Saipem dispels investor fears as sticks to earnings target
By Stephen Jewkes MILAN (Reuters) - Italian oil services group Saipem confirmed its earnings outlook for the year on Monday, dispelling investor fears that a third profit warning could be in the offing. Saipem, which is 43 percent owned by oil major Eni , confirmed in a statement a net loss for the year of 300-350 million euros, sending its shares up to a two-week high. "Just a few weeks ago we were worried there could be another hole in accounts but these numbers have dispelled that," a Milan-based analyst said. "I think we're going to see short covering on the stock in coming days." In late January, a new management team under CEO Umberto Vergine took an axe to forecasts and slashed 2013 net profit targets due to lower profit margins on new orders. In June it lowered those targets further, citing project difficulties in Mexico and Canada as well as increasingly strained relations with Algerian state energy company Sonatrach. The discovery that a swathe of Saipem's bread-and-butter contracts were much less lucrative than previously thought put a hole in the company's track record of beating targets and wiped more than 50 percent off the company's market value. But in a conference call with analysts on Monday, Saipem said it was pleased about the trend it was seeing in order intake as it weeds out lower margin contracts. "Acquisitions (of new contracts) is coming better than we had originally budgeted," Saipem CFO Stefano Goberti said. Saipem won contracts for 1.25 billion euros since the end of September, including work for the South Stream gas pipeline contract, after its order intake fell 6.4 percent to 8.56 billion euros in the first nine months. Saipem trimmed its 2013 revenue target to around 12.5 billion euros from a previous 13 billion euros, but investors said this was already priced in. Saipem shares closed up 5.1 percent while the European oil and gas index ended down 0.37 percent. Net profit in the third quarter was 101 million euros, below a Thomson Reuters I/B/E/S consensus of 113.4 million euros. Profit warnings and troubled projects have dented investor confidence in the oil services industry which has ridden a wave of increased investment by energy firms chasing rising oil prices. Saipem management on Monday acknowledged delays in contracts in Asia and in Brazil, difficulties in Australia on the giant Gorgon project and complications on being paid for work in Egypt and Venezuela. "The slight reduction in the revenue outlook is nothing. The important thing is there are no more profit surprises," a Milan trader said. Saipem is embroiled in judicial investigations in Italy and Algeria for allegedly paying bribes to secure $11 billion worth of contracts in the gas-rich northern African country. Vergine said the group was cooperating with the U.S. Department of Justice which has asked for information on events in Algeria. "In July 2013 we delivered the findings of an internal investigation to the Department. Since then we are not aware of any further request for information," Vergine said. Analysts have expressed concern that the DoJ could decide to take action against Saipem's 43-percent owner Eni which has shares listed in New York. (Editing by David Evans)
