Maire S.p.A. (MAIRE) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Maire Tecnimont's 9 Months 2021 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pierroberto Folgiero, CEO of Maire Tecnimont. Please go ahead, sir.

Good afternoon, everyone. Thank you for attending the first half 2021 financial results conference call. As we advance on existing and new projects in our backlog, we continue to enjoy growth in all the major KPIs this year. As a result, we recorded 9-month revenues of EUR 2.1 billion, up 9.8%, and EBITDA of EUR 124.1 million, up 10.3% and the group net income of EUR 60.4 million, up almost 74%. EBITDA profitability continues to be in line with our annual guidance of 6%. Cash flow generation has been particularly strong this year at almost EUR 200 million. As a comparison, we had an outflow of about EUR 228 million in the same period last year, a swing of almost EUR 430 million. As a consequence, adjusted net debt decreased by EUR 106.3 million and adjusted net working capital improved by almost EUR 55 million in the first 9 months. Our commercial activities keep on running at full speed. As we recorded the highest first 9 month order intake since 2017 at EUR 3.3 billion, increasing our backlog to EUR 7.5 billion. On the other hand, our pipeline remains extremely solid with over EUR 63 billion worth of opportunities, both in our traditional business and in green energy. The latter continues on its expansion path with new purchases started and more agreements signed over the last few months across a variety of areas, including waste to chemicals, green ammonia and circular gas. In conclusion, we continue to grow our traditional business while advancing our efforts and contribution in the energy transition field. Our main consolidated financial results are shown on Page 4 and will be discussed in more detail by Alessandro later in the presentation. Let's begin by taking a look at our operational performance. Our commercial efforts have been extremely successful over the last few years. Between 2018 and 2020, for example, we had an average order in case of EUR 3 billion. This is remarkable, considering how 2020 has been impacted by the pandemic. 2021, moreover, will be one of the most successful years ever, with the 9 months intake at EUR 3.3 billion already higher than the above mentioning coverage. The effectiveness of our commercial efforts have been more evident when we look at the book-to-bill ratio of the first 9 months since 2018. In the chart on the right, you can appreciate how this ratio has been doubled over the course of 4 years. The 1.6 ratio of the first 3 quarters this year is going to be a major driver for the group's future revenue growth in the years ahead. Our 3 core sectors fundamentals continue to remain extremely strong and will continue to shape this group in the near to medium term. Let's now look at the couple of recent acquisitions in more detail. In early August, we announced an EP contract awarded by KOS in the Republic of Tatarstan in the Russian Federation. The contract is worth EUR 130 million and covers a new low-density polyethylene and ethylene-vinyl acetate plant. The contract is under a lumpsum scheme for the engineering and procurement services and under a reimbursable scheme for the equipment and material supply. The scope of the project includes the implementation of a new LDPE/EVA plant with capacity of 100,000 tons per year. The project will be mainly aimed at expanding the production capacity of polyolefins, and its completion is expected within about 40 months from the contract signing date. The portion of the scope of work in the Russian Federation will be performed by MT Russia and its Moscow Engineering center, where Maire Tecnimont Group employs about 200 specialists currently involved in several ongoing Russian projects. This award allows us to further consolidate our strong track record in the Russian federation, leveraging on our undisputed leading position in the petrochemicals. More importantly, we will support the industrial development of the Republic of Tatarstan with state of the art technologies that will ensure best environmental performance in [ Canada ]. At the end of September, we were awarded an EPC contract by LOTOS oil in Poland. The project is worth over EUR 200 million and covered expansion activities of the Gdansk refinery. In particular, it relates to the execution of hydrocracking units, hydrocracker-based oil plants with associated logistics facilities, which will allow the production of group 2 base oils. Project completion with fully operational facilities is expected by the first half of 2025. This innovative plan will be the second one in Europe and will be capable of treating better performing base oil groups with a lower environmental impact. International environmental regulation are driving the need for higher-quality base oils, especially in the automotive sector, where engine oil manufacturers are responding to an increase in demand for low sulfur and energy-efficient products. We are excited to start our third project in Gdansk refinery, a sign of our long-standing relationship with LOTOS Oil as well as our leading position in refining [indiscernible]. As we continue to be awarding new projects, however, we must be aware of the challenges that the not to distant future holds and be capable to apply our innovation skills in order to deliver the plan for the future. For this reason, we are developing our digital transformation approach, focusing on an integrated platform, which includes a suite of solutions for the [ Excel ] and [ TPC ] project execution and shut off services dedicated to our customers made next plant. The digital shoot includes both of the shelf and tailor-made services designed to help our customers to be ready for the future and tackle the challenge of the new normal, i.e., operating cost containment, combined with efficient and safe plant management and reducing carbon footprint. Our ambition is to enable the reduction of plant OpEx up to 30% by 2030, in line with our customers' expectations. In addition to the services already available, we are actively working to include in our digital platform and project control power, a central hub, providing enhanced visibility for decision-making and risk control through end-to-end EPC data management, a 5G-based plant connectivity, which ensures a tremendous capacity in data collection, storage and analytics. And the application of blockchain technology to energy transformation plants with particular focus to plastics mechanical recycling plants. The blockchain, combined with Maire Tecnimont's process optimization will help certify the carbon footprint of the feedstock as well as the sustainability profiles of output products ensuring access to premium incentives and demonstrating the contribution to decarbonization for scope 2 and 3. Our digital suite can be thus used to optimize the plant yield and reduce emissions. We are enthusiastic about our digital services, which are already included in some existing contracts in which we expect to be highly appreciated in future projects. Let us turn now to our backlog. Thanks to one of the highest order intake in the period, our backlog stands at EUR 7.5 billion at the end of September. 3 quarters of the total is represented by gas monetization and energy transition projects, thanks to our ongoing presence in these areas. Europe continues to remain our main area of operations, but our backlog is widely diversified across value geographies around the world. Africa has gained an importance, thanks to the Port Harcourt project. Let's focus now on 2 business units. Starting from the main one, we continue to maintain a good balance between volumes, marginality and duration in the backlog. The E and EP portion amounts to about EUR 1.3 billion or 17% of the hydrocarbons backlog. This contributes to the derisking of our existing business, a very relevant factor in these volatile times. The backlog coverage is 2.6x, providing a very high visibility for the future. Following the acquisition in 2021, the portion of gas monetization and transition fuels projects in our hydrocarbon backlog is now 75% at the end of September. This is a reflection of our Green [ DNA ] and the fact that this group is committed to and is an inactive player in the energy transition process, which is already a dominant factor in our current strategy and positioning now and going forward. Moving on the commercial -- moving through the commercial opportunities, our pipeline has increased by almost EUR 2 billion in the last quarter in spite of more than EUR 1 billion of new contracts being awarded in the same period. Such an increase is further testament of the resilience of our core business, strongly supported by the powerful business drivers. Such a positive environment bodes well for our group's growth prospects in the years ahead. The geographical breakdown shows a few changes in terms of geographical allocations, mainly as a result of projects being awarded and new projects entering the pipeline. The Middle East and CIS continue to be the 2 most important areas in terms of opportunity and Asia following fleet. Overall, our pipeline remains extremely strong and geographically diversifying, providing a solid support to future awards in the short and medium term. It's -- let's move now to the Green Energy business unit. Energy transition is at the core of our technological innovation commitment. It is something that shapes all the group subsidiaries with a number of cross organizational initiatives driven by [ scan ] but involving hundreds of the group's employees. Energy transition is, in fact, the natural evolution of our business, and our goal is to be the partner of choice for our customers in the new energy scenario. With this speeding demand, we continue to advance on several fronts over the last few months. For example, we announced that the logical partnership with Johnson Matthey aimed at commercially developing to waste to methanol technology worldwide. This solution integrates our own waste to chemical technologies, having its rules in the chemical combustion of nonrecyclable plastic and urban waste into valuable syngas, which, in turn, is used to produce the circular methanol. In the area of low-carbon fertilizer, last September, we reached an agreement with the U.S.-based Greenfield Nitrogen to co-develop a green ammonia plant in the U.S., Middle East. Based on our semi-carbon green ammonia technology, the plant with a capacity of 240 metric tons per day will be designed on best available technology for green hydrogen and will be powered by local renewable sources. We are very proud that the green ammonia project is the second one after the one we launched in Kenya, and that represents one of the largest announced this year worldwide in terms of green hydrogen production. Leveraging again on our waste to chemical solutions, we recently signed an agreement with Acciaierie d'Italia, Italy's largest steel company for a feasibility study to use circular syngas in the Taranto steel mill. The circular syngas obtained from the chemical conversion of nonrecyclable plastics, plastic and the waste can be used to replace coal, dust and blast furnaces or natural gas in direct reduction, resulting in an important reduction of CO2 emissions. The feasibility study will focus on environmental benefits of circular gas in the steel mill as well as maximizing the steel mill tail gas using the proprietary catalytic partial oxidation technology. Finally, we continue on our open innovation path, the biolubricant observatory promoted by the scan, recently presented its first study on the sector, which is expected to grow at a rate of 7% per year until 2025. All in all, we march on towards developing our industrial technologies in order to green the brand. As we are talking about waste to chemicals, let me spend a few words about our waste to chemical solutions, which are a brilliant example of what we like to say, innovation means connecting the dots. Our waste to chemical technologies are both proprietary and ready-to-use solutions based on an innovative way of integrated, consolidating and well-proven technological processes. The base process is the chemical conversion of nonrecyclable waste into a circular syngas classification. The conversion reactor can compare the carbon and the hydrogen contained in plastics and dry materials into syngas through a partial oxidation process at high temperatures, which avoids the emissions of pollutants into the atmosphere. The system uses pure oxygen as a reaction agent. The syngas is then pull it, purify and condition it to obtain through different technologies, [indiscernible] chemicals and fuels such as pure hydrogen, ammonia, methanol, second-generation ethanol, depending on the way its used. These technological solutions, licensed by our subsidiary, Maire chemicals allowed for the decarbonization of fuels, chemicals and hard to abate industries, replacing [indiscernible] and addressing at the same time, the recovery of nonrecyclable plastic and human waste that would otherwise end up incinerated or in landfills. Finally, let me remind you that waste to chemical technologies are at the base of our Green circular district model. In Italy, we are currently developing 12 green district projects, which evolved a recovery of about 3.2 million tons per year of nonrecyclable waste to produce [ Sferen ] circular chemicals and fuels, avoiding about 2.6 million tons per year of CO2 emissions. Let's now take a look at our commercial pipeline. As we continue to push our green energy business, the commercial pipeline in these areas is also growing. At the end of September, we were pursuing opportunities worth about EUR 6.8 billion, up EUR 700 million in the first 9 months. While a good portion of the prospects is European base, we continue to push other geographies, starting from Asia and the Americas. I now hand over the microphone to Alessandro, who will discuss our financial performance. I will be back to provide you with some final remarks. Alessandro?

Thank you, Pierroberto. Our 9 months revenues grew 9.8% to EUR 2.1 billion. Such an increase is mainly due to the new acquisitions starting to provide a positive contribution to our top line. Revenues are expected to continue increasing over the course of the following quarters as other acquisitions start to kick in. Contract gross profit margin has remained stable at 11.7%, thanks to a backlog of project under execution that provides a good balance between technology-driven and execution driven projects. G&A were EUR 57.3 million, up 8.8% due to the reinforcement of the local organization in those countries where the group has recently been awarded new projects, such as Nigeria, Portugal and Tatarstan. Nevertheless, such an increase was contained and is less than the growth in revenues. This is due to our ongoing retention and disciplined approach that has led to one of the lowest incidents in the industry. Also, please remember that the G&A in 2020 benefited from the massive cost saving plan, which was implemented following the beginning of the pandemic. Our ongoing commitment to green chemistry continues to be demonstrated by a growing amount of R&D expenses up at 11.2% to EUR 6.1 million. EBITDA was EUR 124.1 million, with a profitability of 6%, so in line with the previous quarters and with this year's guidance. Net financial charges were EUR 11.6 million, down EUR 19.5 million. Such an improvement has been driven by a positive effect in the valuation of certain derivative contracts as well as by higher amount of financial income generated by higher level of deposits, especially in foreign currency. Excluding the derivative effect in both periods, moreover, the net financial charges in the 9 months of '21 improved by about EUR 3 million, thanks to lower gross debt and a more efficient capital structure. The tax rate was 30%, down versus our historical average, mainly due to tax savings arising from the special tax rules associated with our innovation and technology R&D activities. The current level can be taken as a proxy for the projected tax rate for 2021. In conclusion, the positive operating performance, coupled with an appropriate management of financial costs, led to a consolidated net income of EUR 57.3 million, up 81.3%, while group income was EUR 60.4 million, up 72.6%. Moving now on to the balance sheet. Let's analyze the cash flow dynamics during the first 3 quarters. As you can appreciate from this chart, 2021 has been characterized by a [ virtus ] better towards lower net debt and negative working capital. We generated operating cash flow of about EUR 200 million, which was the main driver for the decrease in the adjusted net financial position from $116.9 million to EUR 10.6 million or on a breakeven. This reduction took place also tends to lower net financial charges and taking into account EUR 38.1 million in dividends, CapEx of EUR 19.9 million, cash taxes of EUR 17 million and purchases of treasury shares of EUR 5.5 million. The reduction in the net debt in 2021 follows a remarkable decrease up to EUR 128 million in the last 3 quarters of last year, making the total reduction in the last 18 months equal to the impressive EUR 334 million. Let us now take a look at the working capital dynamics. The continuous improvement in our net financial position goes handy with a corresponding improvement in our net working capital. As a matter of fact, this item has improved by over EUR 245 million since Q1 2020. The net working capital improvement this year has been positively impacted by the advances related to the significant order intake as well as the cash-ins across several projects, including the 2 Amurski ones. These events more than compensated an increase in the net working progress as projects continue to advance today of next milestones. Please consider that about 70% of this increase is related to both Amurski projects, a dynamic, which is now very familiar to you and follows the natural and healthy evolution of these projects. We are extremely happy about this continued improvement and we will continue to work in order to further improve our net working capital. Having said that, and given its order of magnitude, let's focus on the Amurski network in progress and networking capital dynamics. This chart show the breakdown of net working process that is contract assets minus contract liabilities between the 2 Amurski and other projects with similar contractual obligations and the rest. You can appreciate how the net work in progress portion relating to the first group of projects has increased over the course of 2021, representing now about 62% of the total. It is extremely worth to remember once again, however, that the risk profile of this portion of net working progress is extremely low since the primary contractual condition is a back-to-back obligation with subcontractors and other third parties. As far as the Amurski project are concerned, certain former constraints make the approval process of the work already executed longer than normal, thus resulting in a higher-than-average amount of work done, but not yet billable to the client. However, since the contractual formal obligation have been mirrored to the subcontractors, the accentuate of their services are released to the extent our clients accept and pay our invoices. So while we do not expect the current trend to continue, Amurski will keep on being the main driver behind the net working progress dynamics over the next few quarters. While it is an important component, however, net working process is not the only one in the calculation of the net working capital. It is, therefore, important to analyze all the components in order to better understand the [indiscernible] of both Amurski projects and reach a conclusion and to their contribution to the cash flow generation. From this chart, you can see how the total net working capital of both project is composed over. As of the end of September, both account payable and advances for clients more than compensated the other 3 items so that these networking process, advances to suppliers and account receivable. As a result, the net working capital for both projects is almost EUR 100 million negative. In fact, the Amurski net working capital has remained a negative throughout 2021 despite often increase in the net working progress. The overall conclusion, therefore, is that while the contribution of the individual items can be meaningful, given the project considerable size, Amurski enjoys an ideal low risk, negative net working capital position. And now I hand over the microphone to Pierroberto for his final remarks.

Thank you, Alessandro. In conclusion, our solid financial performance in the first 3 quarters of 2021 has confirmed that we are on a stable growth pace. Our successful commercial efforts will provide a solid foundation to future revenues. Our Green energy business continues to develop as new agreements have been signed and new projects started. At the same time, our strong and growing commercial pipeline is expected to deliver new projects, both in the traditional and green energy businesses. As a consequence, we confirm our 2021 guidance of revenues in the range of EUR 2.8 billion and EUR 3 billion, a 6% EBITDA profitability and the close to breakeven net financial position at the end of this year with the usual assumption that there is no worsening of current conditions. Our investment case remains extremely strong and compelling as we continue to build a role to a better and sustainable future. This concludes our presentation. As usual, Alessandro and I stand ready to answer any questions you may have. Operator, Please go ahead.

[Operator Instructions] The first question is from Michele Baldelli of Exane BNP Paribas.

I have 2 questions. The first one relates to the trend of the vendors in terms of both the core business, petrochemical and fertilizer, if you see any kind of slowdown of the finalization of these standards because of the current trends for the feedstock and their free cash flow generation of your clients? And the second point on the orders was also when do you think that the feasibility studies on the [ Corin ] projects can become order? Is it something that you expect in H1 of next year? Or can we think about in, let's say, second part of next year or outer in that period?

So if I understand correctly, you are wondering whether the gas price is somehow impacting the trends in the demand for fertilizer plants or other gas monetization plants. We don't see this kind of issue. Conversely, we continue to experience strong and continuing demand for our services, demand for our competencies and skills in all the typical gas monetization projects, mainly fertilizers and polyolefins. On your second question related to the timing of the green projects, as we told in the past, the [ bioreason ], the life cycle of green projects initiative is peculiar because it's made of a kind of staging gate path according to which we get along with clients in this journey, which is lower and which is by nature less, I would say, standardized and off the shelf vis-a-vis the traditional business. Having said that, we told very clearly and transparently that we've been cultivating those initiatives throughout the last 3 years. So therefore, there are quite a variety of projects that are very close to the translation into EPC projects. So we confirm our enthusiasm in this respect. Now your question is, it is tomorrow morning or it is the day after tomorrow or it is in 3 days. Let me say, next 12 months will be crucial. So we are pursuing a number of opportunities that can be announced any time, truly any time. But again, the characteristics of the green business, it's so that the timing is not so binary. It's not so black and white. But we are exposed to opportunity that gives us the perception that in the 12 months, we will create a green backlog. This is the answer.

The next question is from Roberto Ranieri of Intesa Sanpaolo.

Yes. 3 questions, if I may. On Russia, we understand that it is a core area for Maire Tecnimont. And my question is if there are risks of suffering any problems -- operational problems from COVID situation there. My second question is on commercial activities. Just to understand what the upside could come from the commercial activities in the near future. Some companies are saying that the clients, the oil companies are planning CapEx at a relatively low oil prices. So I'm wondering if they are revising their CapEx plan with -- taking into account the current oil prices. So I'm wondering if this commercial pipeline, which is still improving, could also improve at a higher speed. My third question is on the Forex. And specifically on -- so the impact on financials and specifically on cash generation, referring to Slide #20. There is a positive effect on -- if I understand well, there has been a positive effect on cash flow generation in -- especially in the working capital. And overall, I'm wondering if there has been also a positive effect on the backlog. My very last question is a follow-up on talent feasibility study. Just to understand if the client could be under pressure to spit up the process for an EPC contract for tendering an EPC contract for the Syngas utilization in the process. My question is if the clients could also have some positive effect and operating costs -- in terms of operating costs. So I'm wondering if this new process could also lead to cost savings for the steel plant. So there could be also an incentive to accelerate the process of tendering for EPC project.

Let me start for your last question. First of all, to repeat, if I understand correctly. So your point is, tell us more about Taranto [ procurity ], tell us more about the impact on the OpEx of the steel factory, steel mill and tell us if you see the horizon, if you see opportunities? If this is the question, my understanding is correct.

Yes. It is.

Let me say that we are very eager and enthusiastic to collaborate, first of all, with the [indiscernible], with Acciaierie d'Italia because we found super technical chemical competencies. So let me say that it is not only the biggest steel mill of the country, but it is the biggest steel factory of Europe. And so they cover every possible treatment in the steel value chain. And so they are very competent technically and clinically in a number of critical transformation and productions. So we are joining forces with the best -- with a best-in-class available know-how, fitting very well with our best-in-class knowledge in gas and knowledge in the CIRCOR economy. So having said that, we are helping and joining forces to understand which are the alternatives to coal. Coal in the steel production is needed, first of all, to create steel because steel is a combination of iron and carbon. So you need carbon, for sure. But then carbon and coal is needed also for the reduction process, for the process of hardening of steel. So in the second part of the process, there are very good alternatives to go. So the first call to be avoided is the call for the reduction process. In this respect, we have a very strong technology that is our waste to chemical technology, which will be possibly also in synergy with the production of hydrogen -- CIRCOR hydrogen for the decarbonization of Taranto refinery, which is in front of Taranto Steel Factory. So as we have already announced to the market, the beauty of this idea, it is a plan that could serve to clients. One client is Taranto refinery for the decarbonization of the hydrogen production for the hydrocracking processes of Taranto refinery and at the same time, giving carbon oxide to infra to the ex-infra for the reduction process. So the idea starts very strong because that's very optimized. It's a very, very efficient "smart idea." There, we will have all the competencies, as I said, to study and simulate the possibility to use our syngas in the reduction process in substitution of coal. On top of it, we are, in general, exchanging ideas with them on all the possible use and application of gas in substitution of coal. And we have other ideas that we are developing in the steel decarbonization processes. So it's a longer answer to tell you that we are very, very, very happy and optimistic because we find unique competencies over there and a fantastic fit with our ideas and with the specificity of Taranto, including the availability of the feedstock and including the, I would say, concurrence of Taranto refineries in the same year. EPC at the horizon. It is not our task. Our task is only to work on the technology, hand-in-hand with Acciaierie d'Italia. Then once the card is validated, all the options will be there. Obviously, the national option for us is to continue -- is to continue the project in the next basis. The strength of the scan is that we can be a one-stop shop partner. So once you get in association with us, we don't need to worry about the implementation phase. So we can combine best-in-class technological ideas and the reliability of the cost structure. So -- but there is nothing agreed to not inter, nothing at the audition. Obviously, we -- you and we should ask Acciaierie d'Italia. For sure, they have a very, very, very extensive program and plan to adopt all the possible technological ideas to decarbonize the steel structure because they need to do it. And it is the first priority of the [ asset ]. For Forex, I will then leave the closed attempt...

Sorry, if I interrupted Pierroberto. Just one follow-up on the follow-up, I think the steel plant as Acciaierie d'Italia can access to the recovery fund currency sources for these projects or they are not eligible, it is not eligible for that.

But let me say that in Taranto and for Taranto, there are many different instruments and many different financial needs. There is a concentration of resources. It is the priority of the country. The steel production is important. Primary steel production is important for a country of manufacturing like Italy. So Italy is the second manufacturing of Europe. And in order to be a manufacturing power, you need primary resources and steel is the primary resource. So let me say, the only thing that will not miss in Taranto is the availability of money. Recovery funds, fund for the South, specific fund will be allocated to Taranto, the problem is to make things happen. As I said, we believe that we need innovation [Foreign Language] we say in Italy. So innovation that can be translated into industrial applications. And Taranto will be the place for this kind of initiative. So I think nobody should worry about the availability of money for such a project, including access to recovery fund, but there are a lot of different instruments for that. Moving to the Forex, Alessandro will take care. Russia, if we see operational consequences due to the COVID, the new wave. Let me say that Russia and our projects in Russia went through in the past very difficult times at the first -- during the first waves of COVID. So I would say there is a mechanism already there that is fully tested already by fact in order to cope with the typical disruptions of the COVID wave. So I don't see any reason why the existing sanitary measures and systems will not work for this purpose in other possible waves of COVID. So COVID was tough because COVID called us by surprise. Once you are accustomed, once you have the systems and the measures in place, I don't see why we should have some extra surprises. Commercial activities and which is the root of clients due to expectation on oil price. That's my note to question number 2. We are specialist in polyolefins and in fertilizers. Those are the 2 core businesses of biobanking. On both business, we see our clients very convinced, very eager to build new capacity, taking very bold steps, taking a strategic view rather than a tactical view. So fluctuations are, by definition, sign of kind of volatility, while strategy is driven by other assumptions -- assumptions on the demography, assumptions on the middle class demand and assumptions on the gap in the offer vis-a-vis the existing demand. So we don't see special shocks, but we see a tremendous continuous, convincing, growing demand for our brands. And then I leave the floor on ForEx to Alessandro.

Yes. Roberto and Pierroberto, of course. Roberto, as you know very well, the derivatives contracts are part of our normal business. Since, as you know, as soon as we sign the contract with the client, immediately, we hedge the portion of the contract denominated in foreign currency since we don't want to take additional risk on the project. So derivative contracts are part of our risk management strategy because we want to sterilize as much as possible as far as the foreign currency risk fluctuation. For this reason, we classified the effect of the derivative contracts, which we have in place as part of the operating cash flow. In particular, as you have correctly appreciated, those contracts which we have entered into during the year and even in the previous years, has generated a positive contribution in the first 9 months, not negligible, not really significant because the most significant portion comes from the operating cash flow, operating activities, really, but has been coupled with the positive contribution of the derivatives, which must be considered part of the ordinary cash flow generated by the projects.

The next question is from Massimo Bonisoli of Equita.

3 quite general questions. First, on your guidance, you pointed out growing revenues over the next few quarters. Can you give us some color on the expected volume acceleration considering the step-up in order intake year-to-date? Should we assume a step-up in revenues as well, such as the double-digit growth year-on-year or maybe a more gradual increase? Second, I would like to better understand if the global supply chain and logistics issues are currently a source of concern for your volume increase going forward? And third, on raw material inflation, do you expect any implication for your net working capital from the high inflationary environment?

In terms of -- let me try to answer to your first question, and then, of course, for the rest, I leave the floor to Pierroberto. But as you know, we don't like to extend our statement as far as the growth of our revenues are concerned for the quarters extending after December 2021. For sure, what we can say, and we have already anticipated in our presentation, considering that the most important, the most significant project awarded in May, June, July, are now entering in a more operating phases, for sure. Considering also the remaining project under execution, it is not reasonable, it is certain to expect that there will be an additional growth, at least, for sure, in the fourth quarter. And then since those projects will continue also the next year, even assuming no additional new acquisition, the growth will continue. But for the time being, it's better to remain -- to maintain our expectation limited to the fourth quarter of 2021. And then when we will present the final -- the accounts for the entire period, we will release also our expectation for the entire 2022.

Massimo, can you tell me more about the global supply chain question because I didn't take you?

Yes, regarding the fact that there are supply chain issues on raw material like steel, cement or other or aluminum, like there is lack of some raw material and could maybe have an effect on the evolution of the volumes. Just to understand if you experienced any of these issues in the project?

So question 2 and question 3, I will answer jointly because they are 2 sides of the same coin. The -- for sure, the supply chain of the world is being, I would say, heavily impacted by the post COVID. This is the theme in our industry. Everybody is working on it. Everybody is preparing itself in order to cope with such the feel of this. Let me say that the situation is contingent. So we strongly believe that there is a gradual trend toward normalization. Our procurement department is, for sure, shifting as much as possible from the traditional suppliers to more Asia-driven suppliers because in Asia, the situation is more under control. So we have a procurement platform developed enough in order to manage this kind of disruption and to secure to the maximum possible extent the materials. For sure, also in terms of prices, the situation is turbulent, needless to say. It's, as you said, it's [indiscernible]. It's a matter of managing with discipline, this kind of dynamics where discipline means to trace this occurrence. this phenomenon, needs to notify this phenomenon to clients, projecting the proper light, i.e., that such dynamic is a direct consequence of COVID. And by definition, beyond the control of any entrepreneur who decided to incur certain epsilon, some risk well before this kind of dynamics. So there is no way that this dynamic is attributable to us and therefore, can become, in any way, in any sense, a liability for us. So it's a matter of discipline. And it is a matter of being [indiscernible] and staffed in order to manage this complexity in the proper way and in association with clients. As I said last time, at the end of the day, the fortune of our business is that we work in the commodity business. So we are not building generically plants, but we are building plants with commodities as inputs. So polyolefins or fertilizers, for example. And the beauty of this nature or the beauty of this part is that our clients are very happy because the commodity is skyrocketing. And therefore, the product is particularly valuable to them. The time to market we are giving them is particularly valuable to them. So because of this value creation, on top of the fact there is no possibility to make us liable. But this big value creation they have in front makes them very reasonable in finding fast track solution and contractual amendments to cope with this dynamics. So the battle they create, when the plant is in operation, it's a big multiple of the cost -- extra cost of the disruption of material. And this is because we are at the final chain of the transformation process. So we can benefit of this direct correlation between the escalation of the cost of the interest and the multiply escalation of the value of the output. I don't know if you take your point.

Maybe -- I don't know -- that's clear for the hydrocarbon business. It is also true for the green business. And maybe there, they are more -- they have lower return on capital. So they clearly want to stick with the cost of the project.

The green business is different by nature. The green business is artisan by nature. So there are a lot of qualifications in what we are elaborating with our clients. So while on the traditional, if you see some risk, I see the dynamic, I told you and described you on the green business, the issue is simply not existing because there is no EPC [indiscernible] kind of traditional scheme. It's more a joint collaboration scheme. So the level of rivalry, the level of bureaucracy, the level of back passing is simply not existing, not existing because we are building one of the kind plants. And so when you build one of the kind plants, the mode is not to be contractual, but the mode is to be I would say, collaborative by design, let me say. So as soon as the green business will become standardized, replicated off the shelf, then I may follow your concern. But as of now, it's not a concern. Everything is customary. And everything is tailor-made and everything is qualified. So no one is there to squeeze the lender. Everyone is there to build a new paradigm and pave the way for the replication of this new one of the kind plants.

The next question is from Kevin Roger of Kepler Cheuvreux.

Yes, first question, sorry, if I missed that, but can you explain me the EBITDA margin of the green division this quarter because we have a jump close to 13% in Q3. And I was wondering if we can use this margin as a kind of proxy of what you expect to generate in the green business in terms of EBITDA margin? And the second question is related to the recent announcement that you made with an opportunity in Russia, early engagement. Can you give us a bit of details in terms of what would be the potential [ FID ] date and potential contract value for you on this opportunity in Russia.

On the first question on the marginality of the green business, please consider that as usual, the marginality is depending on the mix of products. So as we said beginning -- at the beginning of the story, for sure, we expect from green business, some better margin vis-a-vis the traditional business. And we explained that this expectation is based upon different competition, different rivalry, kind of technology distinctiveness. So for sure, we expect, from the green business, higher marginality than traditional business. What you see now, the 13% you mentioned is conversely depending on the current mix of products. And the current mix of products is in the specific closure of this quarter characterized by a certain mix of product, which is maybe more body centered on certain kind of studies, which are, by definition low volumes and higher margin. So I wouldn't take it as a long-term indication of what we believe will be the blended marginality of the green business, which I confirm, is expected to be better than the 6%, which is the blended marginality of the traditional business, but -- upon the same blend that we use this word. But 13% is a contingent case due to the contingent mix, which is not representative of a kind of medium, long-term mix of products. And on the last question, if I understand correctly, you would like to add more color about the agreement with Rosneft. Let me, first of all, say that we are very, very happy to break the eyes with Rosneft. Rosneft is the "aristocracy" of the oil and gas in Russia being Russia, the most active and the most, I would say, also one of the most powerful players in this field. The -- it's difficult for me to disclose details that we agreed with the clients not to disclose. So -- but I can give you more color with respect to the information already disclosed in the press release. As we have written in the press release, they have a very, very, very intense and, I would say, robust pipeline of investment to be done. All the rational company wants to go downstream, wants to go in the direction of the environmental-friendly fuels, monetization of byproducts in order to maximize the Tripod capacity of the existing refineries, the compression grade of existing refineries and this is absolutely our bread and butter. So our scale is exactly together along with clients that are not interested in being green figure refineries. But they're interested in optimize and evolve in an environmental-friendly all the byproducts or existing plants, which is exactly our strength. So I -- what I want to tell you is that it is not an MOU for the sake of a very beautiful convention. So a very beautiful event in Verona. It is an industrial story, which also will pave the way and translate into real business. So this cooperation is not a memorandum of intent, is an agreement to start working together on industrial scale on taking a portion of the huge investment plan that Rosneft is pursuing with all the muscles, all these strength, all the vision of a big champion in the business.

The next question is from Roland Vetter of Praxis Partners.

I have a question about your suppliers. I assume the cost situation is not very easy for them because they also signed partly at least fixed-price contracts. Do you see any bankruptcies or difficulties among your suppliers at the moment?

But let me say that we don't see any pathologic dynamics going up. So it's a little bit also the other around. So for sure, whoever suffered from COVID is in best shape, no doubt. But we see a lot of -- I would say, interest of the different governments in the different geographies to support the local supply chain, even in case of difficulties. So let me say in the past, if you have the difficulties, used to be your own problem. Today, if you have the faculties, there is a system that is a network of production that is supporting, even supplying us to hold on and to be ready for this big new wave of economic growth, which is heavily driven by public money. So that's my answer. So there is a lot of physiological sufferance in the industry for sure. There is the competition of the East. For sure, there is the need to decarbonize. So if you are left behind because you are not reading the future, for sure, you're going to face problem. So I don't want to say that we live in a pink and magic cartoon. But today, there is an abundance of public money that are available for good companies. They are available to companies with an industrial sale.

And can you maybe say on average, how many days are you paying your suppliers?

It's a kind of average of the average of the average. So in order not to give some -- and useful numbers is better. If we follow-up with our Investor Relations team that can give you some segmentation of category and associate some meaningful days.

If you don't mind, I would like to come quickly back to the cost. What we have seen is that material prices went up a lot and a lot of companies to have like some part of it as hedges. Is it the same for you that you have some short-term hedges? And should we expect some more pressure maybe because of the cost increases in 2022 next year?

So when you mean cost, you are meaning that cost of the raw materials and therefore, impact on our procurement of materials.

Exactly. That's the idea.

On that matter, I -- a couple of questions ago, I gave you my perception and my indication. So let me reiterate that the cost escalation is a fact. It's a fact of the post-COVID economy that we are managing this dynamic with the necessary contractual and accounting discipline. Where contractual line means notifying the clients. And let me reiterate also that once we open these kind of discussions with our clients, we discussed with someone that is benefiting a lot from the escalation because our plants are not gas plants. Our plants that produce commodities, which are under escalation in the same way with the multiple insights. So today, you want to be fast, you want to go to the market, you want to take market share, you want to take new clients because your commodity, your polyolefins are very demanding, and you want to occupy the space because you are going to gain a lot of money. So I believe all our clients are multiplying the IRR of the initial investment, I'm sure. So if to do this, they have to cope with our notification of transport extra costs because the transport, for example, it's a cost that is under previous escalation. If they had to cope with the notification of steel structures' extra cost, considering the extra IRR, they are gaining with the high-value, high price of polyolefins, for example. My perception is that it's not a big, huge program for them not to slow down the project but rather to quickly get along with our notification and move forward.

[Operator Instructions] The next question is from James Winchester of Bank of America.

Just one from me, please. So if we were to isolate the Amurski 1 project, are you able to provide some color on your expectations of the evolution and the time line of when this will unwind? And given that your trade payable is are now sitting around EUR 1.8 billion, how much of this is because you're waiting to get paid for the work done on the Amurski project?

As we stated in our presentation, it's just a matter of paperwork because the work has been done, is going to be accepted progressively by the client, but there is a very, very formal approach, which has been identified at the beginning with the contract, and we have to comply with this bureaucracy. Of course, as we have stated, this bureaucratic approach we have mirrored these formal condition to our subcontractors. And today's trend, they -- the subcontractors will perform perfectly the required -- will satisfy perfectly the requirements, which are based on our contract, and we have then coupled with the content, with the client, it will be possible then to invoice -- to issue the invoices to the client, and then we will accept the building from the supplier. One is due to happen. I believe, thanks to the huge work, we are going to satisfy together. Together means our own organization with the organization of the subcontractors, it is extremely reasonable to expect that the amount that we had presently in our balance sheet is going to be lower in the coming months. So considering that the project is progressing, is going then to achieve the completion. And so also the level of activity will be -- will lower in the incoming months. And this will be accompanied by a more intensive paperwork, we believe that in 2022, the size of the work in process as well as then the amount of payable will be reduced significantly.

Let me add one thing, James. Please acknowledge that on the construction of Amurski-1, we have no liabilities. So the contracts, as we have evolved during the life of the project, it's a contract whereby our duty is only to feed the site with drawings and material. And the drawing and material provision is finished. So for sure, we remain in this pass-through exercise in between, but with no liabilities. So the more the construction company is working the more we accrue on the one hand, work in progress; on the other hand, comparables to the construction company. So basically, we are in between, but we have no risk, apart from the percentage of margin on top of this pass-through exercise. So in the past, we were in a kind of concurrence for the execution of the project. But now that the EP part is completed and the drawings and materials are there, it's a matter of the construction company and Gazprom to take care of the paperwork and to procure that the physical progress, which is there, is progressively translated into accounting process -- accounting progress. As soon as the paperwork will be done and Gasprom paperwork is designed for typically for pipelines, so for kind of simplified as bill kind of processes. So now that it's not a pipeline, but it's a huge petrochemical plant. We are encountering some extra work in the paper activity. But I want you to appreciate that we are in a pass-through position and that we have no liability, and it's a phenomenon whereby I have a lot of work in progress, and at the same time, this work in progress are, I would say, in front of equivalent account payables, and my role is to stay there in order to invoice markup.

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

Thank you. Thank you, madam, to you and to the rest of the attendees.

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