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 2022 Results Conference Call. [Operator Instructions] 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. Welcome to Fincantieri 2022 Financial Results Conference Call. This set of results shows a solid top line with revenues up by 12% to EUR 7.4 billion, in line with expectations and with the development of the backlog. EBITDA stands at EUR 221 million with a margin of 3% impacted by first half lower marginality, especially in Infrastructure as a result of the thorough risk analysis carried out by the management in the second half of the year by nonrecurring items of the period and by inflationary pressures due to the macroeconomic scenario. In 2022, we delivered 19 ships from 9 different shipyards. This underlines, once again, how strongly are our industrial and production capabilities. Order intake came at EUR 5.3 billion, well above last year figures, thanks to a revamp in cruise vessels demand. As a matter of fact, during the second half of the year, we signed 3 different agreements with green and next-generation cruise ships, strengthening the partnership with consolidated clients and welcoming newcomer luxury brands. On the defense side, the U.S. Navy exercised the option for the third frigate, renewing the full trust in our franchise. Turning on net debt. Since the first half of the year, it improved as anticipated during the last conference call in November. Net loss for EUR 324 million, hit by extraordinary and nonrecurring guidance for EUR 238 million, of which EUR 164 million noncash items, namely goodwill and intangible assets impairment. Giuseppe will give you further details on the main financial and operating performances of the period later on. Let's now move to Slide 7 for some business updates. Our operating performance has been consistently positive throughout the year. Indeed, the group's shipyards are running at full speed with 14 vessels delivered in 2022. On Cruise, in the sole fourth quarter, we ended over 3 ships, namely 1 for Viking, 1 for Virgin and 1 for MSC. On the latter, the MSC Seascape is the largest and most technological advanced cruise ship ever built in Italy. She is the fourth for the client as part of a EUR 7 billion investment package for up to 10 ships and stands at the forefront in terms of environmental sustainability. On Naval, we delivered the third Corvette to the Qatari Ministry of Defense and the multipurpose offshore patrol ship to the Italian Navy. Indeed, construction activities for the ongoing programs are continuing as agreed with our main clients. In Offshore, the subsidiary Vard confirms its leading position in the construction of Service Operation Vessels with 10 total units in backlog. Besides, in the fourth quarter, a new order came in for a second Cable Laying Vessel for Prysmian Group. In addition, in January, our U.S. subsidiary has signed a contract with CREST Wind to design and build a Service Operation Vessel, while last week, we signed a contract worth EUR 250 million through the subsidiary Vard for the construction of 4 SOVs units for a new client, Edda Wind. This confirms Fincantieri as prime mover in the sector of offshore wind support vessels with a market share of around 38% regarding SOVs. We set very ambitious target to further validate our commitment to become an even more sustainable company as well as acknowledged already by major rating agencies and institution in Italy and abroad. It is worth mentioning the A- score we have received for the third year in a row by CDP, formerly Carbon Disclosure Project, that recognizes our commitment in fighting climate change. For the second year, Sustainalytics, part of Morningstar, which evaluates our companies, manage ESG risks, positioned Fincantieri in the low-risk range with a score of 17.3, now ranked 11th out over 400 companies in the machinery sector. During 2022, we delivered 19 vessels from 9 shipyards, highlighting the global outreach of our operations. We recorded EUR 5.3 billion in new orders with a book-to-bill ratio at 0.7. In the medium, long term, we confirm our delivery plan up to 2029. With 31 vessels in portfolio, 31, Offshore guarantees the production of the next 2 years. Please note that it is typically a fast-moving business with a weaker turnaround and shorter production times. We are confident it will benefit from an increased demand for offshore wind specialized vessels driven by the decarbonization and higher investments in renewable energy. The total backlog coverage secures 4.6 years of work compared to this year 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, ladies and gentlemen. Moving now to Page 11. Total -- discussion on total backlog and order intake. We closed with a total backlog of EUR 34.3 billion, in line with the first half and this includes EUR 10.5 billion in soft backlog, thanks to the recent order achievements in the Cruise and Offshore businesses. We have a total of 109 ships, of which 88 vessels in backlog and 21 in the soft backlog. EUR 5.3 billion of order intake with a very positive contribution from Shipbuilding segment and Offshore, plus 65% year-over-year with 10 new specialized vessels ordered. And in order intake, not only we witnessed positive signals in Cruise orders, which came in earlier than previously expected, but as Pierroberto underlined earlier, we are now taking orders for next-generation innovative and greener vessels in the niche sector, luxury for newcomer brands that are expanding their operations into Cruise. Revenues are up almost 12% with a positive contribution from Offshore & Specialized Vessels. We landed at EUR 7.4 billion in revenues. The contribution was good across all segments, but Offshore year-on-year came at plus 64.7% which is a very important increase, and this is thanks also for the pickup in demand for wind offshore vessels. Shipbuilding grew 4.5%. We had high production volumes in the Italian shipyards of the group, both in cruise and naval vessels. Cruise still accounts for almost 50% of total revenues and Defense revenues account for 22%. The result is also attributable to efficiencies of the engineering and production processes launched in the past years, together with the high production volumes. Moreover, Defense revenues will reflect the progress in the Qatari and Italian and U.S. naval construction activities. The growth in Offshore up almost 65%, as we mentioned before, is, again, a result of the successful repositioning strategy we have implemented towards the offshore wind sector. We also had an increase in the Equipment, Systems & Services revenue, 18%. This is driven by the operations in the Mechanics (sic) [ Mechatronics ] and Complete Accommodation businesses. Still, a very large share of revenues, 87%, are generated from international clients, and this confirms the unparalleled leadership with a highly diversified backlog and a global client portfolio. On Page 13, EBITDA. EBITDA stands at EUR 221 million. As we mentioned in the first half conference call, we said that second half would have been better, and it was better than the first half. Although EBITDA margin for 2022 dropped at 3%, and this comes from the impact of the lower marginality in Infrastructure and in Shipbuilding due to nonrecurring items already reported in the first half, raising raw material prices that further increased in 4Q 2022, along also with some inflation pressures and shortages we had in the U.S. labor market. And notably, in Shipbuilding, the causes of the decrease in EBITDA was particularly hit by higher inflation rates and energy costs and also a write-down of work in progress due to the reassessment of a client credit rating, which we already had in the first half of this year. Offshore EBITDA margin came at 2.9%, a slight improvement compared to 2.1% in 2021. While finally in the Equipment, Systems & Services, the reduction -- the sharp reduction in marginality comes from the Infrastructure business that has recorded a negative EBITDA of EUR 126 million with revenues of EUR 262 million. And this is the result of the risk analysis we undertook in the first half of 2022, especially on a couple of projects, and of course, commodity price inflation as it across all the segments. On Page 14, net loss to EUR 324 million. And of course, this comes after EBITDA at 3%, EBITDA margin at 3%, but we also had one-off items in the period of EUR 238 million and these include EUR 52 million of asbestos related -- cost for asbestos litigations, EUR 164 million of impairment -- goodwill impairment and EUR 22 million of write-offs for offset agreements. Moving to balance sheet items. We had an improved net financial position compared to -- as expected, let me say, compared to the first half of 2022, we closed with a net debt at EUR 2.5 billion, thanks also to the deliveries we had in the second half of the year. We had an implied net cash generation of roughly EUR 765 million. We are moving -- with net financial position, we're moving consistently with production volumes and delivery schedule and the situation as of 12/31 fully reflects net working capital evolution in the Cruise business. We are going to have 3 vessels be delivered in the second quarter of 2023. Of course, we still have a suffer from the deferrals we granted to clients during the pandemic. At this point in time, we have roughly EUR 94 million in vendor loans granted to clients. Net working capital is positive at EUR 618 million. It was EUR 440 million in the -- as of the end of 2021. And the main changes are related to the increase in work in progress, construction, contracts and client advances. And also, this increase has been partially offset by the increase in trade payables, roughly EUR 200 million. We have spent roughly EUR 300 million in CapEx to support the strengthening of our asset base and to improve technological standards, which are essential features to pursue the sustainable growth strategy of the group. In 2021, this number was EUR 360 million. In the last 3 years, we almost spent EUR 1 billion, EUR 960 million, and this CapEx have been directed towards production sites, both in Italy and abroad in order to optimize production, strengthen our positioning and adjust shipyard facilities to sustain the sizable backlog acquired in recent years. And now I give the word back to Pierroberto for the outlook and the concluding remarks. Thank you.

Thank you. Thank you, Giuseppe. Let me tell you more about the market outlook. Some updates on the market in which we operate with our core businesses. First of all, looking at Cruise, at the end of the year, 93% of the global fleet was back in full operation. Booking trends are now back to 2019 levels with passengers volumes expected to overcome pre-pandemic levels by the end of 2023. IMO regulations for sure represent a potential catalyst for more sustainable, green and innovating solutions. As a matter of fact, we saw in the past few months an increased demand for ships equipped with the high-tech features and next-generation engines to reach a fully decarbonized cruise industry by 2015. In particular, we are fully committed to apply new propulsion technologies and new fuels such as LNG, methanol, ammonia and hydrogen, leveraging on solid in-house skills and production capabilities. Not only we witnessed the first signs of order resumptions, but also new luxury niche operators enter the cruise market with orders for medium to small vessels. Our consolidated leadership put us in the best position to seize further opportunities from the near comeback and the green transition of the whole cruise market. As for the Naval, global defense spending is expected to further accelerate in the upcoming years, fostered by the current geopolitical scenario and the NATO guidelines up to 2% of national GDP. In such business, we are second to none in the construction of high-tech surface vessels such as Frigates and Corvettes and are able to benefit from a wide client base, both in Italy and abroad. Turning to Offshore. As of today, worldwide wind farms are delivering a nominal power of around 55 gigawatt, that is expected to rise fivefold to reach a total global capacity of around 270 gigawatt by 2030. In addition, further opportunities may arise from an increased demand for offshore vessels to maintain and operate wind farms, driven by the pace and breadth of investments into renewables, with floating offshore wind rapidly ramping up. Let me once again stress that we have a strong track record in development of cutting-edge offshore units, featuring green propulsion and remote control solutions with Vard, currently the market leader in the production of Service Operation Vessels for the number of units in portfolio and for client diversification. Let's turn now to last slides of the presentation. Before moving to the Q&A session, please let me remind that in December 2022, we set the route for the new 2023-2027 business plan, and here are some outlines. The plan is grounded on 5 strategic pillars, streamlined to a set of strategic projects and concrete actions to be carried out over the planned horizon with a focus on human capital, enabling technologies and supply chain. The utmost focus will lie on core business, namely Cruise, Naval and Offshore, triggered by the green and digital transition as a catalyst to strengthen further the group distinctiveness and competitive positioning in the shipbuilding industry. In the first months of 2023, we have already launched a few strategic initiatives in order to further strengthen our industrial engineering and production efficiencies. We have already taken steps to further enhance procurement processes and cost governance. Regarding the potential challenges of the core business may face, the group is integrating its offering, scaling up digital and automation solution to spur the transition from a CapEx supplier towards a leading service supplier. In addition, we keep on rationalizing our capabilities to become a prime contractor and complex system integrator in the defense business. Furthermore, as a fully aligned with the emission reduction road map for cruise ships, we plan to deliver in the first half of 2024, the first dual ship, propelled mainly with liquefied natural gas, LNG and featuring systems, ALS, for reduced friction resistance. Passing on financial targets, net of a further deterioration of macroeconomic scenario and other unforeseeable operating and financial consequences related to the conflict between Russia and Ukraine and the persistent and imbalances caused by the pandemic break, in 2023, we expect to maintain production at full speed, revenues in line with 2022 and margins improving up to 5%. As we announced last December, the target outlines of the business plan include revenues in 2025 at EUR 8.8 billion and margins at around 7%. The ratio between net financial position and EBITDA will range between 4.5 and 5.5, breakeven is also expected from 2025. At the end of such industrial plan, in 2027, revenues will land at almost EUR 10 billion with a marginality of around 8%. The debt-to-EBITDA ratio will stand between 2.5 and 3.5, in line with business dynamics and with leveraging expected over the plan The management team will present the new strategic direction during the first quarter '23 results. Moving on the conclusion, I would like to reiterate that we are currently working on deploying our new 2023-2027 business plan and sustainability plan, which will be to roughly explained and presented during the first quarterly results. We strive to strengthen our competitive positioning and business distinctiveness in the global shipbuilding scenario to optimize our operating performance and anticipate clients' future needs. In particular, we will focus on high-added value core shipbuilding business with increasing expansion to competencies towards the digital and net zero ship. We will further strengthen the Italian and shipyards through the review and the digitalization of the production processes, resulting in an increased productivity and efficiency. We will continue with the relentless attention to cost governance and financial discipline. The new strategic direction will, on 1 hand, lower the group's risk profile and on the other hand, confirmed the role as a sustainable player able to create value for all stakeholders. With no further the delineation in the macroeconomic scenario and other unforeseen operating and financial consequences following the imbalances caused by the pandemic outbreak, we expect for 2023 revenues in line with 2022 with margins improving up to 5%. Net financial position broadly in line with this year and with cash absorption due to the delivery schedule in onshore -- in, sorry, in Offshore and in Infrastructure business to be completed in early 2024. Again, in May, we will present the group's strategic plan in much more details in an Investor Day dedicated for the financial community. Please pencil it down and stay tuned for further information. With that being said, let's move to the Q&A session, Giuseppe and I stand ready to answer any question you may have. Operator, please go ahead.

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

I have actually 4 questions. So the first one is, I'm trying to focus on the last quarter results. And I was wondering if excluding the energy cost, what would have been the group's margins in the last quarter of the year? And if I may ask, did you account any provisions in the last quarter of 2022, ahead of the business plan deployment? The second question is on the margins in 2023 as for the Shipbuilding. Is it correct to assume an EBITDA margin for the Shipbuilding of at least 5.5% above the margin of the group or maybe I need something in my estimate? And as for the Infrastructure business, I can imagine that you still expect losses for the Infrastructure business. So I was wondering if you -- what could be a sustainable margin for the Equipment, Systems & Services division, excluding the Infrastructure. And the very last is on the cost of debt. Can you give us some highlights on the cost of debt and the level of financial charges in 2023 and across the plan.

Five questions is a lot of questions. No, don't worry about it. First, on last quarter results and it's -- we'll answer to 1 and 2 at the same time. In the last quarter, we have experienced, let me say, the highest peak in energy prices at time in which we were, let me say, doing our business plan calculations for the future. So we -- of course, these 2 elements tell you a lot on what's factored in the accounts for both last quarter results and for the forecast for the business plan. Of course, there is a lot, a lot of volatility in the raw materials markets in commodity prices and also in energy prices. Therefore, our accounts and our numbers account for this volatility. Margins of Shipbuilding for 2023. Of course, we guide for the total -- for the overall EBITDA margin for the group, which is -- we expect it to be around 5%. Of course, there is a mix within this target and considering that Shipbuilding still has the largest chunk in the total revenues of the group with Cruise having roughly half of the total revenues of the group, we could say that it's going to be slightly above the total margin we are guiding right now for 2023. What's the sustainable margin for Equipment, Systems & Services? I would say that without the Infrastructure business, 2022 would have been very good. I mean we gave you a higher disclosure with respect to the past on the Infrastructure business because the performance of the Infrastructure business was very, very bad. So if you take out that margin, we would close roughly at 7% EBITDA margin. The target and looking at how this business performed historically without the Infrastructure business, I think we could, we should target, again, a double-digit margin. But of course, this is, let me say, a long-term scenario exercise, we -- by no means it is a guidance. But without the Infrastructure business, 7% up is a reasonable number. On financial charges. For the average cost of debt for 2023 onwards, we are roughly at 2.6% with a higher -- we are progressively, let me say, increasing our hedge ratio, hedging from floating to fixed rate interest. We are right now at 70% of total liabilities fully hedged at fixed interest rate and this is the average cost.

Okay. So just a final check, sorry, the very last one. No provisions in the fourth quarter of the year to be released across the plan, is it correct?

Sorry, say that again? I lost you.

Did you account any provisions in the fourth quarter of the year that maybe could be released across the business plan? Just I didn't get for this answer.

Sorry for intervening because I'm too curious. What do you mean by that?

I mean that maybe you take some batch of prudence and you account some provision that would be released with an upside?

Doesn't work like that. It doesn't work like that. When you account provisions, it is because they are possible to be provisioned. So if you see provisions in our profit-loss, it is not because we are putting some more money in order to use them afterwards. We are not rich enough to do it and/or, I would say, experienced enough to do it. So we are simple creatures. So when you account costs, it is because we believe they need to be accounted.

I didn't mean that I was [indiscernible] because maybe could do better than the initial expectation given such a volatile scenario. So it would be wise to account some provision, to account for some potential cost and then if things go better, there is room to deliver to lease the provision.

Let me put in a different word. If you are saying if we are managing volatility with the instruments, that are permitted under international accounting standards, the answer is absolutely yes. If it is prudence, I don't know if it is prudence because we are facing such uncertain times that unfortunately, there is no space for prudence. I would say that we are managing certain -- uncertain, sorry, for the joke, variables, and we're managing these variables trying to factor in as much as possible the volatility. So for example, on energy, we are taking a view. On steel, we are taking a view. And obviously, we are taking a view that is to the best of our knowledge as of today. Then obviously, if in 6 months' time, the energy cost will collapse and the steel and other raw materials will collapse, we could have some positive developments. Conversely, if by chance the view we are taking will be not enough, we will have a negative outcome. So let me say this is what I mean by volatility. When you manage volatility, you take a view, you try to anchor your view as much as possible on sources that are reputable and then you wait to see. So I have to say what's happened in the last 2, 3 years, was absolutely unexpected. So it's very difficult today to take such a bold view saying we are taking prudent accruals. We are reading the future through our deflectable lens.

The next question is from Matteo Bonizzoni from Kepler.

So the first question is as regards this profitability restatement that full-life of contracts which you described in your press release in both Cruise and Naval. So I was -- I wanted to know a little bit more about that, in particular, was it more related to Cruise, more related to Naval? And as regards Naval was -- it seems that it was particularly involved in the U.S. operation? Does it include, I think, the constellation contract? So the question is if you can provide a little bit more color on this profitability reassessment at full-life of the contract which we implemented in the last quarter of the year? The second question is on financial charges. I was not listening well to your previous answer to the question of Monica. The total amount of financial charges in 2023, is it correct to estimate in the region of slightly above EUR 150 million? And the third and last question is as regards the Offshore segment. The intake evolution is proving particularly positive, particularly for offshore wind support vessel and it should remain positive for longer. So the question is, are you planning -- in the past, you shut down some capacity [indiscernible] particularly in Norway. Are you now planning to expand capacity in the Offshore segment in the next years to accommodate rising intake? And what are your margin targets for the offshore Segment for the long term?

Sure, Matteo. On the first question on the profitability restatement on Shipbuilding. It's a mix between Cruise and Naval. Of course, commodity price inflation, energy inflation and also labor inflation in the case of the United States as affected across the businesses. Of course, when it comes to the United States, we also -- we already said it in the third quarter, the deterioration in margins were mainly related to the constellation program. And we had a few projects, specific risk arising on a few projects in Cruise, for which we are not, let me say, concerned at this point in time. On financial charges, you say EUR 150 million, I say it's going to be higher than that. We forecast it to be higher than that in 2023. How much higher? We can give you details in further conversations. On offshore wind, we are not planning to expand capacity in Norway. There is a capacity expansion plan in the form of capital expenditures in Vietnam to, let me say, increase our execution capacity related to the wind offshore business that is facing a huge growth in demand. Right now, according to our estimates, these are our calculations based on market intelligence. We have roughly 38% market share in the support operation vessels for wind farms. But again, the expansion is only related to the increase of production capacity in the Vietnam yard. By no means, we want to open new yards. And it's already factored in the assumptions, CapEx assumptions, for the business plan.

The next question is from Alessandro Pozzi from Mediobanca.

I have 2 questions. The first one is, I was surprised by 2 items, the low Q4 EBITDA margins, which I believe you explained well and also the flat revenues guidance in 2023. I mean looking at the plan, I was expecting a more linear progression, but probably you're going to have flat revenues in '23 and more of a step-up in '24. So I was wondering if you can maybe give us a bit more indication of the path of growth to 2025 in terms of top line expansion? And also, going back to the margins, I think Q4 was particularly weak, but you assume or you foresee an improvement, a material improvement from Q4 into 2023 as you have a 5% EBITDA guidance. Can you give us maybe an indication of what are your main assumptions around that 5% guidance? For example, how much you're assuming in the Infrastructure business and also maybe an indication of where you see raw material costs or energy costs, what are your assumptions basically behind the 5% guidance? So that's the first question. The second question is how should we think about the order intake in 2023? We are seeing a strong recovery in Cruise, but also a number of opportunities in Defense. And also, at the same time, you mentioned -- a couple of times during your presentation, next-generation ships, highly technological the request from your clients and I was wondering is this an opportunity to improve margins in the Shipbuilding or is there an opportunity to improve the market share or maybe both in the Shipbuilding? That is the second question.

I will answer with pleasure to your last question on which are the market developments in term of order intake and which is the "marketing" of our product the time being. On the market developments, again, 2022 has been quite emblematic, quite indicative of the macro trends. So we are experiencing a progressive, I would say, willingness to invest of our traditional clients that are interested either in the substitution of the capacity, which is something natural in the management of the fleet and a certain expansion because we made no secrets that, let's say, 2025-2026, the market will experience a gap between supply and demand in terms of expectation of customers. So the most entrepreneurial cruise ship builders are taking a view in the direction of increased investment. So 2022 is already a testament of what is going to happen in 2023. So we believe that the more we get closer to this gap between supply and demand, the more we will appreciate willingness to invest to our investors, so -- of our shipbuilders. So on the Cruise, the path is set and the part is there. On the Naval business, we are serving Italian Navy and exports. The Italian Navy is absolutely in line with the program. So we are implementing progressively the, what was called [indiscernible] and according to [indiscernible] we will continue with submarines and we will continue with what is called [indiscernible] which is a patrol vessel that will be formalized in the coming months. So this is with respect to Italian Navy. Then there is the big export. So there is the ambition of Fincantieri to extract additional value from the set of products we have with new navies in new geographies. So we're being very, very, very, active in Greece, which is something we will have to cross finger, wait and see in the next weeks. Then we're being quite active in Southeast Asia. Malaysia and Indonesia are 2 markets in which we are being very concentrated. By the way, that Indonesia was already in the radar of Fincantieri. Malaysia will be more and more. And then there is the Middle East. In the Middle East, as you may have appreciated from the press, from the newspapers, we have been active in order to position Fincantieri with a new partnership scheme in order to have access to the investment program of Abu Dhabi. Middle East in general is rethinking its geopolitical role in a world that is changing the geopolitics and the geoeconomics more and more. So Middle East is not only Middle East in the geopolitics of the world. So their ambition in the defense and in particular, in naval, will grow a lot. So Qatar is being a tremendous business card, tremendous reference in the region because we are delivering our ships on time and on budget during COVID, when Qatar was experiencing a lot of delays in the investment program, for example, of the World Cup, Football World Cup environment. So -- all in all, we are best positioned in Middle East because Qatar is a good reference. Abu Dhabi is a market we are already tapping in, we have already experienced. And then the other big market, market of Middle East is Saudi. So probably, it's not for 2023, but Saudi will have to be a market for Fincantieri. First of all, because Saudi will invest a lot in regionalization of production. And we are the only shipbuilder in the world that is accustomed to go closer to clients and accommodate their regionalization strategy. So believe me, it will play as a marketing tool very, very powerful, in particular, in the naval business, where our competitors are very rigid, are very traditional. So this is what will be hot in 2023. Again, Saudi and Abu Dhabi, not necessarily in terms of order intake, but in term of preparation of the ground for good developments in the short term, nevertheless. Let me move then obviously, needless to say that we are looking also to Latin America which is a market in which Italians, in general, have good credentials and Italy has a good geopolitical platform. Let me move to the offshore sector. What is happening in the offshore is absolutely remarkable. As you may have appreciated, we have announced the cable layer of 2022, but also a set of SOVs last week, another cable layer yesterday. So Vard is going to become, as expected in the business plan, as sort of good commercial satisfactions. In a company that has credentials that are simply unique compared to competitors. Not only because it's European engineering but because as the Vietnam shipyard that couple the commercial reliability of Norway with a very "ship" execution model in Vietnam. We are enlarging our investment in Vietnam because we are very satisfied with the productivity and the unit costs we are achieving over there. So please consider Vard perfectly set to penetrate the offshore market because with Vard, you can have, at the same time, the reliability of European engineering and at the same time, the profit and loss of [indiscernible] player. And the combination of the 2 is very, very, very powerful in a market with a growing demand. And then there is the possibility to use Romania as an additional shipyard in case the workload as it's happening -- as it is happening, will grow and grow. So I don't believe, let's touchwood, that the issue for Fincantieri will be accessible market. I don't believe that the issue with Fincantieri will be top line. Yes, we have some phasing effects, 2022, 2023, 2024. We can draw the line with different, I would say, steepness, but at the end of the day, the issue is never ever the top line. Our greatest effort is to manage the profitability. First of all, at the EBITDA level, then in terms of bottom line and then in term of cash generation. So we will present you with a lot of emphasis, with a lot of, I would say, focus, why we believe that we are credible at the moment of setting the bar on profitability, bottom line and cash flow generation. And we will make this big effort in the, I would say, first week of May -- second week of May when we will present the first quarter result because we would like to have -- to give you as much visibility as possible on which are the bottom up actions that we are undertaking to make this improvement happen. You touch base on technology, what's the role of the technology, what's the role of the digital, what's the role of the green? Let me say that first of all, we want to validate our new products. So in these days, we are already capable to put on the table digital solutions in front of our clients. There will be the Seatrade in Miami, end of March, and that will be the place in which we will showcase what we have already delivered because the first target is to let our clients know that there is much more technology in Fincantieri than what you think and what they think. So we want to occupy the space and "concur" their trust as technology partners. Once it is done, we will have 2 positive effects: one, we will continue to differentiate the relationship and the distinctiveness of Fincantieri. So we will put another star close to the name of Fincantieri; two, we will technically attach to Fincantieri ship an extra NPV value, which is the value of the optimized OpEx of a Fincantieri ship. So once you NPV this improvement in the OpEx, you are somehow attaching more competitiveness to Fincantieri offer because you don't evaluate Fincantieri offer with the glasses through the lens of CapEx, but through the lens of CapEx plus OpEx. So this is the turning point. So I don't believe that the first digital product we are selling will change the profit and loss of Fincantieri. I don't believe that the cash we received with the payment of the first invoice for a digital service will pay the salaries of the management of Fincantieri, but I strongly believe that it will be the moment in which we create the perception over Fincantieri that it is a companion of journey for the life cycle of the ship. So you don't need to think of Fincantieri simply as a CapEx suppliers, but as a CapEx and an OpEx supplier, which will make the difference. And this is exactly what we do in the naval business. So in the naval business, when we sell a ship, we manage this ship. So that's the strength of Fincantieri. The fact of being naval and cruise. So we can cross-fertilize the cruise business with what we do in the naval business. So that's the second point will be very important during the Investor Day, to let the market understand why Fincantieri is different from competitors, not only because it will be more digital, but because we have a set of competencies, which is different from our cruise shipyard competitors, as simple as that. So when we tell a client in the cruise business that we will be a life cycle companion of journey, they probably will appreciate because this is exactly what we do with Qatar Navy, this is exactly what we do with Italian Navy. So now we know exactly what does it mean to manage OpEx of a complex ship, either in term of maintenance cycles, either in term of how to add extra technology to have extra economic benefits. So I don't want to make the presentation today, even if I would like, but I will invite you for the second week of May.

Yes, and I will be there. So I guess from your very extensive and helpful answer, the order intake this year has gone up by 60%. Probably, it will go up again in 2023 given the set of opportunities that you just described?

Giuseppe, please, if there are any -- I remember Mr. Pozzi was making some extra points.

Yes. Well, order intake, Alessandro is a number we do not guide, but we do expect of course, orders to pick up with respect to the years, I would say, '20 and '21. When it comes to your first question, flat revenues in 2023. It's not a surprise that revenues are flat, our forecast is flat in 2023 as we did not experience a substantial order acquisition in the years from '19, '20 and '21. And it's not a surprise that revenues grew heavily in the past few years, leaving aside, of course, the COVID year because I recall that in 2019, we closed a revenues of roughly EUR 5.8 billion. Right now, we reached EUR 7.5 billion. This growth came out of the huge order acquisition we performed up to 2018, notably in the Cruise business. 2018 and 2019 were record years for order acquisition in Cruise business. Of course, 2023 revenues are an inflection point in our growth. We are taking a pause because we took a pause in order acquisition in the previous years. I mean if you plot orders and revenues, you see how the 2 figures are linked together. And when it comes to Cruise business, not only we lacked new orders in 2021 and partly '19, but also, we reached -- we are working -- we -- since 3 years at full production capacity, and we reached the peak in terms of revenues at EUR 4 billion, the peak, both with respect to our capacity and with respect to the orders that we have. We are stable at 5 to 6 deliveries per year, also in '23 and '24, okay? So -- and of course, for revenues to pick up, we have to wait for a new wave of orders, both in Cruise and in the Naval business. And when it comes to Offshore, the order intake is surprising us in the upside, especially in terms of how fast this is happening. We have good, good forecast in terms of new orders. And that is why, as I said before, as an answer to Matteo's question, we are ramping up capacity in Vietnam, which is already a very efficient yard with highly skilled labor. But the rate, the pickup in the growth in order acquisitions in the wind Offshore business has surprised us on the upside. And this is already visible also in the revenues considering the shorter production cycle that we have in Offshore. On your question on margins, you want more color on guidance. Of course, we expect -- we are guiding for an overall group level EBITDA margin at roughly 5% for 2023. The largest contribution to this 5% margin, of course, will come from Shipbuilding that still has the largest chunk in revenues for the group, will come from a further pickup in EBITDA margin from Offshore. The story of Vard's recovery is a very long story. Vard has had a very, very bad performance for 8 straight years. And we said that, first of all, we're going to -- we were going to reach breakeven in terms of EBITDA, breakeven in terms of EBIT and then net result. Well, next year, it could be a very good year for Vard. Also considering what I said in terms of the anticipation of the order intake. We talked about before of the Edda Wind order, which was a very good sign of this pickup in the orders. So we have good vibrations, let me say, from the Offshore business.

Yes. I was interested in the delta between the Q4 margin EBITDA and the 5% in 2023. So I guess part of it is the recovery in Vard, but also part of it probably is Infrastructure as well recovering.

Well, Infrastructure business, considering that we reassessed the whole life cost of the projects, notably of 1 project. We expect it to move on at basically at 0 EBITDA contribution because all the loss was as per the accounting principles, of course, was booked in the year 2022. And that's our -- these are our expectations. Of course, having an EBITDA margin of 0 dilutes the total margin of Equipment, Systems & Services. But I'm sure you're pleased that we slightly improved our disclosure by giving you the numbers on Infrastructure business. We do not expect an improvement. We expect flat 0 margin.

[Operator Instructions] The next question is from Gabriele Gambarova from Banca Akros.

Yes. The first question is about CapEx, EUR 295 million in 2022. So I was wondering what would be the number for 2023? The second question is on your outlook. For net financial position, you are seeing that there will be a certain level of cash absorption with reference to Offshore and Infrastructure. Is it possible to understand what would be in absolute terms this level of absorption? And if you can remind me how the net working capital works for Offshore, in particular? Is it the same in terms of advanced payment as Cruise or different? And then the third question on Shipbuilding. I see that, again, on margin, I'm sorry, in Q4, basically, you -- I mean EBITDA was EUR 135 million lower vis-à-vis Q4 2021. Would it be possible to break down -- I mean, is that between higher raw materials, energy, I mean the moving parts of this debt would be very interesting? And the last one, I promise, is on -- I mean there is, I would say, a certain level of -- I mean, the news flow on the [indiscernible] basically the region linking the [indiscernible] It's something we have picking for 40 years, I think. Do you believe that the Fincantieri Infrastructure might have a significant role in this important project?

I will give you a feedback on this last point and then I believe Giuseppe and the team, either during the call or separately, can give you as much details as needed. On the Infrastructure business, I believe that is very important that we strengthen Fincantieri Infrastructure because we have a backlog. So before getting into [indiscernible] which is not something in which Fincantieri can be a player because we are not -- we are not famous for building such big bridges. But let me tell you more about what we are doing with Fincantieri Infrastructure. First of all, as I said from the very beginning, we need to deliver our backlog. So we have to be very, very serious with our clients and thinking, for example, of the [indiscernible] because once you put a signature, then you have to deliver. And I know, by heart, what does it mean to deliver infrastructure. So you have to prepare yourself. You have to be very good in control management. You have to have very kind of vertical competencies and know-how. And so that's what we are doing today while we speak. So we have hired a new CEO with a lot of experience in this segment, having experience either in managing and building hospitals, in managing and building a different kind of infrastructure, and that's the first target for me. So before thinking of the future, let's think of the present. And in order to have a sustainable future, let's have a livable "present". So that's what we're doing today. So obviously, as we said several times, we don't see synergies between this business and the business of shipbuilding. And I strongly believe that the challenge we have in the shipbuilding is so beautiful and so I would say, energizing that is going to collect 100% of our entrepreneurial energy, managerial energy and financial energies. Having said that, we have the responsibility of Fincantieri Infrastructure and at the same time, so at the same time, we are also strengthening Fincantieri Infrastructure in order to deliver its backlog in respect of the contractual obligation and in respect of our clients. Let me touch base more clearly on the [indiscernible]. The [indiscernible] will be kind of gigantic, monumental, iconic, superimportant infrastructure of the country. And obviously, if Italy is incurring such a very, very, very ambitious program, we will never step back because we don't want to give the perception to the government, to the country that Fincantieri is not entrepreneurial or is not set up to take challenges. I strongly believe that if Fincantieri will be there because there is the need of having a reliable, well-known, connected party on board, for sure, we will not be the driver of it because the driver of it should be someone having the skin, the skill, references, the track record, the people, the project management, it has to be kind of a black belt, let me use this word, in infrastructure. And frankly, I can understand that Fincantieri can be there to guarantee the success, to have reliable people around, but we don't think -- I don't think that Fincantieri is black belt in infrastructure. And let me say the profit and loss and the blood test of Fincantieri Infrastructure is supporting my reading. So I hope I was not misunderstood, and I hope I was quite black and white in the answer. So we want to strengthen Fincantieri because we want -- Fincantieri Infrastructure because we want to deliver on the backlog, no jokes. Then if the country is asking us to join the most critical and important infrastructure of the country, we will not step back. We will be there to support. We will be there to help with what we can do. But for sure, we are not famous in the world for building Strait of Messina bridges. We're famous in the world to build the most complicated ships and the largest ships in the world and the ships with more technology. So that's what we, let me say, strive every morning when we wake up.

Gabriele, on your first question, 2023 CapEx, they're going to be broadly in line with 2022. On your second question, cash absorption on Offshore and Infrastructure business. Of course, on the Infrastructure business, what you saw in terms of results, in EBITDA results for 2022, you will see it -- you will see the cash flow consequences of this throughout the completion of 1 project that is expected to occur by 2024 -- end of 2024. So it's going to be diluted in the next 18, 20 months. Our net working capital absorption in Offshore, to be on the safe side, terms of payments are more similar to Cruise business than to Naval business, with a higher share of payments during construction. I would say instead of having the 80-20 -- 20-80 split, we have 30-70 split. This is what's factored in our assumptions for 2023 onwards. Let's see if we can do better. Let me put it this way. On your third question, we could maybe reconvene in separate meetings because these are modeling questions that I would not like to take during this call.

The next question is from Giuseppe Grimaldi from BNP Paribas.

I have actually 2 questions. The first one relates to ESS division. You said you have roughly EUR 4 billion of order backlog there. If you can sort of give a sense of which is the share of the Infrastructure business, at least a very rough number? On this point, given you have a very large backlog in this kind of business, is it fair to expect to have some growth in 2023? Second question relates to the Cruise. Based on the number of deliveries that you plan for this year, my question is that -- and that you're running at full capacity, is it fair to sort of say that you can have stable revenues compared to 2022?

Yes. Fair to say that revenues are going to be stable in 2023 over 2022. In previous questions, I said that revenue growth is, let me say, an inflection point considering the pattern of order acquisition we experienced in the past few years. So stable growth is a fair assumption on Cruise. Cruise revenues have reached EUR 4 billion and still accounts for more than 50% of the total revenues of the group. And the share of the Infrastructure business in the Equipment, Systems & Services backlog, as the CEO said before, we are fully concentrated on executing at best our backlog. It's -- the total backlog of the Equipment, Systems & Services includes also orders for captive business, the accommodation business, the mechanical business, the electronics business. So it's gross -- the number you mentioned is gross of this component also. The share of the backlog of the Infrastructure is roughly EUR 2.2 billion, that is 8% of the total backlog we have in the group of the EUR 24 billion and, of course, is EUR 2.2 billion, it's 60% of the EUR 3.84 billion you mentioned before.

And maybe on this point, how long does it take to execute this backlog on average, clearly?

How long?

Does it take to execute all this backlog? So I mean the duration of the backlog?

I would say a couple of years.

[Operator Instructions] Mr. Dado, there are no more questions registered at this time.

Thank you. Thank you, gentlemen. Thank you.

Thank you, ladies and gentlemen.

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