? And can you provide any, let's say, comment on OTO Melara in the submarine business of Thyssenkrupp. I think it will be very useful.

Thanks for the question. This is Fabio. Everything is suspended in the current environment, so we'll have -- as we said before, we clearly are focused on our delivery. Clearly, keeping our eyes open, but everything is suspended, not just in Italy I'm saying, throughout Europe.

Okay. About the role of Fincantieri in the consolidation of the European Naval segment, just to have your view.

It's exactly what I said in the sense that we always keep our eyes open. But currently, there's nothing going on. We do believe that, as we said before, what's going on now is a game changer for the industry. But -- so focusing on what we do, clearly, as again, analyzing potential options. But it's really important that whatever the environment, whatever the future can present to us, we get there in a solid, robust competitive positions. This is our priority.

The next question is from Gabriele Gambarova of Banca Akros.

The first one is on CapEx beyond 2022. I understood that your investment on the U.S. yard should be over by this year. So I was wondering in a longer perspective a normalized the level of CapEx what it could be?

Well, of course, the levels that we have seen in the past years are not normalized levels. We believe that the peak in CapEx is '21, '22. After that, we will slowly pace down to levels more similar to the levels of amortization and depreciation. But of course, it's pretty early to speak about 2023 at this point in time as we are not giving a long-term guidance.

Okay. Very clear. And then another housekeeping question on tax rate. I saw that it was pretty high beyond 40%. So same question here, what could be let's say, a normal level of taxation going on?

30%.

Sorry, I didn't get, sorry.

30%.

And then last question for me. I saw there is this DDX program for the Italian Navy, 2 very big, let's say, units that are being discussed by politics. So I was wondering if you have any, let's say, any idea of what could be the timing for this important EUR 2.7 billion program, the timing of the award? I mean, do you see it coming next year? Or I mean any explanation would be...

Not really, not in 2022, at least in our numbers, then we will see.

The next question is from Monica Bosio of Intesa Sanpaolo as follow-up.

Just a follow-up on the big pictures. Given that Cruise business is expected to resume, given that Naval is obviously a game changer, in your view and in a big picture, in a time frame of 3, 4 years, how do you see the proportion between Cruises and Naval in the shipbuilding division? Now Naval accounts 23%. How do you expect this way it can increase and to which level?

Well, that is a crystal ball question because the events we are facing, we see right now may change the footprint of 2 industries, of course, Cruise and Defense. Leaving aside any forecast on the resumption of orders in Cruise, I think that the share of the Naval business is prone to grow. Organically, considering the backlog that we have right now, we still have to see what will come in the future. I cannot give you a precise estimate at this point in time, but it is what it is right now.

Okay. It's too early to predict a normalized level, okay.

It should be within the shipbuilding segment, between 30% and 40% Naval and the rest with shipbuilding.

30%?

This is very long term.

[Operator Instructions]

Just to add on to Monica's questions. We said before, but it's important to note that we're talking about sectors in normal conditions would be grown and are performing GDP growth.

[Operator Instructions] With that, there are no questions registered at this time, sir.

Thank you.

Thank you. Thank you.

Bye-bye.

[indiscernible].

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.