What will Fincantieri do between US orders and a capital increase
Fincantieri shares slide on the stock market after rumors about a capital increase. Investigation started in the USA on problems that would involve the ships of the Litoral Combat Ship project. Meanwhile, the ex Stx operation is approaching its deadline. Facts, numbers and rumors about Fincantieri
Difficult session for Fincantieri in Piazza Affari.
Fincantieri shares fell more than 3% in early trading on Thursday, extending the previous session's losses. The stock tumbled after a Bloomberg report claimed the shipbuilding group was considering a capital increase of up to € 1.5 billion to weather the pandemic.
The investigation launched by the US Navy into repeated problems involving the military ships Litoral Combat Ship (LCS) also weighs on the title. Fincantieri participated in the design and construction of the LCS with the Fincantieri Marinette Marine shipyard of the subsidiary Fincantieri Marine Group .
All the details among the latest orders for the group and the approaching deadline forthe acquisition of the former Stx French shipyards.
CAPITAL INCREASE IN SIGHT FOR FINCANTIERI?
According to Bloomberg, Fincantieri – the shipbuilding group 71% controlled by Cdp Industria – is considering extraordinary options to offset the blow to its finances by the pandemic. Fincantieri's revenues fell in the first 9 months of the year, even though there was no cancellation of orders.
Potential deals under consideration include a capital increase of up to € 1.5 billion that could be approved early next year, the news agency wrote.
As Bloomberg points out, the shares of Fincantieri have fallen by about 33% since the beginning of the year, and if the capital increase were to continue it would exceed the company's entire market capitalization, which is just over one billion euros.
DEEP RED IN BAG
Shares fell 8.9%, the highest since March 27, in Milan after Bloomberg reported that the company is reviewing options.
The main shipbuilding complex in the world moves in deep red, which is in sharp decline, showing a loss of 4.67% on previous values.
THE COVID IMPACT ON ACCOUNTS
Fincantieri said in November that production volumes decreased by 19% compared to previous estimates that did not take into account the impact of Covid-19.
The consolidated net financial position shows a negative balance (payable) of € 1,425 million, almost doubled compared to 2019 (payable of € 736 million at 31 December 2019).
THE POSITION OF THE TRIESTE GROUP
Regarding the rumors about the upcoming capital increase, Fincantieri did not comment.
“The company is evaluating several options for extraordinary transactions, as it usually does. No decision has yet been made, ”a spokesman said .
EQUITA'S COMMENT ON THE PROBABLE CAPITAL INCREASE OF FINCANTIERI
According to Equita, in light of the impact of Covid on debt and the uncertainties still present in the cruise business, it is "credible that the company is considering the option of a capital increase even if the size appears excessive". Already assuming a capital increase of 800 million, the broker continues, the operation would be very dilutive. Therefore Equita continues “to consider the title uninteresting considering the low visibility of the cruise business and the uncertainties linked to the risk of a capital increase”. Equita has a “hold” rating on Fincantieri with a target price of 0.57 euros.
AND THAT OF BANCA AKROS
Also according to Akros the hypothesis of a capital increase is "realistic" and if it were 1.5 billion it would be very dilutive. Therefore, the recommendation is reduced to “reduce” while the target price remains at 0.5 euro even if it does not fully reflect the scenario of the recapitalization.
THE DIVERSIFICATION STARTED BY BONO
As Il Sole 24 Ore wrote "it is true, however, that any initiative, even looking at the latest results put in place by the company, must not necessarily be seen as a defensive action since the company led by Giuseppe Bono has started a policy of diversification that has been giving significant results for some time and which has led it to strengthen itself a lot also in the infrastructure sector, from the alliance with Autostrade Tech (Aspi group) and Ibm for monitoring national and foreign motorway networks , to the next acquisition of Inso, a company of the Condotte group active in large contracts and in project financing. Not to mention the relaunch of the subsidiary Vard which managed to get out of the shallows of the offshore crisis by gaining an important position in other businesses ”.
THE CONTRACT FOR SUBMARINES TO THE ITALIAN NAVY
There was also good news for the group this week, such as the notification of an Italian order. The Ministry of Defense will acquire up to four U212-type Near Future (NFS) submarines from Fincantieri through the Joint Organization for Armaments Cooperation (Occar), according to a notice published December 9 in the official tender database of the EU.
The contract notified to Fincantieri has a value of 1.35 billion euros for the construction of the first two U212 NFS, providing for a total of four submarines for the Italian Navy.
It has not yet been communicated by Fincantieri, but the program for the construction of four U-212 NFS submarines seems to have been finalized , after having received the double parliamentary green light last year.
But for Banca Akros as of December 15, the group's stock was not yet pricing this probable positive news, as MF / Milano Finanza wrote.
NEWS ON THE AMERICAN FRONT
Also from the other side of the Atlantic there are interesting news for the Trieste group. The Us Navy doubles the FFG (X) frigates built by Fincantieri in the Marinette Marine shipyard.
Last May the group had won the tender for the future US Navy FFG (X) frigates, dubbed Constellation. The US Navy FGG (X) requirement is twenty units. At the time, the construction of the first unit was authorized with the other nine in option of the first lot, while the other ten, also optional, will be set up later.
According to the US Navy's estimate , each should cost $ 870 million.
As Repubblica reported, “in one of his latest government initiatives, Defense Minister Mark Esper planned to increase the purchase of Fincantieri frigates to 38 units. A forecast included in the budget presented by the outgoing administration. But many in the Pentagon believe that 70 Constellations are needed to keep up with the Chinese fleet ”.
BUT NOTHING IS DISCOUNTED ON THE FURTHER FRIGATE CONSTELLATION
However, doubling the work for the Fincantieri shipyard in Wisconsin is not a given. As the analyst Aurelio Giansiracusa pointed out on Start “it is important to note that, technically, Fincantieri Marinette Marine supplies the US Navy with the project which the US government is the legitimate owner of. This detail is crucial, because, as stated in the statement from the Department of Defense, after the first batch of 10 frigates (exercised the options) set up by FMM, the construction of the possible optional batch of additional 10 units could be assigned by the DoD to another construction site based on a tender ".
THE INVESTIGATION LAUNCHED IN THE UNITED STATES FOR LCS
Also from the United States, clouds are gathering over Fincantieri's work.
In addition to the recent milestone of the FFG (X) frigates, the group is also developing the Littoral Combat Ships (LCS) program for the US Navy, which involves the construction of 16 ships (10 of which have already been delivered).
But the US Navy is investigating potential design flaw in Freedom-class LCS ships. According to some rumors also reported by Mf / Milano Finanza , several and repeated failures regarding the propulsion train on the ships "Little Rock" and "Detroit" of the Littoral Combat Ships program, have raised some concerns about a possible design flaw that would extend to the entire class of boats, which could force insiders to perform an expensive reworking of a crucial component on as many as seventeen of the US Navy's small surface fighters.
The Freedom class was designed by Lockheed Martin and built at Fincantieri's Marinette Marine shipyard. There are 10 frigates in service today, with seven more under construction or under contract, according to the US Navy's 2021 budget.
THE JUDGMENT OF BANCA AKROS
On this news, Banca Akros recalled this morning that “Fincantieri has also won a contract for the supply of four Multi-mission Surface Combatants for the Saudi navy, and it seems that the Greek navy is also interested in the platform. A design flaw would clearly be bad news for Fincantieri, which builds American ships at its Marinette shipyard. Although to be confirmed, such news could have a decidedly negative impact for the title. "
We recall that at the moment Fincantieri sells 6% to Piazza Affari, at 0.55 euros.
WAITING FOR THE BRUSSELS CLEARANCE FOR THE FRENCH SHIPYARDS OF SAINT-NAZAIRE
Finally, the deadline for the transfer of the Chantiers de l'Atlantique ((formerly Stx France of which 84.3% in the hands of the French state) to Fincantieri is approaching.
In fact, the sales agreement expires on 31 December 2020. The Trieste shipbuilding giant has announced that it will decide by the end of December whether to support its offer for Chantiers de l'Atlantique. Without necessarily waiting for Brussels to decide on the validity of the operation.
The transaction is pending a decision by the European Commission – in the wake of fears of less competition in the global cruise ship building market – which has requested additional documents and suspended the review of the transaction.
PLAN B FOR THE EX STX?
On the French side, fears about relations between Fincantieri and China are growing. The Italian group has entered into a partnership with CSSC for the first Chinese cruise ship.
While both Economy Minister Bruno Le Maire and Prime Minister Jean Castex continue to defend the deal, lawmakers and trade unions show serious doubts.
Without forgetting that there would also be a hand from other players to hinder the operation. As Repubblica wrote, “there is talk of a possible entry into the capital of the Dutch Damen or of some of the main customers of the French shipyards, including MSC Cruises”.
And precisely on the possibility for Paris to withdraw from the sale of the Saint-Nazaire shipyards to Fincantieri, the latest statement comes from the mayor of Saint-Nazaire. The latter assured the press yesterday: "Plan B (on the former Stx) is not a fantasy or a spell".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/che-cosa-fara-fincantieri-fra-commesse-usa-e-aumento-di-capitale/ on Thu, 17 Dec 2020 15:21:03 +0000.